The U.S. Department of Justice recently announced that Telefónica Venezolana C.A., a Venezuela-based subsidiary of global telecommunications company Telefónica S.A., agreed to pay more than $85.2 million as part of a three-year deferred prosecution agreement to resolve a bribery investigation. According to the DOJ, Telefónica Venezolana engaged in a scheme to bribe Venezuelan government officials in exchange for preferential treatment in a government-sponsored currency auction that allowed Telefónica Venezolana to exchange Venezuelan bolívars for U.S. dollars. As stated in the criminal information, Telefónica Venezolana acted as an agent of its ultimate parent company, Telefónica S.A., whose American Depositary Receipts are traded on the New York Stock Exchange, thereby subjecting Telefónica Venezolana to FCPA jurisdiction. No charges were brought against Telefónica S.A.
According to court documents, Telefónica Venezolana “recruited” two unnamed suppliers that agreed to pay approximately $29 million to intermediaries, who, in turn, passed on a substantial amount of the $29 million to Venezuelan government officials. As described in the criminal information, the payments were made to influence the outcome of a currency auction held by the Venezuelan government in 2014, which allowed companies to exchange Venezuelan bolívars for U.S. dollars. Telefónica Venezolana then reimbursed the unnamed suppliers by purchasing equipment from them in U.S. dollars at inflated prices, according to the information. According to federal prosecutors, Telefónica Venezolana ultimately received over $110 million in the currency auction, which amounted to approximately 65 percent of the total currency awarded in the auction.
Although the criminal information filed along with the DPA only named Telefónica Venezolana as a defendant, pursuant to the DPA, Telefónica Venezolana and Telefónica S.A. agreed, among other things, to improve their compliance program and cooperate with federal investigators in any ongoing or future investigation that may arise during the DPA’s three-year term. In reaching this resolution, the DOJ stated that Telefónica Venezolana received credit for cooperating with federal investigators, which included: (i) making regular factual presentations to the DOJ based on information learned in the course of Telefónica Venezolana’s internal investigation; (ii) voluntarily making employees based outside the United States available for interviews in the United States; (iii) producing a significant number of documents to the DOJ, while navigating foreign data privacy laws; and (iv) collecting, analyzing, and organizing voluminous evidence and information for the DOJ, along with translations of documents. The DOJ noted, however, that Telefónica Venezolana did not receive full cooperation credit because in the “initial phases” of the DOJ’s investigation, Telefónica Venezolana “failed to timely identify, collect, produce, and disclose certain records and important information, which affected investigative efforts” by the DOJ. Telefónica Venezolana did not voluntarily disclose to the DOJ, and thus did not receive credit for doing so.
Telefónica Venezolana did receive credit for remediation, including for disciplining employees, appointing a Chief Compliance Officer, strengthening the controls around the engagement of third parties, and establishing a risk assessment and audit process. The $85.2 million fine was a 20% discount off the 5th percentile of the Sentencing Guidelines range. The DOJ also determined that the appointment of an independent monitor was unnecessary after considering the state of Telefónica Venezolana’s compliance program, the timely remedial measures taken by the company, and the company’s agreement to report program updates to the DOJ.
DOJ Press Release | Deferred Prosecution Agreement | Information