Swiss conglomerate ABB Ltd agreed Friday to pay penalties of $462.5 million to resolve charges that it violated the Foreign Corrupt Practices Act by bribing a South African official to win contracts for a power plant project. It was the third time ABB has been charged with FCPA offenses, following earlier settlements in 2010 and 2004.
In Friday’s resolution, Zurich-based ABB Ltd entered into a three-year deferred prosecution agreement with the DOJ.
Under the DPA, ABB’s total criminal penalty is $315 million.
The DPA resolved a criminal information filed in federal court in 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.
In addition, subsidiaries ABB Management Services Ltd. (Switzerland) and ABB South Africa (Pty) Ltd. (South Africa) each pleaded guilty to one count of conspiracy to violate the anti-bribery provisions of the FCPA.
The DOJ said it agreed to credit up to one-half of the criminal penalty against amounts the company pays to authorities in South Africa in related proceedings, along with other credits for amounts ABB pays to resolve the SEC enforcement action and investigations in Switzerland and Germany. The DOJ will only credit ABB’s payments to German authorities made within 12 months.
The SEC resolved the civil case through an internal administrative order. The order imposed a penalty of $75 million and disgorgement and prejudgment interest of $72.5 million.
ABB consented to the SEC’s cease-and-desist order that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA.
The company agreed to report to the SEC regularly for three years about ongoing remediation of its internal accounting controls and compliance program.
Between 2014 and 2017, ABB paid bribes through its subsidiaries to a high-ranking employee at the state energy company, Eskom Holdings Limited (Eskom), to obtain multiple contracts.
“ABB engaged multiple subcontractors associated with the South African government official and made payments to those subcontractors that were intended, at least in part, as bribes,” the DOJ said.
ABB conducted sham negotiations with one of the subcontractors stipulated by the government official and agreed on inflated prices.
The company falsely recorded payments to the subcontractors as legitimate business expenses.
South African authorities imposed a penalty of $143 million in “punitive reparations,” according to a December 1 release from the National Prosecuting Authority. The NPA said ABB’s crimes had a “negative impact on South Africa and its people.”
In a parallel settlement Friday, ABB paid the Swiss Office of the Attorney General 4 million Swiss francs ($4.25 million) to settle criminal charges that it failed to take appropriate steps to prevent bribe payments in South Africa.
ABB CEO Björn Rosengren said in a statement Friday, “We take the Kusile matter very seriously. Since it was reported, ABB has cooperated fully with all authorities and spent considerable time and effort – including launching a new code of conduct, educating employees and implementing an enhanced control system – to prevent something similar from happening again.”
In December 2020, ABB paid Eskom — the South African state energy company — $104 million as part of a settlement with both Eskom and South African prosecutors. According to documents provided by FCPA Tracker, the settlement related to improper payments and “other compliance issues” regarding the Kusile power station.
In May 2020, the UK Serious Fraud Office closed its investigation into ABB after it found the case did not meet the “relevant test for prosecution.”
According to FCPA Tracker, ABB first disclosed the investigation into “suspect payments” in April 2017 in a filing with the SEC.
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ABB is the only company to have three separate FCPA settlements. Fourteen companies have settled FCPA offenses twice.
In 2010, ABB paid $58 million to the DOJ and SEC to settle FCPA violations in Iraq and Mexico.
ABB subsidiaries paid kickbacks to the former regime in Iraq to obtain contracts under the U.N. oil for food program. The bribes generated contracts worth $13.5 million in revenues and $3.8 million in profits.
“ABB’s Jordanian subsidiary acted as a conduit for other ABB subsidiaries by making the kickback payments on their behalf. . . . ABB improperly recorded the kickbacks on its books as legitimate payments for after-sales services, consultation costs, and commissions,” the SEC said in 2010.
In Mexico, a U.S. subsidiary bribed employees at state-owned electric utilities and won contracts that generated over $90 million in revenues and $13 million in profits.
In 2004, ABB and two subsidiaries paid $16.4 million to the DOJ and SEC to settle FCPA charges.
The ABB parent company settled charges with the SEC that it violated the anti-bribery, books and records, and internal control provisions of the FCPA related to “suspected payments” in Nigeria, Kazakhstan, and Angola.
The U.S. and UK subsidiaries pleaded guilty to a criminal information charging each with two counts of bribery in violation of the FCPA.
In total, ABB has paid around $537 million to settle FCPA offenses through its three enforcement actions.
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