ABB's bribe scheme nearly collapsed after chair 'refused to share spoils' with Eskom exec

Swiss engineering firm ABB Group was contracted to Kusile in 2015.
Swiss engineering firm ABB Group was contracted to Kusile in 2015.
Gallo Images
  • ABB admitted that between 2014 and 2017, it bribed an official "to improperly influence the decisions of Eskom".
  • But the bribe scheme nearly came undone when the chairman of the engineering firm "refused to share the spoils" with the Eskom official due to an apparent falling out.
  • ABB has agreed to pay remuneration and fines over the deal.
  • For more financial news, go to the News24 Business front page.

A scheme by employees at Swiss industrial firm ABB to pay bribes for contracts at South Africa’s state-owned power utility 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 power company plagued by deteriorating finances and regular blackouts. The case, by US prosecutors and regulators, also sheds light on evolving US policy toward companies like ABB that have repeatedly broken the law.

ABB agreed 2 December to pay a $315 million (R5 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 case "highlights the expanding global network of countries fighting international corruption," Marshall Miller, a senior Justice Department official, said 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.

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

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.

READ | Former Eskom boss Matshela Koko, wife and stepdaughter arrested on charges of corruption

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.

$104 Million Repayment

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 email: "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.

'A+ Cooperation'

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 Tuesday. Instead, he emphasized the firm’s compliance program 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.

"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 program."

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."

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.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24
Rand - Dollar
Rand - Pound
Rand - Euro
Rand - Aus dollar
Rand - Yen
Brent Crude
Top 40
All Share
Resource 10
Industrial 25
Financial 15
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders