Jailed French executive who felt force of US bribery law

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Frederick Pierucci.
Brigitte Baudresson

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Pierucci’s five-year ordeal is a cautionary tale for globe-trotting executives

In April 2013, as Frédéric Pierucci stepped off a plane at New York’s JFK airport during a routine business trip, he was seized and handcuffed by uniformed men.

The 45-year-old executive for Alstom, a French energy and transport group, was then driven to the FBI building in Manhattan, where the reason for his arrest became clear.

In 2003-4, a federal prosecutor explained, Pierucci had authorised bribes to Indonesian officials to secure a contract for boilers at a power plant.

This was true. At the time, he was working for an Alstom subsidiary in the Connecticut. Bribing was common practice at the company then.

Risky business

Pierucci had assumed he was safe from prosecution because he had not arranged the Indonesian kickbacks, only signed off on them. And since then, Alstom had assured the US justice department that it was cleaning up its act.

But, as Pierucci discovered, the department had been gathering evidence against him on charges including wire fraud and money laundering.

He did not know about them because the indictment had remained sealed – as it was for Meng Wanzhou, the Huawei executive who was arrested in Canada last year and denies US allegations that she helped evade sanctions on Iran.

Pierucci was to spend more than five years in the clutches of the American justice system. His story illustrates the risks faced by foreign businessmen who – sometimes unbeknownst to them – are accused of breaching US law.

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The bribes were in connection with the Tarahan power plant on Sumatra island, which was completed in 2007

The US government has long been dead serious about corruption. In 1977 it approved the Foreign Corrupt Practices Act (FCPA), the world’s first ban on bribing foreign officials. Elsewhere, companies continued to get away with it for decades. In the 2000s, however, spurred by a campaign by the OECD, other developed nations began to clamp down.

Co-operation from foreign law-enforcement agencies helped the US government export its anti-corruption drive. Alstom is a case in point. The justice department pursued the company after Italian, Swiss and British prosecutors had exposed the company’s global bribery scheme.

American investigators have their own way of pursuing white-collar crime. Instead of launching raids on company offices, they start by asking for co-operation. The request is polite but the underlying message brutal: help us incriminate yourself and we will not come down as hard as we might otherwise.

Prison rules

When Alstom was first approached in this way in 2011, its then-chief lawyer Fred Einbinder understood the need for coming clean. “When you get a subpoena, it’s not like you’ve got a choice,” he tells the BBC.

But his advice to co-operate was ignored. Later that year, Einbinder was let go.

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The prosecutor offered his quarry a deal: Pierucci could be released if he agreed to act as a secret FBI informant within Alstom. He declined the offer.

The next day, Pierucci was denied bail and transferred to the Wyatt Detention Facility, a high-security prison in Rhode Island.

He had to adjust quickly to living alongside hardened criminals. “You must not look fellow inmates in the eye. You must not touch or even brush past them. Any perceived slight can turn into a fight,” Pierucci told the BBC in a recent interview. A 70-year old man was raped by a drugged-up youth in a nearby cell, he says.

Detention conditions were not Pierucci’s only, or even main, concern. He had no idea how long he would stay inside. The Connecticut-based lawyer appointed and paid by Alstom to defend him said his best hope for release was to plead guilty in a deal with prosecutors.

Monumental error

The advice may have been sound, but there was a problem. Pierucci wanted to argue that he was far down the chain of command. However he soon realised that the Alstom management would never go along with a line of defence that implicated them.

“At first I was happy that Alstom took charge of my defence – it was only later that I saw it had been a monumental error,” Pierucci says.

As months went by, the news got worse. Three other Alstom executives were arrested on bribery charges. If one of them struck a plea deal first, Pierucci’s own bargaining position would be undermined. He was in a race with the other defendants to satisfy the prosecutors.

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Unsure about the next step, Pierucci turned to his cellmates for legal advice. Jacky, a veteran of the French Connection drug ring who had 36 years’ experience of the US penal system, warned him against accepting an “open plea”, where defendants sign away their presumed innocence without any guarantee on a sentence.

What Pierucci wanted, Jacky said, was a “binding plea” that commits prosecutors to a specific jail term. When he relayed this request to his lawyer, he was told – correctly – that Connecticut only accepted open pleas.

But the lawyer thought he had a gentleman’s agreement with the district attorney on a six-month sentence: if Pierucci admitted sole guilt, he could expect to be free by October. The alternative was to go to trial and risk up to 125 years in jail.

The pressure he was experiencing was far from unique. Thanks to mandatory sentences, US prosecutors wield huge powers. One of Pierucci’s fellow detainees, who had been caught with drugs but had no previous convictions, hanged himself in his cell after being offered 15 years as an opening bid.

Fired

In July 2013, hoping for release within months, Pierucci bowed to the inevitable and pleaded guilty. The plea deal, however, brought little relief.

Now that Pierucci was a convicted criminal, Alstom cut him loose. His absence, the dismissal letter read, “imperils the operation of the entity which you lead” and makes it impossible “to maintain our contractual relation”. In addition, it noted, his misdeeds “run counter to the values and the ethics of the group”.

Besides being apparently fired for not turning up for work while in jail, Pierucci found it a bit rich to be lectured about integrity by a firm that had engaged in corruption in many countries and been blacklisted over these practices by the World Bank.

But he recognises that the company had little choice. It made sense for Pierucci’s bosses to blame him as much as they could.

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As Alstom boss, Patrick Kron (right) was close to then-President Nicolas Sarkozy

Meanwhile Pierucci’s detention showed no sign of ending. October came and went. Six months turned into a year, without any news on sentencing. In a book on the case, Le Piège américain (the American trap), he compares his ordeal to being stuck in “an endless tunnel with slippery walls – nothing to hold on to.”

In June 2014, Pierucci was released after friends put up their homes as bond and later that year went home to Paris. But he was yet to be sentenced, and the possibility of more jail time still hung over him.

The uncertainty lasted another three years. In September 2017 Pierucci flew back to Connecticut for sentencing. The judge gave him 30 months.

He did not become a free man until late 2018, when he walked out of the Pittsburgh prison where he had served the second half of his sentence.

Paranoia?

Pierucci believes he was a pawn in three larger battles with global economic and political ramifications.

The first is the fight between the US justice department and Alstom, which resulted in total surrender by the French company.

In late 2014, it admitted having paid $75m bribes over a decade, in a scheme described by prosecutors as “astounding in its breadth, its brazenness and its worldwide consequences”. Alstom settled the case for $770m (£580m; €670m) – the largest-ever FCPA fine imposed by the department.

The arrests of Pierucci and other managers were crucial in breaking Alstom’s resistance. As then-Assistant Attorney General Leslie Caldwell said: “It was only after the department publicly charged several Alstom executives – three years after the investigation began – that the company finally co-operated.”

The second battle that Pierucci believes influenced his fate was the purchase of most of Alstom by its US rival General Electric (GE).

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Under CEO Jeffrey Immelt, GE made several mega deals, including GE’s acquisition of Alstom’s power business

The business saga and the legal cases unfolded in lockstep. Alstom boss Patrick Kron announced plans to sell the power business – 75% of the company – in mid-2014, when it was clear that the company was in the justice department’s crosshairs.

Shareholders approved the sale to GE that December. Three days later, the settlement in the bribery case took Alstom’s top brass off the hook.

Pierucci is among many in France who claim that the justice department was helping GE by keeping the pressure on Alstom until the sale was complete. According to a French parliamentary report published last year, the threat of a huge fine “undoubtedly… precipitated Mr Kron’s decision”.

Kron has always vehemently denied the allegation. “We absolutely did not make this transaction in response to any direct pressure on myself or anyone else,” he told MPs. Alstom’s power operations, he insists, were sold for the best business reasons. Indeed the purchase is widely seen as a costly mistake by GE, and in 2017 its CEO admitted as much.

The US justice department’s anti-corruption chief, Daniel Kahn, also rejects any suggestion of collusion. “We certainly didn’t force Alstom to plead guilty in order to help out GE. That never entered into consideration,” he told the BBC.

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Since the sale to GE, Alstom and its boss Henri Poupart-Lafarge have refocused on its transport business

Neither is the timing necessarily suspicious. The justice department could have taken the sale into account in its settlement with Alstom simply because of GE’s strong anti-corruption record. “In general, we don’t want to discourage companies with strong compliance programs from acquiring companies with weaker ones,” Kahn says.

Andrew Spalding, who teaches anti-corruption law at the University of Richmond, Virginia, notes that for any conspiracy between prosecutors and GE to work, it would also have to involve America’s independent judiciary. “That’s paranoia,” he says.

Power games

The third battle Pierucci is convinced he was dragged into is the biggest of all. It is nothing less than a struggle for worldwide supremacy.

In the subtitle of his book, he describes himself as a “hostage in the greatest campaign of economic destabilisation”. He is not alone in believing America is seeking to weaken foreign companies. This is the way most French analysts and many politicians have described the various Alstom sagas over the years.

Pierre Laporte, a former GE lawyer who now works as Pierucci’s partner, notes that 70% of firms targeted for US anti-bribery action are foreign – notably European. The FCPA and other laws that apply beyond US borders, Laporte says, are “tools of economic domination”.

Such suspicions may sound overblown, but they reflect serious concerns in France. Alstom, whose turbines power the country’s nuclear stations and submarines, is regarded as a strategic asset. Many worry that if a serious diplomatic spat arose with the US, as was the case during the Iraq war, French sovereignty could be undermined.

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A US company now makes the turbines that power French nuclear submarines

America’s judicial expansionism is a matter of concern for many countries whose companies are being pursued for doing business with Iran and other states targeted by American sanctions.

Since his return to Paris, however, Pierucci has focused on the narrow issue of the fight against corruption rather than geopolitical power games.

He and Laporte have set up a consultancy to help companies stay on the right side of anti-bribery prosecutors.

There is a big demand for Pierucci’s expertise. In 2016, France belatedly passed tough anti-corruption legislation and is enforcing it. The US justice department’s Daniel Kahn says he has a “very strong relationship” with his French counterparts – this recently resulted in a successful joint action against French bank Société Générale over bribes in Libya.

“Once you identify possible violations, you can put safeguards in place,” Pierucci says. He tells his clients to be particularly vigilant about hidden practices by overseas partners or consultants that may put them at risk.

Danger can lurk in unexpected places. In 2017 a retired Siemens manager was arrested while on holiday in Croatia and extradited to the US, where he was eventually convicted over bribes paid by the German group in Argentina in the 1990s.

As the reach of US legislation expands, foreign executives who fight the law may well find that the law wins.

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