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Earth to Secretary Ross … There Have Been Several FCPA Enforcement Actions Concerning Conduct In Uzbekistan

Ross

Recently, U.S. Commerce Secretary Wilbur Ross delivered this speech in Uzbekistan to the American-Uzbek Chamber of Commerce Business Forum.

In the speech Ross stated: “When contracting with U.S. companies on public tenders, the citizens of Uzbekistan can be guaranteed that there are no shady deals involved. The 1977 Foreign Corrupt Practices Act prohibits U.S. companies from engaging in any type of corrupt practice to win contracts. The law is strictly enforced by the U.S. Department of Justice and has been instrumental in fighting corruption. It provides officials and citizens of this country with a guarantee that when they do business with a U.S. company, they know that there are no clandestine deals, no lousy terms to a state-backed loan, and no exchange of cash-laden briefcases. When you do business with American companies, a new generation of aspiring Uzbekistanis gains experience in corporate governance and best practices.”

For starters, Ross bungled the FCPA with the above description.

The FCPA of course does not just apply to U.S. companies and the FCPA does not exactly apply to “any type of corrupt practice to win contracts.” The FCPA’s anti-bribery provisions actually have elements such as foreign official, and obtain or retain business among others.

This legal clarification aside, what struck me about Ross’s comment is his suggestion then when a company is subject to the FCPA there is a “guarantee that there are no shady deals involved” and that foreign officials and foreign citizens are somehow provided with a “guarantee that when they do business” with a company subject to the FCPA that “there are no clandestine deals, no lousy terms to a state-backed loan, and no exchange of cash-laden briefcases.”

This is absurd, just as it would be absurd to “guarantee” that no acts of negligence or contract breaches will occur because a business organization is subject to tort and contract law.

More specific to the FCPA, earth to Secretary Ross … as highlighted below there have been several FCPA enforcement actions concerning conduct in Uzbekistan.

Baker Hughes

A portion of the 2007 FCPA enforcement action (which was resolved for a then record $44 million) included allegations that:

“from 1998 to 2004, Baker Hughes authorized commission payments of nearly $5.3 million to another agent (who worked in Kazakhstan, Russia and Uzbekistan) under circumstances in which the company failed to determine whether such payments were, in part, to be funneled to government officials in violation of the FCPA.”

Daimler

The $185 million 2010 enforcement action involved conduct in numerous countries including:

“In connection with contracts worth €37,415,070 to sell 302 buses and 4 vans to an Uzbekistan government agency … Daimler’s EvoBus subsidiary paid a total of approximately €3.5 million in improper payments to·shell companies of government officials to obtain the deal.”

Tenaris

The approximate $9 million 2011 enforcement action concerned “improper payments by employees and agents of Tenaris to officials of OJSC O’ztashqineftgaz (“OAO”), an Uzbekistan state-controlled oil and gas production company, and the accounting and record-keeping associated with these improper payments.”

Vimpelcom

The net $375 million FCPA enforcement action in 2016 concerned the Uzbek telecom sector and focused on the Uzbek Agency for Communications and Information (“UzACI” – an Uzbek governmental entity authorized to regulate operations and formulate state policy in the sphere of communication, information, and the use of radio spectrum in Uzbekistan). The “foreign official” was an Uzbek government official and a close relative of a high-ranking Uzbek government official (widely known as Gulnara Karimova, the eldest daughter of Uzbekistan’s first president, Islam Karimov). According to the government:

“VimpelCom and UNITEL [a related entity] conspired with others to provide over $114 million in bribes in exchange for Foreign Official’s understood influence over decisions made by UzACI concerning Uzbekistan’s telecommunications market. VimpelCom and UNITEL officials understood that they had to regularly pay Foreign Official millions of dollars in order to continue to obtain necessary UzACI approvals and be allowed to obtain and retain Uzbek telecommunications business.”

Telia

This 2017 enforcement action (which resulted in a net FCPA settlement amount of approximately $485 million) concerned the same type of conduct at issue in the VimpelCom enforcement action – namely that Telia directly and indirectly through various third parties made bribe payments to an Uzbekistan foreign official to obtain necessary approvals from the Uzbek Agency for Communications and Information and be allowed to obtain and retain Uzbek telecommunications business.

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