SEC v. VIMPELCOM LTD, Southern District of New York (Jan. 1, 2016) — Complaint

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF 
NEW YORK 
SECURITIES AND EXCHANGE COMMISSION, 
Plaintiff, 
v. 
VIMPELCOM LTD, 
Defendant. 
Civil 
No.------­
COMPLAINT 
Plaintiff Securities and Exchange Commission ("Commission") alleges: 

SUMMARY OF ALLEGATIONS 

1. This matter arises from violations ofthe anti-bribery, recordkeeping, and internal 
accounting controls provisions 
ofthe Foreign Corrupt Practices Act ("FCPA")[15 U.S.C. §§ 
78dd-1, 78m(b)(2)(A)-(B)] by defendant VimpelCom Ltd ("VimpelCom"). 
2. From 2006 to at least 2012, VimpelCom offered and paid bribes to a government 
official in Uzbekistan in connection with its Uzbek operations. During the course 
ofthe bribery 
scheme, VimpelCom made 
or caused to be made at least $114 million in improper payments in 
order to obtain and retain business that generated more than $2.5 billion in revenues for 
VimpelCom. 
3. These payments were primarily made through sham contracts, but were also, in 
certain instances, made under the guise 
of legitimate charitable contributions or sponsorships. 
These payments were improperly characterized 
in the books ofrecords ofVimpelCom's 
subsidiaries as legitimate expenses, and consolidated in VimpelCom's fmancial statements 
which were filed with the Commission throughout the relevant period. 

JURISDICTION AND YENUE 

4. This court has jurisdiction over this action pursuant to Sections 2l(d), 2l(e), and 
27 
ofthe Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78u(d), 78u(e), and 
78aa]. VimpelCom, directly 
or indirectly, made use ofthe means or instrumentalities of interstate 
commerce, 
ofthe mails, or ofthe facilities ofa national securities exchange in connection with 
the transactions, acts, practices, and courses 
ofbusiness alleged in this Complaint. 
5. Venue is proper in this District pursuant to Section 27 ofthe Exchange Act [15 
U.S.C. 
§ 78aa]. Certain acts or transactions constituting the violations by VimpelCom occurred 
in this district. 
DEFENDANT 
6. VimpeiCom Ltd ("VimpelCom") is a corporation organized under the laws of 
Bermuda. VimpelCom was headquartered in Moscow, Russia until2010, when it moved its 
headquarters to Amsterdam, the Netherlands. VimpelCom issues and maintains a class 
of 
publicly traded securities registered pursuant to Section 12(b) ofthe Securities Exchange Act of 
1934, which are now traded on the NASDAQ, and were traded on the New York Stock Exchange 
prior to September 2013. 
7. VimpeiCom is a global provider oftelecommunications services. VimpeiCom 
operates through subsidiaries and affiliates in Europe, Asia, and Africa. VimpelCom manages its 
operations through separate regional business units, which are each overseen by an officer 
of 
VimpeiCom and member ofthe senior management group. 
RELATED ENTITIES AND PERSONS 
8. Unitel LLC ("Unitel") is VimpeiCom's wholly-owned subsidiary and provides 
2 


mobile telecommunications services in Uzbekistan. Unitel was formed in Uzbekistan, and it was 
purchased by VimpeiCom in 2006. Unitel is part ofVimpelCom's Commonwealth of Independent 
States ("CIS") business unit and is managed by local managers as well as a supervisory committee 
which includes senior members 
ofthe CIS business unit management. 
9. Buzton JV Ltd ("Buzton") is VimpeiCom's majority-owned subsidiary and 
provides fixed-line telecommunications services in Uzbekistan. Buzton was formed 
in Uzbekistan 
and a majority interest was purchased by Vim pel Com in 2008. Buzton is part 
ofthe CIS business 
unit and, like Unitel, is managed by local managers and a supervisory committee largely comprised 
ofsenior members ofthe CIS business unit management. 
10. Freevale Enterprises ("Freevale") is VimpelCom's wholly-owned subsidiary and 
acts as one 
oftwo holding companies ofUnitel. Freevale was formed in the British Virgin Islands 
and was purchased by VimpeiCom in 2006 as part 
ofits acquisition of Bakrie Uzbekistan 
Telecom ("Buztel"), a separate mobile telecommunications operator in Uzbekistan that was 
merged into Unitel following its acquisition. Freevale has no operations and no holdings other than 
Unite
I. 
11. Silkway Holding BV ("Silkway") is VimpelCom's wholly-owned subsidiary and 
acts as one 
oftwo holding companies ofUnitel. Silkway was formed in the Netherlands and was 
purchased by VimpelCom in connection with its 2006 acquisition ofUnitel. Silkway has no 
operations and no holdings other than Unitel. 
12. Local Partner A was an Uzbek government official at all relevant times. Local 
Partner A was also a close relative 
ofa high-ranking Uzbek government official and VimpelCom 
understood that Local Partner A had significant influence over other Uzbek government officials. 
Local Partner A operated through numerous shell companies, including Takilant Ltd. 
3 


13. Takilant Ltd is a company beneficially owned by Local Partner A and operated 
by close associates 
of Local Partner A at all relevant times. Takilant was formed in Gibraltar and 
was the entity through which VimpelCom made payments to Local Partner A. 
STATEMENT OF FACTS 
14. VimpelCom is a global telecommunications company operating through a 
network 
ofsubsidiaries and joint venture entities. Vim pel Com is organized by geographic 
business units, each 
ofwhich is directly supervised by a member ofthe management board. The 
management board includes senior officers ofVimpelCom and VimpelCom's 
chief executive 
officer and chief financial officer. 
15. VimpelCom entered the Uzbek market in 2006, through its acquisitions ofUnitel 
and Buztel. Throughout the relevant period, Unitel and Buztel (until Buztel was merged into 
Unitel in July 2006) were subject to regulation by the Communications and Information Agency 
of Uzbekistan ("ACI"). ACI is the Uzbek regulatory authority that issues licenses, frequencies, 
channels, and number blocks necessary for VimpelCom to operate in that country. Throughout 
the relevant period, in Uzbekistan private parties could not sell or purchase licenses, frequencies, 
channels, 
or number blocks. 
16. Unitel is part ofthe CIS business unit ofVimpelCom, which had its own 
executive officers who in turn supervise the local managers in Uzbekistan. Financial results for 
Unitel are reported in the CIS business unit results which are consolidated with the other 
geographic business units into the financial results reported by VimpelCom. From at least 2005 
to at least 2012, Vim pel Com dealt with representatives ofTakilant and maintained a relationship 
with Local Partner A, who was an Uzbek government official and family member 
ofthe 
President 
of Uzbekistan. Vim pel Com understood that Local Partner A was able to exert 
4 

significant influence over other Uzbek officials to cause them to take official action that would 
benefit VimpelCom's business in Uzbekistan. 
17. Over the course ofthe relevant period, VimpeiCom made or caused to be made at 
least $114 million in improper payments to Local Partner A through Takilant, through a series 
of 
transactions that were designed to obfuscate their true purpose. Most ofthe transactions designed 
to benefit Local Partner A through Takilant were denominated in United States dollars, and 
communications concerning those transactions were conducted, in part, using electronic mail 
accounts on United States-based servers. 
Entry Into Uzbekistan 
18. In 2005, VimpelCom was evaluating whether to enter the Uzbek 
telecommunications market and considered purchasing certain companies with existing 
operations in Uzbekistan. 
In January 2006, VimpelCom announced the acquisition ofBuztel 
with 2,500 subscribers for the purchase price of approximately $60 million, and in February 
2006, VimpelCom announced the acquisition ofUnitel with 300,000 subscribers for the purchase 
price 
ofapproximately $200 million. 
19. In order to acquire Buztel and Unitel, then senior managers ofVimpelCom had 
negotiated with Unitel, Buztel, and representatives 
of Local Partner A. Senior managers of 
VimpelCom directly involved in the transaction understood that a relationship with Local Partner 
A was required in order to enter the market and that it could only acquire these entities with the 
assistance 
ofLocal Partner A. 
20. In December 2005, senior management discussed with members 
ofthe board of 
directors how Local Partner A was actively influencing the potential sales ofUnitel and Buztel, 
that Local Partner A was a partner in Buztel, and that Local Partner A could approve 
or 
5 


disapprove any bidders for Unitel and probably also influence the price for Unitel. 
21. At the time 
ofthese acquisitions, certain VimpelCom senior managers directly 
involved with the transaction understood that Local Partner A would exercise improper influence 
over other Uzbek government officials in exchange for an ownership stake in the acquired 
companies and other payments. In connection with its entry into the Uzbek telecommunications 
market in 2006, VimpelCom approved a plan to enter into an ostensible consulting agreement 
with Takilant through which Local Partner A received an improper payment 
of$2 million. 
22. In July 2006, VimpelCom merged Buztel into Unitel, which resulted in 
VimpeiCom-owned holding companies Silkway and Freevale owning 79 percent and 
21 percent 
ofUnitel respectively. 
Ownership Stake Proyided to Local Partner A Throueh Takilant 
23. In June 2007, VimpelCom sold to Takilant a 33.3 percent ownership stake in 
Freevale. The purchase price paid by Takilant was $20 million, and the agreement also contained 
a put option which allowed Takilant to sell the interest back to VimpelCom in 2009 for a 
minimum price 
of$57.5 million. 
3G Market Expansion 
24. Later in 2007, VimpelCom sought to develop a 30 network in Uzbekistan. At the 
time 
oftheir acquisition, neither Buztel nor Unitel had the necessary licenses and permission 
from ACI to operate a 30 network. In order to obtain the necessary licenses and permission, 
VimpelCom engaged in a scheme with representatives ofLocal Partner A whereby VimpelCom 
paid Local Partner A through Takilant to exert improper influence over ACI to issue the required 
30 licenses. Under this arrangement, ACI would issue the 30 licenses to a Takilant subsidiary, 
which in tum would repudiate the licenses so they would instead be issued to Unitel. Numerous 
6 


red flags were raised by structuring the 3G license transaction, not the least ofwhich was the 
knowledge by then senior VimpelCom executives that private parties in Uzbekistan could not 
directly transfer telecommunications licenses between themselves. 
25. VimpelCom's board ofdirectors and Finance Committee approved the 3G license 
transaction in October 2007, and an agreement with Takilant was executed later that month. 
VimpelCom paid Takilant $25 million in connection with the 3G license transaction, and 
recorded the 3G license transaction as an intangible asset and a receivable to its shell holding 
company, Watertrail Industries Ltd. 
26. In connection with the 3G license, VimpelCom paid Local Partner A through 
Takilant using funds paid by Watertrail in 2007, which is a VimpelCom holding company for 
operations other than Uzbekistan. Watertrail had no role in VimpelCom's Uzbek operations in 
2007, and was simply used in this transaction by VimpelCom as a vehicle for these payments. 
Repurchase ofLocal Partner A's Ownership Stake Held Through Takilant 
27. Takilant exercised its put option in 2009 to sell its interest in Freevale back to 
VimpelCom, and on September 25, 2009, VimpelCom announced that it had repurchased 
Takilant's ownership stake for 
$57.5 million-which represented a return of nearly 200 percent 
over the initial sales price 
in approximately twenty-seven months. Certain consulting fees and 
the re-purchase amount were paid by VimpelCom to Local Partner A through Takilant. 
4G Market Expansion 
28. By 2011, 4G networks were appearing in other countries and VimpelCom 
determined it would operate a 4G network in Uzbekistan. To achieve this, VimpelCom again 
turned to Local Partner A through Local Partner A's representatives. 
29. Many 
ofthe same red flags identified during the 3G license transaction existed for 
7 


the 4G license transaction. The counterparty to Takilant was the same counterparty from the 3G 
license transaction which again was a VimpeiCom subsidiary that did not have any relationship 
to the Uzbek operations, but rather was a shell holding company for other operations. 
VimpelCom knew that under the laws 
ofUzbekistan a 4G license could be obtained directly 
from ACI and that licenses did not require up-front payment. 
30. To justify the payments made in connection with the licenses, Takilant supplied 
fake technical reports to provide the appearance that legitimate services had been provided. The 
fake technical reports were cut and pasted from online sources, publicly-available materials, and 
Unitel's own reports. VimpelCom accepted the fake technical reports without question as 
services for the payment to Takilant, which was intended to improperly benefit Local Partner A. 
31. Unlike the 3G license transaction, the 4G license transaction was not presented to 
the board 
ofdirectors or the Finance Committee ofthe board. Instead, the 4G license transaction 
was reviewed as part 
ofa management process called B-FLAT (Business, Fiscal, Legal, 
Accounting, and Treasury). B-FLAT was designed to give functions outside 
ofthe business 
group visibility into significant transactions. While several members of B-FLAT questioned the 
structure 
ofthe 4G license transaction and raised concerns to more senior officers of 
VimpelCom, the transaction proceeded as proposed. Ultimately, the B-FLAT members approved 
the 4G license transaction and VimpelCom paid $30 million to Local Partner A through Takilant. 
Unitel recorded an intangible asset and a payable to Watertrail. 
32. In connection with the 4G license, VimpelCom also paid Local Partner A through 
Takilant using funds paid by Watertrail. Watertrail had no role in VimpeiCom's Uzbek 
operations in 20 
II, and was simply used in this transaction by VimpelCom as a vehicle for these 
payments. 
8 


33. For several years, Vim pel Com was not able to build a 4G network in Uzbekistan. 
In early 2014, VimpelCom announced that it would take a $30 million impairment charge related 
to the 4G license. 
Payments to Local Partner A Usin& Takilant as a Fake vendor 
34. Following VimpelCom's re-purchase ofLocal Partner A's indirect ownership 
stake in Freevale and the 3G and 4G license transactions, new mechanisms were developed to 
pay Local 
Partner A. One 
ofthose mechanisms was to make payments to Local Partner A 
through Takilant as a fake vendor. 
35. Due to currency restrictions in Uzbekistan, Unite! had an excess of the local 
Uzbek currency and a deficit 
ofhard or foreign currency. In order to pay Local Partner A in U.S. 
dollars, a then senior VimpelCom manager along with then senior officers 
ofUnitel and then 
senior members 
ofthe CIS business unit structured a series oflayered transactions. The layering 
oftransactions was to disguise payments ultimately made to Local Partner A through Takilant as 
payments to vendors in the local Uzbek currency in exchange for fake 
or inflated construction 
and research services. The vendors provided the exchange 
oflocal Uzbek currency into United 
States dollars. The vendors subcontracted to affiliates ofthe vendors who in turn subcontracted 
(through financial intermediaries) to Takilant. The payments from vendors to affiliates and then 
affiliates to Takilant were denominated in United States dollars. The layered vendor structure 
provided a way for VimpelCom to reduce excess local Uzbek currency 
at Unite! while providing 
U.S. dollars to Takilant and thereby to Local Partner A. Using this process, VimpelCom 
improperly paid a further $10 million to Local Partner A through Takilant in both 2011 and 
2012. 
9 


Payments to Charities 
36; In addition to direct payments to Local Partner A through Takilant, VimpelCom 
also made what were ostensibly charitable payments in order to improperly influence Local 
Partner 
A. In connection with corruptly influencing Local Partner A, representatives of Local 
Partner A directed VimpelCom to make at least $502,000 in payments to charities directly 
affiliated with Local Partner A. 
37. Unitel had insufficient internal accounting controls and maintained inaccurate 
books and records regarding its charitable contributions. From 2009 and through 2013, Unitel 
provided approximately $38 million in sponsorships or charitable contributions in Uzbekistan. 
Despite the presence 
ofred flags, these transactions were not vetted to ensure that they were not 
improperly benefitting government officials. 
FIRST CLAIM FOR RELIEF 

Unlawful Payments 

[Violations of Exchange Act Section 30A] 

38. Paragraphs 1 through 3 7 are re-alleged and incorporated by reference. 
39. 
As described above, VimpelCom corruptly offered, promised to pay, or 
authorized unlawful payments to one or more persons, while knowing that all or a portion of 
those payments would be offered, given, or promised, directly or indirectly, to foreign officials 
for the purposes 
ofinfluencing their acts or decisions in their official capacity, inducing them to 
do or omit to do actions in violation oftheir official duties, securing an improper advantage, or 
inducing such foreign officials to use their influence with a foreign government or 
instrumentality thereof to assist VimpelCom in obtaining or retaining business. 
40. By reason 
ofthe foregoing, VimpelCom violated, and unless enjoined will 
10 


continue to violate, the anti-bribery provisions of Section 30A of the Exchange Act [ 15 U .S.C. § 
78dd-1]. 
SECOND CLAIM FOR RELIEF 

Corporate Books and Records 

(Violations 
of Section 13(b)(2)(A) oftbe Exchange Act] 

41. Paragraphs 1 through 37 are re-alleged and incorporated by reference. 
42. 
Section 13(b)(2)(A) 
ofthe Exchange Act requires each issuer with securities 
registered with the Commission pursuant to Section 
12 [15 U.S.C. § 781] to make and keep 
books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the 
transactions and the dispositions 
ofthe assets ofthe issuer. 
43. As described above, VimpelCom, through its officers, employees, and agents, 
failed to keep books, records, and accounts, which, in reasonable detail, accurately and fairly 
reflected its transactions and the disposition 
ofits assets. 
44. By reason ofthe foregoing, VimpelCom violated Section 13(b)(2)(A) ofthe 
Exchange Act [15 U.S.C § 78m(b)(2)(A)]. 
THIRD CLAIM FOR RELIEF 
Internal Accounting Controls 
[Violations 
of Section 13(b )(2)(B) of tbe Exchange Act] 
45. Paragraphs 1 through 37 are re-alleged and incorporated by reference. 
46. Section 13(b )(2)(B) 
ofthe Exchange Act requires issuers ofregistered securities 
to devise and maintain a system 
ofinternal accounting controls sufficient to provide reasonable 
assurances that, among other things, transactions are executed in accordance with management's 
general or specific authorization; transactions are recorded as necessary to permit preparation 
of 
II 


financial statements in conformity with generally accepted accounting principles or any other 
criteria applicable to such statements; transactions are recorded as necessary to maintain 
accountability for assets; and access to assets is permitted only in accordance with management's 
general 
or specific authorization. 
47. VimpelCom failed to devise and maintain such a system 
ofinternal accounting 
controls and was therefore unable to record the nature and purpose of, or prevent, the provision 
ofmonies and things ofvalue to government officials, as set forth above. 
48. 
By reason ofthe foregoing, VimpelCom violated Section 13(b)(2)(B) ofthe 
Exchange Act [15 U.S.C. 
§ 78m(b)(2)(B)]. 
12 


PRAYER FOR RELIEF 
WHEREFORE, the Commission respectfully requests that this Court enter judgment: 
a. 	Permanently enjoining VimpelCom from violating Sections l3(b)(2)(A), 13(b)(2)(B), 
and 30A 
ofthe Exchange Act [15 U.S.C. §§ 78dd-1, 78m(b)(2)(A), and 78m(b)(2)(B)]; 
b. 	Ordering Vim pel Com to disgorge ill-gotten gains wrongfully obtained as a result ofits 
illegal conduct described herein, plus prejudgment interest thereon; and 
c. 	Granting such other relief as this Court may deem just and appropriate. 
Dated: February 18, 2016 
Respectfully submitted, 
Paul G. Gizzi 
Securities and E change Commission 
200 Vesey St, Suite 400 
New York, 
New York 10281 
Charles 
E. Cain (not admitted in SONY) 
Tonia 
J. Tornatore (not admitted in SONY) 
Securities and Exchange Commission 
100 F St NE 
Washington, DC 20549 
Telephone: (212)336-0077 (Gizzi) 
E-Mail: [email protected] · 
Attorneys for Plaintiff 
13 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 

SECURITIES AND EXCHANGE COMMISSION, 

Plaintiff, 

v. 

VIMPELCOM LTD, 

Defendant. 

Civil No.------­

COMPLAINT 

Plaintiff Securities and Exchange Commission ("Commission") alleges: 


SUMMARY OF ALLEGATIONS 


1. This matter arises from violations of the anti-bribery, recordkeeping, and internal 

accounting controls provisions of the Foreign Corrupt Practices Act ("FCPA")[15 U.S.C. §§ 

78dd-1, 78m(b)(2)(A)-(B)] by defendant VimpelCom Ltd ("VimpelCom"). 

2. From 2006 to at least 2012, VimpelCom offered and paid bribes to a government 

official in Uzbekistan in connection with its Uzbek operations. During the course of the bribery 

scheme, VimpelCom made or caused to be made at least $114 million in improper payments in 

order to obtain and retain business that generated more than $2.5 billion in revenues for 

VimpelCom. 

3. These payments were primarily made through sham contracts, but were also, in 

certain instances, made under the guise of legitimate charitable contributions or sponsorships. 

These payments were improperly characterized in the books of records ofVimpelCom's 

subsidiaries as legitimate expenses, and consolidated in VimpelCom's fmancial statements 

which were filed with the Commission throughout the relevant period. 



JURISDICTION AND YENUE 


4. This court has jurisdiction over this action pursuant to Sections 2l(d), 2l(e), and 

27 of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78u(d), 78u(e), and 

78aa]. VimpelCom, directly or indirectly, made use of the means or instrumentalities of interstate 

commerce, ofthe mails, or of the facilities ofa national securities exchange in connection with 

the transactions, acts, practices, and courses ofbusiness alleged in this Complaint. 

5. Venue is proper in this District pursuant to Section 27 of the Exchange Act [15 

U.S.C. § 78aa]. Certain acts or transactions constituting the violations by VimpelCom occurred 

in this district. 

DEFENDANT 

6. VimpeiCom Ltd ("VimpelCom") is a corporation organized under the laws of 

Bermuda. VimpelCom was headquartered in Moscow, Russia until2010, when it moved its 

headquarters to Amsterdam, the Netherlands. VimpelCom issues and maintains a class of 

publicly traded securities registered pursuant to Section 12(b) of the Securities Exchange Act of 

1934, which are now traded on the NASDAQ, and were traded on the New York Stock Exchange 

prior to September 2013. 

7. VimpeiCom is a global provider of telecommunications services. VimpeiCom 

operates through subsidiaries and affiliates in Europe, Asia, and Africa. VimpelCom manages its 

operations through separate regional business units, which are each overseen by an officer of 

VimpeiCom and member of the senior management group. 

RELATED ENTITIES AND PERSONS 

8. Unitel LLC ("Unitel") is VimpeiCom's wholly-owned subsidiary and provides 

2 




mobile telecommunications services in Uzbekistan. Unitel was formed in Uzbekistan, and it was 

purchased by VimpeiCom in 2006. Unitel is part ofVimpelCom's Commonwealth of Independent 

States ("CIS") business unit and is managed by local managers as well as a supervisory committee 

which includes senior members of the CIS business unit management. 

9. Buzton JV Ltd ("Buzton") is VimpeiCom's majority-owned subsidiary and 

provides fixed-line telecommunications services in Uzbekistan. Buzton was formed in Uzbekistan 

and a majority interest was purchased by Vim pel Com in 2008. Buzton is part ofthe CIS business 

unit and, like Unitel, is managed by local managers and a supervisory committee largely comprised 

ofsenior members ofthe CIS business unit management. 

10. Freevale Enterprises ("Freevale") is VimpelCom's wholly-owned subsidiary and 

acts as one of two holding companies ofUnitel. Freevale was formed in the British Virgin Islands 

and was purchased by VimpeiCom in 2006 as part of its acquisition of Bakrie Uzbekistan 

Telecom ("Buztel"), a separate mobile telecommunications operator in Uzbekistan that was 

merged into Unitel following its acquisition. Freevale has no operations and no holdings other than 

UniteI. 

11. Silkway Holding BV ("Silkway") is VimpelCom's wholly-owned subsidiary and 

acts as one of two holding companies ofUnitel. Silkway was formed in the Netherlands and was 

purchased by VimpelCom in connection with its 2006 acquisition ofUnitel. Silkway has no 

operations and no holdings other than Unitel. 

12. Local Partner A was an Uzbek government official at all relevant times. Local 

Partner A was also a close relative ofa high-ranking Uzbek government official and VimpelCom 

understood that Local Partner A had significant influence over other Uzbek government officials. 

Local Partner A operated through numerous shell companies, including Takilant Ltd. 

3 




13. Takilant Ltd is a company beneficially owned by Local Partner A and operated 

by close associates of Local Partner A at all relevant times. Takilant was formed in Gibraltar and 

was the entity through which VimpelCom made payments to Local Partner A. 

STATEMENT OF FACTS 

14. VimpelCom is a global telecommunications company operating through a 

network of subsidiaries and joint venture entities. Vim pel Com is organized by geographic 

business units, each ofwhich is directly supervised by a member of the management board. The 

management board includes senior officers ofVimpelCom and VimpelCom's chief executive 

officer and chief financial officer. 

15. VimpelCom entered the Uzbek market in 2006, through its acquisitions ofUnitel 

and Buztel. Throughout the relevant period, Unitel and Buztel (until Buztel was merged into 

Unitel in July 2006) were subject to regulation by the Communications and Information Agency 

of Uzbekistan ("ACI"). ACI is the Uzbek regulatory authority that issues licenses, frequencies, 

channels, and number blocks necessary for VimpelCom to operate in that country. Throughout 

the relevant period, in Uzbekistan private parties could not sell or purchase licenses, frequencies, 

channels, or number blocks. 

16. Unitel is part ofthe CIS business unit ofVimpelCom, which had its own 

executive officers who in turn supervise the local managers in Uzbekistan. Financial results for 

Unitel are reported in the CIS business unit results which are consolidated with the other 

geographic business units into the financial results reported by VimpelCom. From at least 2005 

to at least 2012, Vim pel Com dealt with representatives ofTakilant and maintained a relationship 

with Local Partner A, who was an Uzbek government official and family member of the 

President of Uzbekistan. Vim pel Com understood that Local Partner A was able to exert 

4 



significant influence over other Uzbek officials to cause them to take official action that would 

benefit VimpelCom's business in Uzbekistan. 

17. Over the course of the relevant period, VimpeiCom made or caused to be made at 

least $114 million in improper payments to Local Partner A through Takilant, through a series of 

transactions that were designed to obfuscate their true purpose. Most of the transactions designed 

to benefit Local Partner A through Takilant were denominated in United States dollars, and 

communications concerning those transactions were conducted, in part, using electronic mail 

accounts on United States-based servers. 

Entry Into Uzbekistan 

18. In 2005, VimpelCom was evaluating whether to enter the Uzbek 

telecommunications market and considered purchasing certain companies with existing 

operations in Uzbekistan. In January 2006, VimpelCom announced the acquisition ofBuztel 

with 2,500 subscribers for the purchase price of approximately $60 million, and in February 

2006, VimpelCom announced the acquisition ofUnitel with 300,000 subscribers for the purchase 

price ofapproximately $200 million. 

19. In order to acquire Buztel and Unitel, then senior managers ofVimpelCom had 

negotiated with Unitel, Buztel, and representatives of Local Partner A. Senior managers of 

VimpelCom directly involved in the transaction understood that a relationship with Local Partner 

A was required in order to enter the market and that it could only acquire these entities with the 

assistance ofLocal Partner A. 

20. In December 2005, senior management discussed with members of the board of 

directors how Local Partner A was actively influencing the potential sales ofUnitel and Buztel, 

that Local Partner A was a partner in Buztel, and that Local Partner A could approve or 

5 




disapprove any bidders for Unitel and probably also influence the price for Unitel. 

21. At the time of these acquisitions, certain VimpelCom senior managers directly 

involved with the transaction understood that Local Partner A would exercise improper influence 

over other Uzbek government officials in exchange for an ownership stake in the acquired 

companies and other payments. In connection with its entry into the Uzbek telecommunications 

market in 2006, VimpelCom approved a plan to enter into an ostensible consulting agreement 

with Takilant through which Local Partner A received an improper payment of $2 million. 

22. In July 2006, VimpelCom merged Buztel into Unitel, which resulted in 

VimpeiCom-owned holding companies Silkway and Freevale owning 79 percent and 21 percent 

ofUnitel respectively. 

Ownership Stake Proyided to Local Partner A Throueh Takilant 

23. In June 2007, VimpelCom sold to Takilant a 33.3 percent ownership stake in 

Freevale. The purchase price paid by Takilant was $20 million, and the agreement also contained 

a put option which allowed Takilant to sell the interest back to VimpelCom in 2009 for a 

minimum price of$57.5 million. 

3G Market Expansion 

24. Later in 2007, VimpelCom sought to develop a 30 network in Uzbekistan. At the 

time of their acquisition, neither Buztel nor Unitel had the necessary licenses and permission 

from ACI to operate a 30 network. In order to obtain the necessary licenses and permission, 

VimpelCom engaged in a scheme with representatives ofLocal Partner A whereby VimpelCom 

paid Local Partner A through Takilant to exert improper influence over ACI to issue the required 

30 licenses. Under this arrangement, ACI would issue the 30 licenses to a Takilant subsidiary, 

which in tum would repudiate the licenses so they would instead be issued to Unitel. Numerous 

6 




red flags were raised by structuring the 3G license transaction, not the least ofwhich was the 

knowledge by then senior VimpelCom executives that private parties in Uzbekistan could not 

directly transfer telecommunications licenses between themselves. 

25. VimpelCom's board ofdirectors and Finance Committee approved the 3G license 

transaction in October 2007, and an agreement with Takilant was executed later that month. 

VimpelCom paid Takilant $25 million in connection with the 3G license transaction, and 

recorded the 3G license transaction as an intangible asset and a receivable to its shell holding 

company, Watertrail Industries Ltd. 

26. In connection with the 3G license, VimpelCom paid Local Partner A through 

Takilant using funds paid by Watertrail in 2007, which is a VimpelCom holding company for 

operations other than Uzbekistan. Watertrail had no role in VimpelCom's Uzbek operations in 

2007, and was simply used in this transaction by VimpelCom as a vehicle for these payments. 

Repurchase of Local Partner A's Ownership Stake Held Through Takilant 

27. Takilant exercised its put option in 2009 to sell its interest in Freevale back to 

VimpelCom, and on September 25, 2009, VimpelCom announced that it had repurchased 

Takilant's ownership stake for $57.5 million- which represented a return of nearly 200 percent 

over the initial sales price in approximately twenty-seven months. Certain consulting fees and 

the re-purchase amount were paid by VimpelCom to Local Partner A through Takilant. 

4G Market Expansion 

28. By 2011, 4G networks were appearing in other countries and VimpelCom 

determined it would operate a 4G network in Uzbekistan. To achieve this, VimpelCom again 

turned to Local Partner A through Local Partner A's representatives. 

29. Many ofthe same red flags identified during the 3G license transaction existed for 

7 




the 4G license transaction. The counterparty to Takilant was the same counterparty from the 3G 

license transaction which again was a VimpeiCom subsidiary that did not have any relationship 

to the Uzbek operations, but rather was a shell holding company for other operations. 

VimpelCom knew that under the laws ofUzbekistan a 4G license could be obtained directly 

from ACI and that licenses did not require up-front payment. 

30. To justify the payments made in connection with the licenses, Takilant supplied 

fake technical reports to provide the appearance that legitimate services had been provided. The 

fake technical reports were cut and pasted from online sources, publicly-available materials, and 

Unitel's own reports. VimpelCom accepted the fake technical reports without question as 

services for the payment to Takilant, which was intended to improperly benefit Local Partner A. 

31. Unlike the 3G license transaction, the 4G license transaction was not presented to 

the board ofdirectors or the Finance Committee of the board. Instead, the 4G license transaction 

was reviewed as part of a management process called B-FLAT (Business, Fiscal, Legal, 

Accounting, and Treasury). B-FLAT was designed to give functions outside of the business 

group visibility into significant transactions. While several members of B-FLAT questioned the 

structure of the 4G license transaction and raised concerns to more senior officers of 

VimpelCom, the transaction proceeded as proposed. Ultimately, the B-FLAT members approved 

the 4G license transaction and VimpelCom paid $30 million to Local Partner A through Takilant. 

Unitel recorded an intangible asset and a payable to Watertrail. 

32. In connection with the 4G license, VimpelCom also paid Local Partner A through 

Takilant using funds paid by Watertrail. Watertrail had no role in VimpeiCom's Uzbek 

operations in 20 II, and was simply used in this transaction by VimpelCom as a vehicle for these 

payments. 

8 




33. For several years, Vim pel Com was not able to build a 4G network in Uzbekistan. 

In early 2014, VimpelCom announced that it would take a $30 million impairment charge related 

to the 4G license. 

Payments to Local Partner A Usin& Takilant as a Fake vendor 

34. Following VimpelCom's re-purchase of Local Partner A's indirect ownership 

stake in Freevale and the 3G and 4G license transactions, new mechanisms were developed to 

pay Local Partner A. One of those mechanisms was to make payments to Local Partner A 

through Takilant as a fake vendor. 

35. Due to currency restrictions in Uzbekistan, Unite! had an excess of the local 

Uzbek currency and a deficit ofhard or foreign currency. In order to pay Local Partner A in U.S. 

dollars, a then senior VimpelCom manager along with then senior officers ofUnitel and then 

senior members of the CIS business unit structured a series of layered transactions. The layering 

of transactions was to disguise payments ultimately made to Local Partner A through Takilant as 

payments to vendors in the local Uzbek currency in exchange for fake or inflated construction 

and research services. The vendors provided the exchange of local Uzbek currency into United 

States dollars. The vendors subcontracted to affiliates of the vendors who in turn subcontracted 

(through financial intermediaries) to Takilant. The payments from vendors to affiliates and then 

affiliates to Takilant were denominated in United States dollars. The layered vendor structure 

provided a way for VimpelCom to reduce excess local Uzbek currency at Unite! while providing 

U.S. dollars to Takilant and thereby to Local Partner A. Using this process, VimpelCom 

improperly paid a further $10 million to Local Partner A through Takilant in both 2011 and 

2012. 

9 




Payments to Charities 

36; In addition to direct payments to Local Partner A through Takilant, VimpelCom 

also made what were ostensibly charitable payments in order to improperly influence Local 

Partner A. In connection with corruptly influencing Local Partner A, representatives of Local 

Partner A directed VimpelCom to make at least $502,000 in payments to charities directly 

affiliated with Local Partner A. 

37. Unitel had insufficient internal accounting controls and maintained inaccurate 

books and records regarding its charitable contributions. From 2009 and through 2013, Unitel 

provided approximately $38 million in sponsorships or charitable contributions in Uzbekistan. 

Despite the presence of red flags, these transactions were not vetted to ensure that they were not 

improperly benefitting government officials. 

FIRST CLAIM FOR RELIEF 


Unlawful Payments 


[Violations of Exchange Act Section 30A] 


38. Paragraphs 1 through 3 7 are re-alleged and incorporated by reference. 

39. As described above, VimpelCom corruptly offered, promised to pay, or 

authorized unlawful payments to one or more persons, while knowing that all or a portion of 

those payments would be offered, given, or promised, directly or indirectly, to foreign officials 

for the purposes of influencing their acts or decisions in their official capacity, inducing them to 

do or omit to do actions in violation of their official duties, securing an improper advantage, or 

inducing such foreign officials to use their influence with a foreign government or 

instrumentality thereof to assist VimpelCom in obtaining or retaining business. 

40. By reason of the foregoing, VimpelCom violated, and unless enjoined will 

10 




continue to violate, the anti-bribery provisions of Section 30A of the Exchange Act [ 15 U .S.C. § 

78dd-1]. 

SECOND CLAIM FOR RELIEF 


Corporate Books and Records 


(Violations of Section 13(b)(2)(A) oftbe Exchange Act] 


41. Paragraphs 1 through 37 are re-alleged and incorporated by reference. 

42. Section 13(b)(2)(A) of the Exchange Act requires each issuer with securities 

registered with the Commission pursuant to Section 12 [15 U.S.C. § 781] to make and keep 

books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the 

transactions and the dispositions of the assets of the issuer. 

43. As described above, VimpelCom, through its officers, employees, and agents, 

failed to keep books, records, and accounts, which, in reasonable detail, accurately and fairly 

reflected its transactions and the disposition of its assets. 

44. By reason of the foregoing, VimpelCom violated Section 13(b)(2)(A) ofthe 

Exchange Act [15 U.S.C § 78m(b)(2)(A)]. 

THIRD CLAIM FOR RELIEF 

Internal Accounting Controls 

[Violations of Section 13(b )(2)(B) of tbe Exchange Act] 

45. Paragraphs 1 through 37 are re-alleged and incorporated by reference. 

46. Section 13(b )(2)(B) of the Exchange Act requires issuers of registered securities 

to devise and maintain a system of internal accounting controls sufficient to provide reasonable 

assurances that, among other things, transactions are executed in accordance with management's 

general or specific authorization; transactions are recorded as necessary to permit preparation of 

II 




financial statements in conformity with generally accepted accounting principles or any other 

criteria applicable to such statements; transactions are recorded as necessary to maintain 

accountability for assets; and access to assets is permitted only in accordance with management's 

general or specific authorization. 

47. VimpelCom failed to devise and maintain such a system of internal accounting 

controls and was therefore unable to record the nature and purpose of, or prevent, the provision 

ofmonies and things ofvalue to government officials, as set forth above. 

48. By reason of the foregoing, VimpelCom violated Section 13(b)(2)(B) ofthe 

Exchange Act [15 U.S.C. § 78m(b)(2)(B)]. 

12 




PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that this Court enter judgment: 

a. 	 Permanently enjoining VimpelCom from violating Sections l3(b)(2)(A), 13(b)(2)(B), 

and 30A of the Exchange Act [15 U.S.C. §§ 78dd-1, 78m(b)(2)(A), and 78m(b)(2)(B)]; 

b. 	 Ordering Vim pel Com to disgorge ill-gotten gains wrongfully obtained as a result of its 

illegal conduct described herein, plus prejudgment interest thereon; and 

c. 	 Granting such other relief as this Court may deem just and appropriate. 

Dated: February 18, 2016 

Respectfully submitted, 

Paul G. Gizzi 
Securities and E change Commission 
200 Vesey St, Suite 400 
New York, New York 10281 

Charles E. Cain (not admitted in SONY) 
Tonia J. Tornatore (not admitted in SONY) 
Securities and Exchange Commission 
100 F St NE 
Washington, DC 20549 

Telephone: (212)336-0077 (Gizzi) 
E-Mail: [email protected] · 
Attorneys for Plaintiff 

13 


mailto:[email protected]