In another blockbuster FCPA prosecution, the Justice Department and the SEC announced an $850 million settlement with Mobile Telesystems (“MTS”), Russia’s largest mobile carrier.  At the same time, the Justice Department announced criminal indictments against an MTS executive and the notorious corrupt Uzbek official, Gulnara Karimova, on criminal charges.

MTS is the largest mobile telecommunications company in Russia, and has stock that is publicly-traded in the United States.  MTs’ wholly owned subsidiary in Uzbekistan, Kolorit Dizayn Ink (“Kolorit”) agreed to plead guilty to FCPA charges. (Here) and (Here). MTS entered into a three-year deferred prosecution agreement with the Justice Department and agreed to the appointment of an independent compliance monitor. (Here).

MTS also agreed to an SEC administrative settlement (Here) and payment of a $100 million penalty for anti-bribery, books and records and internal accounting controls provisions.  DOJ will credit the $100 million civil penalty paid to the SEC to the overall $850 million criminal penalty.

At the same time, the Justice Department unsealed criminal indictments against Gulnara Karimova, the daughter of the former president of Uzbekistan, and Bekhzod Akhmedov, former MTS executive based in Uzbekistan.  (Indictment Here). Karimova has been under house arrest in Uzbekistan since 2014.  Starting in 2015, DOJ has filed civil forfeiture complaints against Karimova assets worth more than $850 million, including bank accounts in Switzerland, Luxembourg and Ireland.

Karimova was charged with one count of conspiracy to commit money laundering; Akhmedov was charged in the same indictment with one count of conspiracy to violate the FCPA, two counts of violating the FCPA and one count of conspiracy to commit money laundering.  Karimova is accused of accepting more than $865 million in bribes and laundering the illegal proceeds through the U.S. financial system, as part of three separate FCPA prosecutions involving MTS, Vimpelcom (Here and Here), and Telia (Here).

This is the third case brought by DOJ and the SEC involving public telecommunications companies operating in Uzbekistan.  Last year, Telia Sonera paid $965 million in total penalties to resolve FCPA charges in Uzbekistan.  In 2016, VimpelCom reached a $795 million FCPA settlement with the DOJ and SEC for FCPA violations in Uzbekistan.  In total, U.S. and foreign authorities have recovered $2.6 billion for bribery violations in the telecommunications market in Uzbekistan.

In applying the FCPA Corporate Enforcement Policy factors, MTS did not voluntarily disclose the matter to the Justice Department; MTS’ cooperation and remediation was lacking because it was slow to provide information and evidence in response to DOJ requests and MTS failed to discipline senior executives involved in the conduct.  DOJ also noted a mitigating factor included the fact that the Uzbek government expropriated MTS’ telecommunications assets in Uzbekistan, resulting in no realized pecuniary gain to the companies’ telecommunications assets in Uzbekistan.  As a result, the Justice Department and MTS agreed that MTS would pay a total fine equal to 25 percent above the bottom of the Federal Sentencing Guidelines range.

According to the government, MTS paid $420 million in bribes to enter the Uzbekistan market and operate in the country for eight years, from 2004 to 2012.  During the eight-year period, MTS generated revenues of more than $2.4 billion.  MTS shut down operations in Uzbekistan in 2016.