Monday, January 5, 2015

Alstom Nears Record $700 Million U.S. Bribe Accord

Alstom Nears Record $700 Million U.S. Bribe Accord

Feb 1Mar 1Apr 1May 1Jun 1Jul 1Aug 1Sep 1Oct 1Nov 1Dec 1Jan 120.0022.5025.0027.5030.00* Price chart for ALSTOM. Click flags for important stories. ALO:FP26.20-0.68 -2.51%
Alstom (ALO) SA is close to settling a bribery case with the U.S. Justice Department for a record $700 million, according to three people familiar with the matter, allowing the French engineering company to wrap up a criminal investigation of its business in Indonesia and other countries before a sale to General Electric Co. (GE)
The fine would be the largest criminal penalty paid to the Justice Department under the Foreign Corrupt Practices Act, overshadowing the $450 million that Siemens AG paid in 2008. Siemens paid an additional $350 million to the U.S. Securities and Exchange Commission. Alstom isn’t subject to SEC scrutiny because its shares don’t trade in the U.S.
A settlement could be announced as early as next week, said one of the people, all of whom asked not to be identified because the accord isn’t final.
Alstom shares fell as much as 1.5 percent to 26.50 euros, and were trading down 0.5 percent at 4:04 p.m. in Paris. GE rose 0.7 percent to $24.76 in New York.
Virginie Hourdin, a spokeswoman for Alstom, said the company “doesn’t comment on ongoing proceedings.” Seth Martin, a GE spokesman, and Peter Carr, a Justice Department spokesman, also declined to comment.
The U.S. probe of Alstom has centered on a $118 million contract to provide boiler services at a power plant in Tarahan, on the southern coast of Sumatra. Alstom executives, together with Marubeni Corp., a Japanese commodity-trading company, used middlemen to funnel hundreds of thousands of dollars to a member of Indonesia’s parliament and officials at Perusahaan Listrik Negara PT, a state-controlled electricity company known as PLN, according to court papers filed by the Justice Department in related cases.

Largest Acquisition

The settlement removes a cloud over the company before its planned sale to GE. The Fairfield, Connecticut-based manufacturer reached an agreement in June to buy most of Alstom’s energy assets for 12.4 billion euros ($15.6 billion), GE’s biggest acquisition ever.
The FCPA, a 1977 law, bans individuals and companies from making payments to foreign government officials to win or retain business. The law lets the government assert jurisdiction over non-U.S.-based companies whose shares are traded in U.S. markets or if any of the alleged fraud occurred in the U.S. The alleged corruption at Alstom involved its Connecticut unit and bribe payments that were wired through a bank account in Maryland.
The French government formally signed off last month on the deal, which still requires approval from Alstom shareholders at a Dec. 19 meeting. GE said last month that it’s seeking approval from antitrust authorities in about 20 countries and that it’s on track to close the acquisition by mid-2015.

Multiple Investigations

The deal is a critical piece of Chief Executive Officer Jeffrey Immelt’s plan to expand GE’s industrial units while shrinking its finance arm. The company has sold real estate and foreign-bank assets, and it held an initial public offering in July for its consumer-lending arm, known as Synchrony Financial. (SYF)
Alstom, which is based in Levallois-Perret, France, outside Paris, has been investigated by multiple countries since 2004, when auditors for the Swiss Federal Banking Commission unearthed documents showing possible corrupt payments. Since then, the company has paid more than $53 million over claims its employees bribed officials in at least five countries. A settlement with the U.S. won’t resolve corruption investigations by the U.K. and Brazil.
In the U.K., the Serious Fraud Office charged Alstom Network UK Ltd. in July with corruption in relation to transport projects in India, Poland and Tunisia. One executive has been charged and more individuals are expected to face prosecution alongside him, people with knowledge of the situation have said.

Energy Projects

A second Alstom unit will be charged by the SFO before year-end with corruption tied to work in Lithuania, a person with knowledge of the situation said last month.
While investigating the Indonesian deal, the Justice Department found evidence of possible bribery in several other energy projects in Indonesia, India and China, according to documents filed in a case against William Pomponi, the former vice president of regional sales at Alstom’s Connecticut unit.
Pomponi, one of four former Alstom officials charged in federal court in Connecticut, pleaded guilty in July to conspiracy to violate the FCPA and agreed to cooperate. Two others also pleaded guilty while the fourth is scheduled to go to trial next year.
The U.S. investigation involved recordings made by at least two government informants, according to court records.
Marubeni, which pleaded guilty to bribery violations in March and paid an $88 million fine, also agreed to cooperate.
U.S. prosecutors also said Alstom hadn’t been forthcoming with evidence of wrongdoing earlier in its investigation.
Robert Luskin, Alstom’s lawyer at Squire Patton Boggs LLP in Washington, said earlier this year that cooperation improved after he was hired by the company.
Cases enforcing the FCPA have drawn attention in recent years for the magnitude of corporate penalties they command. Among the largest U.S. penalties for foreign bribery are KBR Inc. (KBR)’s $579 million settlement in 2009 and Alcoa (AA) Inc.’s $384 million penalty earlier this year. Those cases included criminal and SEC penalties.
To contact the reporter on this story: Tom Schoenberg in Washington at
To contact the editors responsible for this story: Sara Forden at Jeffrey D Grocott

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