Alstom to Pay $772 Million to Settle Bribery Charges -- 3rd Update

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 [e-mail] and Joel Schectman at [e-mail]

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