August 12, 2021

PNF credits compliance program, reduces fine for corruption of a public official

On July 12, 2021, the Procureur de la Republique Financier of the Parquet National Financier of France (the PNF) entered into a convention judiciaire d’intérêt public (CJIP), similar to a deferred prosecution agreement in the United States or the United Kingdom, with Systra SA, a transportation engineering and consulting company based in Paris.

The CJIP resolves an investigation initiated in June 2017 following a complaint by Japanese authorities concerning possible corruption in the tender process for a railroad electrification project in Uzbekistan.  According to that complaint, an official at the national railroad company of Uzbekistan, UTY, asked an employee of Japan Transportation Consultants, Inc. to submit an inappropriate bid on the project in order to cause Systra to be selected.  The Japan Transportation employee was promised that Systra would submit a similarly inappropriate bid for the electrification of a different rail line, so that the tender would be awarded to Japan Transportation.  In exchange for the guaranteed tender awards, both Systra and Japan Transportation would be required to employ a UK-based company, Kirkliston Development LP, as their logistics subcontractor. 

The investigation revealed that Systra made payments totaling nearly $576 thousand to an account in Latvia held by Kirkliston, for which the beneficial owner was the UTY official.  The investigation also revealed that Kirkliston rented apartments to Systra and Japan Transportation for their employees at a rental price much higher than the market rate, and that these apartments were owned by members of the selection committee in charge of public tenders.

When Systra’s managing board learned of the suspicious events in Uzbekistan, a full audit was initiated, and the suspicious contracts were terminated.  Between 2013 and 2019, Systra had received a net profit of €339,428, with gross revenues worth €3,515,480.

Investigators also examined Systra’s conduct in connection with the award of an engineering contract for the metro in Baku, Azerbaijan in May 2009.  They determined that the contract was obtained corruptly, and that the Systra subsidiary established in Azerbaijan to administer the contract paid so-called “commissions” through intermediaries in the US and Scotland to an agent of the public metro company in Baku, who had close access to the government minister in charge of the metro.  These commissions totaled approximately 30% of all invoices over the course of the project, which lasted from 2009 to 2017 with gross revenue over €44 million, of which Systra’s profit exceeded €4.6 million.

Following a change in management of the Baku metro company, contracts with the intermediary companies were terminated, and an investigation was initiated.  Systra’s investigation determined that its local management had violated the company’s compliance program, established in 2011.  According to the CJIP, Systra’s management acted very quickly once the conduct was discovered, replacing the local management team and strengthening compliance procedures and controls.

In reaching the settlement amount, the PNF took into account aggravating factors such as the gravity of the misconduct – the corruption of foreign officials – and the use of sophisticated concealment mechanisms by local management.  At the same time, the PNF considered the relatively distant dates of the violations, the implementation of a compliance program in 2011, the continuous reinforcement thereof since the program’s initiation, and the company’s active cooperation during the course of the investigation and settlement.  Based on both aggravating and mitigating factors, the PNF levied a fine of €7,496,000, significantly lower than the maximum fine permitted under the law, €187,217,100, based on the revenue generated and the € 4,997,428 benefit Systra derived from the misconduct.