Telefônica Brasil recently agreed to pay the U.S. Securities & Exchange Commission (SEC) more than $4 million to settle charges brought against the organization for allegedly violating the Foreign Corrupt Practices Act (FCPA).
In March 2012, Telefônica Brasil, whose American Depositary Receipts (ADRs) are traded in the United States, purchased 1,860 tickets for the 2014 World Cup from a FIFA vendor for approximately $5.1 million. The SEC determined most tickets were distributed to government officials “significant to the company’s business interests.” But the SEC also charged Telefônica Brasil with violating the FCPA by giving tickets to officials who may have merely “opened doors” for new business.
According to the SEC Order, while Telefônica Brasil had a code of ethics that prohibited bribery, it "lacked internal accounting controls sufficient to implement or maintain these policies." The SEC Order also states Telefônica Brasil's records failed to properly account for the purchase of the tickets, inaccurately describing their purchase and related hospitality as being for "general advertising and publicity purposes."
The Telefônica Brasil case underscores the significant risks involved with providing any gifts and hospitality to foreign government officials, regardless of actual or reported intent. It also stresses the absolute need for internal controls and accounting practices that help make policy reality.
To learn more about the Telefônica Brasil case, and the compliance lessons your organization’s conduct risk management team can glean from it, please consider reading a recent article from JD Supra.