You can learn a lot from other people’s mistakes. We all know that.
In our FCPA world, we have a new poster child for blundering – Alstom. The handwriting is on the wall – as time goes on, the Justice Department is building a bigger and bigger FCPA case against Alstom. One of my favorite Dylan lyrics applies with full force – “You don’t need a weatherman to know which way the wind blows.”.
Clearly we have a case where the client company just does not understand what is going on, nor does senior leadership have the ability or desire to respond and fix the problems. Instead, Alstom’s failure to act and respond reflects the lack of any ethical culture. That in a nutshell is probably 90 percent of the reason that a culture of bribery took over the company.
Starting first with just a few “tea leaves,” the Justice Department has publicly disclosed that Alstom is failing to comply with US grand jury subpoenas. If a company resist even the production of documents, you know that is a bad sign as to who is running the company and what direction they are going.
In order to send a message, the Justice Department broke off the Indonesia project from its massive investigation and prosecuted four individual executives from Alstom. (Two executives have pled guilty; two others are awaiting trial). The Justice Department wants Alstom and the executives to know that they mean business. Hopefully the message is getting through to Alstom’s management, although it is unlikely that any significant change will occur.
The fact is that Alstom is quickly making itself the new poster child for FCPA enforcement. My prediction, in 2015, the settlement will eventually eclipse Siemens in terms of corporate fines and individuals prosecuted. Alstom is a company that is living on the edge of corporate culture and will pay a significant price for its systemic breakdowns.
Starting in 2010, Alstom’s bribery problems started to unravel. Three executives at a British unit were 
arrested for bribery as part of dawn raids at various UK Alstom business offices. The SFO now expects to file charges in the next few months.
The same year Alstom settled a bribes for contract case in Italy.
In 2011, Alstom paid a penalty of $38 million in Swiss francs to settle a bribery case with the Swiss authorities involving fifteen foreign countries.
The Justice Department has been investigating Alstom since 2010. In 2013, the US indicted three individuals from Alstom in connection with a project in Indonesia.
The Indonesia project is one of at least ten that the Justice Department is investigating. Interestingly, Alstom has failed to comply with gran jury subpoenas relating to a number of these projects.
Recently, Brazil opened a corruption investigation of Alstom involving eleven people accused of bribery involving bids for contracts relating to construct Sao Paolo’s metro rail system. The individuals are accused of paying $10 million in bribes to obtain the contracts using three Uruguay shell companies to funnel bribes to Brazilian officials.
Country-by-country the list grows longer and Alstom’s problems multiply. In the end, the question will be whether Alstom itself will survive. Right now, we know that, like Siemens, there will be massive penalties, lots of individual prosecutions, and a cleaning of the house.
It is an important reminder of how bad a company’s culture can become and the consequences of embracing a culture of lawlessness versus a culture of ethics and integrity.
