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On December 22, 2014, Alstom S.A. (Alstom), a French power and transportation company, and various subsidiaries pleaded guilty to a range of FCPA violations and agreed to pay a $772 million criminal fine, the largest on record for an FCPA case. According to DOJ officials, the bribery scheme "spanned many years, occurred in countries around the globe and in several business lines." The size of the fine was also no doubt influenced by DOJ's perception that Alstom was insufficiently cooperative, at least until several of its executives were indicted.
On December 29, 2014, the U.S. District Court for the District of Connecticut denied a motion to dismiss the indictment brought by Lawrence Hoskins, a former employee of Alstom S.A., the French power and transportation company that recently pleaded guilty to a massive scheme to violate the FCPA and agreed to a record $772 million criminal fine. Hoskins was charged in connection with activities involving a Connecticut-based Alstom subsidiary, Alstom Power, Inc. Alstom Power entered into a Deferred Prosecution Agreement as part of the broader Alstom settlement. Hoskins offered several arguments to dismiss the indictment, including that he had left Alstom (and therefore withdrawn from any conspiracy) outside the statute of limitations, that he was not actually an agent of Alstom Power and that the FCPA cannot be applied to purely extraterritorial conduct. With regard to the withdrawal claim, the court noted that the defendant bears the burden of proving some type of affirmative act of disavowal, not just a mere cessation of activity. Because the indictment did not contain facts establishing the defense and the government had not made a full proffer of its evidence, the court held that it could not determine pretrial whether the defendant had in fact withdrawn from the conspiracy. The court also held that a trial was required to resolve Hoskins's claim that he was not an agent of Alstom Power, noting that "the existence of an agency relationship is a highly factual inquiry" dependent on a number of factors. Lastly, while Hoskins claimed that the FCPA could not apply to him because he engaged in no conduct in the United States, the indictment alleged "that he used domestic wire transfers to promote the conspiracy."
A Swiss subsidiary of Alstom SA, the French engineering giant, agreed last week to settle corruption-related charges with Swiss authorities and pay a total sanction of USD $42.7 million. According to an Office of the Attorney General (OAG) press release, Alstom Network Schweiz AF has been convicted of not having taken all necessary and reasonable organizational precautions to prevent bribery of foreign public officials in Latvia, Tunisia and Malaysia. Key to the OAG action was the finding that "the use of agents, particularly on the basis of success fees, in countries with a high level of corruption (cf. corruption index of Transparency International) bears a considerable risk of criminal prosecution for the companies." For in-house counsel and compliance professionals, the Alstom settlement offers a number of practice pointers:
- This action confirms Switzerland's standing as having one of the most active anti-corruption enforcement programs among OECD countries. According to Transparency International's Progress Report 2011: Enforcement of the OECD Anti-Bribery Convention, 7 of the 38 signatory countries have "active enforcement," with Switzerland among the 7 most active. Companies with operations implicating Swiss jurisdiction must remain mindful of the active Swiss anti-corruption program, and confirm that compliance controls are sufficient.
- The investigation involved 15 countries and the Swiss government submitted numerous requests for mutual legal assistance to foreign criminal prosecution authorities. This confirms the recent trend in which anti-corruption investigations involve extensive cooperation among law enforcement authorities from different countries.
- The OAG press release commented that "the group had implemented a Compliance policy that was suitable in principle, but that it had not enforced it with the necessary persistence." Thus, the OAG looked to the actual implementation of Alstom's compliance policy, in addition to the content of the policy itself, and found the implementation was lacking.
- The conduct in question involved consultants engaged by Alstom with consultancy agreements using success fees, portions of which were then passed to foreign government officials. The OAG press release states, "Only by extensive efforts in compliance and by rigorously enforcing and controlling the accordingly strict internal policy may this risk of criminal prosecution be reduced to an extent that is in accordance with the law." This highlights once again the risks associated with third parties and the need to impose appropriate compliance controls on relationships with third parties.
Alstom SA issued its own press release on the matter.
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