Mobile Telesystems PJSC (“MTS”), headquartered and incorporated in Russia, was a multinational telecommunications company, which conducted its business in various countries in the territory of the former Soviet Union through subsidiaries and joint ventures. MTS had a class of securities registered with the SEC and traded on the New York Stock Exchange.
JV Uzdunrobita (“Uzdunrobita”) was a telecommunications operator in Uzbekistan from the 1990s until 2012. Uzdunrobita became a subsidiary of MTS in 2004.
Kolorit Dizayn Ink LLC (“Kolorit”) was an Uzbek advertising company that was acquired by Uzdunrobita in 2009.
According to the documents in this case, from 2004 to 2012, MTS, Uzdunrobita, and two executives at the companies engaged in a conspiracy to pay bribes totaling over $420 million to Gulnara Karimova in order to enter and to operate in the Uzbek telecommunications market. Karimova was the daughter of the then-president of Uzbekistan and an Uzbek government official who had influence over decisions made by the Uzbek Agency for Communications and Information, the governmental entity authorized to regulate operations and formulate state policy regarding communications, information technology, and the use of radio spectrum in Uzbekistan. The bribes were primarily paid through aquisitions of companies owned by Karimova. In 2004, MTS acquired a 74% stake in Uzdunrobita by purchasing 41% from an American company and 33% from a shell company owned by Karimova. The price paid per share for Karimova's stake was six times higher than the price paid per share to the American company. Later, a shell company owned by Karimova exercised an option to sell its remaning stake in Uzdunrobita at a price much higher than in the original option agreement. MTS and Uzdunrobita also paid an inflated price for Kolorit, which benefited Karimova. Finally, Uzdunrobita made contributions to purported charities or sponsorships for the benefit of Karimova. However, the last payments made to Karimova were made in 2012, after which MTS and Uzdunrobita failed to satisfy Karimova's demands for additional payment. She then retaliated by using her influence with the Uzbek government to expropriate Uzdunrobita's assets. Therefore, MTS ended up not seeing any profit connected to the bribery scheme.
On March 6, 2019, the DOJ filed two Informations in the Southern District of New York against MTS and Kolorit. The DOJ charged both MTS and Kolorit with conspiracy to violate the anti-bribery and books and records provisions of the FCPA and MTS alone with direct violations of the internal controls provisions of the FCPA. These Informations were filed in accordance with a deferred prosecution agreement and a plea agreement entered into by MTS and Kolorit, respectively, on February 28, 2019. Under the terms of the agreements, MTS agreed to pay a total criminal fine of $850 million and to hire an independent compliance monitor for a period of three years. The DOJ credited $100 million of the fine for the civil fine paid by MTS to the SEC in a related proceeding. The remaning $750 million included $40 million in forfeiture and a $500,000 criminal fine imposed on Kolorit.
In a jointly filing on March 3, 2022, MTS and the DOJ jointly moved to extend the DPA by a year. This extension would also extend the monitorship for an additional year. In its portion of the filing, the DOJ submitted a letter which indicated that the extension motion was made because while MTS had "made significant improvements to its compliance program, certain critical components of MTS’s anti-corruption compliance and ethics program [we]re in the early stages of development, [we]re not yet effective, and w[ould] not be implemented and tested prior to the end of the term."
In a related administrative proceeding initiated on March 6, 2019, the SEC issued a cease and desist order againt MTS. Under the terms of the proceeding, the SEC ordered MTS to cease and desist violations of the anti-bribery, books and records, and internal controls provisions of the FCPA, pay a civil fine of $100 million, and retain an independent monitor for a term of three years to assess and report to the SEC the status of the company's enhanced anti-corruption compliance policies and procedures.
