How the US makes foreign firms behave
Published on: Sunday, October 17, 2021
By: David C C Lim and Syn Chew
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Credit: elawyer.com.my
The American Trap by Frederic Pierucci (London: Hodder and Stoughton, 2019) tells of cooperation between the U.S. Department of Justice (DOJ) and the energy giant General Electric (GE) to waylay and buy out French premium company, Alstom, and how the author was made a pawn in the whole exercise.
Frederic Pierucci was a former senior executive of France’s biggest power and transportation company, Alstom, which had worldwide activities in energy generation and transportation. He had no inkling that his company was going to become a target of a takeover by the US giant, General Electric.
Pierucci was on a Cathay Pacific flight from his home in Singapore and the plane had just landed in New York’s JFK International. The flight attendant had called out his name and asked him to identify himself to the crew upon landing. Unaware that he was going to be arrested, Pierucci unwittingly stepped on US soil, and was immediately shackled after he had identified himself to the waiting police. He was gruffly informed that he was under arrest, and would be taken to the FBI headquarters in Manhattan.
It was the beginning of a harrowing experience that was to last five and a half years of which twenty-five months would be spent in US jails, 15 of which would be in maximum-security detention facilities. On that day still groggy from jet-lag, he could not think what wrong he had done, thought that it was probably a mistake, all would be taken care of by the French embassy, and he would be released the next morning.
The prosecutor from the US Department of Justice knew all about his case. In a thinly veiled threat, he was asked whether he would cooperate in the case against his company. Pierucci pleaded innocence and said he would have to consult with his company’s lawyers.
He was then curtly dismissed and informed he would be produced in court the next day. He was sent off to Manhattan prison to await his court appearance. One of his taciturn escorts on leaving him at the prison gates said ominously, “Good evening Mr Pierucci. What I tell you is going to make you nervous, but I want you to know that tomorrow morning you will be glad to see us.”
It was true. On admission to the prison he was stripped naked and asked to ‘squat and cough’ before being issued with the orange jump-suit. Still shackled, he was led into a dark little cell to spend the night.
Pierucci’s book tells of his insensitive treatment at the hands of the U.S. Department of Justice which charged him under the Foreign Corrupt Practices Act (FCPA), an extraterritorial law that gives the DOJ the right to arrest anyone, regardless of nationality, the moment that person is suspected of having committed the offence of bribing a foreign public official which may be linked in some ways to the United States.
The Foreign Corrupt Practices Act (1977) was passed ostensibly to “prohibit US firms and individuals from paying bribes to foreign officials to further business deals.” But, as disclosed by Investopia, a site on investments, there appears to be a different agenda for the passing of the Act in 1977:
“When the act was passed in 1977, it received substantial American business backing because they could not compete fairly in the overseas market where bribery was accepted.”
That is a telling commentary, as the logic seems flawed, pointing more to the use of the act to curb foreign companies than to level the playing field to help American businesses overseas. An amendment later distinguished between bribes and “grease”, payments made to facilitate the running of the contract, which is allowed, thus giving some “discretion” to the authorities on whether and who to prosecute.
While the aim of the act is laudable, the application turns out to be arbitrary and selective, making it, as the book describes, “an economic weapon used in America’s underground economic warfare against its overseas competitors”.
That it was selectively applied is apparent from the number of prosecutions against foreign companies as compared to US companies. The book tabulates the number of foreign companies caught by the act, and the amount of fines paid. European companies were forced to pay to the DOJ a sum of up USD6.4 billion in a period of 10 years, compared to the amount paid by US companies of USD2.1 billion.
An indictment under the FCPA is heard by a “Grand Jury” consisting of 16 to 23 ordinary citizens picked at random, in the absence of the accused. If a case is made out, the indictment is sealed, so that the accused would have no idea at all that he would be arrested the moment he stepped on US soil. In this case, Pierucci was detained in 2014 upon touchdown over a matter which happened in Indonesia over ten years ago in 2004.
While he was a senior executive in ABB, the subsidiary company of Alstom, the company had engaged consultants in Indonesia to secure a contract, paying them “commissions”. Under the FCPA that was considered to be a bribe. Three other executives of the company were charged in this case. Two had agreed to cooperate with the prosecution.
Pierucci, after refusing to cooperate with the prosecution, was to find out that this law would be applied to him in all its severity. Even though formal rules are observed strictly, justice appears to take a back seat to hidden political interests as the Department goes through the procedures to ensure that the letter of the law is followed. In prison and with plenty of time in his hands he went through an 800 page study of the FCPA given him by his lawyers.
Pierucci learned that the law was enacted after the infamous Watergate scandal when investigations into the affair uncovered wide-scale unethical practices involving American companies overseas. When it was found that the law was putting American companies at a disadvantage in competing with their rivals overseas, enforcement was pulled back. It was later realized that it could be used to “control” foreign corporations and the law was amended to give it an extraterritorial reach in 1998. Pierucci concludes:
“With this law Americans have succeeded in pulling off a neat sleight of hand. They have transformed a law that could have weakened their own industry into a formidable instrument of underground economic warfare and intervention.”
Upon his arrest Pierucci was given his one phone-call, no more even if there was no answer at the other end, and was to be produced in court to be charged the next day. While waiting he was locked up in a detention centre to spend the night. It was the beginning of his months of brutal and inhumane treatment in prison while waiting for his case to run the gamut through the court system.
Bail was next to impossible as he was to find out. An astronomical sum was demanded, and to top it up, an American citizen had to put up his house as a security to make sure Pierucci would turn up in court and not abscond overseas.
The US legal system is like a behemoth, with conveyor belts moving people in and into a maze of alleys, with the cogs moving lazily and at a pace to accommodate all the officials in the system before those found guilty or otherwise are spit out into the appropriate “guilty” or “not guilty” bins.
Asking for the charge against him, he was given a 72-page indictment, and a further 4 discs of exhibits. He was later informed that if he wished to fight the case, he would have to go through thousands of other exhibits as he would be questioned on them. Pierucci remarked that the one good thing about the US legal system is that it is very transparent.
Due to the sheer number of cases to prosecute, most prosecutors lay out the facts and the ‘tariff’ or penalties the accused will get if he pleads guilty or if he pleads not guilty. The gap is invariably huge, so the accused even if innocent would have to choose between a long wait in prison leading to an expensive trial and possibly a heavy sentence, or a lighter sentence if he pleads guilty. This plea bargaining goes on behind the court, so to speak, and the judges pretend that it does not take place.
Initially feeling defiant, and quite understandably, Pierucci asked his lawyers to calculate the maximum term he would get if found guilty. After some calculation based on each charge, and amounts involved, they told him he could be sentenced to one hundred and twenty five years.
Compelled by the circumstances and on advice of his lawyers he eventually agreed to plead guilty to the charge. Even then, he had to spend months in jail before he was sentenced, and even after sentencing, he had wait for the report on which the court would fix the sentence.
Described as the “Prison Industrial Complex”, US prisons are run by corporations on a commercial basis, and as Pierucci discovered, food ration was restricted to the cost of USD 1 per day, and everything else had to be purchased. The corrections’ corporations belong to a strong lobby with the ability to influence the making of laws in the country. With strict anti-drug laws enacted, a person found trafficking in crack could face life or long term of imprisonment.
Over a period of 10 years, the prison population in the US increased two hundredth fold, to over two million inmates, making the US, a country with 5pc of the world’s population but with 25pc of the world’s prison population. African Americans make up the majority of these.
Prison was like being in another country, and definitely not a country for old men. Hardened criminals group themselves into gangs, running prison life with their own unwritten rules within the official prison regulations. Pierucci tells of an occasion when a serial rapist was put in the same cubicle with an old man:
“At night we heard screams, we guessed what had happened. In the morning, it was too late; the little old man was taken to the infirmary.”
The book gives two parallel accounts of the author’s experience, one of the American prison system and prison life, and the other of the legal wrangling he and his lawyers had to go through with the DOJ while the corporate maneuvering and negotiations over the purchase of Alstom by General Electric see-sawed.
The tentacles of the U.S. so called security services can reach any place in the world except Russia and China as we have seen in the case of Julian Assange. He had escaped from them in Sweden, only to have the U.S. spear-carrier, Britain, hound him to seek refuge in the Ecuadorian Embassy.
Under relentless pressure no doubt from ‘Big Brother’, the British police, first, manhandled him from the Embassy and then confined him, quite unnecessarily, to Belmarsh maximum security prison while the U.S. fights for his extradition in the court. So much for British justice. The saga continues to this day, the prosecutor totally unsympathetic with the dire life-threatening conditions he faced in Belmarsh.
.The New Statesman in its review of the book notes that it was one of the books seen on the table of the Huawei CEO and, in the light of what had happened to his Chief Financial Officer-daughter Meng Wanzhou, understandably so.
The book has also been widely distributed and read in China. The experience of having been treated as a pariah nation by the West has taught the Chinese to be wary of the Western powers and their water carriers. They can see through the thinly disguised self-ordained and self-proclaimed protectors of democracy and democratic values for what they really are – Hegemons in pursuit of their own political and economic interests.
The more confident American policymakers feel about the hammer of US power, the more likely they are to find nails quite regardless of the moral values espoused. (PeterBeinart, The Icarus Syndrome: A History of American Hubris (New York: HarperCollins, 2010). Witness the costly price paid by the Huawei CFO on the recent deal over the release from her 3-year long Canadian house-arrest. She was made to agree to a ‘Deferred Prosecution Agreement’ under which a guilty plea had to be entered on terms that would be kept strictly confidential.
Some Caucasians though of the same skin pigment may be – with an apology to George Orwell – more equal than others. The French were, according to the US, history’s losers and, as the French has found out, French eyes do not match up to the ‘Five Eyes’. AUKUS was proclaimed without consultation with any of the countries in the region. ASEAN was also taken by surprise. Brown brothers obviously also do not count much with the Anglos.
Bloomberg calls the book ‘a cautionary tale’. It is more than that: it is an eye opener to all those foreigners who still look to the United States as the ‘land of the free, home of the brave’ and the torchbearer of democracy.
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