Accused of corruption in several countries by the US Department of Justice, Alstom had pleaded guilty and signed an agreement for the investigation is closed. The amount of the fine was formalized, Monday, December 22: the French group will have to pay a fine of 772,290.000 dollars (630 million euros) in the United States.
The financial penalty is the largest ever imposed under US law on foreign bribery Practices (FCPA), was calculated nu Bloomberg last week, when the deal was announced by an anonymous source.
Alstom will be forced to support this fine although the US company General Electric has committed to bear all liabilities and risks associated with the energy division of the French group, it has agreed to buy. If the terms of it are well respected by both US subsidiaries of Alstom, the proceedings against him should be dropped after three years.
Preliminary hearing in London, January 5
A statement from the US Department of Justice, Alstom acknowledged that some of its officers and employees have paid bribes to officials in Indonesia, Egypt, Saudi Arabia, the Bahamas and Taiwan to win contracts, thus violating the FCPA.
Moreover, the British leadership Fraud (Serious Fraud Office, SFO) announced that a British subsidiary of Alstom and two former employees were accused of having paid under-the-table between 2002 and 2010 in relation with contracts for a power plant in Lithuania. A preliminary hearing is scheduled in London on 5 January.
The SFO had said in September that another subsidiary of the French group would have paid fraudulent commissions to win orders for the Delhi Metro and major works in Warsaw and Tunis between 2000 and 2006.
Alstom mired in corruption cases
For the American justice 2014 has been a good year, but less so for French companies. After BNP Paribas, who was sentenced in June to the highest fine ever imposed on a bank for violation of an embargo ($8.9 billion, or about €7.3 billion), Alstom has also beaten a record Monday, December 22, by agreeing to pay $772 million (€631 million) to the American justice in a corruption case.
The energy and transport group has announced it has reached an agreement with the Justice Department to close an investigation into alleged violations of US law on corruption. The unofficial announcement of the agreement was unveiled Tuesday, December 16. Alstom executives were accused of having paid in bribes to government officials in several countries to obtain contracts. In total, more than 75 million in kickbacks that were so paid in exchange for some $4 billion contracts worldwide, said American justice.
“The system of corruption persisted for over a decade and continents,” said James Cole, Assistant Attorney General, at a press conference in Washington. A system that “was amazing in its scope, its boldness and its consequences in the world,” he added. The subsidiaries of Alstom Indonesia, Saudi Arabia, Egypt, the Bahamas and Taiwan were involved.
An institutionalized system
“There have been a number of problems in the past and I deeply regret,” confessed Patrick Kron, CEO of Alstom. The group explained in particular have made the mistake of appealing to “external consultants paid by Alstom depending on the success of the projects they were held in support for internal sales teams,” while stressing that he had put end to these practices. The French group has falsified its accounts to hide these payments and when referring to these consultants in its internal notes, it used code names as “Mr Geneva”, “The Quiet Man” or “old friend”. An institutionalized system that was “Alstom way to win contracts,” said Leslie Caldwell, head of the criminal division at the Department of Justice.
This team carried out a sale for $118 million boilers for a power plant located Tarahan on the south coast of Sumatra. Justice was found that the group with the complicity of the Japanese trading company Marubeni, sent hundreds of thousands of dollars to Indonesian parliamentary officials and the public electricity company, NLP. The Japanese group agreed to work further upstream with the law and was fined minus 88 million.
Alstom pleaded guilty to violating US laws on corruption by having falsified documents and for not having implemented adequate controls to prevent this type of crime. An approach that allows it to avoid criminal proceedings.
As announced on Friday, December 19, at the general meeting of Alstom, which approved the purchase for $12.4 billion of its energy division by the US General Electric (GE), the amount of the fine imposed will be fully supported by the French group. “The agreement with the Justice Department will have no significant impact on the overall economics of the transaction with GE,” says Alstom.
GE will have none provided through with the procedures since Monday new charges against Alstom were revealed. The French group is pursued by the Serious Fraud Office (SFO), the UK body responsible for investigating the large financial crime. A preliminary hearing before a London court was held Monday morning. The case concerns Alstom Power Ltd, which would also have paid for bribes to win contracts in Lithuania between 2002 and 2010. Another survey of the SFO is also underway about transportation projects in India, Poland and Tunisia, conducted between 2000 and 2006.
US law against corruption
The fine imposed on Alstom aims to sanction the violation by the group’s Foreign Corrupt Practices Act (FCPA). The 1977 Act prohibits a corporation or an individual having legal ties with the United States to influence a person by paying money or rewards in other forms. While Alstom is not listed in the United States, the survey of justice is raised up one of its subsidiaries, based in Connecticut, and a bank account domiciled in Maryland which transited the famous bribes.