After admitting guilty, Lafarge repays Islamic State $778 million

French cement firm Lafarge pleaded guilty in a U.S. court on Tuesday to an allegation that it made payments to terrorist organizations recognized by the U.S., including Islamic State, in order to maintain operations in Syria.

This was the first time a company in the United States pled guilty in federal court in Brooklyn to providing material support to a terrorist organization. Lafarge, which became part of Swiss-listed Holcim (SIX:HOLN) in 2015, agreed to pay $778 million in forfeiture and penalty as part of the plea bargain.

According to U.S. authorities, Lafarge and its Syrian subsidiary Lafarge Cement Syria paid Islamic State and al Nusra Front roughly $5.92 million between 2013 and 2014 to allow employees, clients, and suppliers to pass through checkpoints after the onset of civil violence in Syria.

Authorities claim that this enabled the company to collect $70 million in sales revenue from a factory it operated in northern Syria.

Breon Peace, the lead federal prosecutor in Brooklyn, stated to reporters following the guilty plea, "Lafarge made a deal with the devil." This behavior by a Western firm was ugly, unprecedented, and unjustified.

Lafarge eventually evacuated the cement facility in September 2014, according to U.S. authorities. According to authorities, Islamic State confiscated the remaining cement and sold it for $3.21 million.

The chairman of Lafarge, Magali Anderson, said in court on Tuesday that, from August 2013 to November 2014, former corporate officials "knowingly and willfully agreed to participate in a conspiracy to make and authorise payments for the benefit of various armed factions in Syria."

Holcim declared in a statement that none of the behavior involved Holcim, "which has never operated in Syria, or any Lafarge activities or employees in the United States, and stands in direct contrast to all Holcim stands for."

DUE DILIGENCE

Holcim asserts that former Lafarge executives who participated in the behavior concealed it from Holcim and external auditors.

The U.S. Deputy Attorney General, Lisa Monaco, told reporters, without naming Holcim, that the company that acquired Lafarge did not undertake adequate due diligence on the Syria business.

No Lafarge executives were charged in the United States. Monaco reported that French authorities have arrested a number of pertinent executives, but declined to provide any names. U.S. court records list six anonymous Lafarge executives.

Anderson testified in court that the responsible persons have not worked for the company since at least 2017.

Eric Olsen, the company's first CEO following the merger, resigned in 2017 when the company admitted to paying armed groups in Syria. Olsen indicated that he was unaware of or did not participate in the payments at the time.

Tuesday, the Paris-based charity Sherpa for Human Rights criticised the plea agreement. The action brought by Sherpa against Lafarge in France prompted a criminal inquiry into the company's possible involvement in crimes against humanity.

Director of advocacy and litigation for Sherpa, Anna Kiefer, argued that the arrangement "impedes victims' access to justice and denies them a public trial."

Lafarge refuted allegations that the company committed crimes against humanity. Tuesday, a source close to France's anti-terrorism prosecution agency told Reuters that the probe into partially French-based activities is still ongoing.

Prior to the announcement, trading in Holcim shares was halted on the SIX Swiss Exchange. Following the resumption of trading, the share price increased by up to 3.2%.