ABB to pay R5.5 billion to settle US charges over Eskom bribes

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Swiss engineering firm ABB Group was contracted to work at Kusile in 2015.
Swiss engineering firm ABB Group was contracted to work at Kusile in 2015.
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  • Swedish-Swiss engineering company ABB has agreed to pay ~R5.5 billion to settle US criminal charges related to irregular contracts with Eskom.
  • Two of ABB's affiliates pleaded guilty for violating the US Foreign Corrupt Practices Act.
  • Earlier this week, Switzerland fined ABB R75 million, similarly for bribery linked to the contracts it secured for Kusile power station.
  • For more financial news, go to the News24 Business front page.

Swedish-Swiss industrial company ABB agreed to pay $315 million (~R5.5 billion) to settle US criminal charges that it bribed state-owned Eskom of South Africa over government contracts, the Department of Justice (DOJ) announced Friday.

Two affiliates of ABB each pleaded guilty to one count of conspiracy to violate the US Foreign Corrupt Practices Act as part of a three-year deferred prosecution agreement, the US agency said of a settlement that was coordinated with government authorities in Switzerland, Germany and South Africa.

The issue concerns a troubled project near Johannesburg with the Kusile power station, the fourth largest coal-fired generator in the world, which has been fraught with allegations of graft. South Africa's struggling power utility Eskom commissioned the plant in 2007.

In October eight people, including former Eskom CEO Matshela Koko, were arrested on corruption charges linked to the ABB work.

Between 2014 and 2017, ABB through its subsidiaries secured "multiple" government contracts, syphoning illicit payments through subcontractors associated with an official at Eskom, South Africa's state-owned power company, the DOJ said.

READ | Switzerland fines engineering giant R75m over South African bribery

"ABB worked with these subcontractors despite their poor qualifications and lack of experience," the DOJ said in a news release. "In return, ABB received improper advantages in its efforts to obtain work with Eskom, including, among other benefits, confidential and internal Eskom information."

ABB engaged in "sham" negotiations with the Eskom official and falsely reported the payments as legitimate business expenses, according to the press release.

ABB chief executive Bjorn Rosengren said the company has acted in the wake of the case by "launching a new code of conduct, educating employees and implementing an enhanced control system to prevent something similar from happening again."

In a statement, he said that ABB has "a clear zero tolerance approach to non-ethical behavior within our company."

The US agency said the penalty was reduced 25% from the high end of the sentencing range in light of ABB's "extraordinary" cooperation and "extensive" remediation efforts.

But the department noted that ABB had two earlier criminal FCPA resolutions in 2004 and 2010, as well as a guilty plea by an ABB entity for bid rigging in 2001.

READ | Eskom corruption: Multinational ABB to pay SA R2.5bn for dodgy Kusile deal

The US law on foreign corrupt practices applies to foreign companies with US-issued stock, as is the case with ABB.

The company also settled a parallel civil case with the Securities and Exchange Commission.

Earlier Friday, the Swiss attorney general's office said ABB was fined four million Swiss francs (~R75 million) in the case. ABB said it hoped to reach a resolution with German authorities in the near term.

In total, ABB said the settlements totaled $327 million (~R5.7 billion), and have been accounted for in the company's third quarter financial results.

*All amounts are based on the rand-dollar exchange rate on 3 December 2022.

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