Spanish phone giant Telefónica to pay $85M to resolve US probe of Venezuelan bribery scheme

WASHINGTON — Spain’s largest telecommunications operator will pay more than $85 million to resolve a U.S. fairness Department investigation into a scheme to bribe Venezuelan officials with a lavish Caribbean vacation and expensive watches.

The agreement with Telefónica S.A. announced Friday is the second period that the telco giant has faced bribery accusations in the U.S. after it was ordered in 2019 to pay a $4.1 million penalty to the stocks and bonds and trade fee for providing tickets to the FIFA globe Cup for foreign officials it was seeking to influence.

The latest bribery scheme started around 2014, when a subsidiary of Telefónica bribed two Venezuelan officials to participate in an auction that allowed it to get U.S. dollars in trade for Venezuelan bolivars, fairness Department officials said.

Telefónica’s Venezuelan subsidiary bought equipment at inflated prices from unnamed multinational equipment suppliers, who through intermediaries then paid the bribes on its behalf in an attempt to hide the illegal scheme, prosecutors said.

In trade, Telefónica received over $110 million in money auctions that were then the only way for foreign companies to get around strict foreign trade controls designed to curb fund flight and repatriate returns in bolivars decimated by years of triple-digit expense boost. The amount represented about 65% of the $172 million awarded to telecommunications companies that year, prosecutors said in court filings in Manhattan.

“Telefónica Venezolana chose to back a corrupt regime to circumvent the difficulties of conducting legal business in Venezuela,” said loan amount Deputy Assistant Attorney General Nicole Argentieri, who leads the fairness Department’s Criminal Division.

According to court records, a elder executive at Telefónica was summoned to a conference in May 2014 in which two unnamed officials informed the executive that Telefónica would require to pay a “fee” on any funds awarded in the money auction.

Some of the proceeds from the scheme were used to fund a $500,000 vacation for one of the officials in Saint Barthelemy in the French-speaking Caribbean. While there, another $605,000 was spent on luxury watches and jewelry for the official and their spouse.

The subsidiary is charged in U.S. federal court with conspiracy to violate the Foreign Corrupt Practices Act but will avoid prosecution under an agreement with the fairness Department if it follows sure conditions.

Telefónica has been operating in Venezuela, under the Movistar brand, for two decades, one of 12 countries, most in Latin America, where it has a presence. It currently has 8 million wireless customers in the country.

Telefónica S.A. officials did not immediately respond to an email seeking comment Friday.

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AP writer Joshua Goodman in Miami contributed to this update.