The SFO announced on the 24th March that it had arrested three members of the UK board of Alstom, an infrastructure and transport group with its headquarters in France, and raided five of Alstom’s UK offices, and four residential properties. The arrests were made on suspicion of bribery and corruption, conspiracy to pay bribes and money laundering and false accounting in relation to overseas contracts. The SFO said that it had been working with the Swiss Federal Police, as well as the Attorney’s office and other local police forces in the UK. On the 25th March, the SFO said that they had extended their search following the arrests.
The arrests mark the beginning of a UK investigation: the three executives have not yet been charged. The Guardian newspaper and the Financial Times reported that the executives are: Stephen Burgin, Alstom’s UK president, Altan Cledwyn Davies, its legal director, and Robert Purcell, its finance director, and that they were on the boards of Alstom UK Holdings Ltd, Alstom Ltd and Alstom Network UK Ltd.
In May 2008, the Wall Street Journal reported that Alstom was under investigation by Swiss and French authorities. The French prosecutors started a probe in November 2007 into allegations that Alstom had paid hundreds of millions of pounds in bribes to win contracts in Asia and South America. The French investigation was initiated as the result of information provided by the Swiss Judicial Authorities in May 2007 where Alstom is also under investigation. The Swiss investigation in turn had been prompted by a report by auditors KPMG for the Swiss Federal Banking Commission in 2004 which revealed that Alstom had circulated 20 million euros through shell companies in Switzerland and Liechtenstein, which was then transferred to its marketing people in Singapore, Indonesia, Brazil and Venezuela.
Alstom is alleged to have paid $6.8 million in bribes in Brazil, for instance, to win a $45 million contract to expand the Sao Paulo underground network. The KPMG report also found that another 7.74 million euros had been paid via accounts in Hong Kong, Bahrain, Thailand, Singapore, the US, Switzerland and Liechtenstein to pay individuals in Venezuela, China, Thailand and Singapore (see AFP). Investigators were said to be looking at $200 million worth of payments.
According to a document from Swiss investigators, “the Swiss investigating authorities strongly suspect that senior officials at the Alstom group systematically embezzled money over years and horded it in ‘black funds’” between 1995 and 2003 (see Spiegel). Swiss banker, Oscar Holenweger, was said to be at the centre of the payments.
In August 2008, Bruno A. Kaelin, a former Alstom compliance officer, was detained in Switzerland on bribery and money laundering charges and raids were made on Alstom offices in Switzerland. In a public statement at the time, the Swiss prosecutor’s office stated that “payments were made for corrupt ends by an intermediary of Alstom Prom AG located in Baden” (which is in Switzerland) and that they suspected that “these sums were transferred by other companies of the Alstom group to public servants or officials of various countries in cases determining the awarding of contracts.” In September 2008, a Swiss court found that there was a reasonable suspicion that a large part of $400 million paid out by Alstom, may have been bribes. Payments up to 2008 were said to have been found.
No charges against Alstom have been brought by the French authorities yet. Alstom’s general counsel and compliance chief were interviewed by a French investigating magistrate in February 2008. The case is being looked into by the French investigating judge, Renaud van Ruymbeke, who has a reputation as a fierce investigator, and who also initiated the investigation into bribes paid by KBR in Nigeria. In May 2008, Alstom sought plaintiff status in the French investigation alleging that it was a victim of corruption. Alstom was however saved from bankruptcy in 2004 with a $1.24 billion bailout by the then finance minister and current President, Nikolas Sarkozy and is regarded by some as having considerable political protection.
The UK arrests will put pressure on France to take further action against the company. Alstom is France’s Siemens moment. Siemens was found guilty of corruption in December 2008 in the US and Germany, and which was fined $1.4 billion. Unlike Siemens, however, Alstom is not registered on the US Stock Exchange and so has been beyond the reach of the US Department of Justice.
Some of the projects are said to have received World Bank backing. Alstom Power UK Ltd has received numerous guarantees from the UK’s Export Credit Guarantees Department.