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VimpelCom (VIP) Securities Fraud Class Action


This securities class action lawsuit alleges that defendant VimpelCom made false and misleading statements about its business and prospects and also failed to disclose material facts concerning its payment of unlawful bribes in order to secure the company's access to Uzbekistan's telecommunications market and the fact that those actions led to probes and criminal investigations by the SEC, Dutch authorities and the U.S. Department of Justice.

What investors are part of this class action? The class period is currently defined as all purchasers of VimpelCom securities between June 30, 2011 and November 2, 2015, inclusive (the "Class Period"). VimpelCom's American Depositary Receipts (ADRs) trade on the NASDAQ under the ticker symbol "VIP."

Procedural status: This lawsuit was filed on November 4, 2015 and is captioned Kux-Kardos v. VimpelCom, LTD, et al. It was filed in the United States District Court for the Southern District of New York. Its civil docket number is 1:15-cv-08672. The lead plaintiff deadline is January 3, 2016.

Defendant VimpelCom, Ltd. is a Bermuda corporation with its principal executive offices located in Amsterdam, Netherlands. The company provides telecommunications services under various brand names in Italy, Russia, Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Armenia, Georgia, Kyrgyzstan, Laos, Algeria, Bangladesh and Pakistan. 

The plaintiff in this action purchased VimpelCom common stock during the Class Period and suffered damages as a result of federal securities law violations and false and/or misleading statements and material omissions committed by company officials. 

Annual and quarterly reports were filed by VimpelCom stating that with regard to its dealings in Uzbekistan, all actions were governed by that Republic's Law on Telecommunications which stated that all owners of such networks would have equal rights and enjoy equal protection guaranteed by the law and that the legislation imposed no restrictions on foreign investors. The statements also stated that the company's financial information was accurate and that any material changes to its internal control over financial reporting had been disclosed. However, it was not long before the truth began to be revealed and it was clear that these statements were materially false and misleading in that:

  • they did not disclose that VimpelCom had paid tens of millions of dollars to a company controlled by Gulnara Karimova, the daughter of Uzbekistan's president
  • these payments were unlawful bribes intended to secure VimpelCom's access to Uzkebistan's telecommunications market
  • statements regarding VimpelCom's business, operations and prospects lacked a reasonable basis.

On March 12, 2014, the company filed a report on Form 6-K revealing that it was facing investigations by the SEC and Dutch authorities related to its operations in Uzbekistan. On March 18 of that year, the company filed another report on Form 6-K stating that the company was also the focus of an investigation by the United States Department of Justice regarding the same subject matter. The authorites had specific interest in the company's dealings with Talikant, Ltd., a firm being widely investigated for bribery and money-laundering activities in Uzkbekistan. At this same time, the company announced that it anticipated significant costs would be incurred in responding to the requests for investigation and that it could not make assurances that the investigations would not lead to the conclusion that legal violations occured.

On March 21, 2015, the Organized Crime and Corruption Reporting Project published a report detailing how Karimova had extracted over $1 billion in bribes and controlled the telecommunications industry in Uzbekistan. VimpelCom alone was alleged to have paid Karimova at least $100 million. The non-profit watchdog also stated that the blatant means by which Karimova operated made it virtually impossible for those involved not to realize they were participating in an extortion and bribery scheme.

On August 13, 2015, post-market, it was announced that U.S. authorities had asked European counterparts to seize roughly $1 billion in assets related to a wide-ranging criminal probe of alleged corruption by VimpelCom and other firms for paying millions of dollars to enterprises controlled by Karimova to secure wireless spectrum in Uzbekistan. On November 3, 2015, VimpelCom announced that it had set aside $900 million for litigation costs in connection with the U.S. and Dutch investigations.

As a result of the preceding news and the November 3 disclosure, VimpelCom's ADRs continued their freefall, closing at $3.50, which represented significant losses to the plaintiff and similarly situated members of the proposed class. Plaintiff now requests that the defendants in this case pay damages sustained as a result of their conduct, along with pre- and post-judgment interest, reasonable attorney fees and all costs associated with bringing suit.

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