These companies further admitted to negotiating with and paying armed groups and terrorists, negotiating revenue-sharing agreements with ISIS to seek economic advantage, and concealing their payments, falsified records, and backdated contracts. Under the terms of the resolution with the Department of Justice, Lafarge and LCS will pay a financial penalty, including criminal fines and forfeiture, of $777.78 million.
In remarks announcing the guilty plea, DoJ authorities said the historic resolution marks the first time ever the United States has charged a company with providing material support and resources to terrorist organizations. It also marks the first time ever a company has pleaded guilty to supporting terrorist organizations.
“Never before has a corporation been charged with providing material support and resources to foreign terrorist organizations,” said U.S. Attorney Breon Peace for the Eastern District of New York. “This unprecedented charge and resolution reflect the extraordinary crimes committed and demonstrates that corporations that take actions in contravention of our national security interests in violation of the law will be held to account.”
The scheme
According to court documents, from approximately May 2010 to September 2014, Lafarge, through LCS, constructed and operated a cement plant in the Jalabiyeh region of Northern Syria (the Jalabiyeh Cement Plant).
After the Syrian Civil War began in 2011, LCS executives purchased raw materials needed to manufacture cement from ISIS-controlled suppliers and paid monthly “donations” to armed groups, including ISIS and ANF, so that employees, customers, and suppliers could traverse checkpoints controlled by the armed groups on roads around the Jalabiyeh Cement Plant.
Lafarge and LCS executives “intentionally structured their agreements with ISIS to compensate the terrorist organization based on the amount of cement that LCS was able to sell—effectively, a revenue-sharing agreement—to incentivize the terrorist group to act in LCS’s economic interest,” the DoJ said.
As a condition of entering into this revenue-sharing agreement, Lafarge and LCS executives conspired with ISIS to act against its competitors, “either by stopping the sale of competing imported Turkish cement in the areas under ISIS’s control or by imposing taxes on competing cement that would allow LCS to raise the prices at which it sold cement,” the DoJ said.
From August 2013 through October 2014, Lafarge and LCS paid ISIS and ANF, through intermediaries, approximately $5.92 million in fixed monthly “donation” payments to ISIS and ANF, payments to ISIS-controlled suppliers to purchase raw materials, and variable payments based on the amount of cement LCS sold. The third-party intermediaries who negotiated with and made payments to ISIS and ANF on Lafarge’s and LCS’s behalf were paid approximately $1.11 million.
Moreover, in furtherance of the conspiracy, when LCS evacuated the Jalabiyeh Cement Plant in September 2014, ISIS took the cement LCS had produced and sold it, yielding ISIS approximately $3.21 million.
Over this period, from August 2013 through 2014, LCS obtained approximately $70.30 million in total sales revenue. Total gains to LCS, the intermediaries, and the terrorist groups, was approximately $80.54 million.
Concealing the scheme
Lafarge and LCS executives actively concealed their scheme in the following ways:
- Required intermediaries to create business entities with names not obviously linked to the intermediaries and created invoices with false descriptions of services rendered for an intermediary to submit to LCS;
- Structured the revenue-sharing payments to ISIS so that LCS’s customers would pay ISIS the amounts owed under LCS’s agreement with ISIS, while LCS discounted the prices it charged to the customers to reimburse them;
- Required ISIS not to include the name “Lafarge” on the documents memorializing and implementing their agreements; and
- Used personal email addresses, rather than their corporate email addresses, to carry out of the conspiracy.
In October 2014, as a condition of paying an intermediary for having negotiated with ISIS and other armed groups, Lafarge and LCS executives required the intermediary to sign an agreement terminating his agreement to provide services to LCS.
“Critically, the Lafarge and LCS executives backdated the termination agreement to Aug. 18, 2014, a date shortly after the United Nations Security Council had issued a resolution calling on member states to prohibit doing business with ISIS and ANF, to falsely suggest that he had not been negotiating with ISIS on behalf of LCS after the U.N. resolution,” the DoJ said.
Compliance lessons
In July 2015, Holcim acquired Lafarge. However, Lafarge executives did not disclose LCS’s payments to ISIS and ANF to this successor company during pre-acquisition diligence meetings. Nor did Holcim conduct pre- or post-acquisition due diligence of LCS’s Syrian operation, the DoJ said.
“Here, [Holcim] did not perform due diligence of Lafarge’s operations in Syria, despite the clear compliance risks posed by operations in the region, and it did nothing to investigate or address Lafarge’s illegal activities until they were publicly exposed,” Deputy Attorney General Lisa Monaco said in her remarks announcing the guilty plea.
Lafarge, LCS, and the successor company also did not self-report the conduct or fully cooperate in the investigation, she noted.
“This case sends the clear message to all companies, but especially those operating in high-risk environments, to invest in robust compliance programs, pay vigilant attention to national security compliance risks, and conduct careful due diligence in mergers and acquisitions,” Monaco said.
Lafarge and Holcim respond
In a statement, Lafarge said it now has effective compliance and risk management controls and functions in place to detect and prevent any similar potential misconduct and, thus, “the DoJ determined that the appointment of an independent compliance monitor is not necessary,” the company said.
“None of the conduct involved Lafarge operations or employees in the United States, and none of the executives who were involved in the conduct are with Lafarge or any affiliated entities today,” the company added.
Lafarge said it is cooperating with French authorities in their investigation of the misconduct.
Holcim also issued a statement: “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.” 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.