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A French Company That Was Acquired By A Swiss Company Paid Foreign Terrorist Organizations In Connection With A Cement Plant In Syria And U.S. Collects $778 Million

lafarge

That is a rather odd headline when you think about.

Regardless of the underlying conduct, is there actually a U.S. interest in such an enforcement action particularly since French law enforcement previously brought an enforcement action against the entities based on the same core conduct?

An interesting question to ponder as the DOJ yesterday announced that Lafarge S.A. (a French company that was acquired in 2015 by Switzerland based Holcim) and Lafarge Cement Syria (LCS) pleaded guilty to a one-count criminal information charging them “with conspiring to provide material support and resources in Northern Syria from 2013 to 2014 to the Islamic State of Iraq and al-Sham (ISIS) and the al-Nusrah Front (ANF), both U.S.-designated foreign terrorist organizations.”

It is an even more interesting question given that the 52 page, 117 paragraph statement of facts contains just two sentences regarding a purported U.S. nexus in connection with the underlying conduct. One sentence states: “Many of the Lafarge and LCS executives involved in the offense conduct also used personal email accounts serviced by U.S.-based email service providers.” The other sentence states: “Lafarge paid [a] $210,000 invoice with a wire transfer from Lafarge’s operating account at a financial institution in Paris, through the Eastern District of New York, to intermediary banks in New York City, which transmitted the wire to Intermediary 1’s New Company account at a financial institution in Dubai.”

Relevant to any U.S. nexus, the statement of facts contains the following statement: “The evidence obtained by the government during its investigation reflects that the Lafarge and LCS executives who participated in the offense conduct were located in France, Syria, Egypt, Jordan, Lebanon, Turkey and the United Arab Emirates at various times during their participation in the offense. The offense did not involve employees of Lafarge, or its subsidiaries or business operations, based in the United States.”

In any event, the U.S. collected $778 million (consisting of a total criminal fine of approximately $91 million and forfeiture of $687 million).

In summary fashion, the statement of facts states:

“In or about 2011, after a civil war began in Syria, LCS, with the knowledge and approval of Lafarge, conspired to engage in transactions, through intermediaries, with numerous armed factions present in the region of the Jalabiyeh Cement Plant, ultimately including the U.S.-designated foreign terrorist organizations ISIS and ANF. While other multinational corporations withdrew from and ceased operations in Syria, Lafarge and LCS executives, through intermediaries, negotiated agreements to pay these armed groups to protect LCS employees, to ensure continued operation of the Jalabiyeh Cement Plant, and to obtain economic advantage over their competitors in the Syrian cement market. Lafarge and LCS executives conspired to make periodic security payments to armed groups, including ISIS and ANF, and to purchase raw materials from ISIS-controlled suppliers who paid ISIS based on the amount of their sales to LCS. Moreover, for the explicit purpose of incentivizing ISIS to act in a manner that would promote Lafarge’s and LCS’s security and economic interests, Lafarge and LCS conspired to make payments to ISIS based on the volume of cement that LCS sold—effectively a revenue-sharing agreement that Lafarge and LCS executives likened to paying “taxes” to ISIS. In exchange, ISIS permitted access to raw materials sourced from territory under its control so that the Jalabiyeh Cement Plant could continue to produce cement, and further allowed LCS employees, suppliers and customer-distributors to safely pass through ISIS and ANF checkpoints on the roads leading to the Jalabiyeh Cement Plant. ISIS also agreed to impose costs on, and in some cases block the importation of, competing cement from Turkey. Had Lafarge and LCS refused to deal with ISIS and ANF, LCS would not have been able to acquire the raw materials needed to operate the Jalabiyeh Cement Plant and produce cement, and ISIS and ANF would have used force and threats of force to prevent LCS’s employees and customers from traveling there to do their jobs and purchase the cement that LCS had produced.

LCS engaged in this conduct at the direction of Lafarge’s and LCS’s senior management, including Executive 1, Executive 2, Executive 3 and Executive 4, for the specific purpose of protecting Lafarge’s and LCS’s employees, assets, and future economic opportunities in Syria. As Executive 3 later wrote in an August 27, 2017 response to his August 25, 2017, termination from LAFARGE, “All the local concessions that I had to make to this end were made with the clear and repeated approval of my hierarchy, regarding the details as well as the principle.” Executive 3 added, “Nothing I did was unknown to my hierarchy who methodically approved my initiatives, including all the details, and was satisfied about them.”

Lafarge and LCS completed the construction of the Jalabiyeh Cement Plant in 2010 at a cost of approximately $680 million. Lafarge and LCS executives believed that keeping the Jalabiyeh Cement Plant in business and sharing the proceeds with the armed groups in control of the surrounding areas, including ISIS and ANF, was the best way to protect employees, to safeguard the asset from looting and destruction during the Syrian Civil War, and to enable Lafarge and LCS to benefit from the economic opportunity presented by the need to rebuild Syria following the cessation of hostilities. Neither Lafarge nor LCS made payments to ISIS or ANF because they supported the terrorist organizations’ ideology or methods.

Lafarge and LCS executives actively attempted to conceal their conduct from others within and outside Lafarge and LCS, including by using third-party intermediaries to carry out negotiations and effect these agreements with ISIS, and by attempting to require ISIS not to include the name “Lafarge” on the documents memorializing and implementing their agreements. Many of the Lafarge and LCS executives involved in the offense conduct also used personal email accounts serviced by U.S.-based email service providers, instead of their Lafarge corporate email addresses, to carry out some aspects of the conspiracy. Lafarge and LCS executives also created invoices with false descriptions for the third-party intermediaries they used to negotiate with ISIS, in order to conceal the nature of the work that the intermediaries had performed for Lafarge and LCS, and to allow Lafarge and LCS to later falsely deny knowledge of their activities.

From in or around August 2013, or earlier, through October 2014, Lafarge and LCS conspired to make various payments, through intermediaries, to and for the benefit of ISIS and ANF, which the government estimates totaled the equivalent of approximately $5.92 million. These payments consisted, at various times, of flat monthly “donation” payments totaling approximately $816,000, payments to ISIS-controlled suppliers to purchase raw materials needed to produce cement that totaled approximately $3,447,528, and variable payments based on the amount of cement LCS sold that totaled approximately $1,654,466. When LCS eventually evacuated the Jalabiyeh Cement Plant in September 2014, ISIS stole 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. In addition, LAFARGE and LCS conspired to pay the equivalent of approximately $1,113,324 to third-party intermediaries for negotiating with and making payments to ISIS and ANF on Lafarge’s and LCS’s behalf.

The government estimates that during the time period from August 2013 to October 2014, LCS obtained the equivalent of approximately $70,295,820 in total sales revenue through its participation in the conspiracy, and the gross gains to all participants in the conspiracy, including LCS, the intermediaries, ISIS and ANF, totaled approximately $80,541,890.”

Based on the above, the Lafarge was charged with one count of conspiracy to provide material support to one or more foreign terrorist organizations (“FTOs”), in violation of 18 U.S.C. § 2339B(a)(1). As set forth in the plea agreement, the elements of the offense are as follows: An unlawful agreement existed between each Defendant and one or more other persons to provide material support and resources, as defined in Title 18, United States Code, Section 2339A(b)(1), to the Islamic State of Iraq and al-Sham (“ISIS”) and al-Nusrah Front (“ANF”), which at all relevant times were designated by the Secretary of State as FTOs, pursuant to Section 219 of the Immigration and Nationality Act, knowing that the FTOs were designated foreign terrorist organizations or that the FTOs had engaged and were engaging in terrorist activity and terrorism, and after the conduct required for this offense occurred, the Defendants were brought into and found in the United States, the offense occurred in part within the United States, the offense occurred in and affected interstate and foreign commerce, or the Defendants conspired with a national of the United States (as defined in section 101(a)(22) of the Immigration and Nationality Act).

In this release, Holcim stated:

“Holcim supports the agreement reached by Lafarge SA with the U.S. Department of Justice (“DOJ”) to resolve the DOJ’s inquiry into Lafarge SA and its long-defunct subsidiary Lafarge Cement Syria (“LCS”) related to the legacy conduct of certain former executives during the Syrian civil war, before Holcim acquired Lafarge SA.

[…]

None of the conduct involved Holcim, which has never operated in Syria, or any Lafarge operations or employees in the United States, and it is in stark contrast with everything that Holcim stands for. The DOJ noted that former Lafarge SA and LCS executives involved in the conduct concealed it from Holcim before and after Holcim acquired Lafarge SA, as well as from external auditors.

When Holcim learned of the allegations from media reports in 2016, Holcim proactively and voluntarily conducted an extensive investigation, led by a major U.S. law firm and overseen by the Board of Directors. It publicly disclosed the principal investigative findings in 2017 and separated from former Lafarge SA and LCS executives who were involved in these events.

The DOJ noted that Holcim has effective compliance and risk management controls and functions in place to detect and prevent any similar potential conduct. As a result, the DOJ determined that the appointment of an independent compliance monitor is not necessary.”

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