Archive for the ‘DOJ Enforcement Action’ Category

DOJ Brings First Corporate FCPA Enforcement Action Of 2015

Thursday, June 18th, 2015

IAPNo doubt it was a coincidence, but it was hard to ignore the timing.

Hours after the formal conclusion of the DOJ’s latest FCPA trial court debacle in U.S. v. Sigelman (see here, here and here for prior posts), the DOJ announced its first corporate FCPA enforcement action of 2015.

The enforcement action was against IAP Worldwide Services, Inc. (a small Florida-based company that provides facilities management, contingency operations, and professional and technical services in contracting capacities to the U.S. military and other governmental agencies world-wide).

According to its website, approximately 30% of IAP’s workers are veterans and the company was recently recognized by U.S. Veterans Magazine’s as one of the Top Veteran-Friendly Companies in 2014.  IAP has several contracts with the U.S. Government including the U.S. Navy, U.S. Marine Corps and Air Force.

Per the DOJ’s allegations, the improper conduct occurred 7-10 years ago and was engaged in by one individual at IAP who left the company approximately 7 years ago.

The allegations focus on James Rama who was IAP’s Vice President of Special Project and Programs between 2005 and 2007. Prior to arriving at IAP, Rama, while employed in Kuwait by a large American defense contractor not affiliated with IAP, was introduced to a Kuwaiti Consultant and learned that the Kuwaiti Ministry of the Interior (MOI) was planning to build a large-scale homeland security systems called the KSP.

When Rama joined IAP he began pursuing Phase I of the KSP contract on behalf of IAP as well as the more lucrative Phase II of the KSP project.  According to the DOJ, Rama and others formed Ramaco International Consulting LLC “to hide IAP’s involvement in the KSP bidding and contracting process.”

According to the DOJ:

“In or about November 2005, IAP (through Rama) received non-public indications that the MOI would select it for the Phase I contract, although the formal bidding process had not yet begun. In February 2006, at the direction of the MOI and Kuwaiti Consultant, Rama and others agreed to and did set up Ramaco as a shell company to “bid” on the Phase I contract. One purpose of setting up Ramaco was to allow IAP to hide its involvement in Phase I and participate in the later Phase II without any apparent conflict of interest. Ramaco began acting as the agent for IAP on the KSP.

IAP agreed with the MOI that it would perform the KSP Phase I contract for approximately $4 million. Of that amount, IAP agreed that half, or approximately $2 million, would not be for actual work executing the KSP Phase I contract, but instead would be diverted to Kuwaiti Consultant.

In or about 2006, IAP, Ramaco, Rama, and others structured an illicit payment scheme to funnel approximately 50% of the payments received on the Phase I contract to Kuwaiti Consultant so that he could pay bribes to Kuwaiti government officials and took numerous steps to hide these payments and prevent the detection of their scheme. IAP, Ramaco, and Rama understood that to pay Kuwaiti Consultant, Kuwaiti Company would first inflate its invoices to IAP by charging IAP for the total amount of both the legitimate services that Kuwaiti Company was providing and the payments that Kuwaiti Company was funneling to Kuwaiti Consultant without listing or otherwise disclosing the payments that were funneled to Kuwaiti Consultant. After the MOI paid Ramaco for work on the KSP Phase I contract, Ramaco would transfer funds to a bank account of IAP, and IAP would then transfer funds to Kuwaiti Company. IAP, Ramaco, and Rama knew that Kuwaiti Company was then paying Kuwaiti Consultant approximately 50% of the KSP Phase I contract amount. IAP, Ramaco, and Rama knew that these payments to Kuwaiti Consultant were often further disguised.

In or about April 2006, Ramaco opened a bank account in Kuwait for Ramaco that would be used, in part, to pay Kuwaiti Consultant a portion of the money that IAP and Ramaco received from the KSP Phase I contract.

On or about May 10, 2006, Rama signed the KSP Phase I contract between Ramaco and the Government of Kuwait, which included a markup of approximately $2 million that would be kicked back, in whole or in part, to Kuwaiti government officials through Kuwaiti Consultant.

On or about September 19, 2006, IAP wired KD 120,000 (approximately $420,000) from its bank account to Kuwaiti Company’s bank account, and, on or about that same day, Kuwaiti Company paid that amount to Kuwaiti Consultant.

In or about October 2006, employees of IAP and G3 met with Rama and others at IAP’s office in Arlington, Virginia, which is in the Eastern District of Virginia, in an effort to persuade IAP to continue making payments to Kuwaiti Consultant.

On or about October 18, 2006, IAP wired KD 63,000 (approximately $220,500) from its bank account to Kuwaiti Company’s bank account, and, on or about that same day, Kuwaiti Company paid that amount to Kuwaiti Consultant.

On or about June 5, 2007, IAP wired KD 29,962.27 (approximately $105,000) from its bank account in the United States to Kuwaiti Company’s bank account in Kuwait so that Kuwaiti Company could pay Kuwaiti Consultant, and, on or about June 13, 2007, IAP wired that amount from its bank account in the United States to Kuwaiti Company’s bank account.

On or about December 6, 2007, Ramaco paid Kuwaiti Consultant KD 52,250 (approximately $183,000). 22. On or about March 10, 2008, Ramaco paid Kuwaiti Consultant KD 44,250 (approximately $155,000).

Between September 2006 and March 2008, IAP and its co-conspirators paid Kuwaiti Consultant at least KD 509,625 (approximately $1,783,688) on the understanding that some or all of that money would be provided as bribes to Kuwaiti government officials to assist IAP in obtaining and retaining the KSP Phase I contract and to obtain the KSP Phase II contract.”

The above allegations were resolved via a non-prosecution agreement in which IAP agreed to pay”a monetary penalty in the present value amount of $7.1 million”.  Pursuant to the NPA, the penalty is to be paid in four yearly installments of $1.775 million. The NPA, which has a three year term, states as follows:

“Among the facts considered were the following: (a) the Company has cooperated with the Offices, including conducting an extensive internal investigation, voluntarily making U.S. and foreign employees available for interviews, and collecting, analyzing, and organizing voluminous evidence and information for the Offices; (b) the Company has engaged in remediation, including disciplining the officers and employees responsible for the corrupt payments or terminating their employment, enhancing its due diligence protocol for third-party agents and consultants, and instituting heightened review of proposals and other transactional documents for relevant Company contracts; (c) the Company has committed to continue to enhance its compliance program and internal controls, including ensuring that its compliance program satisfies the minimum elements set forth in Attachment C to this Agreement; and (d) the Company has agreed to continue to cooperate with the Offices in any ongoing investigation of the conduct of the Company and its officers, directors, employees, agents, and consultants relating to possible violations under investigation by the Offices.”

As noted in the DOJ’s release:

“[The] non-prosecution agreement requires IAP to conduct a review of its existing internal controls, policies and procedures, and make any necessary modifications to ensure that the company maintains accurate record keeping and a rigorous anti-corruption compliance program.  The non-prosecution agreement further requires IAP to report periodically to the Criminal Division and to the U.S. Attorney’s Office of the Eastern District of Virginia regarding remediation and implementation of the aforementioned compliance program and internal controls, policies and procedures.”

Typical of most corporate FCPA enforcement actions, the NPA contains a “muzzle clause” in which IAP agreed that it shall not directly or indirectly make any public statement contradicting the information set forth in the NPA.

Based on the same core conduct alleged in the NPA, the DOJ announced a plea agreement with James Rama to one count of conspiracy to violate the FCPA.  See here for the plea agreement, here for the Statement of Facts, and here for the criminal information.

For additional coverage of the enforcement action see here from Reuters.

 

DOJ Prosecution of Individuals – Then vs. Now

Thursday, January 22nd, 2015

Thenvs.Yesterday’s post highlighted the following statistics concerning Foreign Corrupt Practices Act individual criminal prosecutions by the DOJ.

Since NPAs and DPAs were first introduced to the FCPA context in December 2004 (see here), there have been 83 corporate DOJ FCPA criminal enforcement actions. 53 of these corporate enforcement actions were resolved solely with an NPA or DPA. In only 5 of these actions – 9% – was there related criminal charges of company employees.

More broadly, other statistics recently published on this site highlighted how in this new era of FCPA enforcement approximately 75% of corporate DOJ FCPA enforcement actions have not (at least yet) resulted in any DOJ charges against company employees.

Prior posts proposed, based on these statistics, that instead of asking the “but why was nobody charged” question in connection with most corporate DOJ FCPA criminal enforcement actions, the more appropriate question is asking whether NPAs and DPAs necessarily represent provable FCPA violations.

To best highlight how NPAs and DPAs have transformed the nature and quality of FCPA enforcement, it is useful to analyze FCPA enforcement statistics prior to the introduction of NPAs and DPAs to the FCPA context in 2004.

For starters, it must be recognized that few meaningful conclusions can be drawn when comparing early FCPA enforcement (lets say 1977 – 2004) to FCPA enforcement 2005 to the present.

Growing pains associated with a new law, and a pioneering one at that, were understandable as both business organizations and enforcement agencies alike were absorbing the law and its new expectations and challenges.  More substantively, for much of the FCPA’s history there were material differences in the law, enforcement agency policies, and the global business environment that all impacted early FCPA enforcement.  

Nor can any meaningful conclusions be drawn from comparing fine and penalty amounts in early FCPA enforcement actions to fine and penalty amounts in this new era.  For starters, the FCPA’s statutory fine and penalty amounts have changed over time.  Perhaps more significantly, criminal fine amounts in FCPA enforcement actions are rarely based on the statutory amounts, but rather based on the Alternative Fines Act, a statute passed in 2006, which can result in a fine amount up to twice the benefit the payer sought to obtain through the improper payment. Moreover, for much of the FCPA’s history, the SEC did not have authority to assess civil monetary penalties in a wide variety of securities law enforcement actions including FCPA enforcement actions, and disgorgement, a central feature of most SEC FCPA enforcement actions in this new era, was not used for most of the FCPA’s history.

Although certain historical comparisons of FCPA enforcement lack meaningful value, other comparisons are noteworthy.

For instances, while one can question how the DOJ held individuals accountable (i.e whether the criminal fines and sentences were too lenient) for most of the FCPA’s history, the DOJ did frequently hold individuals accountable when a company resolved an FCPA enforcement action.

Indeed, from 1977 to 2004, approximately 90% of DOJ criminal corporate FCPA enforcement actions RESULTED in related charges against company employees.

Compare that to FCPA enforcement in this new era when approximately 75% of DOJ criminal corporate FCPA enforcement actions HAVE NOT RESULTED (at least yet) in related charges against company employees. 

Consider also that when a DOJ criminal corporate FCPA enforcement action is resolved solely with an NPA or DPA, approximatley 90% of such actions HAVE NOT RESULTED (at least yet) in related charges against company employees.

In other words, NPAs and DPAs have significantly distorted the nature and quality of FCPA enforcement and if the statistics recently published on this site do not convince you of this, no statistics ever will.

DOJ Enforcement Of The FCPA – Year In Review

Thursday, January 8th, 2015

DOJ2This previous post highlighted facts and figures from SEC enforcement of the FCPA in 2014.

This post highlights facts and figures from DOJ FCPA enforcement in 2014.

(See here for a similar post from 2013, here for a similar post from 2012, here for a similar post from 2011, and here from 2010).

 

Settlement Amounts and Specifics

In 2014, the DOJ brought 7 corporate FCPA enforcement actions.  By comparision, in 2013 the DOJ brought 7 corporate enforcement action; in 2012 the DOJ brought 9 corporate FCPA enforcement actions; in 2011 the DOJ brought 11 corporate enforcement actions; and in 2010 the DOJ brought 17 corporate enforcement actions.  (Note:  these figures  use the “core” approach to FCPA statistics – see here for the prior post – an approach also endorsed by the DOJ – see here).

In the 7 corporate FCPA enforcement actions from 2014, the DOJ collected approximately $1.25 billion in criminal fines, an all-time record in terms of yearly FCPA settlement amounts. By way of comparison, in the 7 corporate FCPA enforcement actions from 2013, the DOJ collected approximately $420 million in criminal fines; in 2012, the DOJ collected approximately $142 million in criminal fines; in 2011, the DOJ collected approximately $355 million in criminal fines ($504 million including the $149 million forfeiture in the Jeffrey Tesler individual enforcement action); and in 2010, the DOJ collected approximately $870 million in criminal fines.

DOJ FCPA enforcement in 2014 ranged from $772 million in criminal fines (Alstom) to $14 million in criminal fines (Dallas Airmotive).  3 FCPA enforcement actions in 2014 were DOJ only (Alstom, Dallas Airmotive and Marubeni).

Of the approximate $1.25 billion the DOJ collected in 2014 corporate FCPA enforcement actions, $772 million (62%) was in one enforcement action (Alstom) and $981 million (78%) was in two enforcement actions (Alstom and Alcoa).

In 4 of 6 corporate FCPA enforcement actions where an analysis was possible, the DOJ agreed to a criminal fine below the minimum range suggested by the sentencing guidelines.  In these 4 actions, the average was approximately 29% below the minimum guidelines range and the distribution range was 9% below the minimum guidelines range (Avon) to 53% below the minimum guidelines range (Alcoa).  In 2 corporate FCPA enforcement actions in 2014 (Alstom and Marubeni), the company paid a criminal fine within the guidelines range.

[Note - why are only 6 of the 7 corporate enforcement actions included in the above analysis? 1 corporate enforcement action (Bio-Rad) was resolved via an NPA and the DOJ does not set forth a guidelines range in NPAs]

Corporate vs. Individual Prosecutions

How many corporate FCPA enforcement actions in 2014 involved related individual prosecutions of company employees by the DOJ (recognizing that such prosecutions may be forthcoming in the future)?  Of the 7 corporate DOJ enforcement actions in 2014, 1 (14%) has thus far resulted in related DOJ prosecutions of company employees. This action was the Alstom action (in which the DOJ alleged conduct concerning Indonesia, Saudi Arabia, Egypt, the Bahamas, and Taiwan) and the related individual prosecutions related only to the Indonesia conduct alleged by the DOJ.

The DOJ brought or announced 10 individual FCPA enforcement actions in 2014 in 3 core actions (5 individuals associated with DF Group in connection with Indian mining licenses, 2 individuals associated with Direct Access Partners and 3 individuals associated with PetroTiger).

Stay tuned for future posts specifically about DOJ and SEC individual FCPA enforcement actions.

NPAs / DPAs

What about non-prosecution and deferred prosecution agreements vs. old fashioned law enforcement (i.e. if a company committed a crime the DOJ charged it and if the company did not commit a crime the DOJ did not charge it)?  In 2014, 5 of the 7 (71%) corporate enforcement actions included an NPA or DPA.  Marubeni and Alcoa were plea agreements only. [Note, the Alstom enforcement action involved two plea agreements and two DPAs; the Avon enforcement action involved  a plea agreement and DPA; and the HP enforcement action involved a plea agreement, DPA and NPA].

By way of comparison, in 2013, 100% of corporate DOJ enforcement actions involved either an NPA or DPA; in 2012 100% of corporate DOJ enforcement actions involved either an NPA or a DPA;  in 2011 82% of corporate DOJ enforcement actions involved either an NPA or DPA; and in 2010 94% of corporate DOJ enforcement actions involved either an NPA or DPA.

Since 2010, 86% of corporate DOJ enforcement actions have involved either an NPA or DPA.

Voluntary Disclosures

Of the 7 corporate DOJ FCPA enforcement actions in 2014, 2 enforcement actions (29%) were the result of corporate voluntary disclosures (Avon and Bio-Rad),  3 enforcement actions (43%) were the result of previous foreign law enforcement investigations or related thereto (Alstom, Marubeni, and HP), 1 enforcement action was related to a previous FCPA enforcement action (Dallas Airmotive) and 1 enforcement action was the result of civil litigation (Alcoa).

By way of comparison, in 2013 57% of corporate FCPA enforcement actions were the result of corporate voluntary disclosures or the direct result of a related voluntary disclosure; in 2012, 78% of corporate FCPA enforcement actions were the result of corporate voluntary disclosures or casually related to previous corporate voluntary disclosures; in 2011, 73% of corporate FCPA enforcement actions were the result of corporate voluntary disclosures.

Monitors

Of the 7 corporate DOJ FCPA enforcement actions in 2014, 1 (14%) enforcement action (Avon) resulted in a corporate monitor. By way of comparison, of the 7 corporate DOJ FCPA enforcement actions in 2013, 4 enforcement actions (57%) involved a monitor; of the 9 corporate DOJ FCPA enforcement actions in 2012, 3 enforcement actions (33%) involved a monitor; of the 11 corporate DOJ FCPA enforcement actions in 2011, 1 enforcement action (9%) involved a corporate monitor; of the 17 corporate DOJ enforcement actions in 2010, 7 enforcement actions (41%) involved a corporate monitor.

This remainder of this post provides an overview of corporate DOJ FCPA enforcement in 2014.

Alstom and Related Entities (December 22nd).

See here and here for prior posts

Charges:  As to Alstom S.A., violation of the FCPA’s books and records and internal controls provisions.  As to Alstom Network Schweiz AG, conspiracy to violate the FCPA’s anti-bribery provisions.  As to Alstom Power Inc., conspiracy to violate the FCPA’s anti-bribery provisions.  As to Alstom Grid Inc., conspiracy to violate the FCPA’s anti-bribery provisions.

Resolution Vehicle:  As to Alstom and Alstom Network Schweiz, plea agreements.  As to Alstom Power and Alstom Grid, DPAs.

Guidelines Range:  As to Alstom $532.8 million to $1.065 billion

Penalty:  As to Alstom, $772 million (the other entities were not required to pay separate penalties).

Disclosure:  The enforcement action presumably originated from a prior 2011 Swiss enforcement action (see here and here).

Monitor:  No

Individuals Charged:  Yes (as to the Indonesia conduct – see here).

Avon Entities (December 17th)

See here and here for prior posts

Charges:  As to Avon China, conspiracy to violate the FCPA’s books and records provisions.  As to Avon Products, conspiracy to violate the FCPA’s books and records provisions and violation of the FCPA’s internal controls provisions.

Resolution Vehicle:  As to Avon China, a plea agreement; as to Avon Products a DPA.

Guidelines Range:  As to Avon China, $73.9 million to $147.9 million; as to Avon Products, $84.6 million to $169.1 million.

Penalty:  As to Avon China, $67.6 million; as to Avon Products $67.6 million but the Avon China penalty was deducted from this amount.

Disclosure:  Voluntary Disclosure.

Monitor:  Yes

Individuals Charged:  No

Dallas Airmotive (December 10th)

See here for the prior post

Charges:  Conspiracy to violate the FCPA’s anti-bribery provisions and violation of the FCPA’s anti-bribery provisions.

Resolution Vehicle:  DPA

Guidelines Range:  $17.5 million to $35 million

Penalty:  $14 million

Disclosure:  The enforcement action appears to be casually related to a prior enforcement action against BizJet International and certain of its executives

Monitor:  No

Individuals Charged:  No

Bio-Rad (November 3rd)

See here and here for prior posts

Charges:  Not applicable

Resolution Vehicle:  NPA

Guidelines Range:  Not set forth in the NPA

Penalty:  $14.4 million

Disclosure:  Voluntary Disclosure

Monitor:  No

Individuals Charged:  No

HP Related Entities (April 9th)

See here for the prior post

Charges:  As to HP Russia - (i) conspiracy to violate the FCPA’s anti-bribery provisions and books and records and internal controls provisions; (ii) one count of violating the FCPA’s anti-bribery provisions; (iii) one count of violating the FCPA’s internal controls provisions; and (iv) one count of violating the FCPA’s books and records provisions; As to HP Poland – violation of the FCPA’s books and records and internal controls provisions; As to HP Mexico – not applicable.

Resolution Vehicle:  As to HP Russia, a plea agreement; as to HP Poland a DPA; as to HP Mexico an NPA.

Guidelines Range:  As to HP Russia $87 million to $174 million; as to HP Poland $19.3 million to $38.6 million; as to HP Mexico not specified in the NPA.

Penalty:  As to HP Russia $58.8 million; as to HP Poland $15.5 million; as to HP Mexico $2.5 million.

Disclosure:  The enforcement action appears to have been the result of a previous German and Russian law enforcement investigation (see here for the prior post).

Monitor:  No

Individuals Charged:  No

Marubeni (March 19th)

See here for the prior post

Charges:  Conspiracy to violate the FCPA’s anti-bribery provisions and 7 substantive FCPA anti-bribery violations

Resolution Vehicle:  Criminal information resolved via a plea agreement

Guidelines Range:  $63.7 million to $127.4 million

Penalty:  $88 million

Disclosure:  Related to the April 2013 FCPA enforcement action against various current and former employees of Alstom

Monitor:  No

Individuals Charged:  No

Alcoa (January 9th)

See here for the prior post

Charges:  One count of violating the FCPA’s anti-bribery provisions.

Resolution Vehicle:  Criminal information against Alcoa World Alumina LLC resolved via a plea agreement.

Guidelines Range:  $446 million – $892 million.

Penalty:  $209 million (plus administrative forfeiture of $14 million)

Disclosure:  A 2008 civil lawsuit between Alba and Alcoa.

Monitor:  No

Individuals Charged:  No

DOJ Brings First FCPA Enforcement Action Of 2015

Wednesday, January 7th, 2015

European BankThis February 2014 post foreshadowed a future FCPA enforcement action against Dmitrij Harder in connection with a notable Third Circuit grand jury proceeding.

Yesterday, the DOJ announced the enforcement action against Harder, the former owner and President of Chestnut Consulting Group Inc. and Chestnut Consulting Group Co. (together “Chestnut Group”), for allegedly bribing an official with the European Bank for Reconstruction and Development.

The enforcement action is notable in that it invokes the rarely used “public international organization” prong of the FCPA’s “foreign official” element.

In the indictment, Harder is described as “Russian national, naturalized German citizen and permanent resident alien of the United States” who purportedly used the Chestnut Group entities to “provide, among other things, consulting services to companies seeking financing from multilateral development banks.”

According to the indictment:

“Between in or around 2007 through in or around 2009, Harder engaged in a scheme to pay approximately $3.5 million in bribe payments for the benefit of a foreign official to corruptly influence the foreign official’s actions on applications for financing submitted to the European Bank for Reconstruction and Development (“EBRD”) by the clients of Harder and the Chestnut Group, and to corruptly influence the foreign official to direct business to Harder and the Chestnut Group, and others.”

The EBRD is described as follows.

“The EBRD was a multilateral development bank headquartered in London, England, and was owned by over 60 sovereign nations. Among other things, the EBRD provided debt and equity financing for development projects in emerging economies, primarily in Eastern  Europe. On or about June 18, 1991, the President of the United States signed Executive Order 12766 designating the EBRD as a “public international organization.” The EBRD was thus a “public international organization,” as that term is defined in the FCPA.”

The EBRD Official is described as follows.

“EBRD Official” was a Russian and United Kingdom national residing in or around London, England, and was a senior banker working in the Natural Resources Group at the EBRD. As a senior banker, EBRD Official served as an Operations Leader in the Natural Resources Group and was responsible for leading the review of applications submitted to the EBRD for project financing, including loans and equity investments. EBRD Official thus had the authority to influence the process for approving project financing, and setting the terms and conditions for that financing. EBRD Official was a “foreign official,” as that term is used in the FCPA.  [...] Harder  knew EBRD Official from business associations dating back to at least 1999.”

The indictment also described the EBRD Official’s Sister as follows.

“EBRD Official’s Sister” was a Russian and United Kingdom national residing in or around London, England, and was the sister of EBRD Official. EBRD Official’s Sister purportedly provided consulting and other business services for the Chestnut Group. In reality, however, EBRD Official’s Sister provided no such services to the Chestnut Group or Harder.”

According to the indictment:

“Between in or about 2007 and in or about 2009, Harder, through the Chestnut Group, worked as a financial consultant to companies seeking project financing from the EBRD. For at least four of these applications, including those of Company A [a Russian independent oil and gas company] and Company B [an oil and gas company incorporated in the United Kingdom with operations in Russia] EBRD Official was the Operations Leader responsible for leading the management of the application process and negotiating the terms and conditions of any financing provided by the EBRD. Chestnut Inc. was retained by Company A and Company B despite its relatively small size, distant location from the EBRD, and unproven track record as a financial advisor. [...] [T]he EBRD ultimately approved the applications for project financing for Company A and Company B.”

[...]

In all, Chestnut Inc. received payments from Company A totaling approximately $2.9 million, and Harder caused payments to be made to EBRD Official’s Sister totaling approximately $1.06 million. While EBRD Official’s Sister purportedly received these payments as a result of providing consulting and other business services to the Chestnut Group, in reality, EBRD Official’s Sister provided no such services. Instead, EBRD Official’s Sister received these payments for the benefit of EBRD Official, to corruptly influence the foreign official’s actions on applications for financing by the clients of Harder and the Chestnut Group, and to corruptly influence the foreign official to direct business to Harder and the Chestnut Group.”

[...]

“[A]fter Chestnut Inc. received the success fees from Company B, Harder caused a payment of approximately $2,478,580.89 to be made to EBRD Official’s Sister. Although EBRD Official’s Sister purportedly received these payments as a result of providing consulting and other business services to the Chestnut Group, in reality, EBRD Official’s Sister provided no such services. Instead, EBRD Official’s Sister received these payments for the benefit of EBRD Official, to corruptly influence the foreign official’s actions on applications for financing by the clients of Harder and the Chestnut Group, and to corruptly influence the foreign official to
direct business to Harder and the Chestnut Group.”

Under the heading “concealment of the bribe payments,” the indictment alleges:

“Through the Chestnut Group, Harder paid EBRD Official’s Sister approximately $3.5 million in bribe payments for the benefit of EBRD Official. To conceal and cover up these bribe payments, Harder and EBRD Official’s Sister created false paperwork to make it appear that EBRD Official’s Sister had provided services to the Chestnut Group for these payments, when in fact no such services were provided.”

Based on the above allegations, the indictment charges Harder with one count of conspiracy to violate the FCPA and Travel Act, five counts of violating the FCPA, five counts of violating the Travel Act, one count of conspiracy to commit international money laundering, and two counts of money laundering.

In the DOJ’s release, Assistant Attorney General Leslie Caldwell stated:

“We are committed to combating foreign corruption, across the globe and across all industries, through enforcement actions and prosecutions of companies and the individuals who run those companies. As alleged, in this case, the owner and chief executive of a Pennsylvania financial consulting firm secured hundreds of millions of dollars in business by bribing a European banking official. He now faces an indictment for corruption in federal court.  Bribery of foreign officials undermines the public trust in government and fair competition in business.  The charges returned today reflect the clear message that we will root out corruption and prosecute individuals who violate the Foreign Corrupt Practices Act.”

U.S. Attorney Zane Memeger of the Eastern District of Pennsylvania stated:

“We will aggressively investigate and prosecute individuals in our district who use corrupt means like bribery to influence foreign officials.  Our criminal statutes in this arena must be enforced to ensure fair dealing in a competitive global marketplace where foreign officials often hold significant decision-making authority.  The alleged conduct here was particularly reprehensible because it undermined the legitimacy of a process designed to support businesses for the citizens of developing nations.”

Special Agent in Charge Edward Hanko of the FBI’s Philadelphia Division stated:

“This is a great example of the FBI’s ability to successfully coordinate with our international law enforcement partners to tackle corruption. Bribery – foreign or domestic – cripples the notion of fair competition in the marketplace.”

For more information on the conduct alleged in the enforcement action, see this 2012 Bloomberg article.

All About The Alstom Enforcement Action

Monday, December 29th, 2014

AlstomAs mentioned in this previous post, last week the DOJ announced a $772 million FCPA enforcement action against Alstom and related entities.

While the Alstom enforcement action is the largest DOJ FCPA enforcement action of all-time, it is the second largest overall FCPA enforcement action of all-time behind the 2008 Siemens enforcement action ($450 million DOJ component and a $350 million SEC component).  To see the current FCPA top-ten settlement list, click here.

The Alstom resolution documents total approximately 400 pages and this post summarizes these documents.

At its core, the Alstom enforcement action involved alleged conduct in Indonesia, Saudi Arabia, Egypt, the Bahamas, and Taiwan. All of this conduct is alleged in the Alstom S.A. information as the basis for the company’s FCPA books and records and internal controls violations between 1998 and 2004.  The charges were resolved through a plea agreement.  (A future post will explore, among other issues, the irony of Alstom pleading guilty in 2014 to substantive legal provisions that last applied to the company in 2004 when it ceased to be an “issuer.”).  From there the conduct was apportioned to the following Alstom-related entities in related enforcement actions.

  • Alstom Network Schweiz AG (conspiracy to violate the FCPA’s anti-bribery provisions based on the Indonesia, Saudi Arabia, Egypt and Bahamas conduct and resolved through a plea agreement);
  • Alstom Power Inc. (conspiracy to violate the FCPA’s anti-bribery provisions based on the Indonesia, Saudi Arabia and Egypt conduct and resolved through a DPA);
  • Alstom Grid Inc. (conspiracy to violate the FCPA’s anti-bribery provisions based on the Egypt conduct and resolved through a DPA)

Alstom S.A. Information

According to the information, during the relevant time period, Alstom employed approximately 110,000 employees in over 70 countries.  The information contains specific allegations as to 9 individuals associated with Alstom and 9 consultants associated with Alstom.  As highlighted below, at its core, the Alstom enforcement action involved inadequate controls concerning the engagement, monitoring and supervision of the consultants.

The information alleges that “Alstom had direct and indirect subsidiaries in various countries around the world through which it bid on projects to secure contracts to perform power-related, grid-related, and transportation-related services, including for state-owned entities.”  According to the information, “Alstom’s subsidiaries worked exclusively on behalf of Alstom and for its benefit” and that Alstom “maintained a department called International Network that supported its subsidiaries’ efforts to secure contracts around the world.”  In addition, the information alleges that “within Alstom’s power sector, the company also maintained a department called Global Power Sales (“GPS”), which performed functions similar to International Network, in that GPS assisted Alstom entities or businesses in their efforts to secure contracts.”

The information contains a section titled “Overview of the Unlawful Scheme” that has two substantive sections “False Books and Records” and “Internal Accounting Controls.”

Under the heading “False Books and Records,” the information states.

“Alstom, acting through executives, employees, and others, disguised on its books and records millions of dollars in payments and other things of value given to foreign officials in exchange for those officials’ assistance in securing projects, keeping projects, and otherwise gaining other improper advantages in various countries around the world for Alstom and its subsidiaries.

In a number of instances, Alstom hired consultants to conceal and disguise improper payments to foreign officials. Alstom paid the consultants purportedly for performing legitimate services in connection with bidding on and executing various projects.  In reality, the Alstom personnel knew that the consultants were not performing legitimate services and that all or a portion of the payments were to be used to bribe foreign officials.  Alstom executives and employees falsely recorded these payments in its books and records as “commissions” or “consultancy fees.”

Alstom also created, and caused to be created, false records to further conceal these improper payments.  Alstom created consultancy agreements that provided for legitimate services to be rendered by the consultant, and included a provision prohibiting unlawful payments, even though the Alstom executives and employees involved knew that at times the consultants were using all or a portion of their consultancy fees to bribe foreign officials.  Moreover certain Alstom employees instructed the consultants to submit false invoices and other back-up documentation reflecting purported legitimate services rendered that those employees knew were not actually performed, so that Alstom could justify the payments to the consultants.

In other instances, Alstom paid bribes directly to foreign officials by providing gifts and petty cash, by hiring their family members, and in one instance by paying over two million dollars to a charity associated with a foreign official, all in exchange for those officials’ assistance in obtaining or retaining business in connection with projects for Alstom and its subsidiaries.  As with the consultant payments, Alstom knowingly and falsely recorded these payments in its books and records as consultant expenses, as “donations,” or other purportedly legitimate expenses.

Alstom employees, some of whom were located in Connecticut, knowingly falsified Alstom’s books and records in order to conceal the bribe payments that they knew were illegal and were contrary to Alstom’s written policy.  Alstom also submitted false certifications to USAID and other regulatory entities, falsely asserting that Alstom was not using consultants on particular projects when, in fact, consultants were being used, and asserting that no unlawful payments were being made in connection with projects when, in fact, they were.  Various other acts, including e-mail communications, passed through Connecticut.”

Under the heading “Internal Accounting Controls,” the information states:

 ”Although Alstom had policies in place prohibiting unlawful payments to foreign officials, including through consultants, Alstom knowingly failed to implement and maintain adequate controls to ensure compliance with those policies.

Alstom knowingly failed to implement and maintain adequate controls to ensure meaningful due diligence for the retention of third-party consultants. A number of consultants that Alstom hired raised a number of “red flags” under Alstom’s own internal policies.  Certain consultants proposed for retention had no expertise or experience in the industry sector in which Alstom was attempting to secure or execute the project.  Other consultants were located in a country different than the project country.  At other times, the consultants asked to be paid in a currency or in a bank account located in a country different than where the consultant and the project were located.  In multiple instances, more than one consultant was retained on the same project, ostensibly to perform the very same services.  Despite, these “red flags,” the consultants were nevertheless retained without meaningful scrutiny.  To the contrary, those submitting consultants for possible retention at times did not make explicit the true reason for the consultants’ retention, as well as other relevant facts.  And certain executives who had the ability to ensure appropriate controls surrounding the due diligence process themselves know, or knowingly failed to take action that would have allowed them to discover, that the purpose of hiring the consultant was to conceal payments to foreign officials in connection with securing projects and other favorable treatment in various countries around the world for Alstom and its subsidiaries.

Alstom also knowingly failed to implement and maintain adequate controls for the approval of consultancy agreements.  During the relevant time period, Alstom’s consultancy agreements provided that payments to the consultants would only be made on a pro rata basis tied to project milestones or as Alstom was paid by the customer.  In certain instances, Alstom employees changed the amount and terms of payment for the consultants, in violation of the company’s own internal policies, so that Alstom could pay the consultants more money and make the payment sooner in order to generate cash available to bribe the foreign officials.  The Alstom executives and employees responsible for approving consultancy agreements did not adequately scrutinize these changes, and in certain instances were copied on e-mails in which the true purpose for the change was discussed.  During the relevant time period, Alstom also maintained an unwritten policy to discourage, where possible, consultancy agreements that would subject Alstom to the jurisdiction of the United States. To effectuate this policy, Alstom typically used consultants who were not based in the United States, and intentionally paid consultants in bank accounts outside of the United States and in currencies other than U.S. dollars.  The Alstom executives and employees responsible for approving consultancy agreements attempted to enforce this unwritten policy even when it meant that the consultant had to open an offshore bank account solely for the purpose of receiving payments from Alstom.

Alstom also knowingly failed to implement and maintain adequate controls for payments to consultants. In multiple instances, Alstom paid the consultants without adequate, or timely, documentation of the services they purported to perform.  At times, consultants sought help from Alstom to create false documentation necessary for payment approval.  In other instances, the consultants created false “proofs of service” long after the purported services were rendered.  In certain cases … a consultant sought assistance from an Alstom employee responsible for approving payment because, as the consultant explained to the Alstom employee, he did not want to include on his invoices the fact that his services included making unlawful payments.  During the relevant time period, Alstom did not engage in auditing or testing of consultant invoices or payments.  In many instances, requests for payments to consultants were approved without adequate review by Alstom knowing that the payments were being used, at least in part, to bribe foreign officials to obtain or retain business in connection with projects in various countries around the world for Alstom and its subsidiaries.”

Next, the information contains the following summary allegation.

“Alstom paid approximately $75 million in consultancy fees knowing that this money would be used, in whole or in part, to bribe or provide something of value to foreign officials to secure approximately $4 billion in projects in multiple countries, with a gain to Alstom of approximately $296 million.”

The information next contains specific allegations regarding Indonesia, Saudi Arabia, Egypt, the Bahamas, and Taiwan.

Indonesia

As to Indonesia, the information concerns various power projects in Indonesia through Indonesia’s state-owned and state-controlled electricity company, Perusahann Listrik Negara (“PLN”).  One such project was the Tarahan Project, a project to provide power-related services to the citizens of Indonesia at approximately $118 million and another such project was the Muara Tawar Block 5 Project, a project to expand the existing Muara Tawar power plant and provide additional power-related services to the citizens of Indonesia at approximately $260 million.  According to the information, Alstom subsidiaries bid on but were not awarded contracts related to other expansions of the Muara Tawar power plant.  In summary fashion, the information alleges as follows.

“In connection with these projects, Alstom disguised on its books and records millions of dollars and other things of value provided to Indonesian officials in exchange for those officials’ assistance in securing the power projects for Alstom and its subsidiaries.  Alstom also knowingly failed to implement and maintain adequate controls to ensure that no unlawful payments were being made through consultants to foreign officials in connection with these projects.”

The Indonesia allegations in the Alstom information are substantively similar to the allegations in the prior FCPA enforcement action against various individuals associated with Alstom Power.  (See here for the prior post and summary).

Saudi Arabia

As to Saudi Arabia, the information concerns bids for power projects with Saudi Electric Company (“SEC”), Saudi Arabia’s state-owned and state-controlled electricity company, and its predecessor entities.  According to the information, in connection with one project:

“Alstom disguised on its books and records tens of millions of dollars in payments and other things of value provided to Saudi officials to obtain or retain business in connection with the projects.  Alstom knowingly failed to implement and maintain adequate controls to ensure that no unlawful payments were being made to these officials.  The arrangements for these consulting agreements originated with [a separate international power company with which Alstom operated as a joint venture in 1999 and acquired in 2000]. Subsequently, Alstom honored, continued, and in certain instances renewed these consulting agreements without adequate diligence on what services were ostensibly being provided by these consultants, whether the consultants were capable of providing such services, whether the agreed upon consultancy fees were commensurate with such legitimate services, and despite the lack of documentation regarding what legitimate services were provided.”

In one instance, the information alleges that a consultant “was the brother of a high-level official at the SEC who had the ability to influence the award” of a project, “which certain Alstom employees knew.”  According to the information, this consultant was paid “approximately $5 million, with no documentation of any legitimate services having been performed [by the Consultant] commensurate with a $5 million fee and with no documentation of any technical or other expertise to justify such a fee.”  In another instance, the information alleges that another consultant “was a close relative of another high-level official at SEC who had the ability to influence the aware” of a project” which certain Alstom employees knew.”  According to the information, this consultant was paid at least $4 million under similar circumstances to those referenced above.

The information states as follows.

“In addition to paying consultants as a means of bribing key decision makers at the SEC, Alstom and its subsidiaries paid $2.2 million to a U.S.-based Islamic education foundation associated with [an SEC official believed to have 70% of the decision-making responsibility for SEC matters].  The payments were made in three installments, and internal records at Alstom reflect that these payments were included as expenses related [to the projects] rather than as a separate and independent charitable contribution.”

Egypt

As to Egypt, the information concerns bidding on various projects with the Egyptian Electricity Holding Company (“EEHC”), the state-owned and state-controlled electricity company in Egypt.  According to the information, “EEHC was not itself responsible for conducting the bidding [on projects], and instead relied on Power Generation Engineering & Services Co. (“PGESCo”), which was controlled by an acted on behalf of EEHC.”  According to the information, in connection with various projects, “Alstom disguised on its books and records millions of dollars and other things of value provided to Egyptian officials to obtain or retain business in connection with power projects for Alstom and its subsidiaries.  Alstom also knowingly failed to implement and maintain adequate controls to ensure that no unlawful payments were being made to these officials.  According to the information, Alstom used a consultant whose primary purpose “was not to provide legitimate consulting services to Alstom and its subsidiaries but was instead to make payments to Egyptian officials, including Asem Elgawhary who oversaw the bidding process.”  (See here for the prior post regarding the Elgawhary enforcement action).

The information also contains allegations concerning bidding on various grid projects with EEHC and the Egyptian Electricity Transmission Company (“EETC”), the state-owned and state-controlled electricity transmission company in Egypt.  According to the information, certain of these projects were “funded, at least in part, by the United States Agency for International Development (“USAID”).  According to the information:

“In connection with [these projects], Alstom disguised on its books and records payments and other things of value it provided to Egyptian officials in exchange for those officials’ assistance in securing and executing the transmission and distribution projects for Alstom and its subsidiaries.  Alstom also knowingly failed to implement and maintain adequate controls to ensure that no unlawful payments were being made to these officials.”

According to the information, an Alstom entity “repeatedly submitted false certifications to USAID in connection with these projects, and did not disclose that consultants were being used, that commissions were being paid, or that unlawful payments were being made.”

According to the information, “in addition to falsifying records in connection with the retention of consultants and their commission payments,” Alstom employees also “paid for entertainment and travel for [a high-level official] and other key decision-makers at EETC and EEHC, and provided those officials with envelopes of cash and other gifts during such travel.”

Bahamas

As to the Bahamas, the information concerns power projects with the Bahamas Electricity Corporation (“BEC”), the state-owned and state-controlled power company.  According to the information, “Alstom disguised in its books and records payments to Bahamian officials to obtain or retain business in connection with power projects for Alstom and its subsidiaries.  Alstom also knowingly failed to implement and maintain adequate controls to ensure that no unlawful payments were being made to these officials.

According to the information, Alstom retained a consultant “who, as certain Alstom employees knew, was a close personal friend” of a board member of BEC and that the primary purpose of the consultant was not to provide legitimate consulting services but instead to pay bribes to the official who had the ability to influence the award of the power contracts.  According to the information, Alstom did not perform any due diligence on the consultant even though the consultant had no knowledge about, or experience in, the power industry.  Rather, the information alleges, the consultant “sold furniture and leather products, and exported chemical products and spare parts.”

Taiwan

As to Taiwan, the information alleges that between 2001 and 2008, Alstom and its subsidiaries “began bidding on transport-related projects with various entities responsible for the construction and operation of the metro-rail system in Taipei, Taiwan, including Taipei’s Department of Rapid Transit System, known as “DORTS.”  According to the information, an Alstom entity formally retained a consultant on a DORTS project even thought the consultant did not have the requisite expertise in the transport sector.  According to the information, the consultant’s expertise was as a “wholesaler of cigarettes, wines and pianos.”

According to the information, “Alstom’s system of internal controls was inadequate as they related to the Taiwan projects.  Despite numerous red flags, Alstom personnel knowingly failed to conduct further diligence to ensure that payments to its consultants in Taiwan could not be used to make improper payments to Taiwanese officials after the projects were secured.”

Based on the above allegations, Alstom was charged with one count of violating the FCPA’s books and records provisions from 1998 to 2004 and one count of violating the FCPA’s internal controls provisions from 1998 to 2004.

Alstom S.A. Plea Agreement

In the plea agreement, Alstom admitted that it was an “issuer” during the relevant time period and admitted, agreed, and stipulated that the factual allegations set forth in the information were true and correct.

In the plea agreement, the parties agreed that the gross pecuniary gain resulting from the offense was $296 million.  The plea agreement sets forth an advisory sentencing guidelines range of $532.8 million to $1.065 billion.

Under the heading “failure to self-report,” the plea agreement states:

“The Defendant failed to voluntarily disclose the conduct even though it was aware of related misconduct at Alstom Power, Inc., a U.S. subsidiary, which entered into a resolution for corrupt conduct in connection with a power project in Italy several years prior to the Department reaching out to Alstom regarding its investigation.”

Under the heading “cooperation,” the plea agreement states:

“The Defendant initially failed to cooperate with the Department’s investigation, responding only to the Department’s subpoenas to the Defendant’s subsidiaries.  Approximately one year into the investigation, the Defendant provided limited cooperation, but still did not fully cooperate with the Department’s investigation.  The Defendant’s initial failure to cooperate impeded the Department’s investigation of individuals involved in the bribery scheme.  At a later stage in the investigation, the Defendant began providing thorough cooperation, including assisting in the Department’s investigation and prosecution of individuals and other companies that had partnered with the Defendant on certain projects.  The Defendant’s thorough cooperation did not occur until after the Department had publicly charged multiple Alstom executives and employees.”

Under the heading, “compliance and remediation,” the plea agreement states:

“The Defendant lacked an effective compliance and ethics program at the time of the offense.  Since that time, the Defendant has undertaken substantial efforts to enhance its compliance program and to remediate the prior inadequacies, including complying with undertakings contained in resolutions with the World Bank (including an ongoing monitorship) and the government of Switzerland, substantially increasing its compliance staff, improving its alert procedures, increasing training and auditing/testing, and cease the use of external success fee-based consultants.”

In the plea agreement, Alstom agreed to a so-called “muzzle clause” in which it agreed not, directly or indirectly through others, to make any public statement contradicting the acceptance of responsibility set forth in the plea agreement.

Pursuant to the plea agreement, Alstom agreed to a corporate compliance program with elements typically part of other FCPA settlements.

Pursuant to the plea agreement, Alstom agreed to report to the DOJ, at no less than 12 month intervals, for a three-year term, regarding remediation and implementation of the compliance program and internal controls, policies, and procedures.  The plea agreement references that Alstom is already subject to monitoring requirements pursuant to a February 2012 World Bank Resolution but states that “in the event that the Integrity Compliance Office [of the World Bank] does not certify that the Company has satisfied the monitoring requirements contained in the World Bank Resolution, the Company shall be required to retain an Independent Compliance Monitor.”

Alstom Network Schweiz AG Information

The information against Alstom Network Schweiz AG (formerly known as Alstom Prom AG), a subsidiary of Alstom headquartered in Switzerland and responsible for overseeing compliance as it related to Alstom’s consultancy agreements for many of Alstom’s power sector subsidiaries, is based upon the same Indonesia, Saudi Arabia, Egypt, and Bahamas conduct alleged in the Alstom information.

The Alstom entity is charged with conspiracy to violate the FCPA’s anti-bribery provisions under the dd-3 prong of the statute. According to the information, the “purpose of the conspiracy was to make corrupt payments to foreign officials in Indonesia, Saudi Arabia, Egypt, and the Bahamas in order to obtain and retain business related to power projects in those countries for and on behalf of Alstom and its subsidiaries.”

Alstom Network Schweiz AG Plea Agreement

In the plea agreement, the Alstom entity admitted, agreed, and stipulated that the factual allegations set forth in the information were true and correct.

Pursuant to the plea agreement, “the parties agree[d] that any monetary penalty in this case will be paid pursuant to the plea agreement between the DOJ and Alstom, S.A., the parent company of the Defendant, relating to the same conduct …”.

In the plea agreement, the Alstom entity agreed to a so-called “muzzle clause” in which it agreed not, directly or indirectly through others, to make any public statement contradicting the acceptance of responsibility set forth in the plea agreement.

The plea agreement contains the same corporate compliance program, reporting obligations, and monitor conditions as described in the Alstom plea agreement above.

Alstom Power Inc. Information

The information against Alstom Power Inc., a subsidiary of Alstom headquartered in Connecticut in the business of providing power generation-related services around the world, is based upon the same Indonesia, Saudi Arabia, and Egypt conduct alleged in the Alstom information.

Alstom Power is charged with conspiracy to violate the FCPA’s anti-bribery provisions under the dd-2 prong of the statute. According to the information, the “purpose of the conspiracy was to make corrupt payments to foreign officials in Indonesia, Saudi Arabia, and Egypt in order to obtain and retain business related to power projects in those countries for and on behalf of Alstom Power and its subsidiaries.”

Alstom Power Inc. DPA

In the DPA, Alstom Power admitted, accepted, and acknowledged that it was responsible for the conduct charged in the information.

The DPA has a term of three years and under the heading “relevant considerations” states as follows.

“The [DOJ] enters into this Agreement based on the individual facts and circumstances presented by this case and the Company.  Among the factors considered were the following:  (a) the company failed to voluntarily disclosed the conduct even though it had previously entered into a resolution for corrupt conduct in connection with a power project in Italy several years prior to the [DOJ] reaching out to Alstom regarding their investigation; (b) the Company and its parent initially failed to cooperate with the Department’s investigation, responding only to the Department’s subpoena.  Approximately one year into the investigation, the Company and its parent provided limited cooperation, but still did not fully cooperate with the Department’s investigation. The Company’s and its parent’s initial failure to cooperate impeded the Department’s investigation of individuals involved in the bribery scheme.  At a later stage in the investigation, the Company and its parent began providing thorough cooperation, including assisting in the Department’s investigation and prosecution of individuals and other companies that had partnered with the Company and its parent on certain projects.  The Company’s and its parent’s thorough cooperation did not occur until after the Department had publicly charged multiple current and former Alstom executives and employees; (c) the Company and its parent have undertaken substantial efforts to enhance its compliance program as part of the significant compliance and remediation improvements to Alstom S.A’s program, and has committed to continue to enhance their compliance program and internal controls, ensuring that its program satisfies the minimum elements set forth [in the DPA]; (d) General Electric Company, which intends to acquire the Company, has represented that it will implement its compliance program and internal controls at the Company within a reasonable time after the acquisition closes; and (e) the Company has agreed to continue to cooperate with the [DOJ] in any ongoing investigation …”.

In the DPA, the DOJ and the Company agreed that no monetary penalty will be paid by the Company because Alstom S.A., the parent company of the Company, has agreed to pay a fine of $772,290,000 related to the same underlying conduct.

In the DPA, Alstom Power agreed to a so-called “muzzle clause” in which it agreed not, directly or indirectly through others, to make any public statement contradicting the acceptance of responsibility set forth in the plea agreement.

The DPA contains the same corporate compliance program, reporting obligations, and monitor conditions as described in the Alstom plea agreement above.

Alstom Grid Inc. Information

The information against Alstom Grid, Inc. (formerly known as Alstom T&D, Inc.), a subsidiary of Alstom headquartered in New Jersey in the business of providing power grid-related services around the world, is based upon the same Egypt conduct alleged in the Alstom information.

Alstom Grid is charged with conspiracy to violate the FCPA’s anti-bribery provisions under the dd-2 prong of the statute. According to the information, the “purpose of the conspiracy was to make corrupt payments to foreign officials in Egypt in order to obtain and retain business related to power grid projects for and on behalf of Alstom Grid and Alstom and its subsidiaries.”

Alstom Grid Inc. DPA

In the DPA, Alstom Grid admitted, accepted, and acknowledged that it was responsible for the conduct charged in the information.

The DPA has a term of three years and contains the same relevant considerations described in the Alstom Power DPA above.

In the DPA, the DOJ and the Company agreed that no monetary penalty will be paid by the Company because Alstom S.A., the parent company of the Company, has agreed to pay a fine of $772,290,000 related to the same underlying conduct.

In the DPA, Alstom Power agreed to a so-called “muzzle clause” in which it agreed not, directly or indirectly through others, to make any public statement contradicting the acceptance of responsibility set forth in the plea agreement.

The DPA contains the same corporate compliance program, reporting obligations, and monitor conditions as described in the Alstom plea agreement above.

In this DOJ release, Deputy Attorney General James Cole stated:

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

Assistant Attorney General Leslie Caldwell stated:

“This case is emblematic of how the Department of Justice will investigate and prosecute FCPA cases – and other corporate crimes. We encourage companies to maintain robust compliance programs, to voluntarily disclose and eradicate misconduct when it is detected, and to cooperate in the government’s investigation. But we will not wait for companies to act responsibly. With cooperation or without it, the department will identify criminal activity at corporations and investigate the conduct ourselves, using all of our resources, employing every law enforcement tool, and considering all possible actions, including charges against both corporations and individuals.”

First Assistant U.S. Attorney Michael Gustafson of the District of Connecticut stated:

“Today’s historic resolution is an important reminder that our moral and legal mandate to stamp out corruption does not stop at any border, whether city, state or national. A significant part of this illicit work was unfortunately carried out from Alstom Power’s offices in Windsor, Connecticut. I am hopeful that this resolution, and in particular the deferred prosecution agreement with Alstom Power, will provide the company an opportunity to reshape its culture and restore its place as a respected corporate citizen.”

FBI Executive Assistant Director Robert Anderson Jr. stated:

“This investigation spanned years and crossed continents, as agents from the FBI Washington and New Haven field offices conducted interviews and collected evidence in every corner of the globe. The record dollar amount of the fine is a clear deterrent to companies who would engage in foreign bribery, but an even better deterrent is that we are sending executives who commit these crimes to prison.”

As noted in the DOJ release:

“To date, the 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 on July 29, 2013, 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 on Nov. 2, 2012, to conspiracy to violate the FCPA. William Pomponi, Alstom Power’s former vice president of regional sales, pleaded guilty on July 17, 2014, 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 on July 30, 2013, and is pending trial in the District of Connecticut in June 2015. The charges against Hoskins are merely allegations, and he is presumed innocent unless and until proven guilty. The high-ranking member of Indonesian Parliament was also convicted in Indonesia of accepting bribes from Alstom, and is currently serving a three-year term of imprisonment.

In connection with a corrupt scheme in Egypt, Asem Elgawhary, the general manager of an entity working on behalf of the Egyptian Electricity Holding Company, a state-owned electricity company, pleaded guilty on Dec. 4, 2014, in federal court in the District of Maryland to mail fraud, conspiring to launder money, and tax fraud for accepting kickbacks from Alstom and other companies. In his plea agreement, Elgawhary agreed to serve 42 months in prison and forfeit approximately $5.2 million in proceeds.”

In addition to the above DOJ press release, the DOJ also held a press conference, a rare event in connection with an FCPA enforcement action.  In this speech, Cole stated:

“We are here to announce a historic law enforcement action that marks the end of a decade-long transnational bribery scheme – a scheme that was both concocted and concealed by Alstom, a multinational French company, and its subsidiaries in Switzerland, Connecticut, and New Jersey.

Today, those companies admit that, from at least 2000 to 2011, they bribed government officials and falsified accounting records in connection with lucrative power and transportation projects for state-owned entities across the globe.  They used bribes to secure contracts in Indonesia, Egypt, Saudi Arabia, and the Bahamas.  Altogether, Alstom paid tens of millions of dollars in bribes to win $4 billion in projects – and to secure approximately $300 million in profit for themselves.

Such rampant and flagrant wrongdoing demands an appropriately strong law enforcement response.  Today, I can announce that the Justice Department has filed a two-count criminal information in the U.S. District Court for the District of Connecticut, charging Alstom with violating the Foreign Corrupt Practices Act, or FCPA, by falsifying its books and records and failing to implement adequate internal controls.  Alstom has agreed to plead guilty to these charges, to admit its criminal conduct, and to pay a criminal penalty of more than $772 million.  If approved by the court next year, this will be the largest foreign bribery penalty in the history of the United States Department of Justice.

In addition, I can announce that Alstom’s Swiss subsidiary is pleading guilty to conspiring to violate the FCPA.  And the company’s two American subsidiaries have entered into deferred prosecution agreements and admitted that they conspired to violate the FCPA.

Alstom’s corruption scheme was sustained over more than a decade and across several continents.  It was breathtaking in its breadth, its brazenness, and its worldwide consequences.  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.  Let me be very clear: corruption has no place in the global marketplace.  And today’s resolution signals that the United States will continue to play a leading role in its eradication.

The investigation and prosecution of Alstom and its subsidiaries have been exceedingly complex – and they have required the utmost skill and tenacity on the part of a wide consortium of law enforcement officials throughout the country and across the globe.  I want to thank the Criminal Division’s Fraud Section and Office of International Affairs; the U.S. Attorney’s Offices in Connecticut, Maryland, and New Jersey; the FBI’s Washington Field Office and its Resident Agency in Meriden, Connecticut; the Corruption Eradication Commission in Indonesia; the Office of the Attorney General in Switzerland; the Serious Fraud Office in the United Kingdom; as well as authorities in Germany, Italy, Singapore, Saudi Arabia, Cyprus, and Taiwan, for their tireless efforts to advance this matter.  The remarkable cross-border collaboration that these agencies made possible has led directly to today’s historic resolution.  And this outcome demonstrates our unwavering commitment to ending corporate bribery and international corruption.  Our hope is that this announcement will serve as an inspiration – and a model – for future efforts.”

In this speech at the press conference, Caldwell stated:

“Today represents a significant milestone in the global fight against corruption.  It demonstrates the Department of Justice’s strong commitment to fighting foreign bribery and ensuring that both companies and individuals are held accountable when they violate the FCPA.  The guilty pleas and resolutions announced today also highlight what can happen when corporations refuse to disclose wrongdoing and refuse to cooperate with the department’s efforts to identify and prosecute culpable individuals.

Let me first explain how the scheme worked.  To conceal that it was the source of payments to government officials, Alstom funneled the bribes through third-party consultants who did little more than serve as conduits for corruption.  Alstom then dummied up its books and records to cover up the scheme.

Alstom’s corruption spanned the globe, and was its way of winning business.  For example, in Indonesia, Alstom and certain of its subsidiaries used consultants to bribe government officials – including high-ranking members of the Indonesian Parliament and the state-owned and state-controlled electricity company – to win several contracts to provide power-related services.  According to internal documents, when certain officials expressed displeasure that a particular consultant had provided only “pocket money,” Alstom retained a second consultant to ensure that the officials were satisfied.

In Saudi Arabia, Alstom retained at least six consultants, including two close family members of high-ranking government officials, to bribe officials at a state-owned and state-controlled electricity company to win two projects valued at approximately $3 billion.  As evidence that Alstom employees recognized that their conduct was criminal, internal company documents refer to the consultants only by code name.

Alstom similarly used consultants to bribe officials in Egypt and the Bahamas, and again Alstom employees clearly knew that the conduct violated the law.  In connection with a project in Egypt, a member of Alstom’s finance department sent an email questioning an invoice for consultant services and, in response, was advised that her inquiry could have “several people put in jail” and was further instructed to delete all prior emails regarding the consultant.

If approved by the court, Alstom’s criminal penalty of $772 million represents the largest penalty ever assessed by department in a FCPA case.  Through Alstom’s parent-level guilty plea and record-breaking criminal penalty, Alstom is paying a historic price for its criminal conduct — and for its efforts to insulate culpable corporate employees and other corporate entities.  Alstom did not voluntarily disclose the misconduct to law enforcement authorities, and Alstom refused to cooperate in a meaningful way during the first several years of the investigation.  Indeed, it was only after the department publicly charged several Alstom executives – three years after the investigation began – that the company finally cooperated.

One important message of this case is this:  While we hope that companies that find themselves in these situations will cooperate with the Department of Justice, we do not wait for or depend on that cooperation. When Alstom refused to cooperate with the investigation, we persisted with our own investigation.  We built cases against the various corporate entities and against culpable individuals.  To date, the department publicly has charged four Alstom corporate executives in connection with the corrupt scheme in Indonesia, which also chose not to cooperate, and another company’s executive in connection with the scheme in Egypt.  Four of these individuals already have pleaded guilty.  In addition, Marubeni Corporation, a Japanese trading company that partnered with Alstom in Indonesia, pleaded guilty to conspiracy to violate the anti-bribery provisions of the FCPA and substantive violations of the FCPA, and paid an $88 million criminal penalty.

Another important message from this case is that the U.S. increasingly is not alone in the fight against transnational corruption.  Earlier this year, Indonesia’s Corruption Eradication Commission, the KPK, assisted the department in its investigation.  And, in turn, the department shared with the KPK information that federal investigators had obtained, which the KPK used in its prosecution of a former member of the Indonesian Parliament for accepting bribes from Alstom-funded consultants.  This past spring, that Indonesian official was found guilty and sentenced to three years in an Indonesian prison.  Our partnership with Indonesian law enforcement authorities in this case means that both the bribe payors and bribe takers have been prosecuted.  And our investigation is not over yet.

This case is emblematic of how the Department of Justice will investigate and prosecute FCPA cases – and other corporate crimes.  We encourage companies to maintain robust compliance programs, to voluntarily disclose and eradicate misconduct when it is detected, and to cooperate in the government’s investigation.  But we will not wait for companies to act responsibly.  With cooperation or without it, the department will identify criminal activity at corporations and investigate the conduct ourselves, using all of our resources, employing every law enforcement tool, and considering all possible actions, including charges against both corporations and individuals.”

See here for an additional DOJ statement at the press conference.

In this Alstom release, Alstom CEO Patrick Kron stated:

“There were a number of problems in the past and we deeply regret that. 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, consistent with the highest ethical standards.”

The release further states:

“Alstom has made significant progress in the area of compliance over the last several years. The conduct referred to in the agreement mainly arose from the use of external success fee based Sales Consultants hired by Alstom to support its commercial teams. In order to ensure that Alstom strives for the best compliance procedures, Alstom has discontinued the hiring of such Sales Consultants. Further, pursuant to a negotiated resolution agreement with the World Bank, Alstom committed in Feb 2012 to continue to improve its internal compliance programme, including by retaining a monitor to oversee its efforts in this regard. To date, the work of the Monitor has confirmed that Alstom has put in place a Corporate Compliance Programme that reflects the principles embedded in the WBG’s Integrity Compliance Guidelines.”

[...]

“The DOJ has also stipulated that no part of the fine can be passed on to General Electric as part of the projected sale of Alstom’s energy businesses.”

Robert Luskin and Jay Darden of Squire Patton Boggs represented the Alstom entities.