When the Cost of Doing Business Means Funding Terror Groups

In 2018, one of France’s biggest companies was accused of complicity in crimes against humanity. Did it finance terrorist groups in Syria?

When Lafarge, one of the world’s leading producers of building materials, acquired a cement plant in the north Syrian town of Jalabiya in 2007, it was with the hope of expanding into the Middle Eastern markets. The French company—which became LafargeHolcim after merging with a Swiss firm in 2015—spent over a billion dollars renovating the factory, one of the largest foreign investments in Syria’s history and, at the time, a notable example of the political rapprochement between the country and France after years of severed diplomatic ties during Jacques Chirac’s presidency. Inaugurated with great pomp in the presence of Eric Chevallier, the French ambassador to Syria, the plant began operations in 2010.

The next year, the country descended into civil war. Other multinationals, such as French oil and gas giant Total, pulled out of Syria to ensure compliance with European sanctions. Lafarge decided to tough it out. Five years later, following revelations by Syrian news site Zaman Al Wasl in February 2016, the French newspaper Le Monde published my investigation showing that, to secure the passage of trucks carrying employees, cement, fuel, and raw materials to and from the factory, the multinational had allegedly paid “taxes” to a number of armed groups from 2013 to 2014, including the Islamic State organization—or ISIS.

Faustian bargains with unsavoury groups aren’t unusual for international companies desperate to keep goods flowing in a conflict (cellphone makers in Africa have been accused of striking deals with armed groups for access to mines). But “L’affaire Lafarge,” as it is known in France, might be one of the rare times when, as the cost of doing business, a corporation found itself indirectly funding international terrorism.

Lafarge’s troubles in Syria began in 2013, when armed groups started to close in around the cement plant. Checkpoints appeared on the road connecting the plant to the border town of Kobani, then taken over by Kurdish fighters of People’s Protection Units, the armed wing of Syria’s Democratic Union Party. Raqqa, located less than ninety kilometres from the factory, fell into the hands of rebels of the Free Syrian Army and allied Islamist groups. The Islamic State of Iraq and Syria (ISIS) took control of the city later that summer; in January 2014, it reached Manbij, a town sixty-five kilometres east of the plant, where most Lafarge employees were housed. The plant was finally evacuated in September 2014, after it was seized by ISIS jihadists.

An independent internal inquiry commissioned by the company found that payments were made through third parties “in order to maintain operations and ensure safe passage of employees and supplies to and from the plant.” Lafarge also made at least one payment to release kidnapped employees, as I reported in Le Monde in June 2016. As a consequence of the inquiry into these allegations, Eric Olsen resigned as chief executive of LafargeHolcim in April 2017. Nine months later, the Paris prosecutor placed Lafarge’s former CEO Bruno Lafont under formal investigation for a terrorist offense—a first for a company listed in the CAC 40, the French stock market index.

While the judicial investigation is still ongoing, Lafarge was indicted last June for financing a terrorist enterprise, endangering lives, and breaching an embargo. In a memorandum to the investigative judges, the initiators of the criminal complaint against Lafarge—Sherpa, a law association devoted to fighting financial crimes; the European Center for Constitutional and Human Rights; and eleven former employees—argued that, if the actions committed by ISIS in northeastern Syria between 2012 and 2015 are considered crimes against humanity, then the French company “acted as an accomplice.” According to Sherpa, Lafarge paid out more than $19 million in protection money. Prosecutors are today investigating the possibility that some of that cash may have financed the 2015 attacks in Paris that left 130 people dead and hundreds wounded. The “amount and duration” of Lafarge’s payments, according to investigators, likely helped perpetuate ISIS’s existence in Syria, allowing it to “plan and carry out violent operations in the area and abroad, including in France.”

Bruno Pescheux, CEO of Lafarge Cement Syria during the war, admitted that up to $100,000 (US) a month was funnelled to armed groups by go-between Firas Tlas, a Syrian businessman and former shareholder in the plant. Pescheux explained to the judges that Tlass “talked with the rebel factions and paid a small contribution so that our employees [did] not get into trouble at the checkpoints.” The name of “Daesh”—as ISIS is also known—surfaced for the first time on payment lists in November 2013. Pescheux estimated that it would have received around $20,000 (US) per month.

Assessing whether or not Lafarge is guilty of corrupt practices will prove complicated, an employee of an NGO working on these issues explained to me. By international convention, bribery and corruption laws apply primarily to cases involving non-state actors and domestic or foreign public officials. But Lafarge’s payments were not made to members of a state. They were made to armed factions in a context of war and statelessness. “This situation,” said the employee, “bears resemblance to a mafia system where the company is allowed to function in exchange for a percentage paid to an illegal organization with protective functions for the company, in this case armed groups. If we accept this rationale, we could speak of racketeering and Lafarge would seem to be a victim of the system in place.”

The analysis could change if ISIS, which established a caliphate across parts of Iraq and Syria during the years in question, is treated as an entity that intended to function like a state. “ISIS taxes transporters of goods for passing through checkpoints,” explained Wassim Nasr, a journalist specializing in jihadist movements, for the international news channel France 24. “Revenues were managed by Bayt Al-Mal [the Islamic Finance Ministry], which managed the revenues collected or distributed in different provinces of the Islamic State,” said Nasr. Even the dealers Lafarge dealt with in order to buy oil paid a license and taxes to ISIS.

Such confusion is why Lafarge has not yet been prosecuted for bribery. “We could go beyond a legal definition and understand corruption in a broader sense, as breaches of probity requirements in making facilitation payments for instance,” recommends Laurène Bounaud, general delegate at Transparency International, a leading non-governmental anti-corruption organization. It’s a grey area, she suggests, that should be seen as a red flag. “Companies forced to make these payments,” says Bounaud, “should pull out and alert the competent authorities.”

Lafarge didn’t. Its compliance measures—which included a code of conduct warning employees that bribery or corruption could lead to criminal charges or termination—failed to steer the company’s decision-making. “During the war in Syria, Lafarge had internal control systems, such as safety committees that held meetings on a very regular basis. They proved to be ineffective,” says Marie-Laure Guislain, head of litigation at Sherpa. LafargeHolcim, which admitted in a 2017 communiqué that “significant errors of judgement were made that contravened the applicable code of conduct” in Syria, acknowledged the weaknesses in its compliance program and asserted they had been “corrected.”

Two pieces of legislation now exist to help with that vigilance. In December 2016, a law came into effect requiring French companies to evaluate their corruption risks, train employees accordingly, and establish whistleblower mechanisms. The law also created an anti-corruption enforcement agency, the Agence française anticorruption. Non-compliance can now be punishable by fines of up to a million euros.

A second law, adopted in March 2017, is intended to safeguard employees’ lives. It requires large French companies to “map the risks throughout their supply chains and with all of the companies that they directly or indirectly control,” explains Björn Fasterling, head of the accounting, control, and legal affairs department at France’s EDHEC Business School in a post on the NYU Stern School of Business blog. The law threatens severe penalties for a company that fails to take these measures, including civil liability—“which means it could be sued to provide compensation to cover the effect of any harm that would have been prevented by the exercise of due diligence,” explains Anne-Marie Lévesque from Ergon, a consultancy firm with a focus on human rights.

“These two news laws are complementary,” says Bounaud. “They are both based on threefold requirements: risk mapping, regular monitoring, and a whistleblowing policy allowing employees to report on any problems or risks in their company. The novelty is that companies won’t set up these measures out of goodwill. They are legally binding.”

One of the big unknowns in the Lafarge case is the possible complicity of the French state. Christian Herrault, Lafarge former deputy general operating manager, has claimed that Eric Chevallier, the French Ambassador for Syria, “knew about the racketeering” and said “you should stay; the unrest will not last.” Chevalier said he had “no memory of these meetings” with Herrault.

Did the French government push Lafarge to stay, thinking the crisis would not last? Did it think that Bashar Al-Assad would soon be replaced by the Syrian National Council, which was set up after the uprising against the Assad regime erupted in 2011 and was recognized by President Hollande in November 2012 as “the sole legitimate representative of the Syrian people and as future government of a democratic Syria”? Syria specialist Fabrice Balanche said in an interview that “the plant operated in a ‘liberated area,’ which encouraged France to show it could pursue an economic activity.” As possible proof of these aligned interests, shortly after the Islamic State group finally attacked and took control of the Lafarge plant in the fall of 2014, France allegedly asked the US to not bomb the factory. “Rather than suing Lafarge, we should question the politics of France in Syria,” Balanche added.

“This case illustrates the West’s pragmatic blindness. It thought we were dealing with an acceptable opposition, so it was rather less principled about possible breaches of business ethics,” is how a former French diplomat who served in Syria explained it to me. “Also, France closed its embassy in Damascus in early 2012 to denounce the repression of the demonstrations by Al-Assad. Several other European countries followed suit. After that, we had no direct information of what was taking place. We could not rely on the information that came from embassies of EU countries that had stayed, despite regular coordination meetings. There was a minimum of information given and sometimes even misinformation. Lafarge was among key information providers about the situation on the ground,” he added.

Lafarge’s then security chief Jean-Claude Veillard said that he kept the French intelligence services abreast of conditions in the area. He even informed the Directorate of Military Intelligence, which reports directly to the French president. Had he apprised these intelligence services of the payments his employer was making to armed groups controlling the area, including ISIS, to keep the plant running? Veillard replied to the judge that he did not do “any sorting” of the information.

“From the beginning, Lafarge’s cement factory has been a political instrument in French foreign policy toward Syria. It was used by President Nicolas Sarkozy to reinforce the ties between the two countries after the diplomatic freeze imposed by his predecessor and the EU after the assassination of Rafik Hariri,” explained the French diplomat who served in Syria. “During the war, the French government had aligned interests with Lafarge: preserve the assets, having in mind the post-war reconstruction and the future contracts to win in a quasi-monopoly situation,” he added. Pescheux himself hinted that one motive for the illegal payments was the post war need for reconstruction, which the World Bank estimated at up to 200 billion dollars (US). “We thought that, when everything was over,” Pescheux said in 2017, “there would be at least be a cement plant that could provide cement to rebuild Syria.”

Dorothée Myriam Kellou
Dorothée Myriam Kellou is an award-winning French journalist and filmmaker based in Paris. Her reporting was awarded the TRACE International Prize for Investigative Reporting. She is currently developing Algeria, Out of Place, a documentary about forced resettlement during the Algerian War of Independence.