Disconnected – The Many FCPA Enforcement Actions Against Telecom Companies
Not all industry sectors have the same Foreign Corrupt Practices Act risk.
At its most basic level, FCPA risk is a function of company employees or agents having points of contact with alleged “foreign officials” in the global marketplace. The more regulated a foreign marketplace is, the more points of contact there are likely to be.
In many countries, the telecom sector is heavily regulated and thus not surprisingly many FCPA enforcement actions have occurred in this sector.
As highlighted below, since 2010 there have been fourteen FCPA enforcement actions against telecom companies resulting in approximately $3.3 billion in settlements. Ten of these enforcement actions were against non-U.S. telecom companies and three of these enforcement actions are in the Top Ten of FCPA settlements.
A Closer Look At The Comcel Enforcement Action
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.
Disconnected – The Many FCPA Enforcement Actions Against Telecom Companies
Not all industry sectors have the same Foreign Corrupt Practices Act risk.
At its most basic level, FCPA risk is a function of company employees or agents having points of contact with alleged “foreign officials” in the global marketplace. The more regulated a foreign marketplace is, the more points of contact there are likely to be.
In many countries, the telecom sector is heavily regulated and thus not surprisingly many FCPA enforcement actions have occurred in this sector.
As highlighted below, since 2010 there have been thirteen FCPA enforcement actions against telecom companies resulting in approximately $3.2 billion in settlements. Nine of these enforcement actions were against non-U.S. telecom companies and three of these enforcement actions are in the Top Ten of FCPA settlements.
Telefónica Venezolana Resolves $85 Million Enforcement Action
Approximately ten years ago, a Venezuelan telecommunications company (a wholly-owned subsidiary of a Spanish telecommunications) allegedly bribed Venezuelan officials.
The end result is a $85 million U.S. Foreign Corrupt Practices Act enforcement action against the Venezuelan telecommunications company.
The DOJ recently announced that “Telefónica Venezolana C.A. (Telefónica Venezolana), a Venezuela-based subsidiary of Telefónica S.A. (Telefónica), a publicly traded global telecommunications operator based in Spain, will pay over $85.2 million to resolve an investigation by the Justice Department into a scheme to bribe government officials in Venezuela to receive preferential access to U.S. dollars in a currency auction.
The root cause of many FCPA enforcement is a real-world business condition and in this regard the following is relevant to the Telefónica Venezolana enforcement action.
South Korea’s KT Corp. Resolves $6.3 Million FCPA Enforcement Action
KT Corporation is a Seoul, South Korea based telecommunications company with American Depositary Shares registered with the SEC and traded on the New York Stock Exchange.
Yesterday, the SEC announced that the company agreed to pay $6.3 million “to resolve charges that it violated the Foreign Corrupt Practices Act by providing improper payments for the benefit of government officials in Korea and Vietnam.”
In summary fashion, this administrative order finds: