PARIS, FRANCE - FRENCH engineering giant Alstom is being probed in France and Switzerland on suspicion of paying bribes to win contracts in Asia and South America, the Wall Street Journal alleged on Tuesday.

The newspaper said that Alstom acknowledged its offices had been searched by French authorities while noting that no charges had been laid.

Alstom told AFP on Tuesday that the report 'is based on hypotheses and speculations'. A company spokesman added: 'There is no judicial procedure accusing the company of corruption.'

The price of shares in Alstom was showing a fall of 2.19 per cent to 147 euros in morning trading. The overall CAC 40 index of leading shares was down by 0.53 per cent.

Analysts said they took the newspaper report seriously.

Referring to an investigation in Germany into alleged suspicious payments by German engineering group Siemens, Credit Mutuel-CIC, brokers said in a client note that although it was too early to know the facts of the matter at Alstom, the Siemens case 'leads one to think that we may be set for a media-judicial saga lasting years'.

Natixis brokers said that some investors 'may fear that this is only the tip of the iceberg' but that others might consider this to be an old story concerning a previous management.

The WSJ newspaper report was also based on findings by auditing firm KPMG which, it said, came across evidence by chance while working for the Swiss Federal Banking Commission on an audit of a small private Swiss bank.

Auditors allegedly found evidence that Alstom had circulated about 20 million euros (S$42 million) to 'shell companies' in Switzerland and Liechtenstein, from where it was transferred to marketing people working for Alstom in Singapore, Indonesia, Venezuela and Brazil, 'in stacks of 100-dollar bills'.

The audit also found that Alstom had set up accounts in Liechtenstein, Switzerland, the United States, Singapore, Hong Kong, Bahrain and Thailand.

These were used 'to transfer more than US$12 million (S$16.2 million) to individuals in Venezuela, Singapore, Thailand and China', the report alleged, referring to the audit.

Alstom, which builds power stations and the French high-speed TGV train, is a pillar of French industry but was rescued with state help in 2004.

The newspaper noted that the payment of 'commissions' to foreign officials was legal and even tax deductible in many European countries until the Organisation for Economic Cooperation and Development began a campaign against the practice in 1997. France made such payments illegal in July 2000.

One probe concerned a budget of US$200 million for suspected commissions of 15 per cent to win a contract for a power plant in Brazil which was completed in 2001.

Another probe concerned a US$45-million contract for the Sao Paolo subway, and others covered payments of about US$200 million for projects in Brazil, Venezuela, Singapore and Indonesia, the report alleged.