Millicom FCPA Settlement, Part II

Today we return to that FCPA enforcement action last week against Millicom, which paid $118.2 million to settle criminal charges of bribery and corruption in Guatemala in the 2010s. The filings in the case have been unsealed, and they raise a few points worth compliance officers’ attention.

First, a quick recap for those who missed our previous post on the case. Millicom is a telecommunications firm with global headquarters in Luxembourg. It has a sub-headquarters in Florida, to help the company manage its cellular phone business across Latin America, which does business under the TIGO brand. Last week, Millicom agreed to a $60 million criminal penalty, $58.2 million in disgorged profits, and a two-year DPA; all to settle charges that its Guatemalan subsidiary Comunicaciones Celulares (Comcel) paid bribes to government officials there in the 2010s.

This case was news because the Trump 2.0 Administration had declared back in June that it would adopt a new, more constrained appetite for FCPA prosecutions — and yet, here’s Millicom, with a significant criminal penalty, a DPA, mandatory progress reports on improvements to the company’s compliance program, and even a requirement for the CCO and CEO to certify the effectiveness of the compliance program at the end of the DPA term.

So how do we square this quite traditional FCPA enforcement action with those new enforcement priorities, and with President Trump’s well-known hatred of the FCPA generally?

As always with corporate enforcement, the answer depends on the specific facts of the case. Which brings us to the case documents unsealed late last week.

The Cast of Characters

The central story in this case is Comcel, more commonly known as TIGO Guatemala, the joint venture between Millicom and a local business partner in Guatemala. As the statement of facts in the case depicts, this was a rotten arrangement for Millicom that gave it 55 percent ownership of TIGO but not any operational control. The local partner with daily operational control then engaged in long-running and pervasive bribery.

That local partner was Mario López Estrada, telecommunications minister for Guatemala in the 1980s and 1990s, when Comcel was still a state-owned enterprise. The government privatized Comcel in the early 1990s. Estrada left government at the same time, acquired a stake in Comcel, and subsequently built up a 45 percent share in the business. Estrada died in 2023 at the age of 84, the richest man in Guatemala.

The Justice Department identifies Estrada only as “Shareholder 1” in the statement of facts, but that person is clearly Estrada and he “exercised substantial control” over TIGO Guatemala throughout the 2010s when the bribery took place. Two conspirators with Estrada were Acisclo Valladares Urruela, a senior executive at TIGO at the time; and Alvaro Estuardo Cobar Bustamante, a banker in Guatemala. U.S. authorities hit both men with money-laundering charges during the first Trump Administration and they were sentenced to prison.

Those three, along with another, unnamed TIGO senior executive and a board director, engaged in the corruption payments.

Lots of Money, Including Drug Proceeds

The statement of facts describes several bribery schemes worth studying in detail so we can better understand how the Justice Department arrived at the settlement terms for the case.

First, starting in 2012, employees within Estrada’s business empire delivered cash directly to Valladares — literally bags of cash, in duffel bags, often delivered to Valladares by helicopter. Valladares then passed along the cash to Guatemalan lawmakers as bribes in exchange for favorable legislation. Sometimes he delivered the bags of cash to them; sometimes they came to him and picked up the cash at TIGO offices. Either way, it was a lot of money ($18.3 million from 2012 to 2014) and it was done with Estrada’s knowledge and participation.

In 2013, however, one of the helicopters full of cash had to make an emergency stop at a Guatemalan military base. The base commander witnessed TIGO henchmen unloading the bags of cash and reported it to Guatemalan authorities, who launched an investigation. That led Estrada and Valladares to decide they needed a different bribery scheme.

That second bribery scheme took form in early 2014. Long story short, Estrada engineered a financial transaction known as a put-call option that gave Millicom the right to buy out Estrada’s 45 percent stake in TIGO sometime in the future. Millicom ultimately did exercise that option in 2022, buying out Estrada for $2.2 billion — but in the immediate term, the put-call option had Millicom pay Estrada a $15 million fee. Estrada subsequently used those proceeds for bribes.

The third scheme happened from 2014 into 2018. Valladares was looking for more bribe money, and reached out to the banker we mentioned before, Cobar. The pair orchestrated a series of falsified or back-dated contracts, shell companies, and fraudulent invoices to legitimize financial transfers. Those maneuvers put at least another $1.3 million in Valladares’ hands — but that money came from known drug traffickers.

Essentially, Cobar was helping drug lords to launder their money; and one idea was to launder the money by delivering it to Valladares, who used it to fund bribes. (So does that even count as laundering dirty money, when it’s just used for another dirty purpose?) Anyway, that’s the drug connection here.

Back to FCPA Enforcement

So in summary, this case has (a) a long-running bribery scheme involving large amounts of money; (b) orchestrated by senior officers of the business, TIGO Guatemala; and (c) those funds were commingled with proceeds of drug cartels.

Now go back to the FCPA enforcement priorities announced by deputy attorney general Todd Blanche in June. Blanche listed four factors that prosecutors would consider when deciding whether to proceed with a case.

• Whether the FCPA offense involves drug cartels;

• Whether the offense undermines the competitiveness of U.S. businesses overseas;

• Whether the offense somehow threatens national security, such as when the corruption is in defense or critical infrastructure sectors;

• Whether the misconduct is egregious, such as involving large amounts of money and sophisticated bribery schemes.

Of those four criteria, clearly the most applicable are the first (drug cartels) and the fourth (egregious misconduct). You can see why prosecutors would pursue this case even today, with the Trump 2.0 Administration’s diminished interest in FCPA enforcement.

The larger question for compliance officers is whether this case is an example of future enforcement, because there are similar cases still in the enforcement pipeline; or more like the last echo of a prior FCPA enforcement appetite that no longer exists.

You know what would help us understand that question? A Justice Department official (such as Blanche) giving a speech at a compliance conference, such as ACI’s annual FCPA Compliance Conference, coming up in early December in Washington, D.C. Perfect opportunity for the Justice Department to share some of its thinking.

As it so happens, Matthew Galeotti, acting head of the Criminal Division, was just added to the speaker lineup this morning. Let’s see if he actually shows, and what he might say.