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    Home » Energy and sustainability » ABB’s Eskom bribe scheme nearly collapsed over division of loot

    ABB’s Eskom bribe scheme nearly collapsed over division of loot

    A scheme by employees at ABB to pay bribes for contracts at Eskom nearly fell apart in a dispute over who would share in the spoils, US court filings show.
    By Agency Staff9 December 2022
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    A file photo shows the under-construction Kusile power station. Image: JMK/Wikimedia Commons

    A scheme by employees at Swiss industrial firm ABB to pay bribes for contracts at Eskom nearly fell apart in a dispute over who would share in the spoils, US court filings show.

    The filings give a fresh look at corruption at Eskom, the state-owned power company plagued by deteriorating finances and regular blackouts. The case, by US prosecutors and regulators, also sheds light on evolving US policy towards companies like ABB that have repeatedly broken the law.

    ABB agreed on 2 December to pay a US$315-million (R5.4-billion) criminal penalty over bribes to an Eskom official as it sought control and instrumentation contracts at the company’s Kusile coal-fired plant. Two ABB units pleaded guilty and the parent company was charged with violating the Foreign Corrupt Practices Act, the US foreign bribery law. Prosecutors will defer the case and drop it in three years if the company makes promised reforms.

    The bribe scheme ‘nearly came undone’ when the chairman of the engineering firm ‘refused to share the spoils’

    The case “highlights the expanding global network of countries fighting international corruption”, Marshall Miller, a senior justice department official, said on Tuesday in a speech.

    After the settlement, ABB CEO Bjorn Rosengren said the firm has changed.

    “We take the Kusile matter very seriously,” Rosengren said in a statement. “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.”

    The firm also resolved probes by South Africa and Switzerland, and will do so in Germany. Half the penalty will go to South Africa. ABB is paying $4.3-million to Switzerland, where the firm acknowledged not taking “all necessary and reasonable” steps to prevent the bribery. On 3 December, the Securities and Exchange Commission issued an order against ABB that raised the overall cost to the company, after other credits, to $327-million, the firm said.

    ‘Capture team’

    To get its US deferred-prosecution deal, ABB admitted that between 2014 and 2017, it bribed a South African official “to improperly influence the decisions of Eskom, and to secure an improper advantage” to obtain business. It formed a “capture team” to seek Kusile contracts and hired unqualified subcontractors to receive payments intended as bribes for the official.

    Needing a “sales shark”, the capture team appointed a German employee with “a reputation for non-transparency about how he went about interactions with clients”, according to the SEC order.

    The Eskom official agreed to award a $160-million contract to ABB if it hired an engineering firm, which got a $7.2-million subcontract. The official demanded immediate payment of his cut of $720 000. But the bribe scheme “nearly came undone” when the chairman of the engineering firm “refused to share the spoils” with the official due to an apparent falling out, the SEC said.

    The capture team leader tried to broker a peace, arranging a face-to-face meeting, but it failed. Instead, the leader brought in another engineering firm, run by someone tied to a close friend of the official. That firm, which initially didn’t clear ABB’s qualification process, was ultimately paid $37-million, “much of which was intended as bribes” for the official, the SEC said.

    ABB is one of several international companies found to have engaged in years of corruption at Eskom and other South African state-owned companies during the presidency of Jacob Zuma, which ended in 2018. ABB agreed in 2020 to repay $104-million it was paid in connection with Kusile. In July, two former ABB employees and their wives were arrested in South Africa for corruption linked to $29.4-million of contracts.

    Eskom, in response to questions about the ABB criminal and regulatory cases in the US, said in an e-mail: “Kindly note that the civil matter is closed from an Eskom perspective.”

    In the US, ABB is a repeat offender, resolving criminal cases in 2010 and 2004 relating to the US foreign-bribery law, and a 2001 bid-rigging case.

    Such companies would seem to face a tougher stance by US prosecutors, under a policy announced in October 2021 by deputy attorney-general Lisa Monaco.

    She said companies shouldn’t continually get non-prosecution and non-prosecution agreements, and “all prior misconduct is potentially relevant” in deciding how severely to punish companies to resolve criminal investigations. But Monaco softened her stance a bit in September, saying criminal cases more than 10 years old would be given less weight in determining outcomes.

    With ABB, prosecutors downplayed the firm’s past criminal conduct because it was too old, Marshall Miller, the principal associate deputy attorney-general, said in his speech on Tuesday. Instead, he emphasised the firm’s compliance programme had detected the misconduct, which it tried to disclose to the justice department, even though it was scooped by a media report.

    Miller explained why ABB didn’t get punished more severely.

    Read: ABB to cough up R2.5-billion for its role in Eskom corruption

    “The prior misconduct was dated, having occurred over a decade before,” he said. “ABB provided A+ cooperation, including the production to authorities of significant materials located overseas.” It also “made overseas employees available for interviews, engaged in extensive remediation, and upgraded and tested its compliance programme”.

    Miller, speaking at an American Bankers Association conference, said companies should note that prosecutors “assigned significant weight to ABB’s documented efforts to self-disclose in arriving at the ultimate result”.

    Read: ABB settlement is ‘huge development’ in corruption fight

    The justice department needs companies to come forward to build cases in other countries, said Jonathan Green, a former federal prosecutor and SEC attorney now at Arnold & Porter.

    “Corporate misconduct and foreign bribery, in particular, are going to be very, very difficult to detect and investigate if the government does not have significant assistance from the companies themselves,” Green said.  — David Voreacos, with Antony Sguazzin, Paul Burkhardt and Hugo Miller, (c) 2022 Bloomberg LP

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