The Justice Department continues to push an aggressive agenda against businesses. It is committed to demonstrating its resolve to prosecute companies and individuals from the business community. Whether it is antitrust, FCPA, False Claims Act, or other assorted white collar crimes, DOJ continues to demonstrate its focus on white collar crimes.
The lowest-hanging fruit to demonstrate this renewed focus is to focus on companies connected to terrorism or violence against innocent civilians, whether from terrorism, gang activity, or other violent crimes.
In this environment, DOJ announced the first corporate material support for terrorism prosecution against Lafarge S.A. and its Syrian subsidiary. Lafarge is a global building materials manufacturer headquartered in France, with a Syrian subsidiary, Lafarge Cement Syrian (“LCS”), which plead guilty to providing material support and resources to the Islamic States of Iraq and al-Sham (“ISIS”) and the al-Nusrah Front (“ANF”), both designated as foreign terrorist organizations.
After pleading guilty, the District Judge sentenced the defendants to probation and payment of financial penalties consisting of $90.78 million and forfeiture of $687 million, totaling $777.78 million. Lafarge acknowledge that it paid ISIS and ANF for permissions to operate a cement plant in Syria from August 2013 to October 2014. LCS earned $70.30 million in revenue.
From a criminal responsibility and reputational perspective, Lafarge did not just seek permission from ISIS and ANF to operate its cement plant in Syria, Lafarge made the disastrous decision to fund ISIS, but it did so for the naked incentive to leverage its relationship with ISIS for its selfish economic advantage. As a part of this unholy transaction, Lafarge sought ISIS’s assistance to hurt Lafarge’s competition.
Lafarge is the first corporate organization charged with providing material support and resources to foreign terrorist organizations. Lafarge partnered with ISIS, one of the most brutal terrorist organizations, to increase profits and market share, while ISIS engaged in a campaign of violence during the Syrian civil war.
In her press statement, Deputy Attorney General Lisa Monaco, emphasized the importance of “invest[ing] in robust compliance programs, pay[ing] vigilant attention to national security compliance risks, and conduct[ing] careful due diligence in mergers and acquisitions.”
The defendants routed nearly six million dollars in illicit payments to two of the world’s most notorious terrorist organizations — ISIS and INF in Syria.
From 2010 to 2014, Lafarge through LCS, operated a cement plant in Syria. After the start of the Syrian civil war in 2011, Lafarge and LCS negotiated agreements to pay armed factions to protect LCS employees to ensure continued operation of the LCS’s cement plant (and to enhance thier position re competitors in the market). Despite the obvious support of ISIS and ANF, Lafarge executives communicated in contemporaneous emails that they were motivate by economic incentives to gain market share. Lafarge paid monthly “donations” to armed groups, including ISIS and ANF, so that employees, customers and suppliers could travel past checkpoints controlled by the terrorist groups. Eventually, Lafarge agreed to make payments to ISIS based on the volume of cement that LCS sold to customers. Lafarge and LCS executives reference these payments as akin to paying “taxes”.
Lafarge and LCE executives intentionally structured their agreements with ISIS to compensate the terrorist organization based on the amount of cement that LCS was able to sell – effectively, a revenue-sharing agreement – to incentivize the terrorist group to act in LCS’s economic interest. A senior Lafarge executive, who supervised LCS’s executives and reported directly to Lafarge’s Chief Executive Officer, articulated this purpose in instructions he sent to LCS executives about the negotiations with ISIS in July 2014: “We have to maintain the principle that we are ready to share the ‘cake,’ if there is a ‘cake.’ To me, the ‘cake’ is anything that is a ‘profit’, after the amortization and before financial expenses.”
Lafarge and LCS executive sought ISIS’s assistance to impose costs on competitors selling Turkish cement imported into northern Syria, which was often sold more cheaply than cement produced at the Syrian Cement Plant. LCS executives made clear to the intermediaries negotiating with ISIS that, in exchange for LCS paying ISIS 750 Syrian Pounds per each ton of cement that it sold, they expected ISIS to take action against LCS’s competitors, either by stopping the sale of competing imported Turkish cement in the areas under ISIS’s control, or by imposing taxes on competing cement that would allow LCS to raise the prices at which it sold cement.
From August 2013 through October 2014, Lafarge and LCS paid ISIS and ANF, through intermediaries, $5.92 million to ISIS and ANF to purchase raw materials and variable payments based on the amount of cement LCS sold. Lafarge and LCS also paid $1.11 million to the third-party intermediaries for negotiating with and making payments to ISIS and ANF. ISIS eventually took possession of cement that LCS had produced in furtherance of the conspiracy, and ISIS sold the cement at prices that would have yielded ISIS approximately $3.21 million. As a result of the scheme, LCS obtained approximately $70.30 million in total sales revenue from August 2013 through 2014. The gains to all participants in the conspiracy, including LCS, the intermediaries and the terrorist groups, totaled approximately $80.54 million.
Lafarge and LCS executives also actively concealed their scheme to provide material support to ISIS and ANF. Lafarge was eventually acquired by a competitor (the “Successor Company”) in a transaction that closed on July 10, 2015. Lafarge executives did not disclose LCS’s payments to ISIS and ANF to the Successor Company during pre-acquisition diligence meetings, and the Successor Company conducted neither pre- nor post-acquisition due diligence of LCS’s operations in Syria. Lafarge, LCS and the Successor Company also did not self-report the conduct or fully cooperate in this Office’s investigation.
