Power giant Alstom to pay record $772 million to settle bribery charges
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Version 0 of 1. A French industrial titan whose key assets were bought this year by General Electric pleaded guilty Monday to years of international bribery and agreed to pay a $772 million criminal fine, the largest ever levied under a federal foreign anticorruption law, Department of Justice officials said. The landmark penalty against power and railway giant Alstom ended a years-long investigation into widespread corruption that Deputy U.S. Attorney General James M. Cole called “astounding in its breadth, its brazenness and its worldwide consequences.” To win $4 billion in lucrative power-plant contracts, Alstom paid more than $75 million in bribes through “sales consultants” to government officials in Egypt, Indonesia, Saudi Arabia, the Bahamas and Taiwan, investigators said. Alstom and its subsidiaries’ employees, many of whom worked in an office in Windsor, Conn., covered up more than a decade of payoffs through sham records and falsified books, Justice Department records show. GE said it would assume any official penalty costs when it agreed earlier this year to buy Alstom’s power division for about $15 billion, but Justice Department officials stipulated that GE not be held liable for the fines. GE’s takeover was approved by Alstom shareholders Friday, and the deal is expected to close next year. The fine sets a new record for penalties under the Foreign Corrupt Practices Act of 1977, which bans bribing a government official to gain an advantage in winning business. The law has been cited in a number of federal corruption probes that deal with foreign bribes, even if a company only has a subsidiary connection in the United States. Assistant Attorney General Leslie R. Caldwell called the Alstom case “a significant milestone in the global fight against corruption.” Alstom and its subsidiaries’ bribes reached some of the highest levels of foreign government, including powerful members of Indonesia’s parliament and state-owned electricity firm, investigators said. In Saudi Arabia, Alstom employed a half-dozen consultants to dole out kickbacks, including two close family members of Saudi government heads. When government authorities were underwhelmed by their bribes, Alstom would dispatch a second consultant to, as Justice Department investigators said, “ensure that the officials were satisfied.” The bribes helped the company obtain about $300 million in profits. To retain secrecy, investigators said, Alstom and its subsidiaries called its hand-off consultants by code names such as “Mr. Geneva,” “Mr. Paris,” “Quiet Man” and “Old Friend.” When someone on Alstom’s finance team sent an e-mail questioning a consultant’s invoice from a project in Egypt, she was commanded to delete all previous e-mails and told her question could have “several people put in jail.” Justice officials said Alstom was uncooperative in the investigation, failing to disclose key information, until the department announced bribery charges against Alstom executives three years after its probe began. The company has since helped investigators prosecute other firms. Three of the four Alstom executives whom U.S. investigators charged with bribes — Frederic Pierucci, David Rothschild and William Pomponi — have pleaded guilty. A fourth executive, Lawrence Hoskins, is awaiting trial set for next year. The Indonesian parliament member is serving three years in prison after being convicted in Indonesia of accepting Alstom kickbacks. A general manager of a company working for Egypt’s state-owned electricity firm pleaded guilty this month in federal court in Maryland to charges including mail and tax fraud, and in a plea deal agreed to serve 42 months in prison and forfeit $5.2 million. Alstom said in a statement Monday that the company had taken a number of measures to improve its conduct, including no longer hiring what the company called “external success fee based Sales Consultants.” “There were a number of problems in the past and we deeply regret that,” Alstom chief executive Patrick Kron said. “However, this resolution with the DOJ allows Alstom to put this issue behind us and to continue our efforts to ensure that business is conducted in a responsible way.” Alstom pleaded guilty to two counts under the anticorruption act — falsifying records and failing to implement internal controls — in a Monday filing with the U.S. District Court for the District of Connecticut. A final sentencing hearing is scheduled for June. Alstom’s British power unit and two employees were also charged Monday with bribing officials at a Lithuanian state-run energy company, British fraud investigators said. Alstom’s Swiss subsidiary, Alstom Network Schweiz, also pleaded guilty to conspiring to violate the anti-bribery law. Two U.S. subsidiaries, Connecticut-based Alstom Power and New Jersey-based Alstom Grid, agreed to deferred prosecution agreements on similar charges. The case represents only the latest in a string of globe-spanning corruption cases involving multinational firms. Wal-Mart, the world’s largest retailer, is under investigation for international bribery in several countries after it disclosed potential violations in Mexico. An Organization for Economic Cooperation and Development study released this month said the rate of foreign bribery cases, hundreds of which have been penalized since 1999, remains historically high. In most cases, corporate leaders are aware of or involved with the bribes, which often end up in the hands of state-owned business officials or heads of state. Alstom’s stock dropped less than 1 percent in Monday trading. |