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Russian mobile firm MTS says will defend itself in US amid Uzbek business probe

"The Company is reviewing the allegations and intends to defend its interests," MTS said

MOSCOW, March 21. /TASS/. Russian mobile operator MTS said it would defend its interests after a collective lawsuit was filed against the company in the United States by investors, who accuse it of illegal actions in Uzbekistan.

In an ad hoc notice, released via the US Securities and Exchange Commission, the company said that "a proposed class action complaint… has been filed in the United States District Court for the Eastern District of New York against the Company and certain of its managers alleging certain securities law violations relating to the Company’s recently announced resolution of US government investigations."

"It is possible that additional similar complaints will be filed. The Company is reviewing the allegations and intends to defend its interests," the company said.

In March, MTS has struck an amicable deal with US regulators in the Uzbek corruption probe and will pay a penalty of $850 million under the so-called Uzbek business probe.

The US Department of Justice has been conducting probes since 2014 to investigate corruption deals, in which companies are suspected of being involved, including Vimpelcom (now Veon Ltd.) and MTS. Specifically, the probes deal with the bribes given to structures linked with the Uzbek president’s daughter, Gulnara Karimova. The US authorities assert that Vimpelcom and MTS used a network of front companies and fictitious contracts on consulting services to funnel bribes to the close relatives of Uzbekistan’s President Islam Karimov in exchange for gaining access to the country’s telecommunications market. Under this probe, Vimpelcom has already paid out $795 million in fines.

In late 2014, MTS gained 50.01% in the authorized capital of Universal Mobile Systems (UMS, MTS’s subsidiary in Uzbekistan) for free, after settling claims and signing an amicable agreement with the government of Uzbekistan, which had revoked the license of MTS’s previous subsidiary Uzdunrobita in 2012. The remaining 49.99% went to the Center of Radio Communications, Radio Broadcasting and Television under the Uzbek Ministry for the Development of Information Technologies and Communications. In August 2016, MTS sold its entire stake in UMS to the Center of Radio Communications, Radio Broadcasting and Television for $1; however, the company stressed that its decision was not related to the US Department of Justice’s probe.