ABB (NYSE: ABB), the Swiss industrial multinational, has been fined a considerable sum for engaging in foreign bribery. The company has agreed to pay $315mn to resolve a foreign bribery case filed by the U.S. Justice Department. It also agreed to pay a $75mn penalty in a separate case filed by the U.S. Securities and Exchange Commission (SEC).

• The bribery case concerns contracts awarded to ABB by Eskom, the embattled South African public utility company. According to prosecutors, ABB paid over $37mn to bribe a high-ranking Eskom official and obtained a $160mn contract for cable and installation work in return. The bribes were disguised as payments to a subcontracting firm associated with the official.

• The official of concern is Matshela Koko, former chief executive of Eskom. He was indicted for corruption and detained by South African authorities this October and is currently out on bail pending a trial.

ABB has also agreed to return $145mn to Eskom in a separate case filed by South African prosecutors in addition to the $100mn it returned in 2020.

ABB is facing additional prosecutions in Germany and Switzerland, and they’re all intertwined; the U.S. Justice Department agreed to credit up to one-half of the $315mn criminal penalty against ABB to any penalties the company pays to authorities in South Africa, Switzerland, Germany, and the U.S. SEC within 12 months. That implies ABB’s $75mn penalty to the SEC may be credited against the company’s penalty to the U.S. Justice Department.

Alongside the $75mn fine, the U.S. SEC ordered a $72mn disgorgement for ABB but deemed it satisfied by the company’s previous reparations to Eskom.

• ABB’s $315mn penalty falls under a three-year deferred prosecution agreement with the U.S. Justice Department with terms attached; if the company complies with the terms, then the bribery charges will be dismissed after three years, and if it doesn’t, then it’ll face prosecution.

ABB is one of the world’s biggest industrial engineering and technology firms, operating in around 100 countries and employing over 100,000 people. The company reported a $4.5bn net income on $30bn in revenue in 2021.

Was the crime worth it?

Prosecutors said ABB received a $160mn contract from Eskom and funneled $37mn of it as subcontracting payments to the official that awarded the contract, meaning it collected a net $123mn. The company has received a $315mn penalty from the U.S. Justice Department and $75mn from the U.S. SEC and will hand over $200mn back to Eskom. The fines are considerably greater than the sum ABB got from the contract, so it seems not worth it, but note that ABB has received several other contracts from Eskom, the inner workings of which are up for speculation.

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