January 5th, 2015

What You Need To Know From Q4

Several 2014 year in review posts will be published this month.  But first, the fourth quarter of 2014 needs to be closed out.

This post provides a summary of Foreign Corrupt Practices Act enforcement actions and FCPA related events from the fourth quarter of 2014.  See here for a similar post from Q1, here for Q2 and here for Q3.

DOJ Enforcement (Corporate)

The DOJ brought four corporate enforcement actions in the fourth quarter.  (Alstom, Avon, Dallas Airmotive, and Bio-Rad).  DOJ recovery in these enforcement actions was approximately $868 million (with the Alstom action contributing the bulk of this number – $772 million).

In 2014, the DOJ brought seven corporate enforcement actions (Alstom, Avon, Dallas Airmotive, Bio-Rad, HP related entities, Marubeni, and Alcoa).  DOJ recovery in these enforcement actions was approximately $1.25 billion (with again the Alstom action contributing the bulk of this number).  At present, only the Alstom action has resulted in any individual charges against company employees.

The DOJ enforcement actions from the fourth quarter are summarized below.

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

DOJ Enforcement (Individual)

The DOJ did not bring any individual enforcement actions in the fourth quarter.

Year-to-date, the DOJ has brought three core actions in which various individuals have been charged. (See herehere and here).

SEC Enforcement (Corporate)

The SEC resolved four corporate enforcement actions (Avon, Bruker, Bio-Rad and Layne Christensen) in the fourth quarter. SEC recovery in these enforcement action was approximately $115 million.  The enforcement actions have not resulted, at least yet, in any individual charges against company employees.

In 2014, the SEC resolved seven corporate enforcement actions (Avon, Bruker, Bio-Rad, Layne Christensen, Smith & Wesson, HP and Alcoa).  All but the Avon action was resolved via administrative cease and desist orders.  SEC recovery in these enforcement actions was approximately $327 million.  At present, none of the enforcement actions have resulted in any individual charges against company employees.

The SEC enforcement actions from the fourth quarter are summarized below.

Avon (December 17th)

See here and here for prior posts

Charges:   Violation of the FCPA’s books and records and internal controls provisions

Settlement:  Approximately $67.4 million ($52,850,000 in disgorgement plus prejudgment interest of $14,515,013.13)

Disclosure:   Voluntary Disclosure

Individuals Charged:  No

Related DOJ Enforcement Action:  Yes

Bruker Corp. (December 15th)

See here for the prior post.

Charges: None.  Administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.

Settlement:  Approximately $2.4 million ($1,714,852 in disgorgement, $310,117 in prejudgment interest, and a $375,000 penalty)

Disclosure:   Voluntary Disclosure

Individuals Charged:  No

Related DOJ Enforcement Action:  No

Bio-Rad (November 3rd)

See here and here for prior posts

Charges: None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.

Settlement:  Approximately $40.7 million in disgorgement

Disclosure:   Voluntary Disclosure

Individuals Charged:  No

Related DOJ Enforcement Action:  Yes

Layne Christensen (November 3rd)

See here and here for prior posts

Charges: None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.

Settlement:  Approximately $5.1 million ($3,893,472.42 in disgorgement plus $858,720 in prejudgment interest as well as a $375,000 penalty amount)

Disclosure:   Voluntary Disclosure

Individuals Charged:  No

Related DOJ Enforcement Action:  No

SEC Enforcement (Individual)

For the first time since April 2012, the SEC brought an FCPA enforcement action against an individual.  This enforcement action is summarized below.

Stephen Timms and Yasser Ramahi (November 17th)

See here for the prior post

Charges: None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions, causing violations of the FCPA’s books and records provisions

Settlement:  Timms and Ramahi consented to the entry of the order and agreed to pay financial penalties of $50,000 and $20,000 respectively.

Employer Charged:  The individuals were associated with FLIR System, Inc. but at present the company has not been charged

Related DOJ Enforcement Action:  No

Other Developments or Items of Interest

As highlighted here, the FCPA turned 37 and you can read the most extensive piece ever written about the FCPA’s history -”The Story of the Foreign Corrupt Practices Act” here.
As highlighted here, the DOJ issued an FCPA Opinion Procedure Release in the context of successor liability.  In the release, the DOJ rightly concluded that just because a company that is subject to the FCPA acquires a foreign company, such an acquisition does not magically create FCPA liability where there was none before.

As highlighted here, in what has become a mid-November tradition, DOJ and SEC officials gave speeches at an FCPA conference. Topics discussed included the following: individual prosecutions, voluntary disclosure and cooperation, compliance programs, asset recovery, and foreign law enforcement cooperation.  Likewise September and October were also active months for DOJ policy speeches that touched upon FCPA topics.  Posts herehere and here analyze the speeches.

As highlighted here, FCPA individual defendant Joseph Sigelman is challenging various aspects of the DOJ’s case including its interpretation and application of the “foreign official” element – specifically whether an individual employed by Ecopetrol (an alleged state-owned and state-controlled petroleum company in Colombia) is a “foreign official.”

In this guest post, one of the most read ever on FCPA Professor, an anonymous compliance professional provides an inside perspective of an FCPA investigation.

As highlighted here, the Supreme Court declined an opportunity to hear a substantive FCPA case for the first time in FCPA history. (See herehere and here for briefing in the “foreign official” challenge).

See here for an informative Q&A with an individual experienced in the FCPA from a number of vantage points: DOJ FCPA enforcement attorney, in-house counsel, and lawyer in private practice.

Posted by Mike Koehler at 12:03 am. Post Categories: Year in Review 2014




January 2nd, 2015

Issues To Consider From The Alstom Action

IssuesThis recent post dived deep into the Alstom FCPA enforcement action.

This post continues the analysis by highlighting various issues to consider associated with the enforcement action.

 

A Real Head-Scratcher

Alstom entities engaged in conduct in violation of the FCPA.  This is clear from the DOJ’s allegations and consistent with DOJ enforcement theories.  Yet, if the DOJ’s FCPA enforcement program is to be viewed as legitimate and credible, the charged conduct must fit (for lack of a better term) the crime.

The charges against Alstom S.A. are a real head-scratcher.

The conventional wisdom for why the Alstom action involved only a DOJ (and not SEC) component is that Alstom ceased being an issuer in 2004 (in other words 10 years prior to the enforcement action).

Yet, the actual criminal charges Alstom pleaded guilty to – violations of the FCPA’s books and records and internal controls provisions –  were based on Alstom’s status as an issuer (as only issuers are subject to these substantive provisions).

In other words, Alstom pleaded guilty to substantive legal provisions in 2014 that last applied to the company in 2004.

This free-for-all, anything goes, as long as the enforcement agencies collect the money nature of FCPA enforcement undermines the legitimacy and credibility of FCPA enforcement.

Enforcement Action Origins

What were the origins of the Alstom enforcement action?

It appears to be a 2011 Swiss enforcement action that began in October 2007.  (See here, here and here).

Indeed, in briefing in an individual enforcement action (Lawrence Hoskins) connected to the Alstom Indonesia conduct, the DOJ stated:

“When the Government began investigating this case, it sought evidence from various countries including Switzerland [...].  The Government obtained orders pursuant to 18 USC 3292, tolling the statute of limitations in this case for the shorter of three years or the time it took to receive the evidence sought.  The first request, to Switzerland, was transmitted on September 22, 2010, and the tolling order reflects tolling beginning on that date.  Switzerland provided responses to the request on December 23, 2013.”

In the Swiss action, “Alstom Network Schweiz AG … was fined CHF2.5 million for negligence in implementing proper controls to prevent bribery by company officials in Latvia, Tunisia and Malaysia, and it was ordered to pay an additional CHF36 million for profits connected to the negligence.”

The foreign law enforcement origins of the Alstom action are typical of other enforcement actions in the Top Ten List of FCPA settlements (Siemens and the Bonny Island, Nigeria enforcement actions – KBR/Halliburton, Snamprogetti/ENI, Technip, and JGC Corp).

No Monitor

On one level, it seems odd that the Alstom enforcement action did not involve a corporate monitor as a condition of settlement. After all, the $772 million enforcement action was the largest DOJ FCPA enforcement action of all-time and per the DOJ “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.”

However, the resolution documents note “that Alstom is already subject to monitoring requirements pursuant to a February 2012 World Bank Resolution.” (See here).  As stated in the DOJ resolution documents: “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.”

Moreover, the vast majority of the alleged improper conduct in the DOJ enforcement action resided in business units that will soon be part of General Electric in 2015.  Thus, to impose a monitor on Alstom would, in effect, have been to impose a monitor on General Electric.

Third Party Red Flags

Most FCPA enforcement actions result from the conduct of third parties and ineffective corporate controls over third parties.

In this regard, the following paragraph from the Alstom enforcement is a dandy regarding third party red flags.

“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.”

FCPA enforcement actions of course are no laughing matter, but the following specific allegations sort of make one chuckle.

“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.”

“An Alstom entity formally retained a consultant on a [rapid transit] 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.”

More Information Needed As to Lack of Cooperation

Repeatedly in the resolution documents, the DOJ states that Alstom did not “cooperate.”

“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 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.”

Likewise, at the DOJ press conference, Assistant Attorney General Caldwell stated:

“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.”

[...]

“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.”

If the DOJ wants its cooperation message to be fully absorbed by the corporate community, the DOJ should have been more specific about Alstom’s lack of “cooperation.”

Moreover, if “responding only to the DOJ’s subpoena” is considered lack of cooperation by the DOJ, this is troubling.  (See here for the prior post “Does DOJ Expect FCPA Counsel to Role Over and Play Dead?”).

A “Foreign Official” Stretch?

It was a relatively minor allegation in the context of the overall Alstom enforcement action, but one which caught my eye because of its extraordinarily broad implication.

As highlighted in this previous post, Asem Elgawhart was employed by Bechtel Corporation (a U.S. company) and was assigned by Bechtel to be the General Manager of Power Generation Engineering and Services Company (PGESCo), a joint venture between Bechtel and Egyptian Electricity Holding Company (the alleged “state-owned and state-controlled electricity company in Egypt”). According to the DOJ, Elgawhart “used his position and authority as the General Manager of a power generation company to solicit and obtain millions of dollars of kickbacks for his personal benefit from U.S. and foreign power companies that were attempting to secure lucrative contracts to perform power-related services.” “In total,” the DOJ alleged, “Elgawhart received more than $5 million in kickbacks to help secure more than $2 billion in contracts for the kickback-paying companies, all of which he concealed from his employer, from bidding companies that did not pay kickbacks and from the U.S. Internal Revenue Service.” Based on these allegations, and as indicated in this DOJ release, Elgawhart was charged in a 8-count indictment with mail and wire fraud, money laundering and various tax offenses.

In the Alstom enforcement action, PGESCo and Elgawhart are described as follows:

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.”

PGESCo was controlled by and acted on behalf of EEHC. PGESCo worked “for or on behalf of’ EEHC, within the meaning of the FCPA, Title 15, United States Code, Section 78dd-l (f)( 1) [the FCPA's "foreign official" definition].

According to the DOJ, 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.”

In short, in the Alstom action the DOJ alleged that Elgawhary, a Bechtel Corporation employee, was an Egyptian “foreign official.” This is an extraordinarily broad “foreign official” interpretation with implications for any person (privately employed) working on foreign projects with participation by a foreign government department, agency or instrumentality.

Rhetoric Undermined

As highlighted in this post, Assistant Attorney General Leslie Caldwell recently defended the DOJ’s frequent use of NPAs and DPAs by stating that the DOJ is able to achieve through such negotiated settlements reforms, compliance controls, and all sorts of behavioral change compared to what it could achieve without use of NPAs and DPAs.

As highlighted in the prior post, the notion that the DOJ is powerless to effect corporate change through old-fashion law enforcement (that is enforcing the FCPA without use of NPAs and DPAs) is plainly false.

Indeed, the Alstom and Alstom Network Schweiz AG plea agreements contain substantively the same corporate compliance program and reporting obligations as the Alstom Power and Alstom Grid DPAs.

False Certification

A likely overlooked allegation in the Alstom enforcement action concerns bidding on various grid projects with alleged state-owned and state-controlled entities in Egypt. According to the charging documents, certain of these projects were “funded, at least in part, by the United States Agency for International Development (“USAID”)” and “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.”

These allegations are similar to DOJ allegations in the BAE enforcement action (an enforcement action that alleged conduct that could have served as the basis for FCPA violations, but resulted in no actual FCPA charges).  As noted in this previous post, in the BAE action, the DOJ “filed a criminal charge against BAE Systems charging that the multinational defense contractor conspired to impede the lawful functions of the Departments of Defense and State, made false statements to the Departments of Defense and Justice about establishing an effective anti-corruption compliance program to ensure conformance with the Foreign Corrupt Practices Act and paid hundreds of millions of dollars in undisclosed commission payments in violation of U.S. export control laws.”

How to Count FCPA Enforcement Actions

It is a basic issue:  how to count FCPA enforcement actions.

I use the “core” approach to counting FCPA enforcement actions (see here), an approach endorsed by the DOJ, but many in FCPA Inc. use various different creative counting methods that significantly distort FCPA enforcement statistics (see here).

Pursuant to the “core” approach, the Alstom action was one core enforcement action even though it involved the following components all based, in whole or in part, on the same core conduct.

  • Alstom S.A.
  • Alstom Network Schweiz AG
  • Alstom Power Inc.
  • Alstom Grid Inc.
  • Individual enforcement actions against Frederic Pierucci, David Rothschild, William Pomponi, and Lawrence Hoskins.

Counting the above as 8 FCPA enforcement actions instead of 1 core action highly distorts FCPA enforcement statistics and impacts the denominator of just about any FCPA enforcement statistic imaginable.

With several 2014 FCPA Year in Reviews to be published in January, one needs to be cognizant of these creative counting methods.





December 31st, 2014

Thank You For Reading FCPA Professor In 2014

ThankYou5Thank you for making FCPA Professor a part of your day in 2014.  261 posts were published this year.

Launched in 2009, FCPA Professor continues to grow and 2014 set a record in terms of site visits from readers around the world.

I appreciate the trust and confidence you place in me every day by visiting FCPA Professor. Running this website is a responsibility I take very seriously and my pledge to readers is to always provide comprehensive and candid coverage of FCPA and related topics.

A further goal of FCPA Professor has always been to provide a forum for analysis and discussion of the FCPA and related topics by others.  In 2014, dozens of guest posts were published and contributors included practitioners, compliance professionals, and professors from around the world. If you have something unique to say about an FCPA or related topic, please consider making your voice heard on FCPA Professor in 2015.

Again, thank you for reading FCPA Professor in 2014.  If you got your FCPA from FCPA Professor in 2014, you can help support this free website here.

I look forward to your readership and participation in 2015.

Posted by Mike Koehler at 12:03 am. Post Categories: Uncategorized




December 30th, 2014

Checking In Down Under

AustraliaToday’s post is from Robert Wyld (Partner, Johnson Winter & Slattery – here).  Wyld is the Australia Expert for FCPA Professor.

*****

The key issues that are covered in this post include: (i) Australia’s anti-corruption ranking slips down; (ii) The G20 Anti-Corruption Implementation Plan 2015-2016; (iii) Australia’s Attorney General Department’s Foreign Bribery website module; (iv) Australia and ASIC corporate penalties; (v) Australia and China – Operation Fox Hunt – chasing Chinese economic fugitives; (vi) Australia and extractive industry transparency; and (vii) Asia-Pacific Corruption Network.

Australia’s Anti-Corruption Raking Slips Down

On 3 December 2014, Transparency International released its well-known Corruption Perception Index for 2014. Australia slipped out of the top 10 “clean countries” and now sits at No 11 in the ranking of 174 countries.

Prof AJ Brown, a director of Transparency International Australia made the following comments to illustrate why Australia has slipped down the rankings, despite the progress made in leading the G20 to a new Anti-Corruption Implementation Plan (see below):

  • accumulating corruption scandals;
  • a heightened concern as to whether scandals reported in the media and investigated by authorities actually result in any prosecutions;
  • an increasing public perception that Governments do not do enough to seriously target the “big end of town” with the refusal within the Reserve Bank of Australia to admit any problem (with the Securency banknote printing scandal or to independently investigate the conduct of the relevant companies and their Boards of Directors) is just one example; and
  • the consistent reluctance of the Australian Government to acknowledge that corruption is a national problem and failing to even acknowledge that a robust, properly resourced independent national anti-corruption body has a role to play.

It appears that this reluctance to see corruption as a systemic national and international problem in Australia afflicts both the left and right side of politics. In an era of cost cutting, blow-out fiscal budgets and razor gangs cutting swaths through the public sector, business calling for less regulation, it so often just seems too hard for politicians to address. This is unfortunate given the excellent progress Australia demonstrated in leading the G20 to target foreign bribery – now the challenge is to address initiatives focusing on both domestic and foreign bribery with equal zeal and live up to the G20 ideals, failing which the perception of Australia’s anti-corruption efforts is likely to continue to fall, which reflects poorly on us all.

G20 Anti-Corruption Implementation Plan 2015-2016

After the breathless excitement of the G20 meetings in Brisbane in November 2014, the G20 published their collective Anti-Corruption Implementation Plan 2015-2016 (the G20 AC Plan).

The G20 AC Plan identifies key action areas and then for each Action Area, a set of Deliverables over the 2 years of the Plan.  The key Action Areas with their identified Deliverables are as follows:

  • member countries are to identify concrete steps to require the disclosure of ultimate beneficial owners behind any commercial or other structure to promote transparency in all commercial dealings;
  • member countries must promote their own rules on improving transparency in the public sector, including open data, whistleblower protections, immunities from prosecutions, fiscal and budget transparency and standards for public officials, with the Deliverables ranging from practical toolkits, disclosure of assets by public officials to self-assessments of each Members’ compliance with the Plan;
  • to actively promote the criminalisation of foreign bribery and the legal liability of persons (companies and individuals) with a key Deliverable being to focus on the role of intermediaries;
  • improving all levels of government cooperation with a Deliverable focus on acting to identify, recover and return the proceeds of corruption to the victims, countries or entities with enhanced criminal, civil and administrative sanctions and the improved use of anti-money laundering processes;
  • targeting anti-corruption initiatives in high risk areas with a Deliverable focus on customs, extractive industries, fisheries and primary industries and the construction industry; and
  • working to improve private sector transparency and integrity, particularly for small business, incentives for self-reporting, the role of the financial sector in detecting suspicious transactions and for business to adopt robust ethical standards to combat corruption.

The challenge over the next 2 years will be for the G20 member and other countries to take real and meaningful steps to address these issues in the face of inevitable complaints from business about the costs of regulation and compliance, so that these costs and attitudes are seen to work towards sustainable economic growth.

Australia’s Attorney General Department’s Foreign Bribery Module

On 9 December 2014 (world Anti-Corruption Day), the Australian Minister of Justice launched a new inter-active module addressing Australia’s key foreign bribery laws, sanctions, international issues and how business should manage its foreign bribery risks.

The Minister said:

The Australian Government has a zero tolerance approach to foreign bribery and corruption. This type of criminal offence poses a significant risk to Australian businesses operating in overseas markets. There are serious criminal implications for individuals and corporations, both under Australian and foreign laws. Business needs to be aware of the risks and take action to minimise them. The online learning module provides advice on Australia’s anti-bribery policy, the relevant laws and how they apply, and steps that business can take to help promote compliance. It also assists with our whole-of-government programme on foreign bribery and ensures our awareness-raising efforts are efficient, cost-effective and consistent across Government. Australia is reporting to the Organisation for Economic Co-operation Working Group on Bribery later this week on initiatives undertaken since their evaluation of Australia in 2012. The online learning module helps address recommendations to continue to educate and engage with the business community.

The module is available here and companies should consider incorporating the ideas from the module into their existing e-learning or other training modules.

Australia and ASIC Corporate Penalties

Over the last few months, the question of the adequacy of corporate penalties for commercial offences has been bubbling along. In light of various scandals involving banks, their financial planning businesses and other ventures where average investors invested lot and lost a lot more, the ability of ASIC to really prosecute individuals, remains a live debate. Many see ASIC as too weak and too beholden to large companies that generate the fees ASIC collects for the Australian Government.

In the wake of the various Libor-related investigations and prosecutions oversea, ASIC’s Chairman was recently quoted in The Sydney Morning Herald (on 2 December 2014) as saying:

“Tougher penalties, such as more jail sentences, would deter would-be white collar criminals…fear had to be lifted in others to ‘smother the greed’…white collar criminals are scared of going to jail. I had 10 years on Wall Street and going to jail is the thing that scares them most…when they come up to the 18th floor and they put people in handcuffs and wheel them off they don’t come back – it sends a message.”

Yet, despite this bravado, little is seen of any aggressive pursuit of economic criminals in the manner described by ASIC. Hyperbole is all good and well, but without demonstrable action to back up the emotive statements, ASIC appears to many to be little more than a regulator with an angry feather duster.

Australia and China, Operation Fox Hunt

Since July 2014, there has been a range of media coverage on Operation Fox Hunt, a joint initiative between Australian and Chinese investigators and police forces (in China and overseas), targeting corrupt Chinese officials who are purportedly investing corruptly secured assets in Australia.

The media has reported that China has arrested 288 suspects accused of financial crimes across 56 countries as part of its sweeping Operation Fox Hunt. The Chinese Ministry of Public Security said 126 of those suspects were brought back to China and confessed to their crimes. Some of them were apprehended in the US, Canada, and Australia, which have become popular with white-collar criminals because they do not have extradition treaties with China.

The Chinese government declared a deadline of 1 December 2014 for suspects to come forth and surrender to authorities, which could get them more lenient punishments. The operation has required Chinese authorities to co-operate with law enforcement in each of the countries where fugitives reside. While details are scarce, Chinese media quotes the Ministry of Public Security thanking countries for “cooperation and support” in the operation.

In Australia, these developments and the free trade negotiations between Australia and China there have fuelled debate about whether an extradition treaty might be negotiated between China and Australia.  While there are significant issues to address, including the substantial differences in the criminal legal system in the two countries and China’s use of capital punishment, a treaty may not be so insurmountable as some might think, given the new era of trade relationships between China and Australia.

As one Chinese commentator, Yang Hengjun noted in October 2014:

“This is why I believe the “fox hunt” is of the most importance, along with continuing to hunt “tigers and flies” domestically. But compared to “tigers” (which make huge targets) and “flies” (who are everywhere and can be easily caught), the “foxes” are quite cunning. Unless I’m mistaken, the Ministry of Public Security’s “Fox Hunt 2014” has had only limited success. Otherwise, why would the Supreme People’s Court, the Supreme People’s Procuratorate, the Ministry of Public Security, and the Ministry of Foreign Affairs jointly issue a notice urging overseas “economic criminals” to turn themselves in.”

Australia and Extractive Industry Transparency

The recent Corporations Amendment (Publish What You Pay) Bill 2014 (Cth) is Australia’s response to improving transparency in the extractive industries sector, following the US, the UK and Canada introducing mandatory reporting of what in fact is paid by companies to secure valuable business contracts.

Key features of the Bill to note include the following:

  • a mandatory reporting regime for all Australia Stock Exchange listed companies, unlisted public companies, large proprietary limited companies and controlled joint venture companies, involved in a resource extraction activity;
  • a report must be made of any payment, or series of payments of more than AU$100,000 made to a domestic or foreign government (including any authority or company owned by the government);
  • the “reportable payments” are defined broadly to capture such payments as taxes, royalties, licence fees, dividends and “social payments” (to or for community projects);
    • an annual report must be lodged with ASIC making the report publicly available 28 days after receipt by ASIC of the report; and
    • any contravention of the reporting obligations will give rise to an offence under Chapter 2M of the Corporations Act 2001 (Cth) and civil penalties will be available to ASIC if a defaulting company is prosecuted.

The Bill reflects Australia’s commitment to enhancing transparency following the G20 meetings and the increasing focus on how and what type of payments are made to governments and agencies controlled by governments in order to help target and combat corruption. Australian extractive companies should ensure there procedures are reviewed to ensure compliance with the Bill once it is enacted.

Asia-Pacific Anti-Corruption Network

At the 2014 APEC leaders’ meeting in Beijing held in November 2014, APEC agreed to establish an informal structure to facilitate “information sharing” among anti-corruption and law enforcement authorities in the Asia-Pacific region.

It commits the 21 APEC countries, including the United States and China, to “deny safe haven to those engaged in corruption, including through extradition, mutual legal assistance and the recovery and return of proceeds of corruption,” a joint-statement from APEC members said.

Western governments have resisted making extradition deals with China in the past because corruption crimes there are often punished with the death penalty. China has extradition treaties with 38 countries, but not with the United States, Australia or Canada, which have “the highest concentrations of corrupt officials” using those countries to safeguard their illicit assets according to Wang Yukai, an anti-corruption expert at the Chinese Academy of Governance. Mr Yukai also said that:

It will be of great significance if China can build cooperative mechanisms with these countries to capture corrupt officials on the run and recover some economic losses.

The Terms of Reference, adopted at the November APEC meeting require APEC Member States to:

  • establish the ACT-NET as an informal regional anti-corruption platform to permit prosecutors to consult and share practices to improve their investigation and prosecution of corruption (with China as the initial host for 2014 and 2015);
  • help in the training and targeting of corrupt assets to secure their capture and return; and
  • to promote bilateral and multilateral cooperation.
Posted by Mike Koehler at 12:03 am. Post Categories: AustraliaGuest Posts




December 29th, 2014

All About The Alstom Enforcement Action

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.