The American Trap, page 17
My question is, just how do these US companies go about securing business for the last fifty years without once getting their hands dirty? Admittedly, these companies have the backing of US diplomacy. In 2010, for example, GE was able to sell $3 billion worth of gas turbines to the Iraqi government by mutual agreement (i.e. without a tender bid) under abnormal conditions. It was all the more outrageous, given that at the time Iraq did not have the capacity to construct power plants and as a result Baghdad ended up stuck with dozens of gas turbines, not knowing what to do with them. But to this day, no one has raised any objection.
GE also generally skilfully succeeds in positioning itself as a subcontractor to a lead turnkey contractor. The US giant supplies the gas turbines to any company that is responsible for supplying turnkey power plants. Naturally it is the lead contractor that hires and pays the consultants. On the Asian market, GE has a predilection for the largest South Korean or Japanese trading companies, which have also never been bothered by the DOJ.
In the spring of 2014, GE, claiming to be above all this foul play and a true leader in the fight against corruption, also proves to be a master at communication. While its takeover bid is clearly unbalanced, its CEO Jeff Immelt, with the full backing of Patrick Kron, boasts that his proposal is ‘the best way forward for Alstom’.
Jeff Immelt projects two arguments. First, GE is familiar with the French market. It has been operating in France since the late 1960s and employs 10,000 people there. Next, Alstom and GE have forged historical ties. This is undeniable, though this relationship is far from being as idyllic as Immelt would have us believe. Like many Alstom employees, I still remember the Belfort story. After licensing its gas turbines to us, GE rendered its licencees’ technology obsolete by not transferring the new-generation models to them. Having rendered their licensee uncompetitive, GE then offered to buy them back.
In 1999, Alstom sold to GE its gas turbine production site in Belfort. In parallel Alstom bought ABB power generation activities which had its own gas turbine technology. This was the cause of Alstom’s financial trouble in 2002/03 as ABB’s technology was not mature and Alstom ended up paying huge damages to its clients who had bought the troubled gas turbines.
Be that as it may, given that GE has been present in France for several decades, it is familiar with our country, our economic structure, our thirty-five-hour working week, our culture, and above all our political networks. Its leaders are also skilled lobbyists.
In 2006, Jeff Immelt recruited the well-connected Clara Gaymard, a charming and talented ambassador who happened to be also the wife of President Sarkozy’s former Minister of Economy, Finance and Industry, Herve Gaymard. She was appointed president of GE France and then promoted in 2009 to vice-president of GE International. She knows all the right people in Paris. President of the Women’s Forum and named by Forbes magazine as the thirtieth most influential woman in the world in 2011, this public figure and énarque (graduate of the French grande école ENA) is just as at ease in ministerial offices as in TV studios.
Right now, in spring 2014, she hastens to defuse the crisis that has just broken out between her company and the French government with diplomacy, as Arnaud Montebourg’s wrath does not wane. After speaking his mind to Patrick Kron in his office at the Ministry, he reiterates his arguments three days later on 29 April 2014 in the Assemblée Nationale (French parliament). The former lawyer of the Paris Bar transforms himself into a prosecutor and delivers a powerful closing speech.
‘Since February,’ he maintains, ‘I have been questioning Patrick Kron, Chairman and CEO of this company, which is our national pride and joy, and each time I questioned him duly, solemnly and seriously, he each time replied that he had no intention of entering into an alliance. And to wrap up, must I, as Minister of the Economy and Industry, install a lie detector in his office because he isn’t public spirited enough to alert the government?’
A little earlier that morning, Arnaud Montebourg, speaking on the RTL TV channel, also appealed for greater economic patriotism.
‘When a deal is being closed and you forget to call the Minister of the Economy to inform him, although you normally call him for assistance on a daily basis, this constitutes a breach of our national code of ethics.’
Minister Montebourg is not content to simply employ strong rhetoric; he swings into action. He starts by courteously but firmly spurning Jeff Immelt, who had just arrived in France to finalize the agreement. Given the circumstances, he simply cannot meet him. Instead, he sends him a letter to remind him that in France: ‘planned takeovers in the energy sector, and especially in the nuclear domain, are subject to the approval of the authorities’. He also issues a warning to Alstom’s directors. ‘Be careful,’ he tells them, ‘this sale could result in possible breaches of stock exchange regulations.’
In reality, this is just a show. Arnaud Montebourg is trying to buy time. He needs more time in order to organize a double counter-offensive (industrial and legal). From a judicial point of view, he is convinced that the Americans are blackmailing Alstom. However, there are several tangible elements missing from his report, which he must get his hands on before he can submit it to François Hollande.
So he seeks help from the DGSE (the French equivalent of MI6 or the CIA). The French counter-intelligence service refuses to help him. It doesn’t matter; he’ll dispense with their services, and get the information himself. He immediately sets up a full task force within his ministry. He appoints four advisers, entrusting them with the task of digging deep into the GE/Alstom alliance. Soon after, Montebourg’s ‘Four Musketeers’ uncover the details of the American proceedings and just as swiftly trace it all the way back to my own case. At that time, they even tried to establish contact with me.
One of the members of Arnaud Montebourg’s team calls Clara directly in Singapore. My wife is taken by surprise. Since my arrest one year ago, the French authorities have not responded. However, Clara is very suspicious; the minister’s adviser appeared very young to her, and for a moment she even suspected that he might be an impostor. To prove his bona fide intentions, she asks him to send her a mail from the Ministry website. He sends an email as requested, but he is not very convincing. As for me, I am not sure what to do. All my telephone conversations and visits are recorded and sent to the prosecutors. The only opportunity I get to have a free and unsupervised discussion is when I meet my counsel. But since I dare not place all my trust in anyone involved in the US justice system, I find it very difficult to have a meaningful discussion with them.
A stroke of luck. Markus Asshoff, who is defending me in my case before the French industrial tribunal, is spending a week in the United States and has travelled to Rhode Island to visit me in Wyatt. His visit is a tremendous boost to me because, for the first time in over a year, I am able to speak to someone frankly and directly, without fear of being listened to. He stays with me for more than six hours. He has been well briefed by my sister Juliette and I can at last make sense of the many unspoken codes and innuendoes in the telephone conversations with my family and friends. Regarding Montebourg’s adviser, I cannot make up my mind what to do. Of course, deep down I want to work with him to expose the truth. But my whole family and my lawyer Markus Asshoff advise me against it.
I have been locked up in a maximum-security prison for one year now, exploited and manipulated by the DOJ and held hostage to force Alstom to cooperate, and I risk a ten-year sentence. Should the DOJ discover (and it will, because Markus suspects that he and my family are being wiretapped) that I am indirectly aiding and abetting Montebourg to thwart GE’s plans, there is a high risk I could spend a lot more time here.
Reluctantly, I ask Clara to not respond to the call from the minister’s office. Arnaud Montebourg continues to launch his main counter-offensive. To rebuff GE’s offer, he turns to Alstom’s other key rival: Siemens. The German industrial giant immediately responds with a counter-offer.
By virtue of a letter of intent sent to the French Finance Ministry, Joe Kaeser, CEO of Siemens, proposed that they take over Alstom’s energy business and in return sell a significant part of Siemens’ railway division to Alstom. In the shopping cart are its high-speed ICE trains (with an order book worth €5.4 billion) and its locomotives. According to the German CEO, his offer is ‘a unique opportunity to create two European giants: a French transport giant and a German energy giant’. Joe Kaeser also undertakes not to slash any jobs for three years, and says Siemens is willing to relinquish Alstom’s nuclear activities in order to ‘safeguard France’s national interests’. On the strength of this offer, Arnaud Montebourg was able to persuade Alstom’s Board of Directors to defer its decision to sell to GE. The first battle was won. Patrick Kron, who wanted the deal wrapped up in three days, is going to have to revise his strategy.
However, Montebourg is losing ground. The President of the Republic has taken ownership of the case. He urgently convenes a select committee with Manuel Valls and the ministers concerned by the case. François Hollande wants to take his time too. He is wary of his overly vocal minister, who has the unfortunate habit of alienating big business. The remarks made by Montebourg about the Indian company Mittal have stuck in his throat.
‘We no longer want Mittal on our territory’, said Montebourg angrily in November 2012. These verbal projections pleased the left wing of the socialist party, but they annoyed those high up.
The Élysée therefore decided to appoint a mediator, in the person of David Azéma, the then head of the Agence des participations de l’État (the agency responsible for managing state shareholdings). Though the state is no longer a shareholder of Alstom, this is irrelevant, since France’s national security is now at stake. Azéma is the perfect man for the job. He is a senior civil servant, with leftish tendencies but a penchant for the private sector. He reports to Montebourg but is also accountable to Emmanuel Macron.
Between the end of April and beginning of May, I try to follow this politically action-packed saga from the confines of Wyatt on CNN breakfast-time news, though the Americans are not as interested in this affair as the French. I therefore have to wait for the press clippings that Clara sends me on an almost daily basis.
Early May, I call Liz to find out whether Stan kept his promise and did in fact contact the DOJ. She indicated that he verbally asked one of his former contacts at the prosecution department of the judiciary. According to this source, she tells me no deal has been signed between the DOJ and Patrick Kron. Of course, my lawyers did not provide me with any record of this ‘informal’ conversation.
Since Hoskins was indicted in July 2013, almost ten months ago, it is now apparent that the Americans have abruptly halted their investigations at a certain pecking order and are no longer interested in moving up the ranks to Kron. This is a fact. However, my lawyers will say I am reading too much into it. I therefore ask Liz once more to write to the prosecutors and have them confirm in a letter that no transaction of any kind has been concluded with Kron. I feel that the prosecutors have lied to me so much from the outset that I would like material proof.
‘Frankly, I advise against it,’ insists my lawyer. ‘I believe that the prosecutors are now ready to consider your release. They have just agreed to Hoskins’ release.’
‘Good for him. But you know I’m still surprised at the difference in treatment between us.’
‘He is English, and as England extradites its nationals, his lawyers were able to convince the judge.’
I ask Liz: ‘What are the terms of Hoskins’ bail?’
‘One and a half million dollars, which represents a significant portion of the house he owns in England. And he can stay with his son who lives in Texas. But if he wants to leave the United States, he will have to ask the judge’s permission.’
‘One and a half million dollars! That’s big money.’
‘It’s the price of freedom. Moreover, you should be aware that you will have to pay a comparable bail package.’
‘What! One and a half million dollars! But why such a large sum?’
From the start, we’d said $400,000, plus Linda’s house.
‘Yes, but they want the amount to be the same as that set for Hoskins.’
‘It’s just absurd. Hoskins may be in a position to put up that kind of money, but I am not.’
‘I know, but that’s how it is. In addition, you also need to find a second person in the United States who agrees to put up their home as collateral, like your friend Linda. Finally, please be aware that the two American citizens who decide to put up bail bond for you will be held jointly and severally liable, meaning that should you decide to flee to France, both their homes will automatically be seized.’
This mechanism is grotesque. The prosecutors do not stop raising the stakes. They are obviously willing to deploy any means to keep me in detention. At this point I become despondent, believing everything is over. I will never be able to satisfy their conditions and am doomed to spend the rest of my life behind bars at Wyatt.
Notwithstanding the extraordinary resourcefulness demonstrated by my family and friends in this time of need, my father managed to persuade one of his former business partners, Michael and his wife, to agree to put up their house as collateral, as Linda had previously done. I am eternally grateful to them and will never be able to thank them enough. Also, Clara, by scraping together every penny the family has, selling savings and retirement funds and even a part of the land our house is built on, managed to raise the required amount. We can’t do more.
Will it suffice? I fear that my release is predominantly dependent upon the poker match currently being played out by Alstom, GE and the French government. Yet in Paris the sale has not yet been closed and Montebourg appears to be gaining ground this time.
On 15 May 2014, he succeeded in pushing through a bespoke decree to thwart GE’s plans. It was an anti-takeover measure designed to deter takeovers in sensitive and strategic sectors. Under this new law, a foreign group wishing to acquire a French company in the energy, water, transport, telecoms or health sectors would have to obtain state approval before it could be granted such authorization. Arnaud Montebourg was beaming.
‘This stops us being pushed around. France must defend itself against the unwanted carving up of our industries.’
This surge of economic patriotism appealed to the French. According to a recent benchmark survey, 70 per cent of them voted in favour of the Minister’s action. Will he against all odds succeed in getting Patrick Kron and the Americans to back down?
Meanwhile, throughout all this political unrest, I noticed something rather disturbing: Nicolas Sarkozy’s silence and that of his party, the centrist-right UMP. How can it be that Alstom’s great saviour in 2003 is not condemning the left-wing President’s apathy to such a political scandal?
He could have seized this golden opportunity, but instead he chooses not to make any statement and remains silent throughout. All sorts of ideas swirl around in my mind that might explain his reluctance to become involved in the matter, such as protecting some people within his own party who are very close to GE and who will benefit from the deal.
In any case, his failure to respond is incomprehensible. I also notice that the press is sluggish. While it covers the shift in power between Montebourg and Kron, it keeps a low profile when it comes to vexatious topics; except for a few, however. For instance, on 27 May 2014, the Médiapart website, under the aegis of Martine Orange and Fabrice Arfi, published a scathing enquiry entitled: ‘The ugly face of corruptionFN15 lurking behind the sale of Alstom’. In their article, the two journalists considered that ‘the US lawsuits have a direct bearing on the rapidity and lack of transparency of the butchering of Alstom’. Like me, they question the disturbing calendar matches and stop at one particular date: 23 April 2014, the date at which Lawrence Hoskins was arrested in the US Virgin Islands, while, in parallel, Patrick Kron and Jeff Immelt were still in the midst of negotiations in Chicago. According to Martine Orange and Fabrice Arfi, ‘this arrest was significant’. It could have been a last attempt to exert pressure on Alstom’s CEO, just before he closed the deal with GE.
At long last, some of the truth is emerging. At the time I naively thought this article would make a lot of commotion. It was a flop. Like other press articles, such as the one published in the French satirical journal Le Canard enchaîné in May 2014, which points out what is surely a flagrant conflict of interests. In its dealings with GE, Alstom is advised on the legal side by Hogan Lovells, a US law firm. They had announced in December 2013 the nomination as new CEO of their long-time partner Steve Immelt, a specialist in FCPA investigation and . . . Jeff Immelt’s own brother. In the 15 May 2014 edition of the Point, the authors ask the only important question: ‘Is Patrick Kron willing to sell Alstom to the Americans to extricate himself from a legal tight spot?’, but this does not evoke any reaction.
Chapter 32
A Pyrrhic victory
One month later, at the beginning of June 2014, the die is cast.
Arnaud Montebourg has been defeated. In front of the cameras, he puts on a broad winning smile, maintaining to anyone who wants to listen that he is Alstom’s saviour, and presents the agreement he was able to get as being the best possible deal for Alstom. Yet I am not fooled.
