Suspicions of laundering tax evasion: searches at GE

Searches were carried out Thursday, December 15 on the site of the American industrial giant General Electric in Belfort as part of an investigation for aggravated money laundering of aggravated tax evasion, the unions denouncing a scheme of optimization towards tax havens.

This investigation had been opened by the National Financial Prosecutor’s Office (PNF) following a report made by the national secretary of the PCF Fabien Roussel, in July 2019, on “suspicions of optimization and tax fraud by General Electric” (GE) in Switzerland.

CSE interrupted

“GE respects the regulations of all the countries in which the company operates”, reacted to AFP a spokesperson for the group, confirming the search and ensuring to collaborate “fully with the authorities”.

The searches at General Electric Energy Products France, revealed by the site and confirmed to AFP by the PNF, were carried out by the Financial Investigation Service (SEJF).

Thursday morning, the social and economic committee (CSE) of the gas turbine entity, organized by videoconference, was abruptly interrupted.

Broken promises

“Today, on our TE05 site, the company is the subject of a search conducted by judicial police officers,” reads an email from management sent to employees at the end of the morning.

The acquisition in 2015 by General Electric of Alstom’s turbine activity in Belfort, the historic cradle of this activity in France, has continued to fuel controversy, in particular due to promises of job creation not kept. Penalties have been paid.

The investigation that gave rise to the searches concerns suspicions of tax evasion. According to a source close to the investigation, it concerns the group’s transfer prices, these financial flows from France to the parent company or other subsidiaries.

Hundreds of millions of euros at stake

The American multinational would have caused hundreds of millions of euros in profits to escape to Switzerland and the United States – in particular in the State of Delaware known for its advantageous taxation – thanks to a financial arrangement making the Belfort plant a simple “contract manufacturing unit” or “provider” for Swiss subsidiaries of GE.

The Belfort factory also paid royalties to the American parent company for the use of its brand and technologies, according to press reports published in the spring.

Accusation of the inter-union

The Social and Economic Committee (CSE) and the inter-union of the Belfort site had filed a complaint at the end of May which was joined to the investigation. She accuses the American company of having artificially reduced the profits of the Belfort site by this mechanism which does not respect the rules on transfer prices. The inter-union has as a lawyer the former MEP and former investigating judge specializing in the fight against corruption, Eva Joly.

Read alsoGE’s inter-union in Belfort files a complaint with the PNF for tax evasion – Teller Report

“Having a search six months after the filing of a complaint is rather a good omen, all the more so in a context where justice is deemed to be under-resourced”, reacted Alexis Sesmat, Sud Industrie union representative, ” When we launched a criminal complaint, we were part of a long time, so this relatively quick reaction is a strong signal that should warn any company that engages in tax evasion practices.

Nuclear under the tricolor flag

GE has always ensured that it has complied with the tax rules applicable in France. “All companies that operate and manufacture in several countries have a transfer pricing policy to ensure that all inter-company transactions are made at an arm’s length price, i.e. at prices that are ‘would apply to transactions between unrelated parties,’ he said.

Eventually, the Belfort site, where around 2,000 people work, must partially return to the French fold: GE signed an agreement with EDF in February to sell it by the end of 2023 its nuclear activity, including the famous steam turbines. Arabelle intended for nuclear power plants and built in Belfort.

The gas turbines produced by GE in Belfort will remain under the American flag.

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