Telefónica Venezolana C.A., 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.
Telefónica Venezolana entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed today in the Southern District of New York, charging the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).
“Telefónica Venezolana bribed Venezuelan government officials to participate in a government auction through which it exchanged Venezuelan bolivars for U.S. dollars. The company concealed the illicit payments by purchasing equipment at inflated prices from two suppliers who paid the bribes on the company’s behalf,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division.
Argentieri said Telefónica Venezolana chose to support a corrupt regime to circumvent the difficulties of conducting legal business in Venezuela.
“Telefónica Venezolana, a subsidiary and agent of a U.S. issuer, agreed to line the pockets of corrupt Venezuelan officials to gain access to U.S. currency and maintain its position in the Venezuelan telecommunications market,” said U.S. Attorney Damian Williams for the Southern District of New York.
Telefónica Venezolana engaged in a complex and criminal financial fraud scheme, bribing Venezuelan government officials to obtain U.S. dollars, stressed Executive Associate Director Katrina W. Berger of Homeland Security Investigations.
According to court documents and admissions, in 2014, Telefónica Venezolana participated in a government-sponsored currency auction in Venezuela that allowed it to exchange its Venezuelan bolivars for U.S. dollars.
To ensure its success in the auction, Telefónica Venezolana recruited two suppliers to make approximately $28.9 million in corrupt payments to an intermediary, knowing that some of those funds would be paid as a “commission” to Venezuelan government officials.
To conceal the bribe payments, Telefónica Venezolana covered the cost of the bribes by purchasing equipment from the two suppliers at inflated prices. As a result of its corrupt payments, Telefónica Venezolana was permitted to exchange and subsequently received over $110 million through the currency auction, which it used to purchase equipment from the two suppliers it recruited to join the scheme.
These funds represented over 65% of the funds the Venezuelan government awarded in the 2014 currency auction.
As part of the DPA, Telefónica Venezolana and its corporate parent, Telefónica, have agreed, among other things, to continue cooperating with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of New York in any ongoing or future criminal investigation arising during the term of the DPA.
In addition, Telefónica Venezolana and Telefónica have agreed to enhance their compliance program where necessary and appropriate and to report to the government regarding remediation and implementation of their enhanced compliance program.
The Justice Department reached this resolution with Telefónica Venezolana based on a number of factors, including, among others, the nature and seriousness of the offence.
Telefónica Venezolana received credit for its cooperation with the department’s investigation, which included making regular factual presentations to the department based on the information learned in the course of Telefónica Venezolana’s internal investigation; voluntarily making employees based outside the United States available for interviews in the United States; producing a significant number of documents to the department, while navigating foreign data privacy and related laws; and collecting, analyzing, and organizing voluminous evidence and information for the department, accompanied by translations of documents.
However, in the initial phases of the department’s investigation, Telefónica Venezolana failed to timely identify, collect, produce, and disclose certain records and important information, which affected investigative efforts by the department and reduced the impact of Telefónica Venezolana’s cooperation.
