Rahman Ravelli’s Angelika Hellweger assesses the main issues in the French company Lafarge’s prosecution for paying terrorists in order to further its business interests.
In the US Justice Department’s (DOJ’s) first corporate material support for terrorism prosecution, French building materials company Lafarge and its Syrian subsidiary Lafarge Cement Syria (LCS) admitted entering into a revenue-sharing agreement with ISIS and have agreed to pay $778 million in fines and forfeiture.
The companies pleaded guilty to the charge of 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). ISIS and the ANF are both US-designated foreign terrorist organisations.
According to court documents, Lafarge and LCS arranged to pay ISIS and ANF in exchange for permission to operate a cement plant in Syria. This enabled LCS to obtain generate approximately $70.3 million in revenue.
The case is noteworthy in its own right for being the first prosecution of its kind to be brought by the DOJ. But it is also notable that Lafarge agreed to cooperate with the investigation. One other issue in the case which, so far at least, appears unresolved is whether any individuals will be charged over the conduct that the two corporates have admitted.
Lafarge is, it should be remembered, is also facing problems in Europe. In France, the Paris Court of Appeal confirmed the indictment of Lafarge for complicity in crimes against humanity in May 2022 over alleged payoffs to ISIL (ISIS) and other armed groups during Syria’s war, paving the way for an eventual trial. This decision means that a judge could order Lafarge and eight of its executives to stand trial.
The appeal court sided with prosecutors who said Lafarge had “financed, via its subsidiaries, Islamic State [ISIL] operations with several millions of euros in full awareness of its activities”. It also upheld charges of financing terrorism and endangering the lives of others by putting its Syrian employees at risk as ISIL (ISIS) fighters took over large swathes of the country, before Lafarge abandoned its cement plant in Jalabiya, near Aleppo, in September 2014.
There is the possibility that Ericsson might face similar problems as Lafarge. According to a US Securities and Exchange Commission (SEC) filing in June 2022, Ericsson also paid bribes to the Islamic State group while trying to secure business in the Middle East. The SEC’s investigation came only months after the DOJ accused Ericsson of making insufficient disclosures about its internal investigation into alleged employee misconduct in Iraq from 2011 to 2019 and possible payments to terrorists.
A shareholder lawsuit has also been filed, accusing Ericsson of misleading investors about its use of bribes to secure business in the Middle East, and thus causing the stock to drop when news about possible bribes to terrorists came to light. The suit accuses the company of making false and misleading statements by failing to disclose that it paid bribes to the Islamic State group to gain access to certain transport routes in Iraq.
These recent developments are a stark reminder to international corporations that they will be held accountable if they are found to be complicit in human rights violations, war crimes, genocide, terrorist financing or sanctions violations.
The problems encountered by Lafarge and Ericsson are high-profile proof that sanctions and terrorist financing are not only issues for financial institutions: they are matters that need to be assessed carefully by every corporation, and especially those undertaking business in war zones and other high-risk areas.
The case of Lafarge has shown that being held to account can result in huge fines being paid to the regulators. But corporates – and those working for them – need to recognise that such actions can eventually lead to the criminal prosecution of individuals. The recent developments may also pave the way for victims of war crime and genocide to claim damages, based on the argument that the money the corporations paid as bribes indirectly allowed ISIS to finance its genocide against ethnic minorities (e.g Yezidis, Assyrian Christians and Shia Turkmen et al).
Moreover, as can be seen in the Ericsson example, shareholders are now increasingly alert to the possibility of suing companies over their policies and false and misleading public statements. In particular, Lafarge is running into the risk of being sued for misleading statements. Lafarge was governed by an internal Code of Business Conduct that held the company to a standard of respect for human rights in the conduct of its business. It committed itself to “reflect the principles and standards enshrined in the UN Global Compact and the OECD Guidelines for Human Rights for Multinational Enterprises in its policies and day-to- day business practices.” Noteworthy enough it also claimed that” in 2014 there were no reported corruption cases, no report of human rights breaches nor any new anti-trust prosecutions” which does not seem to have reflected reality when taking into account the above mentioned events.