International fight against corruption: Telia Company pays 274.000.000 US Dollars to the Netherlands
21 september 2017 - Functioneel Parket
In the international fight against corruption, the Netherlands has punished three Rotterdam-based subsidiaries of the international telecom provider Telia Company AB. They have accepted a settlement offered by the Dutch Public Prosecution Service (DPPS) totaling 274.000.000 US dollars. The DPPS accuses these Dutch subsidiaries of the criminal offences of bribery of government officials and inaccurate books and records. It concerns the period around the time of gaining access to the Uzbek telecom market and thereafter, during which they paid bribes to the eldest daughter of the former president of Uzbekistan in the period from 2007 up to and including 2010.
Parallel to the Dutch out-of-court settlement, there are settlements with the United States Department of Justice (DoJ) and the United States Securities and Exchange Commission (SEC). Telia Company will pay a total of 965.000.000 US Dollars as a penalty and disgorgement in the U.S. and the Netherlands.
International fight against corruption
Telia Company AB (formerly TeliaSonera AB) is an international telecom provider, with its main office in Stockholm. TeliaSonera AB has arisen from a merger between the Swedish telecom company Telia and the Finnish telecom company Sonera. The company is listed on NASDAQ Stockholm and at NASDAQ Helsinki. The company is active in Europe and Asia.
Sonera Holding BV, TeliaSonera UTA Holding BV and TeliaSonera Uzbek Telecom Holding BV (hereinafter: ‘TeliaSonera’) are Dutch subsidiaries of Telia Company and are based in Rotterdam. TeliaSonera has been found to have paid bribes to operate in the Uzbek telecom market via its Dutch subsidiaries. In doing so, services from the Dutch financial sector were utilized.
Corruption distorts competition and constitutes a serious violation of the integrity of governments, with great moral and political consequences. Corruption affects the free and open markets and constitutes a threat to international stability. Corruption is combatted internationally. This international approach signifies that corruption is not tolerated and that high penalties will be imposed.
The criminal investigation was initiated in 2013. The Dutch criminal investigation was carried out by the Fiscal Intelligence and Investigation Service (FIOD) under supervision of the National Prosecutor’s Office for Serious Fraud, Environmental Crime and Asset Confiscation (“Functioneel Parket”). Parallel to the Dutch investigation, the DOJ, the SEC, and the Swedish Prosecution Service conducted investigations into suspected bribe payments by TeliaSonera. This parallel action shows that corruption is not tolerated internationally. The proceeds of corruption are confiscated and companies are imposed with severe fines.
In March 2014, the Rotterdam offices of the three Dutch subsidiaries of TeliaSonera were searched by the FIOD. Administrative records were seized.
The FIOD investigation shows, via its Dutch subsidiaries TeliaSonera paid bribes to the eldest daughter of the former president of Uzbekistan in the period from 2007 up to and including 2010. The criminal investigation has revealed that the eldest daughter of the former president of Uzbekistan, exercised control over the Uzbek telecom market. Bribe payments were required to operate in this market and for the acquisition of licenses, frequencies and number blocks. The DPPS holds that these payments constitute the criminal offences of bribery of government officials (corruption) and books and records violations. The criminal investigation shows that from 2007 up to and including 2010 TeliaSonera paid bribes in connection with its entry into the Uzbek telecom market and in connection with obtaining telecommunication licenses for 3G and LTE frequencies and number blocks. In total, TeliaSonera paid approximately 314.200.000 US dollars in bribes to the daughter of the President. These payments were made through the offshore company Takilant Limited, based in Gibraltar. Also, 6% of the shares in the Rotterdam subsidiary TeliaSonera Uzbek Holding company was transferred to Takilant Ltd. In addition to these bribe payments, over 27.300.000 US Dollars in ‘sponsorship’ and ‘charitable contributions’ were paid in Uzbekistan in the period from 2007 - 2013. Some of these appear to be linked to Uzbek government officials. The DPPS holds that these payments constitute the criminal offences of bribery of government officials (corruption) and books and records violations.
According to the DPPS, the bribery committed throughout the years resulted in a dominant position in the telecommunication market in Uzbekistan and significant profits as a consequence. By its conduct, TeliaSonera has contributed to corruption in Uzbekistan. The DPPS considers corruption and related criminal offenses serious because of their undermining nature and the consequences for society.
In 2016, TeliaSonera’s sales amounted to approximately USD 11.4 billion. The Netherlands considers the fine and disgorgement totaling 965.000.000 US Dollars as appropriate. It is a punishment that hurts, and it does justice to the significance of the acts committed as well as to the disruption these acts caused to the legal order. The parallel government action against corruption demonstrates that corruption is tackled internationally.
By imposing penalties and confiscating criminal proceeds, committed offences are redressed. It clearly shows that a company does not get away with committing criminal offenses and that criminally earned profits will be confiscated. In addition, there is a deterrent effect of this punishment on other companies. In addition, a large number of compliance measures has been taken within Telia Company, decreasing the risk of recurrence in the future.
Penalty imposed by the Dutch Prosecution
The Company pays a total fine of 274.000.000 US Dollars of which 40.000.000 US Dollars forfeiture to the DOJ and the company pays 274.000.000 US Dollars to the Netherlands. The punishment imposed by the DPPS on TeliaSonera includes a fine of 100.000.000 US Dollars and a payment of 174.000.000 US Dollars. The latter amount is the estimated value of items (in this case shares in the Dutch subsidiaries) that are eligible for confiscation.
In determining the Dutch fine it was taken into account that the payments to the government officials took place during a long time period and that the bribe payments were significant. As is the case when a sentence is formulated in court, the defendant’s attitude was taken into account as well. TeliaSonera has cooperated with the investigation and has made its internal findings available.
The DPPS holds that all earnings of TeliaSonera in Uzbekistan constitute illegally obtained profits. After all, access to Uzbekistan has been gained by paying bribes to (the company of) a government official. Without those payments, the entry to the Uzbek market would not have been successful. Therefore, TeliaSonera’s gross earnings (profit before tax) in Uzbekistan from the time of entering the market until the beginning of 2014 constitute the starting point for calculating illegally obtained profits. The investigations in the Netherlands and the US have set the criminal proceeds at 457.000.000 US Dollars. This will be paid for disgorgement of criminal proceeds.
Telia pays 40.000.000 USDollars of this amount as forfeiture to the DoJ and 208.500.000 US Dollars will be paid to the SEC. The remaining disgorgement amount of 208.500.000 US Dollars will be paid to Sweden or the Netherlands at a later stage, depending on a legal disgorgement procedure against Telia Company AB in Sweden.
Telia Company has taken action to put its compliance in order. Executives who participated in the bribery, directly or indirectly, have left the company. A completely new (top) management has been appointed, including a new CEO and CFO. In addition, Telia Company has launched a very comprehensive compliance program, implemented through the entire company. Among other things, an internal whistleblower scheme has been put into operation. Furthermore, Telia Company has indicated that it intends to divest the entire EURASIA division of the company, including the Uzbek branch.
The DPPS is looking at the role of individuals who are suspected of having been involved in the corruption. The Dutch Prosecution has shared the information from its investigation with countries in which prosecution of these individuals is possible. Sweden has announced that it will investigate the role of a number of former executives.
Apart from the investigation into TeliaSonera, the FIOD also investigated Telecom Company Vimpelcom (Now: Veon) concerning corruption in Uzbekistan. The case against the company was settled with an out-of-court settlement. In addition, the OM is conducting an investigation into a former executive of Vimpelcom with Dutch nationality.
By judgment of July 20, 2016, the Amsterdam District Court sentenced Takilant Ltd (the mailbox company in Gibraltar, via which the bribes were paid to the daughter of the president) to pay a fine of 1.600.000 Euros and a criminal confiscation of 123.000.000 Euros. Takilant was convicted for the co-commission of (passive) foreign bribery and forgery for receiving bribe payments.
The DPPS is looking at the role of service providers in the corruption conducted by companies. Service providers can play an important role in combating corruption. Banks, accountants, notaries and other gatekeepers are required to report unusual transactions to the FIU. If those companies do not fulfill their gatekeeper function adequately, they may become subject to criminal investigations. The Netherlands will address companies that do not take their role in the international fight against crime.
In March it became known that the FIOD is conducting an investigation, under supervision of the DPPS, into ING Bank NV. The bank is suspected of failing to report unusual transactions by Vimpelcom and TeliaSonera, or at least not in time. In addition, the bank allegedly has not performed sufficient customer research. The suspicion is that by doing this, the bank has facilitated international corruption and money laundering. In March 2016, searches were conducted at ING. The investigation is ongoing.
Besides investigation of the role of the bank, the DPPS also investigates the role of accountants. The audit firm of Vimpelcom is suspected of failing to report unusual transactions to the FIU. The investigation is still ongoing.