Alcatel-Lucent SA agreed to pay $137 million to resolve U.S. criminal and civil probes and admitted it bribed government officials in “many countries,” including Taiwan, Malaysia and Costa Rica.
Prosecutors yesterday charged Paris-based Alcatel-Lucent with violating the internal controls and books and records provisions of the Foreign Corrupt Practices Act. The Justice Department will defer prosecution and drop the case after three years if the company improves its compliance program.
Alcatel-Lucent, the world’s biggest supplier of fixed-line phone networks, will pay a $92 million criminal penalty. Three subsidiaries agreed to plead guilty to anti-bribery provisions of the FCPA. The company also will pay $45 million to settle civil charges by the U.S. Securities and Exchange Commission.
“Alcatel and its subsidiaries failed to detect or investigate numerous red flags suggesting their employees were directing sham consultants to provide gifts and payments to foreign government officials to illegally win business,” Robert Khuzami, SEC enforcement director, said in a statement.
Three subsidiaries -- Alcatel-Lucent France SA, Alcatel- Lucent Trade International AG and Alcatel Centroamerica SA -- will plead guilty, according to the deferred-prosecution agreement filed yesterday in federal court in Miami. The company also will pay an independent French monitor to oversee its compliance with anti-bribery measures.
The conduct involved the worldwide sales practices of Alcatel SA before its 2006 merger with Lucent Technologies Inc.
Alcatel “pursued many of its business opportunities around the world through the use of third-party agents and consultants,” according to a statement of facts admitted by the company in deferred-prosecution agreement.
“This business model was shown to be prone to corruption, as consultants were repeatedly used as conduits for bribe payments to foreign officials (and business executives of private customers) to obtain or retain business in many countries,” the company admitted.
A decentralized corporate structure also permitted corruption, as “the local employees were more interested in obtaining business than ensuring that business was won ethically and legally,” the company admitted.
The company admitted subsidiaries made improper payments to obtain and retain business in Taiwan, Malaysia, Costa Rica and Honduras. Alcatel-Lucent also admitted FCPA violations relating to the hiring of third-party agents in Bangladesh, Nigeria, Kenya, Angola, Ivory Coast, Uganda, Mali, Ecuador and Nicaragua.
Alcatel Standard, based in Basel, Switzerland, hired a Honduran consultant who was a perfume distributor with no telecommunications experience to perform “vaguely described marketing and advisory services,” the company admitted.
Alcatel Malaysia made at least 17 improper payments from 2004 to 2006 to employees of Telekom Malayasia, the state-run telecommunications company, for “nonpublic information relating to ongoing tender offers,” the company admitted.
In a related case, two former Alcatel executives, Christian Sapsizian and Edgar Valverde Acosta, were criminally charged earlier with FCPA violations. Sapsizian pleaded guilty in 2007 and is serving a 30-month prison term at a federal prison in Youngstown, Ohio. Valverde, who was president of Alcatel de Costa Rica, is considered a fugitive.
The company made $48 million in profit through the payments, prosecutors said in court papers. It provided “limited and inadequate cooperation for a substantial period of time” before it “substantially improved” its assistance to the government.
‘Radically Different Company’
The company outlined the basic terms of the agreement announced yesterday in a February regulatory filing.
Alcatel-Lucent is now a “radically different company,” with different managers and a culture “that reflects integrity and transparency,” spokeswoman Mary Ward said in a statement.
“We have a zero-tolerance policy regarding bribery and corruption and a system in place with processes and training designed to prevent these types of situations,” she said.
Steve Reynolds, Alcatel-Lucent’s general counsel, said in a statement: “We take responsibility for and regret what happened and have implemented policies and procedures to prevent these violations from happening again.”
The company said in February that it would no longer use sales and marketing agents and consultants.
The U.S. settled nearly 50 corporate FCPA cases since 2005 without trial, reaping more than $3.4 billion for the U.S. treasury. Settlements this year involved BAE Systems Plc, Europe’s largest defense company, which agreed to pay $400 million; Daimler AG, maker of Mercedes-Benz cars, which will pay $185 million; and Royal Dutch Shell Plc, Europe’s largest oil company, which agreed to pay $48.1 million.
The FCPA bars corrupt payments to foreign officials for obtaining or keeping business. The law requires companies with securities listed in the U.S. to keep accurate books and records of transactions and maintain internal accounting controls.
The case is U.S. v. Alcatel-Lucent SA, 10cr20907, U.S. District Court, Southern District of Florida (Miami).
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