FRANCE: Prosecutors probe Alstom for contract corruption

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PARIS (AFP) - French prosecutors suspect engineering giant Alstom,
builder of power stations and high-speed trains, of bribing foreign
officials to win contracts, a judicial source said Tuesday.

Prosecutors started an investigation on November 7 into suspected
"corruption of foreign public agents" and "abusive use
of assets," the source said.

The source spoke after The Wall Street Journal newspaper reported
evidence that the company had "paid hundreds of million dollars
in bribes to win contracts in Asia and South America between 1995 and

Alsom told the paper its offices had been searched by French
authorities but that no charges had been laid.

The company told AFP on Tuesday that the newspaper report was based on
"hypotheses and speculation" and that "there is no
judicial procedure accusing the company of corruption."

Brokers however took the allegations seriously and the price of Alstom
shares fell 2.17 percent to 147.03 euros at mid-day.

The French judicial source said the investigation was the result of
information provided by Swiss judicial authorities in May, but no-one
had yet been charged.

The WSJ said its report that Alstom was under investigation in
Switzerland and France was based on information from people involved
in the matter.

The report was also based on findings by auditing firm KPMG which, it
said, came across evidence by chance while working for the Swiss
Federal Banking Commission on an audit of a small private Swiss

The auditors allegedly found evidence that Alstom had circulated about
20 million euros (31 million dollars) to "shell companies"
in Switzerland and Liechtenstein, which was transferred to marketing
people working for Alstom in Singapore, Indonesia, Venezuela and
Brazil, "in stacks of 100-dollar bills."

The audit found that Alstom also set up accounts in Liechtenstein,
Switzerland, the United States, Singapore, Hong Kong, Bahrain and

These were used "to transfer more than 12 million dollars (7.74
million euros) to individuals in Venezuela, Singapore, Thailand and
China," the report alleged, referring to the audit.

The newspaper noted that paying "commissions" to foreign
officials was legal and even tax deductible in many European countries
until the Organisation for Economic Cooperation and Development began
a campaign against the practice in 1997. France made such payments
illegal in July 2000.

Until then, French law permitted tax deduction of commissions of up to
7.5 percent if they were declared to local tax authorities.

Alstom was saved from bankruptcy in 2004 by state intervention
orchestrated by the then finance minister Nicolas Sarkozy, now French

One probe concerned a budget of 200 million dollars (129 million
euros) for suspected commissions of 15 percent to win a contract for a
power plant in Brazil which was completed in 2001.

Another probe concerned a 45-million-dollar contract for the Sao Paolo
subway, and others covered payments of about 200 million dollars for
projects in Brazil, Venezuela, Singapore and Indonesia, the report

The newspaper said some of the projects concerned had also involved
financing from the World Bank, which had declined to comment.

In Paris, Credit Mutuel-CIC brokers commented in a client note with a
reference to an investigation in Germany into alleged suspicious
payments by German engineering group Siemens.

It said that although it was too early to know the facts of the matter
at Alstom, the Siemens case "leads one to think that we may be
set for a media-judicial saga lasting years."

Natixis brokers said that some investors "may fear that this is
only the tip of the iceberg" but that others might consider this
to be an old story concerning a previous management.

The newspaper interviewed one former Alstom consultant, named as
Michel Mignot, who said: "I never took a cent for myself."
He said: "I didn't think the transactions were illegal, because
they were done to get civil engineering contracts around the
AMP Section Name:Construction
  • 185 Corruption