Issues To Consider From The Telefónica Venezolana Enforcement Action
This prior post went in-depth into the recent FCPA enforcement action against Telefónica Venezolana (a subsidiary of Telefonica S.A.) concerning a bribery scheme in Venezuela.
This post highlights additional issues to consider.
Timeline
Beginning in early 2020, the annual report of Telefónica S.A. (a Spanish company with shares traded in the U.S.) contained the following disclosure.
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.
Spot On Observations Regarding The Telefonica Brasil Enforcement Action
Previous posts here and here discussed the SEC’s recent Foreign Corrupt Practices Act enforcement action against Telefonica Brasil (focused on the company hosting Brazilian officials at soccer matches in Brazil) as well as the many problematic issues associated with the expansive enforcement action.
The most recent edition of the always informative FCPA Update by Debevoise & Plimpton likewise takes issue which various aspects of the enforcement action. Kara Brockmeyer (the SEC’s former FCPA Unit Chief) is the lead author of the spot on article which states in pertinent part:
Issues To Consider From The Telefonica Brasil Enforcement Action
This previous post went in-depth into the recent $4.1 million FCPA enforcement action against Telefonica Brasil and this post continues the analysis by highlighting additional issues to consider.
What Is The U.S. Interest?
According to the SEC, Telefonica Brasil (a subsidiary of Spanish multinational Telefonica S.A. and the largest telecom company in Brazil with 34,000 employees and $14 billion in revenue) purchased 1,860 World Cup tickets for a total of approximately $5.1 million “for relationship-building activities with strategic audiences.”
A Brazilian Telecom Company Hosted Brazilian Government Officials For Soccer Tournaments In Brazil – Five Years Later, U.S. Collects $4.1 Million In FCPA Enforcement Action
It is only fitting that one day after publishing this post regarding the SEC’s inconsistent enforcement of the Foreign Corrupt Practices Act (and how the SEC resolved an FCPA books and records and internal controls case for $0 against a U.S. company for engaging in accounting misconduct including the CEO of the company making misrepresentations to the market concerning $307 million) that the SEC brings this $4.1 million administrative action against Telefonica Brasil (a company with ADRs traded on the NYSE).
The conduct at issue?
You better sit down for this … the company “failed to devise and maintain sufficient internal accounting controls over a hospitality program that the company hosted in connection with the 2014 World Cup and 2013 Confederations Cup” both held in Brazil.