Alcatel-Lucent settles US bribery charges

The telecommunications company will pay a fine of US$137 million to settle U.S. government allegations that it bribed officials in Asia and Latin America to secure business contracts.
Written by Vivian Yeo, Contributor

Alcatel-Lucent has agreed to pay over US$137 million to U.S. authorities to settle charges of bribery in Asia and Latin America.

The French telecommunications equipment maker and three of its subsidiaries channeled over US$8 million of bribes via consultants to government officials in Costa Rica, Honduras, Malaysia and Taiwan in order to win or retain contracts, according to statements released Monday by the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ).

Alcatel admitted it earned about US$48.1 million in profits as a result of the corrupt payments, said the DOJ.

The payouts were carried out between December 2001 and June 2006, prior to Alcatel's merger with Lucent Technologies.

The two agencies stated that Alcatel violated the Foreign Corrupt Practices Act (FCPA) by paying bribes to illegally win business. The payments were either undocumented or improperly recorded as consulting fees that were then incorporated in its subsidiaries' financial statements. The company was also taken to task for inadequate internal controls which allowed the misconduct to take place.

"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, director of the SEC's Division of Enforcement, said in the statement.

Alcatel, added the DOJ, also violated the FCPA by the improper hiring of third-party agents in countries including Bangladesh, Nigeria, and Uganda. Alcatel-Lucent has since eliminated the practice of using third-party sales and marketing agents for its worldwide business.

Court documents revealed that an Alcatel subsidiary won three contracts in Costa Rica worth over US$300 million through illicit means, resulting in a profit of more than US$23 million. Two consultants in the country received more than US$18 million, of which over half were presented to government officials.

In exchange for favorable treatment, Alcatel also paid the family of a senior Honduran government official via a consultant connected with the family. As a result, the company earned US$870,000 by retaining contracts worth US$47 million.

Over in Asia, an Alcatel subsidiary paid two consultants more than US$950,000 to earn a US$19.2 million contract to supply railway axle counters to the Taiwan Railway Administration, even though neither had telecommunications experience. The sum included payments to Taiwanese legislators who had influence over the awarding of the deal, which eventually saw Alcatel reap US$4.3 million.

The SEC also indicated an Alcatel subsidiary had made payments to Malaysian government officials in order to procure a telecommunications contract, but did not offer more details.

The SEC ordered Alcatel-Lucent to pay US$45.4 million, while the DOJ imposed a US$92 million penalty on the vendor. Alcatel-Lucent will also improve its FCPA compliance program and engage a third-party to monitor its compliance for three years, as well as submit yearly reports to the DOJ.

Editorial standards