Aussies owed Alcatel answers: Turnbull

Aussies owed Alcatel answers: Turnbull

Summary: Shadow Communications Minister Malcolm Turnbull has demanded an explanation from the chief executive and chief financial officers of the National Broadband Network Company over the bribery scandal which has engulfed their former employer and now key equipment supplier, French networking giant Alcatel-Lucent.

SHARE:

Shadow Communications Minister Malcolm Turnbull has demanded an explanation from the chief executive and chief financial officers of the National Broadband Network Company over the bribery scandal which has engulfed their former employer and now key equipment supplier, French networking giant Alcatel-Lucent.

The US Securities and Exchange Commission (SEC) revealed this week that Alcatel-Lucent had paid US$137 million to settle criminal and other charges arising from what it said were bribes paid to government officials in South-East Asia and Latin America between 2001 and 2006, with the aim of securing telecommunications contracts.

During that period, both NBN Co CEO Mike Quigley and CFO Jean-Pascal Beaufret held top-level roles in the French company, but NBN Co has issued a statement denying any links between the pair and the bribery, and the SEC did not mention either in its legal documents.

"NBN Co claims neither Mr Quigley nor Mr Beaufret were aware of these bribery schemes," said Turnbull in a statement issued this afternoon. "But both men owe the Australian public a far more detailed explanation."

Turnbull highlighted the SEC's statement that Alcatel-Lucent had "a lax corporate control environment" that had allowed the improper conduct to take place, with the company not detecting or investigating numerous red flags regarding such activities.

"Each must explain how they could serve in such senior positions and be unaware of millions of dollars of bribes flowing to government officials in Costa Rica, Honduras, Taiwan and Malaysia to secure sales of Alcatel equipment," claimed Turnbull. "They must also outline what financial controls are in place at NBN Co to ensure malpractice cannot be overlooked by senior management, as their denials of any knowledge of the bribery schemes suggest it was at Alcatel."

Turnbull questioned what formal recruitment and vetting processes were used to hire the pair, and whether the Labor Government was aware, "as it ought to have been", of the investigation and if so, how it established the two executives were not directly involved or indirectly responsible for what the SEC described as a "lax corporate control environment".

In addition, the Liberal MP questioned what steps the Government and NBN Co had taken to ensure strong corporate controls within NBN Co, and the company's relationship with supplier Alcatel-Lucent and any relationship with individuals employed by the French company during the period when the alleged bribes took place.

In June, Alcatel-Lucent won a contract to supply NBN Co with up to $1.5 billion of optical and ethernet aggregation equipment. However, the company has stated consistently that neither Quigley nor Beaufret were involved in selecting the company, due to potential conflicts of interest.

The office of Communications Minister Stephen Conroy has not yet responded to an invitation today to respond to Turnbull's comments. However, NBN Co issued a statement denying any links between its executives and the bribery case.

"Neither Mike Quigley nor Jean-Pascal Beaufret had any involvement in the matters which were the subject of the recent US Securities and Exchange Commission announcement relating to Alcatel-Lucent," the company said. "In fact the actions of a number of individual Alcatel-Lucent employees detailed in the SEC's statement fell outside the accountability and jurisdiction of both Mr Quigley and Mr Beaufret."

NBN Co stated that if the US regulators had believed either Quigley or Beaufret were accountable with regards to the matter, they would have said so, and "presumably sought to interview them" as part of the investigation.

"They did not," the company said. "The US authorities make no finding or allegation against either Mr Quigley or Mr Beaufret."

Topics: Government, Broadband, Government AU, Legal, NBN

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

9 comments
Log in or register to join the discussion
  • ZDNET has been very impartial in the reporting of NBN developments and must be commended for their attitude.
    GBE-71384
  • Agree, they report news and not create them.
    Vasso Massonic
  • re the Journalists actual article.
    Was Quigley knowingly corrupt or just incompetent? Judge for yourself.
    Either way there is no chance either can continue in their current roles, esp given the politicised nature of the NBN and the many issues and lack of public confidence in this and previous major Labor project failures.
    Here is the fuller text of the findings edited only to reduce the text.
    Skip to the bottom to the net conclusion - by the SEC and issued by Alcatel also.

    Alcatel bribed Costa Rican Presidents and went over the line in Malaysia, Taiwan, Honduras, Kenya, Nigeria, Bangladesh, Ecuador, Nicaragua, Angola, Ivory Coast, Uganda and Mali. No senior executives have been criminally charged, although few believe they weren’t aware of what was going on.
    Australian politicians battling the NBN finally realized that NBN head Mike Quigley was in charge of much of Alcatel when the bribes were paid. They probably will be reluctant to fire him (but may have little choice otherwise).
    The opposition leader in Parliament just attacked him. Investigations have (finally) begun in Malaysia and other countries. Alcatel meanwhile has terminated the use of sales agents and other consultants that are frequently used as middlemen. Maybe why they've lost some big contracts in India lately.
    Department of Justice findings
    Office of Public Affairs
    FOR IMMEDIATE RELEASE
    Monday, December 27, 2010
    Alcatel-Lucent S.A. and Three Subsidiaries Agree to Pay $92 Million to Resolve Foreign Corrupt Practices Act Investigation
    Coordinated Enforcement Actions by Department of Justice and SEC Result in Penalties of more than $137 Million
    WASHINGTON – Alcatel-Lucent S.A. and three of its subsidiaries have agreed to pay a combined $92 million penalty to resolve a Foreign Corrupt Practices Act (FCPA) investigation into the worldwide sales practices of Alcatel S.A. prior to its 2006 merger with Lucent Technologies Inc., the Department of Justice announced.
    +
    As part of the agreed resolution, the department today filed a criminal information in U.S. District Court for the Southern District of Florida charging Alcatel-Lucent with one count of violating the internal control provisions of the FCPA, and one count of violating the books and records provisions of the FCPA. The department and Alcatel-Lucent agreed to resolve the charges by entering into a deferred prosecution agreement for a term of three years.
    +
    The department also filed a criminal information charging three subsidiaries: Alcatel-Lucent France S.A., formerly known as Alcatel CIT S.A.; Alcatel-Lucent Trade International A.G., formerly known as Alcatel Standard A.G.; and Alcatel Centroamerica S.A., formerly known as Alcatel de Costa Rica S.A. The three subsidiaries were each charged with conspiring to violate the anti-bribery, books and records, and internal controls provisions of the FCPA. Each of the three subsidiaries has agreed to plead guilty to the charges.
    +
    "Foreign bribery weakens economic development, erodes confidence in the marketplace and distorts competition," said Mythili Raman, Principal Deputy Assistant Attorney General of the Criminal Division. "The resolutions announced today and our related prosecutions of corporate executives demonstrate our sustained commitment to combating such conduct wherever we find it."
    +
    In addition to the $92 million penalty, Alcatel-Lucent and its three subsidiaries agreed to implement rigorous compliance enhancements. Alcatel-Lucent also agreed to retain an independent compliance monitor for a three-year period to oversee the company's implementation and maintenance of an enhanced FCPA compliance program and to submit yearly reports to the Department of Justice. The charging documents and penalty reflect, among other things, that there was limited and inadequate cooperation by the company for a substantial period of time, but that after the merger, Alcatel-Lucent substantially improved its cooperation with the department's investigation. In addition, the charging documents also credit Alcatel-Lucent for, on its own initiative and at a substantial financial cost, making an unprecedented pledge to stop using third-party sales and marketing agents in conducting its worldwide business.
    +
    According to court documents, Alcatel-Lucent was formed in late 2006 after Lucent Technologies merged with Alcatel, a French telecommunications equipment and services company. Starting in the 1990s and continuing through late 2006, Alcatel pursued many of its business opportunities around the world through subsidiaries like Alcatel CIT and Alcatel de Costa Rica using third-party agents and consultants who were retained by Alcatel Standard. 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.
    +
    Alcatel-Lucent's three subsidiaries paid millions of dollars in improper payments to foreign officials for the purpose of obtaining and retaining business in Costa Rica, Honduras, Malaysia and Taiwan. In addition to the improper payments, Alcatel-Lucent also admitted that it violated the internal controls and books and records provisions of the FCPA related to the hiring of third-party agents in Kenya, Nigeria, Bangladesh, Ecuador, Nicaragua, Angola, Ivory Coast, Uganda and Mali. Overall, Alcatel-Lucent admitted that the company earned approximately $48.1 million in profits as a result of these improper payments.
    +
    Specifically, Alcatel CIT won three contracts in Costa Rica worth a combined total of more than $300 million as a result of corrupt payments to government officials and from which Alcatel reaped a profit of more than $23 million, according to court documents. Alcatel CIT wired more than $18 million to two consultants in Costa Rica, which had been retained by Alcatel Standard, in connection with obtaining business in that country. According to court documents, more than half of this money was then passed on by the consultants to various Costa Rican government officials for assisting Alcatel CIT and Alcatel de Costa Rica in obtaining and retaining business. As part of the scheme, the consultants created phony invoices that they then submitted to Alcatel CIT. According to court documents, senior Alcatel executives approved the retention of and payments to the consultants despite obvious indications that the consultants were performing little or no legitimate work.
    +
    In addition, according to court documents, Alcatel Standard hired a consultant in Honduras who was a perfume distributor with no experience in telecommunications. The consultant was retained after being personally selected by the brother of a senior Honduran government official. Alcatel CIT executives knew that a significant portion of the money paid to the consultant would be paid to the family of the senior Honduran government official in exchange for favorable treatment of Alcatel CIT. As a result of these payments, Alcatel CIT was able to retain contracts worth approximately $47 million and from which Alcatel earned $870,000.
    +
    In addition, according to court documents, Alcatel Standard retained two consultants on behalf of another Alcatel subsidiary in Taiwan to assist in obtaining an axle counting contract worth approximately $19.2 million. Alcatel and its joint venture paid these two consultants more than $950,000 despite the fact that neither consultant had telecommunications experience. In fact, according to court documents, Alcatel Standard’s purpose for hiring the consultants was so that Alcatel SEL could funnel payments through the consultants to Taiwanese legislators who had influence in the award of the contract. Alcatel earned approximately $4.34 million from this contract.
    +
    In a related case, two former Alcatel executives, Christian Sapsizian, a French citizen and Alcatel CIT executive, and Edgar Valverde Acosta, a Costa Rican citizen and president of Alcatel de Costa Rica, were charged in March 2007 with conspiring to violate the FCPA, making corrupt payments in violation of the FCPA, and laundering the bribe payments through a third-party. Sapsizian was arrested in Miami in late 2006 and pleaded guilty on June 6, 2007, to FCPA violations. He was sentenced on Sept. 23, 2008, in the U.S. District Court for the Southern District of Florida to 30 months in prison. Sapsizian admitted that from February 2000 through September 2004, he conspired with Valverde and others to make millions of dollars in bribe payments to Costa Rican officials in order to obtain a telecommunications contract on behalf of Alcatel. Valverde remains a fugitive, and is considered innocent until proven guilty in a court of law.
    +
    In a related matter, the U.S. Securities and Exchange Commission (SEC) reached a settlement filed today in which Alcatel-Lucent consented to the entry of a permanent injunction against FCPA violations and agreed to pay $45,372,000 in disgorgement and prejudgment interest. Alcatel-Lucent also agreed with the SEC to comply with certain undertakings regarding its FCPA compliance program.
    +
    In January 2010, Alcatel-Lucent also agreed to pay $10 million to settle a corruption case brought by the government of Costa Rica arising out of the bribery of Costa Rican officials by the company. The settlement marked the first time in Costa Rica's history that a foreign corporation agreed to pay the government damages for corruption.
    +
    The case is being prosecuted by Deputy Chief Charles E. Duross and Trial Attorney Andrew Gentin of the Criminal Division's Fraud Section. The department also acknowledges the significant contributions to this investigation by Assistant U.S. Attorney Mary K. Dimke, formerly of the Fraud Section. Significant assistance was provided by the SEC's Miami Regional Office, the Criminal Division's Office of International Affairs, the U.S. Attorney's Office for the Southern District of Florida, the FBI, U.S. Immigration and Customs Enforcement, the Office of the Attorney General in Costa Rica, the Fiscalia de Delitos Economicos, Corrupcion y Tributarios in Costa Rica, the French Ministry of Justice, the Tribunal de Grande Instance de Paris, and Service Central de Prévention de la Corruption.
    Alcatel-Lucent welcomes the settlements with U.S. authorities regarding previously reported violations of Foreign Corrupt Practices Act
    Paris, December 27, 2010 Alcatel-Lucent concluded its settlements with the U.S. Securities and Exchange Commission ("SEC") and the Department of Justice ("DOJ") following their investigations of violations of the Foreign Corrupt Practices Act. The initial agreements in principle with the two U.S. government agencies were disclosed in public filings last year and as part of the company's year end 2009 results filing issued Feb. 11, 2010. Alcatel-Lucent, S.A., formerly known as "Alcatel S.A.," entered into a deferred prosecution agreement with the DOJ by which the company will be criminally charged with violations of the books and records and internal controls provisions of the FCPA, but prosecution of those charges will be deferred for a three-year period. In addition, three Alcatel-Lucent subsidiaries will each plead guilty to a criminal information charging one count of conspiracy to commit anti-bribery, books and records, and internal controls violations of the FCPA. Alcatel-Lucent also agreed to resolve related civil anti-bribery, books and records, and internal controls charges filed by the SEC. Alcatel-Lucent recognized a provision of
    Quigley indictment
  • Quigley and Beaufret had already jumped ship, who knows - maybe the writing was on the wall. The dates indicate that they had overall responsibility for management and financial decisions at the time of the exorbitant bribes. They cannot say they 'knew nothing' a both the CFO and CEO are responsible for the balance sheet and the bribery figures were deliberately 'hidden' according to reports. Government cannot afford to have these two involved in any way with the most expensive project that Australia has ever seen.
    Serrendipity
  • As a Queenslander I take exception to the suggestion that the NBN boys could hold a candle to the rip-off capabilities of Queensland's Mr Skase.
    sydneyla
  • Gee someone (sans name) has gone to a lot of trouble...

    But I think this would have more credibility if you had the guts to put a real name to it. This in't just a blog/opinion piece...!

    My, but how dirty has this all become, since moving from basic claims of white elephant!
    RS-ef540
  • Perhaps Abbott & Turnbull should first examine their own backyards in relation to certain wheat sales in their past...grasping at straws here in a feeble attempt to discredit the NBN
    grump3
  • good point grump3. I think the Coalition should be taken to task for holding back the growth of broadband whilst they were in Govt. They did nothing but put bandaids on an obsolete system in the vein hope that private enterprise will take up the slack. We all know that has meant that people who happen to live in unviable regions will miss out. The only way to fix this is to build Govt owned infrastructure so everyone has a fair go. There is overwhelming support for the NBN in the general community as is evidenced by the take up rates on the mainland. Turnbull and Abbott should stand out of the way. Their views in this regard are completely obsolete.
    dickster-e7b60
  • Also, funny how they hold others to higher standards than they hold for their colleagues. Peter Reith lying over Children Overboard! Selling wheat to Iraq while you are planning for war against them! WTF?? Going to war in Iraq over a false premise!
    Don't hold others to standards that you cannot aspire to.
    dickster-e7b60