Alcatel-Lucent to pay $US137M fine to settle bribery cases

Improper payments helped the company make up to $48 million in profit, according to U.S. authorities

Alcatel-Lucent has agreed to make payments of over $US137 million to settle bribery cases brought by U.S. authorities.

The cases concern allegations about the sales activities of French telecommunications giant Alcatel from the 1990s through its 2006 merger with Lucent Technologies. The company has reached settlements with the U.S. Department of Justice and the U.S. Securities and Exchange Commission, the company and authorities announced late Monday.

Alcatel-Lucent and three of its subsidiaries, Alcatel CIT, Alcatel de Costa Rica and Alcatel Standard have together agreed to pay a penalty of $92 million in settlement of cases brought by the DOJ under the Foreign Corrupt Practices Act (FCPA), and the companies have voluntarily agreed to stop using third-party sales and marketing agents in conducting worldwide business.

That business model, the DOJ said, was prone to corruption as the third parties acted as conduits for bribes to customers and officials in many countries. According to the DOJ, the three Alcatel-Lucent subsidiaries made improper payments to officials to win deals in Costa Rica, Honduras, Malaysia and Taiwan.

The three subsidiaries have each agreed to plead guilty to charges of conspiring to violate the anti-bribery, books and records, and internal controls provisions of the FCPA, while the parent company has struck a three-year "deferred prosecution" agreement with the DOJ regarding one count each of violating the FCPA's books and records and internal control provisions.

Alcatel-Lucent admitted making about $48.1 million in profit through the improper payments, according to the DOJ. Almost half of that sum came from three contracts in Costa Rica, together worth over $300 million, that Alcatel won as a result of corrupt payments to government officials, the DOJ said, citing court documents.

The company has also admitted violating FCPA provisions on internal controls and books and records provisions in its hiring of agents in Angola, Bangladesh, Ecuador, Ivory Coast, Kenya, Nicaragua, Nigeria, Mali and Uganda, the DOJ said.

According to the SEC, Alcatel made illicit payments to foreign government officials through its subsidiaries and agents, and knowingly falsifying books and records to camouflage bribes as consulting payments.

Alcatel has neither admitted nor denied the SEC's allegations, but has agreed to pay a $45.372 million penalty, to respect the laws the SEC accused it of breaking, and to appoint an independent monitor for three years. The settlement with the SEC is subject to court approval.

The fines will have little impact on Alcatel-Lucent's results this year, the company said. It made a provision of €93 million (US$122 million) in its accounts for the fourth quarter of 2009 for settlement of the cases, and around the same time had disclosed agreements in principle reached with U.S. authorities.

The improper activities occurred mostly prior to Alcatel's merger with Lucent Technologies, and the combined company now has a new CEO, executive committee and board of directors, Alcatel-Lucent said.

The company announced in 2008 that it would stop doing business through sales agents and consultants, which it said were "the primary means by which certain former employees made the improper payments involved in the violations described in the DOJ and SEC settlement papers."

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