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Lafarge under formal investigation in France over allegations of terrorist financing

A panel of magistrates in France has put cement giant LafargeHolcim under formal investigation over allegations of terrorist financing, violating international sanctions and committing crimes against humanity.

The case centres around allegations that Lafarge paid the Islamic State and other terrorist groups in Syria more than US$15-million between 2011 and 2014 for supplies and assurances they wouldn’t attack the company’s new plant near Raqqa.

The legal move came on Thursday after a court hearing in Paris and it’s a key step toward criminal charges. It marks the first time a western company has faced possible sanctions for crimes against humanity. And it comes after eight former Lafarge executives, including two former CEOs, have been put under formal investigation over allegations of terrorist financing. Several company directors, including Canadian billionaire Paul Desmarais Jr., have also been questioned by police and reports in France indicate that the FBI has also launched an investigation.

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“This is a worldwide premiere for a parent company to be indicted for complicity in crimes against humanity, marking a decisive step forward in the fight against the impunity of multinationals operating in armed conflict zones,” said Sandra Cossart, director of Sherpa, a Paris-based human rights group that filed a lawsuit against Lafarge in 2016 along with the European Centre for Constitutional and Human Rights, which prompted the criminal probe. “The activities of Lafarge in Syria, in a context where extremely violent crimes were perpetrated, including at the doorsteps of its factory, are a perfect illustration of how multinationals can fuel conflicts and human rights violations, “ added Miriam Saage-Maass, legal director at ECCHR.

In a statement, Lafarge said the legal action was expected but that the company will contest the “charges which do not fairly represent the responsibilities of Lafarge SA.”

The allegations predated the US$50-billion merger of Lafarge and Switzerland’s Holcim in 2015, which created the world’s largest cement maker. The merger also resulted in the company’s head office moving from Paris to Zurich.

“We truly regret what has happened in the Syria subsidiary and after learning about it took immediate and firm actions. None of the individuals put under investigation is today with the company,” said LafargeHolcim chairman Beat Hess. “We have further strengthened the compliance program and culture since the merger, to make sure that similar mistakes will not happen again.”

Related: How a Desmarais investment got entangled in an alleged terror-financing scheme in Syria

Documents filed in court and reviewed by The Globe and Mail allege that Lafarge executives were determined to keep the plant operating as the country’s civil war escalated and other western companies pulled out. The material alleges that Lafarge executives often disguised the payments as “donations” and relied on a pair of intermediaries, including a Syrian-Canadian consultant, to make the payments to rebel groups. The relationship between the company and IS became so formalized, IS issued travel permits to Lafarge workers and the company paid a 10 per cent “tax” to the terrorists. The allegations surfaced in 2016 after a group of Syrians who worked at the plant complained on social media about how they had to fend for themselves when IS broke the arrangements and attacked the plant in September 2014.

A French court will now have to determine whether the company’s actions not only violated international sanctions but also financed terrorism and enabled IS to commit war crimes. A conviction could mean up to 10 years in prison for individuals and a fine for the company. Lafarge has been ordered to post a €30-million bond while the case proceeds.

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Mr. Desmarais, whose family controls Montreal-based Power Corp., is a long-time Lafarge director. Power Corp. is also a major Lafarge shareholder through a Belgian firm, called Groupe Bruxelles Lambert (GBL), which it co-owns. Mr. Desmarais was questioned by police in Brussels for 10 hours last December. Police have also questioned three other GBL executives, raided the company’s offices and tapped personal telephones.

Mr. Desmarais has denied any knowledge of the payments and insisted that the board was unaware of the company’s contacts with IS. He also ordered an internal investigation once the allegations surfaced and pushed through changes to the company’s operations. “Over and above existing numerous control mechanisms that Lafarge had put in place, additional measures have been introduced since then to prevent the recurrence of such regrettable events, which we strongly condemn,” he said in a statement to The Globe. The board, “made up of business people of considerable experience, had no reason to believe that such an important matter touching upon security and ethics, would not be brought to its attention.”

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