Date: Nov. 8, 2024 Contact: newsroom@ci.irs.gov Damian Williams, United States Attorney for the Southern District of New York; Nicole M. Argentieri, Principal Deputy Assistant Attorney General for the Criminal Division of the U.S. Department of Justice (“DOJ”); Kareem Carter, Executive Special Agent in Charge of the IRS Criminal Investigation Washington, D.C. Field Office; and, Derek W. Gordon, Special Agent in Charge of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”) Washington, D.C., Field Office, announced today 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 DOJ 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). U.S. Attorney Damian Williams said: “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. Intermediaries then funneled the bribe payments through U.S. correspondent bank accounts. This Office will not tolerate the use and abuse of the U.S. financial system to enrich corrupt foreign officials and those who maintain their market position by appeasing them.” Principal Deputy Assistant Attorney General Nicole M. Argentieri said: “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. Telefónica Venezolana chose to support a corrupt regime to circumvent the difficulties of conducting legal business in Venezuela. This resolution is yet another example of the Justice Department’s commitment to fight corruption and hold companies accountable for their criminal conduct.” IRS-CI Executive Special Agent in Charge Kareem Carter said: “This case is an example of the IRS-CI and our law enforcement partners’ relentless effort to fight corruption and protect United States interests. We are committed to pursuing investigations into corporate fraud in an effort to protect consumers from bearing the costs associated with criminal activity.” HSI Executive Associate Director Katrina W. Berger said: "Telefónica Venezolana engaged in a complex and criminal financial fraud scheme, in which they bribed Venezuelan government officials to obtain access to U.S. dollars. Thanks to the cooperative efforts of HSI, IRS Criminal Investigations, and the Department of Justice, the perpetrators of this conspiracy will be forced to pay for their illicit actions. HSI will continue to collaborate with our law enforcement partners, at home and overseas, to investigate and bring to justice any corporations engaging in such financial crimes.” 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 that 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 DOJ Criminal Division’s Fraud Section and 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 also 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 Department reached this resolution with Telefónica Venezolana based on a number of factors, including, among others, the nature and seriousness of the offense. 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 U.S. available for interviews in the U.S.; 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. Telefónica Venezolana also engaged in timely remedial measures, including: disciplining certain employees involved in the relevant misconduct or that were otherwise made aware of the misconduct, including terminating employees; strengthening its anti-corruption compliance program by building and empowering an independent compliance function, appointing a chief compliance officer with direct access to the Audit Committee of the Board of Directors, and investing in additional compliance resources throughout its global operations; overhauling its review and approval process for transactions with non-standard pricing, including by ensuring that the compliance function reviews all such transactions globally; reviewing, enhancing, and testing its broader internal controls for pricing and other transactions with the assistance of a forensic accounting firm; strengthening processes for vetting, engaging, and monitoring third parties, including implementing additional controls concerning payments to third parties through a proprietary software tool; and establishing risk assessment and audit processes to regularly review and update the compliance program and otherwise mitigate business risks. In light of these considerations, as well as Telefónica Venezolana and Telefónica’s prior history, which includes a resolution involving a subsidiary of Telefónica, Telefónica Brasil S.A., in an action brought by the Securities and Exchange Commission in 2019 for alleged violations of the accounting provisions of the FCPA, the criminal penalty calculated under the U.S. Sentencing Guidelines reflects a 20% reduction off the fifth percentile above the low end of the otherwise applicable guidelines fine range. The IRS-CI and HSI are investigating the case as part of the IRS Global Illicit Financial Team in Washington, D.C. The case is being prosecuted by Assistant U.S. Attorney Jilan J. Kamal of the Southern District of New York; Senior Litigation Counsel Nicola Mrazek and Trial Attorney Abdus Samad Pardesi of the Criminal Division’s Fraud Section. The Justice Department’s Office of International Affairs and authorities in Panama, Switzerland, and Luxembourg provided assistance in this matter. IRS-CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. IRS-CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.
