The Swedish-Swiss multinational corporation ABB Ltd, based in Zurich, has settled its third case relating to violations of the Foreign Corrupt Practices Act (FCPA). The electrical equipment and automation company has agreed to pay over $315m and $75m respectively to the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), plus a further $72m in disgorgement, after bribing a high-ranking official at South Africa’s state-owned energy company.
As a result of the DOJ’s action, ABB subsidiaries in Switzerland and South Africa pled guilty to a bribery conspiracy. ABB’s admissions and court documents show that, between 2014 and 2017, the company paid bribes through some of its subsidiaries to a South African government official, who was a high-ranking employee at Eskom Holdings Limited (Eskom).
“ABB conducted sham negotiations to obtain contracts at inflated prices that ABB had pre-arranged with the South African government official.”
The global technology company engaged multiple subcontractors associated with the South African government official, despite “poor qualifications and lack of experience”. In return for the payments, ABB received improper advantages in its efforts to obtain work with Eskom, including getting confidential and internal Eskom information.
The DOJ’s statement also says that, as a part of the scheme, “ABB conducted sham negotiations to obtain contracts at inflated prices that ABB had pre-arranged with the South African government official, all on the condition that ABB employ a particular subcontractor associated with that official”. ABB also falsely recorded payments to the subcontractors as legitimate business expenses, when in fact the money was partly bribes intended for the South African government official.
According to the SEC’s order, ABB paid the service providers more than $37m to bribe the government official. In return, ABB obtained a $160m contract to provide cabling and installation work at Eskom’s Kusile Power Station.
“Corruption and bribery are not victimless acts. They can create hazardous working conditions, hurt honest businesses, and erode trust and integrity in local and global governance,” said US Attorney Jessica D Aber for the Eastern District of Virginia. “This resolution reflects the need for accountability, recompense, and rehabilitation in the wake of these kinds of violations.”
Deferred prosecution agreement
With these charges, ABB has entered into a three-year deferred prosecution agreement (DPA) with the department in relation to “the filing of criminal information in the Eastern District of Virginia charging the company with conspiracy to violate the FCPA’s anti-bribery provisions, conspiracy to violate the FCPA’s books and records provisions, and substantive violations of the FCPA”.
The ABB subsidiaries ABB Management Services Ltd (Switzerland) and ABB South Africa (Pty) Ltd (South Africa) have each pled guilty to one count of conspiracy to violate the anti-bribery provisions of the FCPA.
“This is the department’s first coordinated resolution with authorities in South Africa, where much of ABB’s criminal scheme was carried out, reflecting our commitment to relationship-building and our ever-deepening partnerships in the global fight against corruption,” said Assistant Attorney General Kenneth A Polite, Jr of the Justice Department’s Criminal Division.
“ABB bribed a high-ranking official at South Africa’s state-owned energy company in order to corruptly obtain confidential information and win lucrative contracts. In addition, our partners in South Africa have brought corruption charges against that official. This resolution demonstrates the Criminal Division’s thoughtful approach to appropriately balancing ABB’s extensive remediation, timely and full cooperation, and demonstrated intent to bring the misconduct to the department’s attention promptly upon discovering it, while also accounting for ABB’s historical misconduct,” Polite said.
The DOJ’s action was coordinated with prosecutorial authorities in South Africa and Switzerland, as well as the SEC.
German authorities involved
According to the DPA, ABB’s total criminal penalty is $315m. However, the DOJ has agreed to credit up to one-half of the penalty against other amounts ABB pays in related proceedings to authorities in South Africa. The credit will also hold for amounts that ABB pays to resolve other investigations conducted by the SEC and authorities in Switzerland and Germany, as long as payments with German authorities are made within 12 months.
Besides coming to an agreement with the DOJ and the SEC, ABB has agreed to resolve separate investigations by authorities in South Africa and Switzerland, as well as its anticipated resolution of a related investigation by German authorities.
“Corruption and bribery are not victimless acts. They can create hazardous working conditions, hurt honest businesses, and erode trust and integrity in local and global governance.”
Jessica D Aber, US Attorney for the Eastern District of Virginia
ABB has also agreed to continue working with the department on the ongoing investigations, therefore receiving a 25% discount on the criminal monetary penalty. And the company has committed to further enhance its compliance program and internal controls. It will also boost its reporting provisions to better detect violations of the FCPA and other applicable anti-corruption laws.
“As this resolution shows, international partnerships are central to the FBI’s efforts against global corruption,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division. “The FBI and our law enforcement partners conducted a thorough investigation to uncover the source of bribes to a senior official at South Africa’s state-owned energy company. No matter which country the crime occurs in, the FBI is steadfast in pursuing those who violate the Foreign Corrupt Practices Act.”
$75m penalty by SEC
In a separate action on December 3, the SEC also charged ABB Ltd for violations of the FCPA, arising out of the bribery scheme. ABB agreed to settle those charges too, and pay a $75m civil penalty.
“Notwithstanding prior FCPA-related violations and known corruption risks throughout its operations, ABB lacked sufficient controls to detect or deter this egregious bribery scheme,” said Charles Cain, Chief of the SEC’s FCPA Unit.
ABB has consented to the SEC’s cease-and-desist order that the company violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA, in which ABB has agreed to pay a civil monetary penalty of $75m.
“ABB lacked sufficient controls to detect or deter this egregious bribery scheme.”
Charles Cain, Chief of the SEC’s FCPA Unit
The SEC also ordered ABB to pay more than $72m in disgorgement; however, the Commission deemed the payment satisfied after ABB reimbursed its ill-gotten gains to the South African government as part of an earlier civil settlement, based largely on the same underlying conflict as this action. Nonetheless, ABB is also required to regularly report the status of its ongoing remediation of its internal accounting controls and compliance program to the SEC for a three-year period.
This is not the first time ABB has faced charges for violating FCPA provisions. In 2004, the SEC sued ABB LTD in a foreign bribery case, where ABB agreed to disgorge $5.9m in illicit profits. Two ABB affiliates also pled guilty and agreed to pay $10.5m in fines, in a case brought by the DOJ.
And in 2010, SEC charged ABB for bribery schemes in Mexico and Iraq. The company agreed to pay more than $39.3m to settle the charges.
