Venezuelan Telecom Subsidiary to Pay Over $85M to Settle FCPA Case
A Venezuela-based subsidiary of Telefonica, a global telecommunications operator based in Spain, will pay over $85.2 million to settle charges that the company violated the Foreign Corrupt Practices Act, DOJ announced. The U.S. alleged that Telefonica Venezolana bribed Venezuelan government officials in exchange for preferential access to U.S. dollars in a currency auction.
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As part of the settlement, the subsidiary and its parent company entered into a deferred prosection agreement under which they will continue cooperating with the fraud section of DOJ's Criminal Division and the U.S. Attorney's Office for the Southern District of New York regarding any current or future criminal investigations. The companies also agreed to "enhance their compliance program" and report to DOJ regarding remediation and implementation of the program.
Starting in 2014, Telefonica Venezolana took part in a currency auction sponsored by the Venezuelan government, which allowed it to exchange Venezuelan bolivars for U.S. dollars. The subsidiary recruited two suppliers to pay around $28.9 million in payments to an intermediary, knowing that some of the payments were paid as bribes to government officials. To hide the bribes, Telefonica Venezolana bought equipment from the suppliers at "inflated prices," DOJ said.
DOJ said it gave the subsidiary a "20% reduction off the fifth percentile above the low end of the otherwise applicable guidelines fine range" as a result of Telefonica Venezolana's cooperation during the investigation and remedial measures.
The agency said the subsidiary cooperated by "making regular factual presentations" to DOJ based on information gleaned during the subsidiary's internal investigation, making employees based outside the U.S. available for interviews, producing a "significant number of documents" and collecting and analyzing evidence for DOJ. However, the agency noted Telefonica Venezolana's failure to "timely identify, collect, produce, and disclose certain records and important information" at the start of the investigation.
The agency also noted the subsidiary's remedial measures, which included "disciplining certain employees" and boosting its anti-corruption compliance program by empowering an "independent compliance function." As part of this effort, the company appointed a chief compliance officer that has direct access to the board of director's Audit Committee.
Telefonica Venezolana also overhauled its review and approval process for "transactions with non-standing pricing" and is reviewing its "broader internal controls for pricing and other transactions" with help from a forensic accounting firm. DOJ noted the company's strengthened process for vetting and engaging with third parties, including use of a "proprietary software tool," and its risk assessment and audit process, which regularly updates the compliance program.