LafargeHolcim’s French unit has been placed under formal investigation over allegations the cement maker was “complicit in crimes against humanity” in Syria after admitting paying funds to ISIS and other terrorist groups.
On 28 June, French authorities announced that the company was to be formally investigated over sanctions violations, endangering the lives of others, financing terrorism, and more.
Investigators are also looking into who at the company knew about those payments and when and whether sanctions were violated. They are also looking at whether Lafarge can be held liable for neglecting its responsibilities.
A formal investigation means that prosecutors believe they have “serious or consistent evidence” that could result in prosecution, according to French law. The investigation, however, can still be dropped.
A panel of three judges in Paris ordered Lafarge to hand over €30 million (U.S. $34.9 million) to authorities as a security deposit ahead of the trial.
Eight former executives, including Lafarge’s former chief executive Bruno Lafont and the first CEO of the newly merged company, Eric Olsen, have already been charged with financing a terrorist group and/or endangering the lives of others over Lafarge’s activities in Syria between 2011 and 2015.
“This case must create a precedent for all the corporations that fuel armed conflicts. Access to justice for thousands of victims in war-torn countries, including the Syrian plaintiffs, depends on it.”
Sandra Cossart, Executive Director, Sherpa
Olsen resigned as LafargeHolcim’s first CEO on 24 April 2017 shortly after the company admitted it had paid armed groups to keep a factory operating in Syria. On the same day, the company’s own internal investigation into the scandal found that he “was not responsible for, nor thought to be aware of, any wrongdoings.” Olsen, however, was put under criminal investigation last December.
The allegations are the most serious against a French company in years (in 2014, France agreed to pay reparations to relatives of Jewish victims of the holocaust who were transported to Nazi death camps by French rail operator SNCF). French human rights group Sherpa, one of the plaintiffs in the case, said it was the first time that a parent company anywhere in the world had been charged with complicity in crimes against humanity because of the actions of its subsidiary.
In March 2017, the Swiss-French company admitted to using “unacceptable” measures to maintain operations at its then newly built cement factory in 2013 and 2014, which included paying terrorist groups.
At the time, however, the company suggested that the Syrian subsidiary acted independently and without the knowledge or consent of the board when making payments to high-risk contractors. Sherpa has refuted this. “The French parent company holds 98.7% of the subsidiary and was most of the time the source of all decisions it made,” it says.
In April 2017, the company made public the main findings of an independent report carried out by law firm Baker & McKenzie into the allegations, which the board had commissioned in 2016. The investigation confirmed that Lafarge’s Syrian subsidiary had provided funding to local armed groups in exchange for keeping the Jalabiya cement plant open and protecting employees.
Compliance weaknesses identified in Lafarge review
LafargeHolcim’s independent investigation released in April 2017 found the following control weaknesses in its Syrian subsidiary’s compliance program:
Improper payments related to Lafarge Cement Syria’s (LCS) security and supply chain;
Failure of line management to object to such payments being made, notwithstanding red flags;
Inadequate controls over individual expenses, discounts, and financial disbursements from LCS;
Inadequate review and oversight of third parties and joint venture partners engaged by LCS; and
Failure to detect and properly escalate improper payments made, and improperly recorded, in company accounts, or identify the same through group audit.
To detect, and hopefully prevent, such conduct in future, the company has said that it will carry out the following measures:
Improve compliance communications;
Embed comprehensive sanctions policies and procedures;
Adopt country-specific risk assessments;
Enhance restricted party screening;
Establish an Ethics, Integrity, and Risk Committee.
At the time, Syria was subject to EU sanctions imposed on President Bashar al-Assad’s government, which had lost control of large swathes of the country to various armed factions.
Sherpa says Lafarge paid close to €13 million (U.S. $15.2 million) to armed groups, including Islamic State militants, to keep operating in Syria from 2011-2015.
“This case must create a precedent for all the corporations that fuel armed conflicts,” says its director, Sandra Cossart. “Access to justice for thousands of victims in war-torn countries, including the Syrian plaintiffs, depends on it.”
Sherpa, alongside Berlin-based campaign group the European Center for Constitutional and Human Rights (ECCHR), is calling for a compensation fund to be set up to pay for the “moral and material damages” suffered by former employees (and their families) of Lafarge’s Syrian subsidiary.
In a statement, Lafarge said that the judicial investigation into the company “was expected given that several of its former managers have previously been placed under judicial investigation.”
Although Lafarge admits that the system of supervision of its Syrian subsidiary “did not allow the company to identify wrongdoings,” it says that it will appeal “against those charges that do not fairly represent the responsibilities of Lafarge”—though it does not specify what these might be.
The company is cooperating with French investigators and has handed over the independent report, along with more than 260,000 documents collected for the investigation. The company has also told French authorities that “unacceptable individual errors” were made.
LafargeHolcim’s chairman, Beat Hess, said in a statement: “Prior to the  merger the Lafarge Group had a comprehensive compliance program which was breached. We have further strengthened the compliance program and culture since the merger, to make sure that similar mistakes will not happen again. I believe our compliance culture is strong through our entire group and with our dedicated employees we will overcome individual wrongdoings.”