Alstom hit with largest foreign bribery fine in US legal history

9 January 2015


As the culmination of a widespread investigation that has been going on in some of its parts since 2008, French power company Alstom has been fined a record $772.3 million (£500m) by the US Department of Justice for bribery in foreign countries. Alstom will pay the fine and plead guilty to settle criminal charges in the USA that it channelled million of dollars in bribes through 'consultants' to win business in several countries around the world.
Alstom tried to conceal tens of millions of dollars in bribes by falsifying its books and claiming that the consultants it had used to deliver the bribes were were legitimate, the US Justice Department said in a statement. In reality they were hired to bribe officials in Indonesia, Saudi Arabia, Egypt, Taiwan, and the Bahamas, in a scheme that took place over about eleven years and involved paying more than $75 million to secure $4 billion in projects, gaining profits estimated at $300m the DOJ said.
"[The scheme] was astounding in its breadth, its brazenness and its worldwide consequences," said Deputy Attorney General James Cole at a press conference on 22 December.
The parent company pleaded guilty to two criminal counts and admitted to the charges in a federal court in Connecticut. It also pleaded guilty to criminal charges that it conspired to violate federal bribery laws. Alstom's US power and grid units have each entered into deferred prosecution agreements and admitted to conspiring to violate bribery laws, the Justice Department said, adding that internal emails and other information it obtained demonstrated the considerable extent to which company officials knew the bribes were illegal. For example in 2003 an Alstom employee in its fincance department sent an email saying she could not process an invoice for a consultant because there was no proof any services were rendered. A project manager then told her to stop sending such emails unless she "wanted to have several people put in jail" and instructed her to delete all emails about the topic.
Patrick Kron, Alstom's chief executive, commented: "There were a number of problems in the past and we deeply regret that. However, this resolution with the DoJ allows Alstom to put this issue behind us and to continue our efforts to ensure that business is conducted in a responsible way, consistent with the highest ethical standards." 
Alstom has surprised its investors by announcing that it will not be able to transfer the fines to GE, which is in the process of buying most of Alstom's power businesses for $15.15 billion (12.35 bn euros). The deal includes transferring Alstom's liabilities as part of the package, but Alstom investors had assumed that meant any related bribery costs would be GE's.
It is now apparent that similar investigations by other national authorities are ongoing. An Alstom unit and two of its employees (as yet un-named) have been charged by the UK's Serious Fraud Office in relation to bribery of officials in securing a contract for a power plant in Lithuania. This followed the arrest in March of three members of the UK board of Alstom, on suspicion of bribery and corruption, conspiracy to pay bribes, money laundering and false accounting in relation to overseas contracts in India. Poland and Tunisia. The SFO had been working with the Swiss Federal Police, as well as the Attorney's office and other local police forces in the UK. Although none of the three were charged at that time, the arrests marked the beginning of an extensive UK investigation.
And in Poland prosecutors have charged five people in a corruption case involving transport contracts won by Alstom, just a few days after the levy of theUS DOJ fines. Two ex-managers at Alstom Konstal - the firm's Polish subsidiary - and three former Warsaw municipal employees are suspected of links to three contracts for delivering 108 subway cars and 122 tramways to the Polish capital in 1998-2002, according to prosecutors. Prosecutors in the western city of Wroclaw have reported that French justice officials had been slow to co-operate in the investigation, which was launched in 2008.

 



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