The long arm of the law: Multilateral enforcement effort leads to deferred prosecution agreement for Telia

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Dec 1, 2017

On September 21, 2017 Swedish telecoms company Telia Co. AB agreed to pay $548.6 million in penalties as part of a deferred prosecution agreement (DPA) with the US Department of Justice (DOJ), settling claims that Telia had contravened the US Foreign Corrupt Practices Act (FCPA) in paying bribes to foreign officials. This settlement is another recent example of: (1) the effectiveness of DPAs in securing the cooperation of corporations in investigations; and (2) the increasingly multilateral nature of FCPA investigations.

Background

According to an Information filed by the DOJ, the bribery began in 2007 when Telia, looking to expand its business into Uzbekistan, bought communications firm Coscom LLC. Telia understood that in order to gain access to and operate in the Uzbekistan telecommunications market they would have to make regular payments to Uzbek government officials – in this case Gulnara Karimova, eldest daughter of the late President Islam Karimov. This requirement to bribe officials was explained to Telia senior management and to the board of directors. Later, an agreement setting out the terms of the payments was entered into by Telia and Karimova and became part of a shareholder agreement, which stipulated that Karimova would invest in Coscom and grant it telecom licenses, frequencies and number blocks. Coscom consequently grew to be a significant operator in the Uzbek telecommunications space and payments continued to be made under the shareholders agreement. In total the bribes amounted to over $330 million, made to shell companies controlled by Karimova. In 2012, Swedish and Dutch authorities alongside the DOJ and other US enforcement agencies began to investigate Telia and Coscom and concluded that both had violated the anti-bribery provisions of the FCPA.

Deferred prosecution agreements

As we have written previously, DPAs (also referred to as non-prosecution agreements) have seen widespread adoption by US law enforcement in cases of criminal wrongdoing by corporations. DPAs are advantageous as they allow for criminal fines to be levied, without the need for the corporation to plead guilty or be formally convicted. Beyond being a tool to administer penalties, the prospect of securing a DPA is a strong motivator for companies to cooperate voluntarily with law enforcement. The DPA regime also encourages companies to take pre-emptive remedial steps to improve their governance structures in exchange for reduced penalties. As such, DPAs may be more effective than traditional criminal convictions in improving the compliance of corporate wrongdoers.

On September 21, 2017 Telia entered into a DPA with the DOJ. Initially, the DOJ calculated that Telia’s fine would range between $730 million and $1.46 billion. However, the final amount has been set at $548.6 million after Telia received a 25% discount for cooperation demonstrated during the investigation. Examples of such cooperation included:

  • undertaking a thorough internal investigation;
  • voluntarily making former employees available for interviews with the DOJ;
  • making regular factual presentations to the DOJ; and
  • producing relevant documents to the DOJ.

The discount also acknowledges the significant remedial measures undertaken by Telia, such as:

  • enhancing its compliance program and internal controls;
  • terminating employees and supervisors involved in the bribery, including several members of Telia’s board of directors;
  • instituting a new comprehensive anti-corruption program; and
  • implementing significant changes to its corporate governance structure.

As discussed previously, DPAs are not yet available in Canada, although the federal government has opened for comment a proposal to implement a DPA regime in Canada.

Increased cooperation amongst international law enforcement in anti-corruption investigations

The Telia case is another example of the increased level of cooperation amongst law enforcement agencies around the world in pursuing anti-corruption investigations. In its press release, the DOJ acknowledged assistance from “PPS, the Swedish Prosecution Authority, and the Office of the Attorney General in Switzerland, as well as law enforcement colleagues in Austria, Belgium, Cyprus, France, Ireland, the Isle of Man, Latvia, Luxembourg, Norway, Switzerland, the Isle of Man, and the United Kingdom.” This continues a trend seen in several other FCPA actions and resolutions over the past year, including those against Rolls-Royce and VimpelCom. It is another reminder that organizations that operate internationally face complex regulatory exposure. Not only are the domestic laws of a particular country relevant, but some jurisdictions consider that their laws (such as the FCPA) have extraterritorial reach. Accordingly, companies need to make sure that they are prepared to respond on multiple fronts if an issue arises, regardless of the particular jurisdiction in which it manifests itself.