By Brent Kendall and Joel Schectman
WASHINGTON--French engineering giant Alstom SA pleaded guilty
and agreed to pay $772 million to resolve criminal charges it paid
tens of millions of dollars in a "widespread" bribery scheme to win
energy contracts around the globe, U.S. prosecutors said on
Monday.
That amount represents the largest-ever criminal penalty the
U.S. Department of Justice has obtained from a company on
bribery-related charges. The agreement comes after more than six
years of investigations into Alstom from law enforcement in the
U.S., Switzerland and Indonesia.
"Alstom's corruption scheme was sustained over more than a
decade and across several continents," said Deputy Attorney General
James Cole. "It was astounding in its breadth, its brazenness and
its world-wide consequences."
The record criminal penalty reflects in part what prosecutors
say was as a failure by the company to disclose the misconduct or
to cooperate with the investigation for several years. Alstom's
written plea agreement said the company's lack of cooperation
impeded the department's investigation of individuals involved in
the bribery scheme. Alstom's bribery schemes took place from at
least 2000 through at least 2011, the department said.
Alstom Chief Executive Officer Patrick Kron said the company
regretted "a number of problems in the past." The settlement
"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," he said.
Mr. Kron said that the bribery came mainly from Alstom's use of
outside sales consultants who received fees for closing deals. To
prevent further issues, the company has since stopped using these
consultants, he said.
General Electric Co., which is expected to buy Alstom's core
assets next year, won't be responsible for any part of the penalty
under terms of the settlement.
"That was something we insisted upon," Assistant Attorney
General Leslie Caldwell, head of the Justice Department's criminal
division, said on Monday.
U.S. authorities often limit the liability for companies that
acquire corrupt firms provided they ensure that any bad conduct
ends after the acquisition.
The Justice Department said Alstom engaged in a bribery scheme
by funneling more than $75 million through third-party consultants
who then paid government officials to secure more than $4 billion
in projects for Alstom. The company profited to the tune of $300
million, the department said.
Alstom and several subsidiaries paid the bribes and falsified
records in connection with power and transportation projects in
countries including Indonesia, Egypt, Saudi Arabia and the Bahamas,
the department said.
In Indonesia, for example, Alstom and subsidiaries used
consultants to bribe a high-ranking member of the Indonesian
Parliament and top officials with the state-controlled electricity
company to win contracts valued at $375 million, prosecutors
said.
The Justice Department said Alstom worked with at least six
consultants in Saudi Arabia, including two close family members of
high-ranking officials at a state-owned electricity company to win
business building steam power-generating units, projects valued at
$3 billion. Prosecutors said internal Alstom documents used code
names when discussing the consultants, such as "Quiet Man" and "Old
Friend."
U.S. authorities have ramped up overseas bribery enforcement in
recent years, often investigating foreign companies that have a
subsidiary located within the U.S. The Foreign Corrupt Practices
Act makes it a crime to bribe a government official in exchange for
business.
Alstom pleaded guilty to two criminal counts in the U.S.
District Court for the District of Connecticut, charging the
company with violating the Foreign Corrupt Practices Act by
falsifying its books and records and failing to implement adequate
internal controls.
Alstom's Swiss subsidiary, Alstom Network Schweiz AG, pleaded
guilty to conspiring to violate the antibribery provisions of the
FCPA. Two U.S. subsidiaries, Alstom Power Inc. and Alstom Grid
Inc., both entered into deferred prosecution agreements, admitting
they conspired to violate the antibribery provisions of the
FCPA.
The Alstom settlement ends one lingering uncertainty in the
pending asset sale to U.S.-based General Electric.
A GE spokesman said the company had evaluated Alstom's potential
liability from the FCPA investigation before the $17 billion deal
was struck this summer. The potential cost of the fine was included
in GE's purchase price, company officials have said.
The plea agreement "does not materially change the overall
economics of the deal," the spokesman said Monday.
Ted Mann contributed to this article.
Write to Brent Kendall at brent.kendall@wsj.com and Joel
Schectman at joel.schectman@dowjones.com
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