On December 2, 2022, Swiss technology company ABB Ltd. announced that it had agreed to pay $327 million to resolve bribery allegations by the US Department of Justice, the US Securities and Exchange Commission, and enforcement authorities in South Africa and Switzerland, as well as an anticipated resolution of related allegations by German authorities.
According to DOJ and SEC filings and press releases, between 2014 and 2017 AB — acting through various subsidiaries — bribed a high-ranking official at Eskom Holdings Limited (Eskom), South Africa’s state-owned energy company, in exchange for (i) confidential information and (ii) business advantages in connection with the award of multiple contracts. ABB engaged subcontractors associated with the South African government official, despite their poor qualifications and lack of experience, and made payments to those subcontractors that were intended, at least in part, as bribes. In particular, as set out in the DOJ materials, ABB conducted “sham negotiations” to obtain inflated contracts, when in each case ABB had pre-arranged with the South African government official that it would win that contract on the condition that it engage a specific subcontractor associated with that official. ABB’s books and records falsely described payments to the subcontractors as legitimate business expenses.
As a result of this conduct, ABB entered into a three-year deferred prosecution agreement (DPA) with the DOJ to resolve allegations of conspiracy to violate the anti-bribery and books and records provisions of the US Foreign Corrupt Practices Act (FCPA) and substantive violations of the FCPA, and agreed to pay a $315 million criminal penalty, to continue to enhance its compliance program, and to provide periodic reports to the DOJ regarding remediation and the implementation of compliance measures for the term of the DPA.
The DOJ penalty reflects “a 25% discount off the mid-point between the middle and high end” of the DOJ’s Sentencing Guidelines. In determining the appropriate penalty, the DOJ stated that it had taken into account ABB’s extensive criminal history, including (i) a 2010 criminal resolution for FCPA violations involving bribes and kickbacks to officials in Mexico and Iraq, (ii) a 2004 criminal resolution for FCPA violations involving bribery of Nigerian officials, (iii) a 2001 guilty plea for bid-rigging involving a construction contract in Egypt, and (iv) 2013 and 2014 administrative resolutions with European and Brazilian competition authorities. The DOJ also took into account that ABB (i) demonstrated its intent to voluntarily self-disclose its misconduct, (ii) engaged in extraordinary cooperation with the DOJ’s investigation, and (iii) extensively remediated (including conducting a “root cause analysis” and enhancing its compliance program). The DOJ agreed to credit up to one-half of ABB’s criminal penalty against any amounts paid to South African, Swiss, and German authorities, and up to $75 million against the SEC’s civil penalty charges. In addition, two ABB subsidiaries — ABB Management Services Ltd. and ABB South Africa (Pty) Ltd. — each pleaded guilty to conspiring to violate the FCPA’s anti-bribery provisions.
ABB also entered into a resolution with the SEC, pursuant to which ABB agreed to cease and desist from violations of the FCPA’s anti-bribery and accounting provisions, and to pay a $75 million civil monetary penalty and $72 million in disgorgement and prejudgment interest. However, the SEC deemed the $72 million payment satisfied by a prior payment ABB had made to the South African government to reimburse its ill-gotten gains. ABB also agreed that, during the next three years, it would periodically report to the SEC on evidence of corrupt payments or questionable transfers and the status of its remediation and anti-corruption compliance measures.
To resolve related allegations, ABB also agreed to pay $143 million to South African enforcement authorities and $4.3 million to Swiss enforcement authorities, and announced that it expected “in the near term” to resolve allegations by German authorities. ABB disclosed that it expected the resolution with U.S., South African, Swiss, and German authorities to total $327 million.