Lafarge’s Penalty Is More Than Just An Example
On October 18, 2022, the United States Department of Justice (the “DOJ”) announced that Lafarge S.A. pleaded guilty to providing material support and resources to the Islamic State (“ISIS”) and al–Nusrah Front (“ANF”).[1] The DOJ fined the French-based cement maker $777.8 million, the largest fine a private corporation has ever paid for providing material support to a terrorist organization,[2] under an Antiterrorism Act ( “ATA”) [3] provision previously reserved for the prosecution of individuals.[4]
As the Syrian civil war escalated, Lafarge and their Syrian subsidiary, Lafarge Cement Syria (LCS), reached an agreement with ISIS and other terrorist groups to operate a cement plant in Syria from 2013 to 2014.[5] Lafarge executives agreed to make monthly payments to the terrorist organizations in exchange for protecting their cement plant and employees.[6] The terrorist organizations provided LCS’s drivers with permits guaranteeing safe passage for shipments and even to choke out LCS’s competition by preventing the introduction of cheaper cement into Syria from neighboring Turkey.[7] Lafarge and LCS paid ISIS the equivalent total of $5.92 million in fixed monthly payments and $1.11 million to third-party intermediaries.[8] The agreement resulted in over $70 million in revenue for LCS.[9]
The DOJ established jurisdiction in the Eastern District of New York through, among other nexuses, Lafarge sending a wire transfer in furtherance of the scheme through a New York financial institution.[10] Despite Lafarge’s limited United States connections, the American judicial system demonstrated its long reach. Deputy Attorney General Lisa Monaco stated:
The defendants partnered with ISIS, one of the most brutal terrorist organizations the world has ever known, to enhance profits and increase market share – all while ISIS engaged in a notorious campaign of violence during the Syrian civil war. This case sends the clear message to all companies, but especially those operating in high-risk environments, to invest in robust compliance programs, pay vigilant attention to national security compliance risks, and conduct careful due diligence in mergers and acquisitions.[11]
On top of the novel prosecution of a foreign company under the ATA’s material support or resources provision, Deputy Attorney General Monaco’s statement suggests that the DOJ plans to aggressively pursue non-compliant successor entities. Switzerland’s Holcim purchased Lafarge in 2015 and had no direct involvement with Lafarge’s scheme.[12] Nevertheless, Holcim failed to conduct adequate pre-acquisition due diligence to unearth Lafarge’s scheme, did not voluntarily self-report to the DOJ, and failed to fully cooperate with the DOJ’s investigation.[13] The DOJ’s fine signifies that Holcim’s voluntary public disclosure of the criminal activity following an internal investigation and subsequently severing the involved individuals was insufficient to constitute voluntary self-disclosure to the DOJ or mitigate Holcim’s lack of pre-acquisition due diligence.[14]
Ryan Green is a staff member of Fordham International Law Journal Volume XLVI.
[1] See Beth Timmins, Cement firm Lafarge pleads guilty to supporting IS, BBC News (Oct. 18, 2022), https://www.bbc.com/news/business-63305371.
[2] See Rebecca Davis O’Brien & Glenn Thrush, French Cement Company to Pay $780 Million Over Payoffs to ISIS, N.Y. Times (Oct. 18, 2022), https://www.nytimes.com/2022/10/18/nyregion/lafarge-cement-isis-terrorism.html.
[3] See 18 U.S.C. § 2339B.
[4] See Theodore Chung et al., First Corporate Anti-Terrorism Act Prosecution Marks Expansion of U.S. Counterterrorism Efforts, JD Supra (Oct. 25, 2022), https://www.jdsupra.com/legalnews/first-corporate-anti-terrorism-act-6601005/.
[5] See Press Release, U.S. Dep’t of Just., Lafarge Pleads Guilty to Conspiring to Provide Material Support to Foreign Terrorist Organizations (Oct. 18, 2022), https://www.justice.gov/opa/pr/lafarge-pleads-guilty-conspiring-provide-material-support-foreign-terrorist-organizations#:~:text=Lafarge%20and%20its%20subsidiary%20pleaded,and%20concealing%20their%20payments%2C%20falsified [hereinafter Press Release].
[6] See Davis O’Brien & Thrush, supra note 2.
[7] Id.
[8] See Press Release, supra note 6.
[9] Id.
[10] Paul, Weiss, Rifkind, Wharton & Garrison LLP, DOJ Brings First Terrorism Material Support Charge Against a Corporation, Underlying the Importance of Compliance When Operating in High-Risk Countries and of Robust M&A Due Diligence, Lexology (Oct. 20, 2022), https://www.lexology.com/library/detail.aspx?g=8025758f-2514-456d-b7d4-1262c80b3b1f.
[11] See Press Release, supra note 6.
[12] See Timmins, supra note 1.
[13] See Chung et al., supra note 5.
[14] Id.
This is a student blog post and in no way represents the views of the Fordham International Law Journal.