Alstom to Pay Record $772 Million in U.S. Bribery SettlementTom Schoenberg and David McLaughlin
Alstom SA pleaded guilty and agreed to pay a record $772 million to end a U.S. Justice Department investigation into bribes paid to win power-plant contracts in Indonesia and the Middle East.
U.K. authorities also charged another unit today for paying bribes in Lithuania. The U.S. fine is the largest criminal penalty paid to the Justice Department under the Foreign Corrupt Practices Act, eclipsing the $450 million paid by Siemens AG in
2008. Investigators had to build their case using informants and recorded phone calls when the French company refused to cooperate at first, prosecutors said.
“Alstom’s corruption scheme was sustained over more than a decade and across several continents,” U.S. Deputy Attorney General James Cole said at a press conference in Washington today. “It was astounding in its breadth, its brazenness and its worldwide consequences.”
Alstom Chief Executive Officer Patrick Kron said on Dec. 19 that the Levallois-Perret-based company will pay the fines connected to its energy businesses as its shareholders voted in favor of their sale to General Electric Co. Earlier, Alstom had said GE would assume the liabilities. The Fairfield, Connecticut-based manufacturer agreed in June to buy most of the assets for 12.4 billion euros ($15.2 billion), GE’s biggest acquisition ever, and the purchase should close next year.
From at least 2000 to 2011, Alstom paid tens of millions of dollars in bribes to win $4 billion in projects from state-owned companies in Indonesia, Egypt, Saudia Arabia, the Bahamas, and Taiwan, the U.S. said. The company earned about $300 million in profits from the scheme.
Alstom attempted to conceal the bribes by retaining consultants who actually acted as conduits for the payments to government officials, the U.S. said. Alstom falsified books and records to hide the payments and referred internally to the consultants using codes names such as “Mr. Geneva,” “Quiet Man,” and “Old Friend,” according to the government.
“Alstom’s corruption spanned the globe and was really its way of winning business,” Leslie Caldwell, the head of the Justice Department’s criminal division, said at the press conference.
Alstom fell 0.6 percent to 26.50 euros in Paris.
“There were a number of problems in the past and we deeply regret that,” Alstom’s Kron said in a statement, adding that the company has changed its compliance practices.
GE spokesman Dominic McMullan said the company is pleased that Alstom has resolved the issue, adding that “the plea agreement does not materially change the overall economics of the deal.”
The U.S. settlement won’t resolve corruption investigations by the U.K. and Brazil. The U.K. Serious Fraud Office charged Alstom Power Ltd. today for bribing agents in connection with contracts in Lithuania over an eight-year period. The SFO charged another Alstom unit, Alstom Network UK Ltd., in July with corruption in relation to transport projects in India, Poland and Tunisia.
The U.S. probe has centered on a $118 million contract to provide boiler services at a power plant in Tarahan, on the southern coast of Sumatra. Alstom executives, together with Marubeni Corp., a Japanese commodity-trading company, used middlemen to funnel hundreds of thousands of dollars to a member of Indonesia’s parliament and officials at Perusahaan Listrik Negara PT, a state-controlled electricity company known as PLN, according to court papers filed by the Justice Department in related cases.
Alstom pleaded guilty to two charges, one for violating bribery laws by falsifying records and the other for failing to have adequate controls, in Connecticut federal court.
The FCPA bans individuals and companies from making payments to foreign government officials to win or retain business. The 1977 law lets the U.S. government claim jurisdiction over non-U.S.-based companies whose shares are traded in U.S. markets or if any of the alleged fraud occurred in the U.S. The case against Alstom focused on its Connecticut unit and bribes wired through a bank account in Maryland. Its shares don’t trade here.
Several countries have opened probes into Alstom since 2004, when auditors for the Swiss Federal Banking Commission unearthed documents showing possible corrupt payments. Since then, the company has paid more than $53 million over claims its employees bribed officials in at least five countries.
Like Alstom, Marubeni, which pleaded guilty to bribery violations in March and paid an $88 million fine, also eventually agreed to cooperate.
Cases enforcing the FCPA have drawn attention in recent years for the magnitude of corporate penalties they command. Among the largest U.S. penalties for foreign bribery are KBR Inc.’s $579 million settlement in 2009 and Alcoa Inc.’s $384 million penalty earlier this year. Those cases included criminal and SEC penalties.
In addition to the $450 million Siemens paid to the Justice Department, it paid an additional $350 million to the U.S. Securities and Exchange Commission. Alstom isn’t subject to SEC scrutiny because its shares don’t trade in the U.S.