Summary:
The Foreign Corrupt Practices Act (“FCPA”) prohibits the payment of monies and other things of value to foreign government officials in an effort to advance business. It also prohibits the falsification of books and records and the failure to implement internal controls. On December 22, 2014, the Department of Justice (“DOJ”) sent a message to companies around the world that it would vigorously enforce the FCPA when it announced a record-breaking $772 million fine imposed against the French power and transportation conglomerate Alstom SA (“Alstom”) for violating the statute.
Case Details:
Alstom pled guilty to a two-count indictment in Connecticut federal court and admitted that Alstom and its Swiss and US subsidiaries paid bribes to foreign government officials, including officials at state-owned transportation entities, in Indonesia, Saudia Arabia, Egypt and the Bahamas to win power and transportation projects. To facilitate these bribes, Alstom hired purported “consultants” identified by code names such as “Mr. Geneva,” and “Old Friend,” who funneled the corrupt payments to the foreign officials. This scheme, which lasted for over a decade, involved numerous members of Indonesian parliament and other high-ranking foreign government officials. In total, Alstom paid more than $75 million in bribes to secure roughly $4 billion in business around the world, for a profit of approximately $300 million.
According to Alstom’s plea agreement, the DOJ demanded a large penalty because, in addition to executing an extensive and complex foreign bribery scheme, Alstom failed to voluntarily disclose its misconduct despite having previously resolved related charges involving a US subsidiary, and resisted cooperating with the DOJ for several years, until several high-ranking Alstom executives were charged.
Take-Away:
This case is a caution to all companies that conduct business abroad, particularly those that utilize placement agents and consultants. Great care must be taken in conducting due diligence of all counterparties, and in entering contracts with and securing adequate representations from them. Additionally, accurate books and records must be maintained and effective compliance plans and internal controls must be deployed.
If you have questions regarding this case, or any other FCPA matter, please reach out to your regular contact at Seward & Kissel or contact one of the attorneys in the Government Enforcement and Internal Investigations practice group – Michael Considine (212) 574-1334 or Rita Glavin (212) 574-1309.
