Lafarge will pay $778 million for funding ISIS and ANF in Syria
Lafarge, a French multinational construction goods business, pleaded guilty to providing material assistance and resources to two US-designated foreign terrorist organisations in Syria, marking the DOJ's (DOJ) first corporate material support for terrorism trial.
Lafarge and its defunct Syrian subsidiary, Lafarge Cement Syria (LCS), agreed to pay roughly $778 million in fines and forfeiture on Tuesday to settle a case filed in the United States District Court for the Eastern District of New York. Lafarge was accused of supplying material support and resources to the Islamic State of Iraq and al-Sham (ISIS) and the al-Nusrah Front from 2013 to 2014. (ANF).
The funds assisted in protecting the Lafarge cement plant in northern Syria and its employees from attacks or harassment by ISIS and ANF, which dominated the region during the Syrian civil war.
“The terrorism crimes to which Lafarge and its subsidiary have pleaded guilty are a vivid reminder of how corporate crime can intersect with national security,” stated Deputy Attorney General Lisa Monaco in a press release issued by the DOJ. "The defendants collaborated with ISIS... to gain earnings and market share—all while ISIS was engaged in a notorious campaign of violence throughout Syria's civil war." This case sends a strong message to all businesses, particularly those operating in high-risk areas, to engage in comprehensive compliance programmes, pay close attention to national security compliance issues, and perform thorough due diligence in mergers and acquisitions."
The DOJ stated that neither Lafarge, LCS, nor the Swiss-based Holcim, which would buy Lafarge in 2015, completely cooperated in its probe.
The misbehaviour began when Lafarge opted to continue doing business at a $680 million cement facility it built in the Jalabiyeh region during the Syrian civil conflict, despite the fact that many other corporations had departed or ceased operations in the country. According to the DOJ, Lafarge paid over $6 million in monthly "donations" to armed groups, in part to allow its employees to pass through checkpoints near the facility, and another $1.1 million to third-party intermediaries for arranging payments with the groups.
Lafarge and LCS would later enter into a revenue-sharing deal with the terrorist groups, with payments set dependent on the volume of product sold. According to the DOJ, the deal helped incentive terrorist groups to act in Lafarge's economic interest. LCS even sent ISIS sales reports on a regular basis to ensure payment amounts were proper.
The DOJ also said LCS requested terrorist organisations to levy tariffs or prevent Turkish competitors from delivering cement to the region in order to raise the prices of Lafarge's products.
Lafarge and LCS finally evacuated the cement facility in September 2014. According to the DOJ, ISIS took over the facility and sold the contents of the cement already manufactured there for a profit of $3.2 million. Overall, Lafarge made $70 million in sales from its northern Syrian operation in 2013-14, while profits to all scheme participants amounted more than $80 million, according to the agency.
Compliance concerns: Lafarge and LCS executives went to tremendous lengths to conceal the arrangement. According to the DOJ, company officials demanded that intermediates “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”. According to the agency, the executives urged ISIS not to include the word "Lafarge" on any of their agreements and conducted much of their business via personal emails.
According to the DOJ, in order to pay an intermediary for negotiating with ISIS and other armed groups, Lafarge and LCS officials ordered the intermediary to execute an agreement cancelling his commitment to supply services to LCS in October 2014.
“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 UN resolution,” the DOJ said.
Holcim purchased Lafarge in 2015, after the misbehaviour had happened. During pre-merger due diligence negotiations with Holcim, Lafarge executives did not reveal contributions paid to ISIS and ANF, nor did they disclose any other material support the business supplied to the terrorist organisations. According to the DOJ, Holcim, on the other hand, never performed pre- or post-due diligence on LCS's operations in northern Syria.
In a statement, Holcim emphasised that Lafarge executives concealed the misbehaviour from it both before and after the merger, as well as from external auditors.
Lafarge is also facing legal action in French courts for the same actions, including claims of complicity in crimes against humanity.
Lafarge isn't the only corporation suspected of bribing ISIS. Ericsson, the Swedish telecom company, initiated an internal probe earlier this year into allegations that it paid ISIS to operate in Iraq from 2011 to 2019.
When Holcim learnt of the claims about Lafarge's payments to terrorist groups in 2016, it "proactively and freely initiated a detailed inquiry, supervised by a prominent U.S. law firm and approved by the board of directors." It made public the main probe results in 2017 and severed ties with former Lafarge SA and LCS executives implicated in these incidents."
According to the corporation, the DOJ stated that Holcim has a strong risk and compliance mechanism in place to "identify and prevent any comparable potential wrongdoing," and hence did not appoint an independent compliance monitor in the case.
“Holcim operates to the highest ethical standards in strict compliance with the laws of all its jurisdictions,” the company said. “Today’s resolution reaffirms Holcim’s commitment to conducting all its business with utmost integrity.”
In a separate statement, Lafarge said, “Lafarge SA and LCS have accepted responsibility for the actions of the individual executives involved whose behavior was in flagrant violation of Lafarge’s code of conduct. We deeply regret that this conduct occurred and have worked with the U.S. Department of Justice to resolve this matter.”
By fLEXI tEAM