First Corporate Anti-Terrorism Act Prosecution Marks Expansion of U.S. Counterterrorism Efforts
The Situation: In October 2022, the U.S. Department of Justice ("DOJ" or "Department") announced a guilty plea in its first-ever corporate "material support" prosecution under 18 U.S.C. § 2339B of the Antiterrorism Act ("ATA"). This is a noteworthy expansion of governmental enforcement efforts under a provision reserved up until now for individual charges.
The Result: Companies can expect scrutiny of transactions and operations in parts of the world where terrorist organizations operate or that have customers connected to those regions, and that scrutiny may result in increased criminal and civil antiterrorism litigation.
Looking Ahead: Companies should review their compliance programs and pre- and post-acquisition due diligence practices with respect to existing customers and new business opportunities to avoid increased exposure to criminal and civil liability under the ATA—particularly if those companies operate in high-risk environments.
On October 18, 2022, the DOJ announced a guilty plea in its "first corporate material support for terrorism prosecution," marking a potential expansion in counterterrorism enforcement.
Lafarge S.A., a French cement maker, and its Syrian subsidiary, Lafarge Cement Syria S.A. (collectively, "Lafarge"), pleaded guilty to a one-count information charging them with conspiring to provide material support and resources to the Islamic State of Iraq and al-Sham ("ISIS") and the al-Nusrah Front ("ANF")—both of which are U.S.-designated Foreign Terrorist Organizations ("FTOs"). In connection with the plea, Lafarge admitted to negotiating with and paying armed terrorist groups in Syria for permission to operate a cement plant in that country. According to the plea documents, company executives likened these payments—which included revenue-sharing agreements—to taxes. The company sought to conceal these payments through falsified records, intermediaries, and the use of personal email addresses.
The DOJ focused on payments to ISIS and the ANF, and the resulting economic gain to Lafarge, despite the lack of any allegation that Lafarge actually ideologically supported ISIS or the ANF. Specifically, the DOJ found, according to its press release, that Lafarge "partnered with ISIS … to enhance profits and increase market share—all while ISIS engaged in a notorious campaign of violence during the Syrian Civil War."
The U.S. government premised jurisdiction over Lafarge on the extraterritorial provisions of the material support statute while noting that the offense did not involve any U.S.-based employees or business operations. Indeed, the plea documents indicate that the individuals who participated in the offense were located in France, Syria, Egypt, Jordan, Lebanon, Turkey, and the United Arab Emirates. The only part of the offense involving the United States appears to be a single wire transfer to a bank account in Paris that transited through the Eastern District of New York to an intermediary bank in New York City.
Lafarge reportedly obtained approximately $70 million in total sales revenue as a result of the scheme. Following the plea, the U.S. District Court for the Eastern District of New York sentenced Lafarge to probation and imposed financial penalties totaling $777.78 million.
Lafarge was required to plead guilty and pay a significant financial penalty, even though: (i) Lafarge had been acquired by the Holcim Group ("Holcim") in 2015, after the criminal conduct had ended; (ii) Lafarge failed to disclose the criminal conduct to Holcim during pre-acquisition due diligence; and (iii) after learning of the conduct, Holcim separated from all involved personnel, conducted an internal investigation, and publicly disclosed the conduct. In the plea documents, the DOJ specifically pointed to Holcim's failure to conduct post-acquisition due diligence on Lafarge's operations in Syria as an aggravating factor and found that the Holcim's public disclosure did not constitute a voluntary self-disclosure of the criminal conduct to the DOJ.
Implications for Potential Corporate Liability
The novel use of 18 U.S.C. § 2339B—which until now has only ever been used to prosecute individuals—against a corporation marks a noteworthy expansion of the ATA and marks a potential shift in the U.S. government's approach to counterterrorism. The DOJ's press release suggests that while this may be the Department's first foray into § 2339B corporate prosecutions, it will not be the last, stating: "This case sends the clear message to all companies, but especially those operating in high-risk environments, to invest in robust compliance programs, pay vigilant attention to national security compliance risks, and conduct careful due diligence in mergers and acquisitions." Indeed, in her remarks on the guilty plea, Deputy Attorney General Lisa Monaco stated, "Today's charges and guilty pleas should make clear: when companies and their executives engage in conduct that threatens our national security—in this case by fueling violent terrorist organizations—the Department will respond with resolve."
The Lafarge prosecution is significant for four additional reasons. First, the prosecution makes clear that providing money to FTOs, directly or through intermediaries, could fall within the material support provision even if the company is outwardly and publicly opposed to terrorism. Indeed, the DOJ's statements highlight only Lafarge's interest in economic gain through the transactions; there is no suggestion Lafarge supported ISIS or the ANF's objectives or was in any way philosophically aligned with them.
Second, the Lafarge case emphasizes that § 2339B is an extraterritorial statute. Although there are limitations on extraterritorial jurisdiction to pursue such charges, federal courts generally find that, for noncitizens acting "entirely abroad," a sufficient jurisdictional nexus exists "when the aim of that activity is to cause harm … to U.S. citizens or interests" (See United States v. Naseer, 38 F. Supp. 3d 269, 272 (E.D.N.Y. 2014)).
Third, the Lafarge case makes clear that the DOJ will aggressively pursue successor entities for pre-acquisition criminal activity where it finds the successor entities did not conduct adequate due diligence that could have discovered the activity, did not voluntarily self-report, and failed to cooperate fully, even where the successor company otherwise takes significant steps to address the conduct. Notably, Holcin's voluntary public disclosure of the criminal activity almost immediately after conclusion of their internal investigation was deemed insufficient to constitute voluntary self-disclosure to the DOJ.
Finally, the Lafarge prosecution increases the risk of follow-on civil litigation. As noted above and in our recent Commentary, recent cases in the Second and D.C. Circuits have opened the door for plaintiffs to file more aiding-and-abetting claims under the Justice Against Sponsors of Terrorism Act, or JASTA, which expressly added aiding-and-abetting liability to the ATA. As such, companies operating in high-risk environments should be aware that both criminal and civil antiterrorism enforcement is on the rise and that ATA litigation may increasingly proceed beyond the motion-to-dismiss stage into discovery. Other civil litigation—including ESG lawsuits, shareholder derivative suits, or other claims following the revelation of possible corporate misconduct under ATA provisions—should also be anticipated.
Reducing the Risk
It remains to be seen whether the Lafarge prosecution is the beginning of a trend to prosecute companies under the ATA. But, given this development, companies doing business in countries where terrorist organizations operate—or with customers that have ties to those regions—should take steps to limit their criminal and civil exposure.
First, companies should consider a preemptive risk assessment informed by the Lafarge prosecution and other relevant antiterrorism developments. For any concerns that materialize, companies should engage qualified legal counsel to determine whether remediation is advisable and, if so, to help in the identification and deployment of remediation measures.
Second, companies should ensure that their compliance programs adequately address anti-terrorism efforts. As Deputy Attorney General Monaco noted during her remarks, this includes "investment in robust and well-resourced compliance programs, attention to national security compliance risks, and careful due diligence in connection with mergers and acquisitions." Companies, including financial institutions and financial services providers, should take extra care in vetting third-party vendors and familiarize themselves with red flags indicative of potential terrorist funding. The Lafarge case also suggests that robust post-acquisition due diligence may yield critical information that was not revealed in pre-acquisition diligence and could better position an acquiring company to self-report potentially unlawful conduct.
Three Key Takeaways
- The Lafarge case marks the first time that the DOJ has prosecuted a company for providing material support to an FTO under the ATA. This development may signal the beginning of a trend toward additional corporate prosecutions under a statutory provision with extraterritorial reach that traditionally has only been used against individuals.
- In recent years, district courts have opened the door for plaintiffs to file more aiding-and-abetting claims against companies doing business in countries where terrorist organizations operate or with customers having ties to these regions. That development—together with the Lafarge prosecution and guilty plea—increases the risk that government investigations may lead to follow-on civil litigation (or alternatively flow from such litigation).
- Companies—especially those operating directly or indirectly in high-risk environments—should ensure that their compliance programs and due diligence processes incorporate robust anti-terrorism provisions.
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