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December 28, 2010, 1:12 AM EST
By David Voreacos and Olga Kharif
(Updates in seventh paragraph with company admissions.)
Dec. 27 (Bloomberg) -- Alcatel-Lucent SA agreed to pay $137 million to resolve U.S. criminal and civil probes into allegations that it paid bribes in Costa Rica, Taiwan and Kenya.
Prosecutors today 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 as promised.
Alcatel-Lucent, the world’s biggest supplier of fixed-line phone networks, will pay a $92 million criminal penalty. Three subsidiaries will plead guilty to anti-bribery provisions of the FCPA, according to the Justice Department. The company also will pay $45 million to settle civil charges filed 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 today in federal court in Miami.
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.
‘Prone to Corruption’
“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.
Alcatel Standard hired a Honduran consultant who was a perfume distributor with no telecommunications experience to perform “vaguely described marketing and advisory services,” the company admitted.
Executives Charged
In a related case, two former Alcatel executives, Christian Sapsizian and Edgar Valverde Acosta, were criminally charged with FCPA violations. Sapsizian pleaded guilty in 2007 and is serving a 30-month prison term. Valverde, who was president of Alcatel de Costa Rica, is considered a fugitive.
The company outlined the basic terms of the agreement announced today in a February regulatory filing.
Alcatel-Lucent spokeswoman Mary Ward declined to comment.
“We take responsibility for and regret what happened and have implemented policies and procedures to prevent these violations from happening again,” Steve Reynolds, Alcatel- Lucent’s general counsel, said in a statement.
The company said in February that it would no longer conduct business through sales and marketing agents and consultants.
The case is U.S. v. Alcatel-Lucent SA, 10cr20907, U.S. District Court, Southern District of Florida (Miami).
--Editor: Mary Romano, Fred Strasser
To contact the reporters on this story: David Voreacos in Newark, New Jersey at dvoreacos@bloomberg.net; Olga Kharif in Portland, Oregon, at okharif@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.
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(Updates in seventh paragraph with company admissions.)
Dec. 27 (Bloomberg) -- Alcatel-Lucent SA agreed to pay $137 million to resolve U.S. criminal and civil probes into allegations that it paid bribes in Costa Rica, Taiwan and Kenya.
Prosecutors today 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 as promised.
Alcatel-Lucent, the world’s biggest supplier of fixed-line phone networks, will pay a $92 million criminal penalty. Three subsidiaries will plead guilty to anti-bribery provisions of the FCPA, according to the Justice Department. The company also will pay $45 million to settle civil charges filed 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 today in federal court in Miami.
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.
‘Prone to Corruption’
“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.
Alcatel Standard hired a Honduran consultant who was a perfume distributor with no telecommunications experience to perform “vaguely described marketing and advisory services,” the company admitted.
Executives Charged
In a related case, two former Alcatel executives, Christian Sapsizian and Edgar Valverde Acosta, were criminally charged with FCPA violations. Sapsizian pleaded guilty in 2007 and is serving a 30-month prison term. Valverde, who was president of Alcatel de Costa Rica, is considered a fugitive.
The company outlined the basic terms of the agreement announced today in a February regulatory filing.
Alcatel-Lucent spokeswoman Mary Ward declined to comment.
“We take responsibility for and regret what happened and have implemented policies and procedures to prevent these violations from happening again,” Steve Reynolds, Alcatel- Lucent’s general counsel, said in a statement.
The company said in February that it would no longer conduct business through sales and marketing agents and consultants.
The case is U.S. v. Alcatel-Lucent SA, 10cr20907, U.S. District Court, Southern District of Florida (Miami).
--Editor: Mary Romano, Fred Strasser
To contact the reporters on this story: David Voreacos in Newark, New Jersey at dvoreacos@bloomberg.net; Olga Kharif in Portland, Oregon, at okharif@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.
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