- ABB admitted that between 2014 and 2017 it bribed an official “to improperly influence Eskom’s decisions”.
- But the bribery scheme almost unraveled when the engineering firm’s chairman “refused to share the spoils” with the Eskom official over an apparent fallout.
- ABB has agreed to pay royalties and fines for the settlement.
- For more financial news, go to News24 company front page.
A plan by employees of Swiss industrial company ABB to pay bribes for contracts to South Africa’s state-owned power company nearly collapsed in a dispute over who would share the spoils, US court documents show.
The presentations take a fresh look at corruption at Eskom, the electricity company plagued by deteriorating finances and periodic blackouts. The case, from U.S. prosecutors and regulators, also sheds light on evolving U.S. policy toward companies like ABB that have repeatedly broken the law.
ABB agreed on December 2 to pay a $315 million (R5 billion) criminal penalty for taking bribes from an Eskom official while seeking control and instrumentation contracts at the company’s Kusile coal plant.
Two ABB units pleaded guilty and the parent company was charged with violating the Foreign Corrupt Practices Act, the US law against foreign bribery. Prosecutors will adjourn the case and drop it in three years if the company makes the promised reforms.
The case “highlights the expanding global network of countries fighting international corruption,” Marshall Miller, a senior Justice Department official, said in a speech.
After the deal, ABB CEO Bjorn Rosengren said the company has changed.
“We take the matter of Kusile very seriously,” Rosengren said in a statement. “ABB has fully co-operated with all authorities and has spent considerable time and effort, including launching a new code of conduct, educating employees and implementing an improved control system, to prevent this from happening again something similar.”
The firm also settled probes in South Africa and Switzerland, and will do so in Germany. Half of the penalty will go to South Africa.
READ | Eskom corruption: Multinational ABB to pay SA R2.5 billion over Kusile deal
ABB is paying $4.3 million to Switzerland, where the firm admitted it failed to take “all necessary and reasonable measures” to prevent bribery. On Dec. 3, the Securities and Exchange Commission issued an order against ABB that brought the company’s overall cost, after other credits, to $327 million, the firm said.
To secure its US deferred prosecution agreement, ABB admitted that between 2014 and 2017 it bribed a South African official “to improperly influence Eskom’s decisions and to secure an undue advantage” for get business He formed a “capture team” to seek contracts from Kusile and hired unqualified subcontractors to receive payments intended as bribes for the official.
Needing a “sales shark,” the capture team appointed a German employee with “a reputation for lack of transparency about how he conducted customer interactions,” according to the SEC’s order.
The Eskom official agreed to award a $160 million contract to ABB if it hired an engineering firm, which won a $7.2 million subcontract. The official demanded immediate payment of his $720,000 cut. But the bribery scheme “almost fell apart” when the engineering firm’s president “refused to share the spoils” with the official over an apparent fallout, the SEC said.
READ | The former head of Eskom Matshela Koko, wife and stepdaughter arrested for corruption
The leader of the capture team tried to broker a peace, arranging a face-to-face meeting, but failed. Instead, the leader brought in another engineering company, run by someone linked to a close friend of the official. That company, which initially did not disclose ABB’s rating process, was eventually paid $37 million, “much of which went to bribes” for the official, the SEC said.
Redemption of $104 million
ABB is one of several international companies found to have been involved in years of corruption at Eskom and other South African state-owned companies during Jacob Zuma’s presidency, which ended in 2018.
ABB agreed in 2020 to repay $104 million that was paid in connection with Kusile. In July, two former ABB employees and their wives were arrested in South Africa for corruption linked to $29.4 million in contracts.
Eskom, in response to questions about ABB’s criminal and regulatory cases in the US, said in an email: “Please note that the civil matter is closed from Eskom’s perspective.”
In the United States, ABB is a repeat offender and settled criminal cases in 2010 and 2004 related to the US Foreign Bribery Act and a bid-rigging case in 2001.
Those companies appear to face a tougher stance from US prosecutors, according to a policy announced in October 2021 by Deputy Attorney General Lisa Monaco.
He said that companies should not continually obtain non-prosecution and non-prosecution agreements, and that “all prior misconduct is potentially relevant” to deciding how severely penalized companies should be to resolve criminal investigations. But Monaco softened its stance somewhat in September, saying criminal cases older than 10 years would carry less weight in determining outcomes.
“A + Cooperation”
With ABB, prosecutors downplayed the company’s past criminal conduct because it was too old, Marshall Miller, the senior associate deputy attorney general, said in remarks Tuesday. Instead, he emphasized that the company’s compliance program had caught the misconduct, which it tried to disclose to the Justice Department, even though it was picked up by a media report.
Miller explained why ABB was not punished more severely.
“The above misconduct was dated as it occurred more than a decade earlier,” he said. “ABB provided A+ cooperation, including production to the authorities of important materials located abroad.” It also “made foreign employees available for interviews, engaged in extensive remediation, and updated and tested its compliance program.”
Miller, speaking at an American Bankers Association conference, said companies should note that prosecutors “have assigned significant weight to ABB’s documented efforts to self-disclose in reaching the bottom line.”
The Justice Department needs companies to come forward to build cases in other countries, said Jonathan Green, a former federal prosecutor and SEC attorney now at Arnold & Porter.
“Corporate misconduct and foreign bribery in particular will be very, very difficult to detect and investigate if the government does not have significant help from the companies themselves,” Green said.