In April 2013, Frédéric Pierucci was arrested in New York and taken in chains to a prison. Thus began a long ordeal that taxed his survival capacities and also provided deep insights into corruption.
Frédéric Pierucci
Pierucci was an executive for the French multinational company Alstom. Part of its operations were in the energy business, including manufacturing boilers for large power plants. Alstom sought contracts in countries around the world and, like many Western multinationals, used bribes to obtain them. As anti-corruption efforts stepped up, Alstom set up internal systems to control bribery. Instead of paying bribes directly, Alstom hired “consultants” who organised the bribery. Everyone knew what was happening but the corruption was more covert.
In Alstom’s hierarchy, Pierucci was several levels down from the CEO. He had no idea that the US Department of Justice (DOJ) had ordered his arrest, so when he was taken into custody, he was caught unawares. Eventually he learned that his arrest was related to an Alstom contract bid in Indonesia years earlier.
He couldn’t figure out why he, of all people, was arrested. The contract in Indonesia was long ago, and he wasn’t the senior figure involved. Gradually he pieced together what was going on.
The DOJ relied on the Foreign Corrupt Practices Act (FCPA). This law allowed the arrest of anyone anywhere in the world if they were involved in corruption with the slightest connection with the US, for example using US currency or Internet servers based in the US. Even if the individual was not a US citizen, did not work for a US company, and the alleged corruption was in another country, the FCPA could be applied.
This use of the FCPA is called extraterritorial, meaning it applies outside the US. It is a prime example of what might be called imperial overreach. The US government asserts that its laws apply throughout the world, not just in the US. But on the other hand, the US government notoriously refuses to be bound by non-US laws that affect its own citizens. For example, the US government refuses to accept the jurisdiction of the International Criminal Court. The double standard involved — the US government applies its laws to citizens of other countries but rejects their laws applying to US citizens — reflects US economic and military power.
It might seem that the FCPA, despite its imperial reach, is being used for a good cause: stamping out corporate corruption worldwide. In this picture, the US government is applying its high anti-corruption standards as widely as possible.
Pierucci, caught in a nightmare in the US criminal justice system, gradually learned otherwise. He was being held in a maximum security prison though he had not been convicted of any crime, and he was not a violent offender. Naturally, he applied for bail, thinking this would be routine. He discovered the DOJ didn’t want to release him no matter what. Why couldn’t Alstom post bail? The DOJ wouldn’t allow it. He had to post an exorbitant amount personally. Then there was an additional requirement: a US citizen had to be willing to mortgage their house as part of the bail requirement. This was difficult to arrange, because Pierucci had been living in Singapore. His wife, taking care of their four children, was not allowed to interact with Alstom because of the DOJ’s case against it. She had few contacts in the US, but eventually a friend offered to put her house up as security for bail. Even this wasn’t enough.
Pierucci realised he was being held as an economic hostage. The DOJ had no intention of releasing him while its case against Alstom proceeded. Pierucci’s plight was a message to top Alstom executives that they might also be imprisoned.
Alstom’s top executive, Patrick Kron, was fully implicated in its corrupt practices. Unlike other companies targeted by the DOJ, Alstom had refused to cooperate, admit guilt, pay a huge fine and allow a DOJ agent to work in the company to monitor compliance, of course paid by the company. The DOJ was playing harder because of Alstom’s resistance.
Patrick Kron
Pierucci discovered a pattern: numerous European companies had paid huge fines to the US government following DOJ anti-corruption investigations. The DOJ had a large workforce for this purpose, and it was reaping large rewards. There was something else. The DOJ apparently had access to electronic monitoring of European communications, as later revealed by Edward Snowden. It was using information gained through surveillance, justified as countering terrorism, for economic warfare.
There was yet something else besides. The DOJ’s operations enabled US companies to take over their competitors. This is what happened to Alstom. Its primary US competitor was General Electric (GE), a massive multinational. Alstom’s CEO, Patrick Kron, commenced secret dealings with GE that eventually led to the sale of Alstom’s power division, its largest, to GE. The price was huge but the benefits to France were minimal. Furthermore, GE did not fulfil any of its promises, for example to create new jobs in France.
The sale of a crucial part of France’s energy sector, in particular its nuclear power production, was a blow to its economic independence. For such a sale, various government approvals were required. Pierucci tells how the US government used the corruption proceedings as a lever to achieve the sale. The tale is complicated, but essentially the US government used various types of power to serve the interests of GE.
The official name of the game was anti-corruption, but behind the scenes was a deeper level of corruption: US surveillance capacities, diplomatic power and economic power, tied to the anti-corruption gambit, were corruptly deployed to serve US corporate interests.
Pierucci was a pawn in this game. To induce Kron to proceed with the sale, Pierucci had to be on the hook. It was apparent that the DOJ did not want to sentence Pierucci until the sale was settled. Pierucci was finally allowed out on bail and returned to France, but had to come back to the US for sentencing. Finally, he was — four years after pleading guilty. The DOJ forced Pierucci to plead guilty to being the central figure in Alstom’s bribery. He was the fall guy. He served another year in a US prison.
Wyatt Detention Facility, a maximum-security prison where Pierucci spent some of his time behind bars
Through these travails, Pierucci had to rely on his US lawyers, who kept promising things that didn’t pan out. The DOJ presents itself as the paragon of justice — what else? — but its treatment of Pierucci was anything but. Yet Pierucci could not afford to challenge decisions made because, if he had, he would have been treated much worse.
Here is another injustice: the US legal system. Pierucci was threatened with decades in prison. If he said he was innocent and went to trial, he risked a long stretch in prison. So wisely he pled guilty. He was not alone in being pressured to lie. The entire US legal system is based on plea bargaining. People are charged with crimes and warned that if they contest the charges, they will face a long prison sentence. Hence most of them plead guilty.
In his time in several US prisons, Pierucci saw the country’s penal system up close. As other observers have noted, it is horrendous. Prisoners are humiliated, treated harshly, subject to abysmal conditions and given little encouragement for rehabilitation. In some prisons, prisoners are forced to work for a few cents per hour: they are slave labour.
Pierucci, throughout his time in prison, wrote about his experiences and his study of the interactions between Alstom, the DOJ and GE, and sent his writing to a French journalist, Matthieu Aron, who is the second author of their book, completed just five weeks after Pierucci was finally freed. It is engaging and alarming, covering Pierucci’s personal experiences and what he found out about corruption.
Matthieu Aron
The title of the book, The American Trap, can be interpreted in several ways. It refers most obviously to US economic warfare using the legal system, warfare in which the rhetoric of anti-corruption is used for a higher level of corruption. The title might also be taken to refer to the US legal and prison system. In the name of justice, this massive system beats down its victims in the most appalling ways.
Superman famously fought for “truth, justice and the American way.” Unfortunately, this was an illusion. Instead, behind the scenes are “lies, injustice and the American trap.”
Frédéric Pierucci with Matthieu Aron, The American Trap: My battle to expose America’s secret economic war against the rest of the world, translated by Deniz Gulan (London: Hodder & Stoughton, 2019)
Some choice quotes
Re the Foreign Corrupt Practices Act (FCPA), “They have transformed a law that could have weakened their own industry into a formidable instrument of underground economic warfare and intervention.” (p. 115)
Re corrupt operations by the US company KBR, a subsidiary of Halliburton: “So in a case [mainly concerning a US company] unearthed by a French judge, a French company was ordered to pay $338 million to the US government rather than to the French government itself. This is known as shooting yourself in the foot.” (p. 118)
Re a US judge saying Pierucci should apologise for Third World corruption, despite the US government’s support for Suharto’s corrupt regime in Indonesia: “This judge fully embodies American hypocrisy in all its grandeur.” (p. 265)
Re the DOJ’s onslaught against European companies, netting billions of dollars in fines: “This racketeering, because that is what it all boils down to, is unparalleled in its scope.” (p. 305)
Brian Martin
bmartin@uow.edu.au
Thanks to Tonya Agostini, Anneleis Humphries, Cynthia Kardell and Jody Watts for useful comments on drafts.