This previous post briefly highlighted the FCPA enforcement action against Comunicaciones Celulares S.A. (“Comcel”), a subsidiary of Millicom International Cellular, S.A. (“Millicom” – a telecommunications company incorporated and headquartered in Luxembourg with its principal place of business in Florida).
This post takes a closer look at the $118.2 million enforcement action.
In terms of background, Comcel was doing business as TIGO Guatemala and was a mobile and fixed telecommunications service provider with its principal place of business in Guatemala. During the relevant period, TIGO Guatemala was jointly owned by Millicom (55%) and a Panamanian company (“Panama Company” (45%) (Telecomunicaciones Digitales, S.A. (Cable Onda or Tigo Panama).
On or about November 12, 2021 , Millicom purchased Panama Company’s share of TIGO Guatemala for approximately $2.2 billion. Since then, TIGO Guatemala has been wholly-owned by Millicom.
In FCPA speak, TIGO Guatemala is described as a “person other than an issuer of domestic concern” under the 78dd-3 portion of the FCPA’s anti-bribery provisions.
The Statement of Facts included in the deferred prosecution agreement states under the headline “The Bribery Scheme” as follows.
From at least in or around 2012 through in or around June 2018, in the Southern District of Florida and elsewhere, TIGO Guatemala, through its Guatemalan shareholder, officers, employees, and agents, knowingly and willfully conspired and agreed with others to corruptly offer and pay bribes to, and for the benefit of, foreign officials in Guatemala, to influence acts and decisions of such foreign officials in their official capacity and secure improper business advantages for TIGO Guatemala and its co-conspirators. The bribery scheme was widespread and systematic, involving, among other conduct, monthly cash payments to numerous Guatemalan members of Congress in exchange for, among other things, their support for legislation that benefited TIGO Guatemala. The bribes were usually paid in cash by and at the direction of Shareholder 1 [described as was a citizen of Guatemala and the owner of Panama Company who exercised substantial control over TIGO Guatemala until his interest was purchased by Millicom], TIGO Guatemala Executive 1 [described as Guatemalan citizen and a high-level TIGO Guatemala executive from in or around 2011 through in or around 2022 who reported directly to the TIGO Guatemala Board of Directors], and Acisclo Valladares Urruela (“Valladares”) [a citizen of Guatemala and TIGO Guatemala’s Chief Corporate Affairs Officer and Head of Legal in or around and between 2008 and 2015 and again serving as Chief Corporate Affairs Officer in or around 2017] among others, and typically picked up at the TIGO Guatemala offices by political officials or members of their security teams. TIGO Guatemala earned profits of at least approximately $58 million from the corrupt scheme.”
Under the heading “Benefits Obtained by TIGO Guatemala,” the Statement of Facts notes:
During the relevant period, TIGO Guatemala maintained approximately 40-50% market share of Guatemala’s mobile telecommunications sector. TIGO Guatemala paid bribes to Guatemalan legislators to ensure their support for legislation and policies favorable to TIGO Guatemala. For example, the bribery scheme resulted in (1) the passage of legislation in 2012 that permitted TIGO Guatemala to renew its radiofrequency usufruct titles-the right to use, possess, and benefit from the spectrum while the government maintained ownership–for a 20-year term; and (2) the passage of legislation in 2014, frequently referred to as “Ley TIGO” because it disproportionately benefited TIGO Guatemala.”
According to the Statement of Facts:
“Throughout the relevant period, TIGO Guatemala, through Shareholder 1, TIGO Guatemala Executive 1, Valladares, and others, effectuated the bribery scheme by developing and implementing a variety of different cash generation strategies. In furtherance of the bribery scheme, the co-conspirators obtained continuous access to large amounts of clean, untraceable cash in order to make the bribe payments and to reimburse Valladares and others for bribes they had advanced to legislators out of their own funds.”
In some instances “duffel bags” of cash were transported by helicopter to the TIGO Guatemala office which were then delivered to government officials or political parties.
According to the Statement of Facts:
“In or around 2013, a helicopter carrying cash destined for Valladares had to make an emergency landing at a military base. As the cash couriers exited the plane carrying the bags of cash, the military base commander observed and reported the incident to Guatemalan authorities, who in tum initiated an investigation. Shortly thereafter, Shareholder 1 decided to stop the cash deliveries by helicopter and Shareholder 1, TIGO Guatemala Executive 1, and Valladares determined that TIGO Guatemala needed a new way to obtain cash for bribe payments.”
According to the Statement of Facts, between June 2012 and May 2014 approximately $18.3 million in bribes were given to government officials and a bank account in the U.S. controlled by Valladares was used to facilitate the bribery scheme.
According to the Statement of Facts:
“Together, Valladares and Alvaro Estuardo Cobar Bustamante (“Cobar”) [a Guatemalan citizen and director of a Guatemalan bank] used falsified or back-dated contracts, shell companies, and fraudulent invoices to legitimize financial transfers that were executed to provide Valladares with cash in order to pay bribes to Guatemalan officials and reimbursements for bribes TIGO Guatemala executives had already paid.
Some of the cash provided to TIGO Guatemala came from drug trafficking and persons who had obtained a significant amount of cash through corruption.”
Based on the above, Comcel was charged with conspiracy to violate the FCPA’s anti-bribery provisions.
The criminal charge was resolved through a deferred prosecution agreement with a 2 year term.
The DPA sets forth the following “relevant considerations”
“a. the nature and seriousness of the offense conduct, as described in the Statement of Facts, including a pervasive bribery scheme to obtain and retain telecommunications business in Guatemala, orchestrated by the Company’s Guatemalan shareholder and then-senior Company personnel and involving the use of narcotrafficking proceeds to fund some of the bribes;
b. in 2015, Millicom voluntarily and timely disclosed to the Criminal Division misconduct at the Company (Millicom’s then-joint venture) that, in part, forms the basis for this Agreement. However, despite Millicom’s 55% ownership share, Millicom lacked operational control over the Company. The Company’s Guatemalan shareholder used its operational control to prevent Millicom from accessing critical information, and to prevent Millicom from requiring Company personnel to cooperate with the Fraud Section’s investigation and take remedial actions. The Fraud Section closed its initial investigation in 2018. Two years later, in 2020, the Offices obtained and proactively developed new evidence from sources other than the Company and Millicom regarding the Company’s conduct and reopened their investigation on that basis. During the second phase of the investigation, the Offices obtained new and additional evidence about the scope of the Company’s conduct, including that the criminal conduct continued during and after the Offices’ closure of the first phase of the investigation and involved narcotrafficking proceeds that were used to generate cash for some of the bribe payments. For those reasons, while the Company received credit for Millicom’s self-report, the Company did not meet the requirements of the Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy, to qualify for either a Part I or Part II resolution. Nonetheless, the Offices gave significant weight to the voluntary disclosure of the misconduct in 2015 in determining the appropriate disposition of this matter-including the form and term of the resolution and the maximum reduction for cooperation and remediation under Part III of the CEP.
c. the Company received credit for its and Millicom’s cooperation with the Offices’ investigation because it cooperated with the investigation and accepted responsibility for its criminal conduct; the Company also received credit for its and Millicom’s cooperation and timely remediation pursuant to the CEP. The substantial cooperation included, among other things, (i) Millicom self-reporting conduct that forms, in part, the basis for this Agreement; (ii) promptly collecting, analyzing, and organizing voluminous information, including complex financial information; (iii) gathering evidence and performing forensic data collections in the countries covered by the Offices’ investigation; (iv) providing information obtained through its internal investigation, particularly during the second phase of the Offices’ investigation, which allowed the Offices to preserve and obtain evidence as part of their own independent investigation; (v) facilitating interviews with employees, including making foreign-based employees available for interviews in the United States; (vi) making detailed factual presentations to the Offices; and (vii) proactively disclosing evidence of which the Offices were previously unaware and identifying key documents in materials produced, including translating Spanish-language documents;
d. the Company and Millicom provided to the Offices all relevant facts known to them, including information about all individuals involved in the conduct described in the Statement of Facts and conduct disclosed to the Offices prior to the Agreement;
e. the Company also received credit pursuant to the CEP because, following the prior joint venture partner’s exit and Millicom’s acquisition of full ownership and control of the Company in 2021, the Company and Millicom engaged in extensive timely remedial measures, including: (i) undertaking a root cause analysis of the misconduct at the Company and risk assessment of the Company’s operations; (ii) terminating personnel involved in the bribery scheme; (iii) introducing new and experienced management and compliance personnel to change the local operation’s culture of compliance; (iv) enhancing third-party onboarding and transaction monitoring, including by centralizing and linking the oversight functions under Millicom, incorporating data analytics and automated continuous monitoring across operations, and periodically testing relevant controls for effectiveness (including testing of more than 250 transactions); (v) developing an ephemeral messaging policy, which employees are required to acknowledge they have read as part of annual training, and incorporating a system to preserve and analyze Company employees’ ephemeral messages; (vi) launching an extensive training campaign covering anti-corruption and compliance risks; (vii) quickly incorporating key compliance policies and procedures, and creating a direct reporting line from the Company’s compliance function to Millicom; and (viii) over the last ten years, significantly restructuring, expanding, and resourcing Millicom’s global compliance program, including enhancing its compliance risk assessment process, growing the dedicated compliance headcount by 800%, and engaging in continuous monitoring, testing, and updating of Millicom’s global compliance program;
f. the Company and Millicom have enhanced and have committed to continuing to enhance the Company’s compliance program and internal controls, including ensuring that the Company’s compliance program satisfies the minimum elements set forth in Attachment C to this Agreement (Corporate Compliance Program);
g. based on the Company’s and Millicom’s remediation and the state of its compliance program, and the Company’s and Millicom’s agreement to report to the Offices as set forth in Attachment D to this Agreement, the Offices determined that an independent compliance monitor is unnecessary and that the term of the deferred prosecution agreement is two years;
h. the Company and Millicom have no prior criminal history;
i. the Company has a limited history of prior civil and regulatory actions in Guatemala resulting from dissimilar and unrelated conduct; and
j. the Company and Millicom have agreed to continue to cooperate with the Offices in any ongoing investigation …
k. accordingly, after considering (a) through (j) above, the Offices have determined that the appropriate resolution of the Offices’ investigation is a deferred prosecution agreement with the Company with a two-year term; payment by the company in the amount of a $60,000,000 criminal monetary penalty, which reflects a reduction of 50 percent from the bottom of the applicable Guidelines range, and $58,198,343 in forfeiture.”
The DPA sets forth an advisory sentencing guidelines range of $120-$240 million and states:
“The Offices and the Company agree, based on the application of the Sentencing Guidelines, that the appropriate criminal penalty is $60,000,000. This reflects a 50 percent discount off the bottom of the Sentencing Guidelines fine range.
As a result of the Company’s conduct, including the conduct set forth in the Statement of Facts, the parties agree the Offices could institute a civil and/or criminal forfeiture action against certain funds held by the Company and that such funds would be forfeitable pursuant to Title 18, United States Code, Section 981(a)(l)(C) and Title 28, United States Code, Section 2461(c). The Company hereby admits that the facts set forth in the Statement of Facts establish that at least $58,198,343, representing the proceeds traceable to the commission of the offense, is
forfeitable to the United States (the “Forfeiture Amount”).[…]
The Company agrees to pay the Forfeiture Amount by wire transfer pursuant to instructions provided by the Offices no later than ten business days after the Agreement is fully executed.”
As a condition of settlement, during the term of the DPA Comcel is required to adopt a host of compliance undertakings and reporting obligations to the DOJ.
Covington & Burling attorneys Daniel Suleiman, Lanny Breuer, and Veronica Yepez represented.
