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(Bloomberg) -- LafargeHolcim Ltd paid money to armed groups to keep a cement plant operating in war-torn Syria, measures the world’s biggest cement maker qualified as unacceptable and against its code of conduct following an internal probe.
“The investigation revealed significant errors in judgment,” the Jona, Switzerland-based company said in a statement Thursday, adding that funds were given to third parties who then made arrangements with a number of groups, including “sanctioned parties.” Islamic State fighters seized the plant in September 2014.
The admission by LafargeHolcim comes after publication last year of a book by a former Lafarge SA security manager detailing how the French company kept churning out cement from its factory in the northern desert near the Turkish border for three chaotic years starting in 2011. The plant was evacuated in September 2014, less than a year before Lafarge merged with Swiss rival Holcim Ltd.
Syria’s deteriorating political situation posed “difficult challenges” for the plant operations and security of personnel as well as supplies and product distribution, LafargeHolcim said in the statement Thursday, the first since it unveiled a plan last year to investigate internally. As Syria descended into civil war, different armed factions controlled or sought to control areas around the factory, the company said.
LafargeHolcim’s internal investigation uncovered evidence of payments to unidentified third parties, but “could not establish with certainty the ultimate recipients” of the funds, the company said. The allegations about the unprofitable Syrian operations, which represented about less than 1 percent of Lafarge’s sales at the aren’t likely to have an “adverse financial impact,” the company said.
In response to the events, the company has created an ethics and risk committee to better evaluate joint ventures and sanctions. It also said it’s not party to any legal proceedings filed in France about the Syrian operations.
“Compliance is of utmost importance to LafargeHolcim,” Chief Executive Officer Eric Olsen told reporters on a call Thursday. “There can be no compromise with the standards outlined in the company’s code of conduct, whatever the operational challenges are.”
In the book published last year, former security manager Jacob Waerness wrote the company had to resort to extreme measures including negotiating freedom for kidnapped employees and cutting supply deals with local fighters, whose allegiances shifted, to keep production going and safeguard the $680 million installation.
Lafarge may have misjudged the situation, he said, hanging on for too long in Syria until militant group Islamic State was literally outside the factory gates. Waerness left the year before when his local contract expired and stopped working for Lafarge in Zurich in 2016.
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