VimpelCom Pays $795 Million To Settle Uzbekistan Bribery Investigation

Netherlands-based telecommunications giant VimpelCom announced today that it would pay U.S. and Dutch government authorities $795 million to end an investigation into bribery in Uzbekistan. While the settlement does not reveal the recipient of the bribes, most sources point to Gulnara Karimova, daughter of the Uzbek president.

VimpelCom, the world's sixth largest telecommunications company, was created through a joint venture of Norway's Telenor and Russia's Alfa Group. The biggest shareholder now is Mikhail Fridman, a Russian billionaire. It has operations in Algeria, Armenia, Bangladesh, Italy, Georgia, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan, Ukraine and Uzbekistan.

"VimpelCom built their business in Uzbekistan on over $114 million in bribes funneled to a government official," Preet Bharara, U.S. district attorney for the southern district of New York, said in a press release. "Those payments, falsely recorded in the company's books and records, were then laundered through bank accounts and assets around the world, including through accounts in New York."

The settlement agreememt does not name the government official but there are key indicators that implicate Karimova, the eldest daughter of Islam Karimov, the first and only president of Uzbekistan after it became independent after the fall of the Soviet Union. Karimova has been named in at least two corruption investigations in Sweden and Switzerland that are probing mobile phone deals.  She also appears to be at the heart of a $300 million asset seizure by the U.S. Department of Justice that refers to a "relative of Karimov" who held "several positions in the Uzbek government" from 2005 to 2011, as Karimova did. (A possible reason for keeping the family name out of the media is the fact that Uzbekistan is a key U.S. ally in the War on Terror since 2001.)

An investigation by the Organized Crime and Corruption Reporting Project (OCCRP) into the business interests of Karimova details how she first became involved with Uzdunrobita, the country's first mobile carrier, in 2001. "Ms. Karimova's acquisition of Uzdunrobita is a good example of the way she did business and made millions of dollars illegally," Farhod Inogambaev, a former Karimova advisor, testified in an affidavit filed in a lawsuit in Washington DC. "She made it clear that, without her support, Uzdunrobita would be destroyed."

Over time, Karimova allegedly squeezed some $1 billion out of the mobile phone companies operating in Uzbekistan, according to OCCRP. "She helped companies obtain operating licenses that agreed to meet her payment demands and she squashed those that did not, including three U.S. companies," wrote Miranda Patrucic.

"Karimova used three main techniques to enrich herself, according to financial records and to people who worked with her. Sometimes she'd demand a percentage of a target company as a gift or dressed up as a fake investment in a local partner. She also allegedly bullied executives to either go along with her plans or to risk arrest or being shut down by Uzbek regulators. Language was inserted into contracts forcing companies to buy back her shares at a future date at an exorbitant profit."

OCCRP listed how Karimova hid her profits in foreign banks, an offshore hedge fund and bought up "luxurious real estate around the world including a castle in France and a penthouse in Hong Kong."

The $795 million VimpelCom settlement will be paid out to the U.S. Department of Justice, the U.S. Securities and Exchange Commission and the Dutch Public Prosecution Service.

"The wrongdoing, which we deeply regret, is unacceptable," Jean-Yves Charlier, VimpelCom CEO said in a press release. "Since the launch of the investigation, VimpelCom has appointed a new Chief Executive Officer, Chief Financial Officer, Group General Counsel, Chief Performance Officer and Group Chief Compliance Officer to drive the necessary change forward."

Meanwhile Karimova has disappered from public life and is believed to be back in Tashkent, the Uzbek capital. "Gulnara has been under house arrest. To add to this, those keeping her and her daughter prisoner have decided to inflict a programme of systematic starvation, preventing any food from reaching them," Locksley Ryan, a public relations consultant, told the Guardian newspaper to whom he provided photos that appear to show her being manhandled by security guards.

• 185 Corruption