In addition to the criminal penalty, ABB entered a three-year deferred prosecution agreement with the DoJ over a “conspiracy to violate the FCPA’s anti-bribery provisions, conspiracy to violate the FCPA’s books and records provisions, and substantive violations of the FCPA,” the DoJ said. Additionally, two ABB subsidiaries—ABB Management Services (Switzerland) and ABB South Africa—each pleaded guilty to one count of conspiracy to violate the anti-bribery provisions of the FCPA.
“This is the Department’s first coordinated resolution with authorities in South Africa, where much of ABB’s criminal scheme was carried out, reflecting our commitment to relationship-building and our ever-deepening partnerships in the global fight against corruption,” said Assistant Attorney General Kenneth Polite of the DoJ’s Criminal Division.
In addition to coordinating its actions with enforcement authorities in South Africa, the DoJ also reached coordinated resolutions with the Securities and Exchange Commission (SEC), as well as enforcement authorities in Switzerland.
The DoJ said it will credit up to half the $315 million penalty against amounts ABB will pay to South African enforcement authorities in related proceedings, along with other credits ABB pays to resolve investigations conducted by the SEC and Swiss and German authorities, so long as payments underlying an anticipated resolution with German authorities are made within 12 months of Dec. 2, 2022.
Case Facts
According to ABB’s admissions and court documents filed in the Eastern District of Virginia, between 2014 and 2017, ABB, through certain of its subsidiaries, paid bribes to a South African government official who was a high-ranking employee at the state-owned and controlled energy company, Eskom Holdings, to obtain business advantages in exchange for the award of multiple contracts.
“ABB engaged multiple subcontractors associated with the South African government official and made payments to those subcontractors that were intended, at least in part, as bribes,” the DoJ stated. “ABB worked with these subcontractors despite their poor qualifications and lack of experience. In return, ABB received improper advantages in its efforts to obtain work with Eskom, including, among other benefits, confidential and internal Eskom information.”
“As part of the scheme, ABB conducted sham negotiations to obtain contracts at inflated prices that ABB had pre-arranged with the South African government official, all on the condition that ABB employ a particular subcontractor associated with that official,” the DoJ stated. “ABB also falsely recorded payments to the subcontractors as legitimate business expenses when, in fact, a portion of the payments were intended as bribes for the South African government official.”
According to the SEC, ABB paid the service providers more than $37 million to bribe the government official. In return, ABB obtained a $160 million contract to provide cabling and installation work at Eskom’s Kusile Power Station.
“Notwithstanding prior FCPA-related violations and known corruption risks throughout its operations, ABB lacked sufficient controls to detect or deter this egregious bribery scheme,” said Charles Cain, Chief of the SEC’s FCPA Unit.
Resolution Factors
Polite said the resolution “demonstrates the Criminal Division’s thoughtful approach to appropriately balancing ABB’s extensive remediation, timely and full cooperation, and demonstrated intent to bring the misconduct to the Department’s attention promptly upon discovering it, while also accounting for ABB’s historical misconduct.”
Specifically, in reaching its resolution with ABB, the DoJ said it considered, among other factors, ABB’s “demonstrated intent to disclose the misconduct promptly,” as well as ABB’s “extraordinary cooperation with the Department’s investigation” and its agreement “to continue to cooperate with the Department in ongoing investigations.”
Additionally, ABB conducted “extensive remediation,” the DoJ said, which included “carrying out a root-cause analysis of the misconduct and making significant investments in compliance personnel, compliance testing, and monitoring through the organization.”
Moving forward, according to the DoJ, ABB has committed to “further enhance its compliance program and internal controls, including enhanced reporting provisions that require ABB, during the pendency of the DPA, to meet with the Department at least quarterly and to submit yearly reports regarding the status of its remediation efforts, the results of its testing of its compliance program, and its proposals to ensure that its compliance program is reasonably designed, implemented, and enforced, so that it is effective in deterring and detecting violations of the FCPA and other applicable anti-corruption laws.”
In light of the above considerations, the criminal monetary penalty reflects a 25 percent discount off the mid-point between the middle and high end of the otherwise applicable U.S. Sentencing Guidelines fine range, according to the DoJ.
Among the aggravating factors the DoJ said it considered was ABB’s decade-old criminal history, which included two prior criminal resolutions by ABB entities for FCPA violations in 2004 and 2010, as well as a guilty plea by an ABB entity for bid rigging in 2001.
SEC Resolution
ABB consented to the SEC’s cease-and-desist order that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA and agreed to pay a civil monetary penalty of $75 million.
The SEC also ordered ABB to pay more than $72 million in disgorgement. However, the Commission deemed the payment satisfied by ABB’s reimbursement of its ill-gotten gains to the South African government as part of an earlier civil settlement based largely on the same underlying facts as the SEC’s action.
In addition, ABB agreed to regularly report to the SEC for a three-year period the status of its ongoing remediation of its internal accounting controls and compliance program. ABB was the subject of two prior FCPA cases by the SEC in 2004 and 2010.
In a statement, ABB said its global settlements total $327 million, which it said it “accounted for in ABB’s third quarter 2022 financial results and include the expected exposure to the German case. The corresponding negative cash flow impact is expected to be split with approximately three quarters in the fourth quarter 2022 with the remainder in the first quarter 2023.”
“We take the Kusile matter very seriously,” said ABB CEO Björn Rosengren. “Since it was reported, ABB has cooperated fully with all authorities and spent considerable time and effort–including launching a new code of conduct, educating employees, and implementing an enhanced control system–to prevent something similar from happening again. We have a clear zero tolerance approach to non-ethical behavior within our company.” 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.