First-Ever Prosecution of a Corporation Under the Anti-Terrorism Act Is “A Vivid Reminder of How Corporate Crime Can Intersect With National Security”

A few weeks ago, the US Department of Justice (DOJ) announced its first-ever prosecution of a corporation for material support to terrorism under 18 USC § 2339B of the Anti-Terrorism Act (ATA). Lafarge S.A., a French cement giant, and its Syrian subsidiary, Lafarge Cement Syria S.A. (collectively, Lafarge) pleaded guilty to one count of conspiracy to provide material support to one or more foreign terrorist organizations—namely, ISIS and the al-Nusrah front (ANF)—in connection with operations in Syria. Lafarge agreed to pay a hefty $777.78 million in fines and forfeitures.

As Deputy Attorney General Lisa Monaco explained, the Lafarge case is “a vivid reminder of how corporate crime can intersect with national security.” Indeed, the case shows the array of tools available to the United States to combat corporate crime, including the long arm of US jurisdiction, which extends to foreign companies operating overseas, even when those companies are subject to enforcement actions in their home countries. The case also highlights the importance of due diligence in corporate acquisitions.

Background

From August 2013 to October 2014, Lafarge paid armed terrorist groups for permission to operate a cement plant in Syria. Company executives likened these payments to taxes. One of the payments was made through a New York intermediary bank. Lafarge also attempted to conceal the scheme through falsified records and the use of personal email addresses serviced by US-based providers.

In July 2015, Lafarge was acquired by one of its competitors, Swiss cement maker Holcim Ltd. During pre-acquisition due diligence, Lafarge executives apparently did not disclose its dealings with ISIS and ANF. Although Holcim “did not conduct post-acquisition due diligence of the defendants’ operations in Syria,” it investigated the conduct when it ultimately came to light. Notably, Lafarge did not voluntarily disclose the conduct, nor did it fully cooperate with the DOJ’s investigation.

On October 18, 2022, following the unsealing of the case in the US District Court for the Eastern District of New York, Lafarge pleaded guilty to conspiring to provide material support to ISIS and ANF in violation of Section 2339B of the ATA. Section 2339B authorizes criminal penalties for any person who “knowingly provides material support or resources to a foreign terrorist organization, or attempts or conspires to do so.” The ATA defines “material support” as the provision of any property or service, including financial services, lodging, training, expert advice or assistance, and transportation.

As a result of the plea deal, Lafarge agreed to forfeit more than $687 million (reflecting the value of assets derived from the criminal enterprise) and pay a criminal fine exceeding $90 million. Lafarge also agreed to cooperate with ongoing investigations.

Some Observations

Precedent-Setting Corporate Prosecution Under the ATA: Interestingly, the DOJ charged Lafarge only with conspiracy to violate the ATA and did not rely on the International Emergency Economic Powers Act (IEEPA) and the sanctions regulations promulgated under it, which previously have been used in comparable circumstances.

Until now, the US government has used the ATA to bring charges for material support to terrorism against individuals. Although Lafarge is the first company prosecuted under the “material support” provision of the ATA, it likely is not the last. As DAG Monaco noted: “Today’s charges and guilty pleas should make clear: when companies and their executives engage in conduct that threatens our national security—in this case by fueling violent terrorist organizations—the Department will respond with resolve.”

The Long Arm of US Law: The Lafarge case shows how DOJ’s enforcement of anti-terrorism laws can extend well beyond US-based companies or conduct—here, to a French company, its Syrian subsidiary, and their dealings with foreign terrorist organizations in Syria. According to the plea documents, the participating Lafarge executives were located in France, Syria, Egypt, Jordan, Lebanon, Turkey and the UAE, and the offense did not involve any US-based persons. It appears that US jurisdiction was based on a single wire transfer made by Lafarge from its operating account in Paris through a US intermediary bank and on Lafarge’s use of US email accounts.

Enforcement Actions in Multiple Jurisdictions: Lafarge has faced prosecution in other countries, too. Earlier this year, the Paris Court of Appeal allowed French authorities to bring similar charges against Lafarge in France.

The Need for Due Diligence in Corporate Acquisitions: The Lafarge prosecution is a cautionary tale about the need for acquiring companies to conduct adequate due diligence and to consider whether to report pre-acquisition activity to the authorities. In the words of DOJ, the Lafarge 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.”

Companies seeking advice on any of the above are encouraged to contact authors of this advisory or their usual Arnold & Porter contacts.

* Junghyun Baek contributed to this blog post. Mr. Baek is a graduate of Harvard Law School and is employed at Arnold & Porter’s Foreign Legal Consultant Office as a Law Clerk.

© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.