An international telecoms company has admitted engaging in corrupt practices in Uzbekistan, following bribery probes spanning several continents whose tentacles reach into the heart of the ruling Karimov family.
This marks the first official admission by an international telecommunications company of illegal practices in a case that centers on the affairs of the eldest daughter of Uzbekistan’s President Islam Karimov, Gulnara Karimova, who was last heard of under house arrest in Uzbekistan on corruption charges.
Russian-owned VimpelCom said it is prepared to “acknowledge certain violations of the U.S. Foreign Corrupt Practices Act and relevant Dutch laws” and pay fines to corruption-busting bodies in the United States and Holland.
The admission was made in a report on final quarter results for 2015, released on February 17 by VimpelCom, which is majority owned by Russian billionaire Mikhail Fridman. Norway’s state-owned Telenor owns a minority stake that it is trying to sell.
VimpelCom said that discussions with the U.S. Department of Justice and Securities and Exchange Commission and the Dutch Public Prosecution Service had resulted in “prospective settlements” that, subject to approval, will see it admit breaking U.S. and Dutch anti-corruption laws and paying “fines and disgorgements.”
The size of the anticipated payments was not disclosed, but VimpelCom said that it was within the $900m it set aside last November to cover potential liabilities from the corruption probes.
VimpelCom was one of the companies named, alongside Russia’s MTS, in a lawsuit filed by the U.S. Department of Justice last year alleging that illicit payments were made to curry influence and secure favorable decisions to operate in Uzbekistan’s telecommunications sector.
The case led to the arrest last year of Jo Lunder, the Norwegian former chief executive of VimpelCom, and forced the resignation of Telenor’s chairman, Svein Aaser.
In July, the U.S. government won a ruling in a New York court to have $300 million dollars frozen as part of an investigation into what it described as an “international conspiracy to launder corrupt payments” involving the two firms.
The chief beneficiary, unnamed in the complaint, was a “close relative” of Karimov’s who previously “held several positions in the Uzbek government.”
Gulnara Karimova, who has served as her country’s deputy foreign minister, has previously been named as a suspect in a money-laundering probe in Switzerland involving payments in Uzbekistan’s telecoms sector.
That is linked to an ongoing bribery probe in Sweden involving Nordic telecoms giant TeliaSonera, which has seen dismissals and resignations over the scandal. TeliaSonera has admitted shortcomings in its practices in Uzbekistan, but denies knowingly engaging in corruption.
Uzbekistan is currently seeking to woo investors, but this reminder of the risks of doing business in Uzbekistan’s graft-ridden business climate comes after a top banker was arrested on suspicion of manipulating the country’s black market in currency and a major bank was banned from conducting commercial hard-currency operations on suspicion of breaching currency laws.