Telenor admits to weak management

Bookmark and Share

Large Norwegian telecoms firm Telenor was back in the media glare on Friday, after an internal investigation into its handling of possible corruption revealed some serious management “weaknesses.” Telenor has shared its findings with government officials and state economic crime unit Økokrim, and two top executives who were suspended last fall have been terminated.

Telenor's new CEO seems eager to clean up the mess created by Telenor's investment in VimpelCom, and VimpelCom's expansion into Uzbekistan, which has prompted a major corruption investigation. PHOTO: Telenor

Telenor CEO Sigve Brekke called Friday a “challenging day” for the company, and said the company had to “face up to the criticism” and learn from it. PHOTO: Telenor

Telenor announced Friday morning that it had received the final report it had commissioned on how the company handled its part-ownership in VimpelCom, the Russian-controlled mobile phone firm that already has admitted to serious corruption in connection with its operations in Uzbekistan. The report, prepared by the accounting, consulting and legal firm Deloitte Advokatfirma in Oslo, did not uncover any actual corrupt acts by Telenor employees, but it did “uncover internal weaknesses” within Telenor.

Telenor’s new board leader Gunn Wærsted was quick to stress Deloitte’s conclusion about the apparent lack of direct involvement in the corruption at VimpelCom. “But it also points to weaknesses in (Telenor’s) organizational structure, communication and leadership in this matter,” Wærsted stated in a press release issued by Telenor Friday morning. “This is serious.”

Wærsted went on to claim that Telenor’s board and new top management “recognize that we must improve how we work … there should never be any doubt that we in Telenor are fully compliant with our ethical guidelines.”

Ignored warning signs, failed to pass them on
Telenor has faced questions and harsh criticism for the past several years for allegedly ignoring several warning signs of the corruption at VimpelCom. An internal whistleblower at Telenor has earlier complained, also to government officials, that little action was taken in response to the warnings. Telenor now admits that when the unidentified “person” raised concerns as far back as 2011 of potential corruption in Telenor and to Telenor’s nominated board members at VimpelCom, they were not shared with Telenor’s chief executive at the time, Jon Fredrik Baksaas, until March 2014. The board of directors was not informed until December 2014, while government officials who oversee the state’s own large stake in Telenor were not informed until last October.

That’s when the Telenor/VimpelCom scandal finally commanded full attention at the highest levels of government power in Norway, even though the questions and concerns had been simmering in local media for years. There’s been widespread suspicions that not only top Telenor officials but also earlier government officials failed to ask questions themselves or respond to warnings. Baksaas retired as CEO just as the scandal bubbled to the surface, and Trade Minister Monica Mæland fired Telenor’s former chairman Svein Aaser last fall, mainly because he had not informed her of the corruption concerns earlier and she thus lost confidence in him.

Telenor's Chief Financial Officer Richard Aa was also suspended. PHOTO: Telenor

Terminated: Telenor’s Chief Financial Officer Richard Olav Aa. PHOTO: Telenor

At least two more heads were rolling on Friday. Telenor’s Chief Financial Officer Richard Olav Aa and its top legal officer, General Counsel Pål Wien Espen, were relieved of their duties after Telenor “reached an agreement of resignation” with each of them. Both had been put on paid leave last fall, when the Deloitte investigation began.

Terminated: Telenor's General Counsel Pål Wien Espen. PHOTO: Telenor

Terminated: Telenor’s General Counsel Pål Wien Espen. PHOTO: Telenor

Telenor announced that two other top executives who also were suspended, Fridtjof Rusten and Ole Bjørn Sjulstad, would be returning their jobs, apparently after being exonerated by the Deloitte probe.

It was Aa and Espen who received the whistleblower’s concerns over payments made by VimpelCom to a postbox company registered in Gibraltar that later was tied to the daughter of Uzbekistan’s dictator. Newspaper Dagens Næringsliv (DN), which first broke the news in Norway about Telenor’s questionable monitoring of VimpelCom, reported on Friday that while neither Aa nor Espen forwarded the concerns to former CEO Baksaas, they disagreed strongly over who was responsible. Espen, though, said he should have made sure Baksaas was aware of them. Espen also told DN that he was offered another position at Telenor, but felt it was best to continue his career elsewhere.

Aa, meanwhile, issued his own press release on Friday, in which he complained that Deloitte raised questions in its report about some evaluations he made after a board meeting in 2013, without clarifyig what they were about. “The decisions I made after that meeting were based on what I knew at the time, and given the circumstances at the time, I still think my decisions were correct,” Aa wrote.

Owning up to mistakes
Sigve Brekke, who took over for Baksaas as Telenor’s new CEO late last summer, said the company “acknowledged” that it had been “unsuccessful in handling an important concern according to Telenor’s ethical standards.” Even though Telenor’s internal whistleblower was ignored nearly five years ago, Brekke stated on Friday that it was “good to see that a Telenor employee noticed unacceptable practices and spoke up about them.”

The company has, meanwhile, reported suspicions of financial crimes and “possible misconduct in other parts of the business” to local police, including questions surrounding some leasing agreements in Thailand. Telenor declined to go into detail, citing requests from local authorities.

Telenor has now also briefed both Norwegian government authorities on the contents of Deloitte’s probe and shared it with Norway’s white-collar crime unit Økokrim, which already has been involved in the VimpelCom investigation and in the arrest last year of Telenor’s top man at VimpelCom, Jo Lunder. He was later released.

Telenor also claimed it was implementing several changes to strengthen its governance and compliance. They include closer monitoring of subsidiaries in areas such as ethics and risk, and new lines of reporting for internal audit and compliance directly to the CEO and the board.

“For all of us at Telenor, this is a challenging day,” Brekke stated, adding that it was “hard” to see this “very difficult and complex case” unfold in public.

“But we have to face up to the criticism and learn from it,” said Brekke, who faced questions himself last fall when he was found to have embellished his own CV. “We take the findings seriously and will use this case to learn and improve.”

newsinenglish.no/Nina Berglund