Every month, we highlight settlements and other interesting developments involving criminal and supervisory authorities around the globe. In this article, we discuss a record penalty in France for UBS and two settlements relating to alleged violations of the FCPA (Cognizant and Mobile TeleSystems). In the UBS case, a French court found UBS AG and UBS (France) SA guilty of illicit solicitation and of laundering tax fraud proceeds. In the USD 25 million settlement with US technology company Cognizant, the DOJ declined to prosecute for multiple reasons, which we will highlight below. We also discuss the USD 950 million settlement with Mobile TeleSystems, Russia's biggest mobile phone company. This is the third case brought by the SEC and the DOJ involving public companies operating in the Uzbek telecommunications market.
US technological solutions company Cognizant has
agreed to pay the Securities and Exchange Commission (SEC) USD 25 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) and other applicable laws. The SEC alleged that, between 2013 and 2015, certain high-level Cognizant employees and agents authorised a third-party construction company responsible for building an Indian office park, to pay a USD 2 million bribe to one or more Indian government officials. The bribe was aimed at securing the planning permit for the office park. According to both the SEC and the
Department of Justice (DOJ), Cognizant employees and agents hid the company's USD 2 million bribe by falsifying the construction company's invoices at the end of the office park project. All of this was authorised by Cognizant's president and its chief legal officer. According to the SEC, Cognizant employees and officers allegedly also falsified the company's internal books and records. The
SEC's order states that Cognizant has agreed to pay a civil penalty of USD 6 million and approximately USD 19 million to the SEC in disgorgement and prejudgment interest.
The DOJ has
declined to prosecute Cognizant, and Cognizant has not admitted or denied the allegations. The DOJ's decision was based, inter alia, on the following circumstances:
- Cognizant's voluntary self-disclosure of the matters within two weeks of their board learning of the conduct;
- Cognizant's thorough and comprehensive investigation;
- Cognizant's full and proactive cooperation in the matter;
- the existence and effectiveness of Cognizant's pre-existing compliance program;
- Cognizant's full remediation, including terminating the employment and disciplining employees and contractors involved;
- the fact that the DOJ was able to conduct an independent investigation and identify culpable individuals as a result of Cognizant's timely voluntary disclosure.
The DOJ's decision not to prosecute the company does not protect any individuals from prosecution. The DOJ and the U.S. Attorney’s Office for the District of New Jersey have already announced the indictment of Cognizant's President and its Chief Legal Officer on criminal charges for violating and conspiring to violate the FCPA’s anti-bribery and accounting provisions.
Mobile TeleSystems PJSC (MTS)
Mobile TeleSystems PJSC (MTS), Russia's biggest mobile phone company, agreed to an
SEC order finding that MTS violated the FCPA's anti-bribery, books and records, and internal accounting controls provisions. MTS will pay a USD 100 million penalty to the SEC. MTS's settlement with the SEC includes the requirement to retain an independent compliance monitor for at least 36 months. According to the SEC press release, MTS has also entered into a deferred prosecution agreement with the DOJ for the alleged FCPA violations and has agreed to pay a criminal fine and forfeiture for USD 850 million. A subsidiary of MTS has pleaded guilty in federal court.
According to the SEC, from 2004 to at least 2012, MTS offered and paid at least USD 420 million in illicit payments to an Uzbek government official related to the former President of Uzbekistan. The bribes allowed MTS to enter the telecommunications market in Uzbekistan, to operate there and to receive commercial benefits to its operations. MTS operated in Uzbekistan as a telecommunications provider for eight years, generating more than USD 2.4 billion in revenue, the SEC said. The illicit payments were allegedly made through a variety of means, including equity transactions with the government official and charitable contributions or sponsorships at the government official's direction. These payments were improperly characterised as legitimate expenses in MTS's books and records.
After Telia (see also
In context October 2017) and VimpelCom (see also
In context March 2016), this is the third case brought by the SEC and the DOJ involving public companies operating in the Uzbek telecommunications market. Together, the three actions have led to the recovery of USD 2.6 billion by US and foreign authorities.
UBS found guilty by French court
A French court has found UBS AG and UBS (France) SA guilty of illicit solicitation and of laundering tax fraud proceeds. The two UBS companies must pay a penalty of EUR 3.7 billion (UBS AG) and EUR 15 million (UBS France), and EUR 800 million in civil damages. The combined penalties are a record for France. They exceed the bank's net profit in 2018 and are more than double the amount the bank has set aside to cover potential losses arising from litigation and regulatory requirements. The ruling comes after a seven-year investigation and aborted settlement negotiations, where the bank turned down a settlement offer of EUR 1.1 billion.
According to the French prosecutors, UBS sent its Swiss bankers to golf tournaments, classical music concerts and hunting parties to illegally solicit new clients. The bank advised these new clients to deposit their money in Switzerland and offered them methods to shield activities from French tax authorities. UBS denies any wrongdoing and is planning to launch an appeal. According to UBS, the conviction is not supported by any concrete evidence. The bank will not have to pay anything until all appeals have been finalised.
Five of the six former UBS executives charged were given suspended prison terms and fines ranging from EUR 50,000 to EUR 300,000.
