Corruption

Alstom to Plead Guilty and Pay U.S. a $772 Million Fine in a Bribery Scheme

By DANIELLE IVORYDEC. 22, 2014

The French industrial giant Alstom has agreed to plead guilty and pay a $772 million penalty to the United States in a bribery investigation by the Justice Department.

Alstom, an energy and transportation company, had been under investigation in a plot involving tens of millions of dollars in bribes paid to government officials in Indonesia and other countries to win power contracts. The criminal penalty, announced Monday, was the largest ever levied by the United States for foreign bribery.

“Alstom’s corruption scheme was sustained over more than a decade and across several continents,” said James Cole, deputy attorney general. “It was astounding in its breadth, its brazenness and its worldwide consequences.”

The Justice Department said Alstom paid more than $75 million in bribes from 2000 to 2011 to secure $4 billion in contracts around the world, which led to profits of about $300 million. Alstom admitted that its executives and other employees had paid bribes to government officials and falsified records in connection with power contracts in countries including Egypt, Indonesia and Taiwan.

“There were a number of problems in the past,” said Patrick Kron, Alstom's chief executive, “and we deeply regret that.”  CreditStephane Mahe/Reuters

“There were a number of problems in the past, and we deeply regret that,” Patrick Kron, Alstom’s chief executive, said in a statement on Monday. “However, this resolution with the D.O.J. 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.”

The Justice Department said that as part of the scheme, for instance, in Indonesia, the company had bribed a high-ranking member of the Parliament and top officials at the state-owned electricity company Perusahaan Listrik Negara. The member of the Indonesian Parliament was convicted in Indonesia of accepting Alstom bribes and is serving a three-year prison sentence.

Alstom tried to hide its bribery scheme by using consultants to serve as conduits for payments to officials. Alstom gave some of these individuals code names, like “Mr. Geneva,” “Quiet Man” and “Old Friend,” according to internal company documents cited by the Justice Department.

When some officials expressed concern that one consultant had provided only pocket money, Alstom retained a second consultant to ensure that the officials were satisfied, recounted Leslie Caldwell, assistant attorney general. In Saudi Arabia, Alstom retained at least six pseudo-consultants, including two close family members of high-ranking government officials, to bribe officials at a state-owned electricity company to secure about $3 billion in contracts.

At one point, a member of Alstom’s finance department sent an email that questioned an invoice for “consultant services” tied to a contract in Egypt. She was informed that her inquiry could have “several people put in jail” and was told to delete all previous emails regarding the consultant, Ms. Caldwell said.

Under the agreement with the federal government, Alstom pleaded guilty to violating the Foreign Corrupt Practices Act by falsifying its books and records and failing to put adequate internal controls into effect. A Swiss unit pleaded guilty to conspiring to violate the anti-bribery provisions of the act.

Its American subsidiaries, Alstom Power and Alstom Grid, entered into deferred prosecution agreements, admitting that they had conspired to violate the act. A significant part of the bribery plot was carried out in Windsor, Conn., where Alstom Power has headquarters, the Justice Department said.

The Justice Department has announced charges against five individuals in connection with the bribery scheme, including four corporate executives of Alstom. The agency said the company had refused for several years to cooperate with its investigation. However, after the department publicly charged several Alstom executives, the company began providing more thorough assistance.

Mr. Cole added that the Justice Department’s action would send a message that it would 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.”

The case was investigated by the F.B.I.’s Washington field office. The bureau said it was creating new squads in New York, Washington and Los Angeles to investigate international corruption.

In further legal woes for the French conglomerate, a British subsidiary, Alstom Power Ltd., was charged on Monday with bribing officials linked to a Lithuanian energy project over an eight-year period, according to the Serious Fraud Office of Britain.

Two former Alstom employees, Nicholas Reynolds and John Venskus, have also been charged with conspiring to bribe an official and offering a bribe, according to court documents.

This year, British authorities also brought charges against Alstom Network UK, another unit, over corruption accusations linked to transport projects in Poland, Tunisia and India.

In June, Alstom agreed to sell most of its energy business to General Electric. The French company said it would not be able to transfer its fine over bribery allegations to G.E.

Source: http://www.nytimes.com/2014/12/23/business/alstom-plead-guilty-bribery-us-justice-department.html?_r=2