French power and transportation giant Alstom today pleaded guilty and agreed to pay a record $772 million criminal penalty to the Department of Justice to resolve charges over violations of the Foreign Corrupt Practices Act. If approved by the court next year, it will mark the largest foreign bribery penalty in the history of the Department of Justice.
The criminal fine resolves charges that Alstom paid tens of millions of dollars in bribes to government officials in several countries in exchange for energy contracts, including in Indonesia, Saudi Arabia, Egypt, the Bahamas, and Taiwan, Deputy Attorney General James Cole stated.
Alstom’s corruption scheme was "astounding in its breadth, its brazenness and its worldwide consequences," Cole stated. "And it is both my expectation—and my intention—that the comprehensive resolution we are announcing today will send an unmistakable message to other companies around the world: that this Department of Justice will be relentless in rooting out and punishing corruption to the fullest extent of the law, no matter how sweeping its scale or how daunting its prosecution.”
As part of the settlement, Alstom’s Swiss subsidiary, Alstom Network Schweiz AG (formerly Alstom Prom), also pleaded guilty to conspiring to violate the FCPA. Additionally, the company’s two U.S. subsidiaries—Alstom Power and Alstom Grid—have entered into deferred prosecution agreements and admitted that they conspired to violate the anti-bribery provisions of the FCPA.
In Indonesia, for example, Alstom, Alstom Prom, and Alstom Power paid bribes to government officials – including a high-ranking member of the Indonesian Parliament and high-ranking members of Perusahaan Listrik Negara, the state-owned electricity company in Indonesia – in exchange for assistance in securing several contracts to provide power-related services valued at approximately $375 million. In total, Alstom paid more than $75 million to secure $4 billion in projects around the world, with a profit to the company of approximately $300 million, according to the Justice Department.
Alstom and its subsidiaries also attempted to conceal the bribery scheme by retaining consultants purportedly to provide consulting services on behalf of the companies, but who actually served as conduits for corrupt payments to the government officials.
The plea agreement cites many factors considered by the Justice Department in reaching the appropriate resolution, including:
Alstom’s failure to voluntarily disclose the misconduct even though it was aware of related misconduct at a U.S. subsidiary that previously resolved corruption charges with the department in connection with a power project in Italy;
Alstom’s refusal to fully cooperate with the Justice Department’s investigation for several years;
The breadth of the companies’ misconduct, which spanned many years, occurred in countries around the globe and in several business lines, and involved sophisticated schemes to bribe high-level government officials;
Alstom’s lack of an effective compliance and ethics program at the time of the conduct; and
Alstom’s prior criminal misconduct, including conduct that led to resolutions with various other governments and the World Bank.
Alstom’s criminal penalty overshadows the $450 million criminal penalty that German electrical and engineering giant Siemens reached with the Justice Department in 2008. In all, Siemens paid $800 million to U.S. and German enforcement authorities, including $350 million to the Securities and Exchange Commission, to resolve charges that it paid a staggering $1.4 billion in bribes to government officials in Asia, Africa, Europe, the Middle East, and the Americas.
To date, the Justice Department has announced charges against five individuals, including four corporate executives of Alstom and its subsidiaries, for alleged corrupt conduct involving Alstom:
Frederic Pierucci, Alstom’s former vice president of global boiler sales, pleaded guilty last year to conspiring to violate the FCPA and a charge of violating the FCPA for his role in the Indonesia bribery scheme.
David Rothschild, Alstom Power’s former vice president of regional sales, pleaded guilty in 2012 to conspiracy to violate the FCPA.
William Pomponi, Alstom Power’s former vice president of regional sales, pleaded guilty in July to conspiracy to violate the FCPA.
Lawrence Hoskins, Alstom’s former senior vice president for the Asia region, was charged in a second superseding indictment last year, and is pending trial in the District of Connecticut in June 2015.
In addition, the U.K. Serious Fraud Office on Dec. 22 brought fresh charges against Alston Power and two of its former employees for paying bribes from 2002 through 2010 to officials of state-controlled energy company AB Lietuvos Elektrine to secure a contract in Lithuania, the Financial Times reported.