I have spent this week reviewing the many lessons that can be garnered by the compliance practitioner from the VimpelCom Foreign Corrupt Practices Act (FCPA) resolution. However, there is one additional follow on from the Department of Justice (DOJ) initiative that has not received as much attention but may be as significant as the settlement itself in the long run; that is the forfeiture action brought by the DOJ under the Kleptocracy Asset Recovery Initiative (the “Act”).
As stated in the DOJ Press Release announcing the VimpelCom resolution, under the section entitled ‘The Forfeiture Complaints’ it stated:
“The department has also filed two civil complaints seeking a total of $850 million in forfeiture. A complaint filed today seeks forfeiture of approximately $550 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the Uzbek official by VimpelCom and two other telecommunications companies operating in Uzbekistan. The $550 million is currently located in Swiss bank accounts. The department also filed a prior complaint seeking forfeiture of an additional $300 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the same Uzbek official. The assets sought to be forfeited in that complaint are restrained in Belgium, Luxembourg and Ireland. In that case, on Jan. 11, 2016, the U.S. District Court for the Southern District of New York entered a partial default judgment against all potential claimants other than the Republic of Uzbekistan.
As alleged in the complaints and as is part of the criminal resolutions announced today, the telecom companies paid a total of more than $800 million in bribes so that the Uzbek official would assist VimpelCom and other telecommunications companies in obtaining and retaining business in Uzbekistan. Thereafter, the official’s associates laundered the corruption proceeds through accounts held in Latvia, the United Kingdom, Hong Kong, Ireland, Belgium, Luxembourg and Switzerland. The illicit funds were transmitted through financial institutions in the United States before they were deposited into accounts in these countries, thereby subjecting them to U.S. jurisdiction.
The department brought these forfeiture actions under the Kleptocracy Asset Recovery Initiative in the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS), working in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, to use those recovered assets to benefit the people harmed by corruption and abuse of office.”
As reported in the FCPA Blog in July 2015, “Last month a federal judge in New York said the DOJ could seize $300 million allegedly linked to the Uzbek telecoms bribery scandal. In a July 9 ruling, U.S. District Judge Andrew Carter allowed the DOJ to impound the funds held by Bank of New York Mellon Corp. in Ireland, Luxembourg, and Belgium, and in accounts at Clearstream Banking SA linked to the companies in Luxembourg.”
In a New York Times (NYT) article , entitled “The Kleptocrats’ Millions”, Leslie Wayne reported that the DOJ has brought some 25 cases under the Act against 20 foreign officials. While these suits are mainly in the US, the VimpelCom matter is significant because the DOJ has focused on the international dimension of the money laundering and corruption involved.
Scott Patterson and David Gauthier-Villars, writing in the Wall Street Journal (WSJ) in an article entitled “U.S. Seeks to Seize $1 Billion in Telecom Probe”, wrote that in addition to the bribes paid out by VimpelCom, there were at least two other international telecom companies involved when they said, “Mobile TeleSystems PJSC of Russia and Sweden’s TeliaSonera AB funneled hundreds of millions of dollars to businesses controlled by Gulnara Karimova, the elder daughter of Uzbek President Islam Karimov, in an effort to secure wireless frequencies and other deals in that country, according to court documents and people with direct knowledge of the probe.”
It would appear that Kleptocracy squad, created within the FBI to investigate and prosecute corruption cases, has begun to bear fruit. At the time this initiative was announced by former Attorney General Eric Holder, he said, “This morning, I am pleased to announce the creation of a dedicated Kleptocracy squad within the FBI. This specialized unit will partner with our Asset Forfeiture and Money Laundering Section to aggressively investigate and prosecute corruption cases — not only in Ukraine, but around the world. The squad of about a dozen personnel will consist of case agents and forensic analysts who are capable of unraveling the intricate money laundering transactions commonly employed by kleptocrats. Their sophisticated work will be supported by deputy marshals from the United States Marshals Service and analysts from FinCEN, which is our financial intelligence unit. And this new initiative will provide the United States with increased capacity to respond rapidly to political crises as they arise — so we can help prevent stolen assets from being dissipated or secreted away by deposed regimes.”
In the NYT article Kenneth Hurwitz, a senior legal officer with the Open Society Justice Initiative, was quoted as saying, “No one is confident that this will work perfectly. But that’s still better than if the U.S. didn’t try.” Assistant Attorney General Leslie R. Caldwell was also quoted in the same article for the following, “We’ve gotten a lot of forfeiture orders that have limited their ability to get their hands on their assets. And that’s still significant.”
As most people understand, the FCPA is a supply side law that focuses on the conduct of the bribe-payor. However through the Kleptocracy Asset Recovery Initiative, the DOJ is able to focus some of its efforts on the bribe-receiver. Any initiative or successful effort to take back the ill-gotten gains of the bribe-receivers is a plus in my book.
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