The company and three subsidiaries will pay $92 million to resolve criminal charges with the DOJ and $45 million in disgorgement to the SEC.
The settlement places Alcatel-Lucent seventh on the top-ten FCPA list.
By agreeing to plead guilty, Alcatel-Lucent escaped substantive bribery charges. In a two-count criminal information, the DOJ charged the company with violating the internal controls and books and records provisions of the FCPA.
The DOJ and the company entered into a three-year deferred prosecution agreement. Among other things, Alcatel-Lucent pledged to stop using third-party sales and marketing agents in conducting its worldwide business. The DOJ said the unprecedented pledge was made on the company’s “own initiative and at a substantial financial cost.”
Three subsidiaries were also charged and each agreed to plead guilty to conspiring to violate the antibribery, books and records, and internal controls provisions of the FCPA.
Alcatel-Lucent — which provides telecommunications equipment and services — was formed in 2006 after U.S.-based Lucent Technologies merged with Alcatel, a French company. The new company is headquartered in Paris, France.
The illegal conduct started in the late 1990s and continued through 2006.
Prosecutors said Alcatel-Lucent’s three subsidiaries bribed foreign officials to win business in Costa Rica, Honduras, Malaysia, and Taiwan. The company also hired agents without proper controls in Kenya, Nigeria, Bangladesh, Ecuador, Nicaragua, Angola, Ivory Coast, Uganda, and Mali. Overall, Alcatel-Lucent admitted making $48.1 million in profits as a result of its bribery.
In Costa Rica, a subsidiary wired about $18 million to two consultants. More than half of the money, the DOJ said, was then passed to Costa Rican government officials. The bribes produced contracts worth more than $300 million for Alcatel-Lucent and a profit of more than $23 million.
In Honduras, a company subsidiary hired a “consultant” who was a perfume distributor with no experience in telecommunications. He was personally selected by “the brother of a senior Honduran government official,” the DOJ said. Alcatel-Lucent won contracts in Honduras worth $47 million, with profit of $870,000.
In Taiwan, the company and its joint venture there hired two consultants with no telecommunications experience. They passed some of their $950,000 payments to Taiwanese legislators. Alcatel-Lucent received a contract worth $19.2 million and earned $4.3 million.
In September 2008, former Alcatel executive Christian Sapsizian, 62, was sentenced to 30 months in prison, three years of supervised release, and forfeiture of $261,500 for bribing employees of the state-owned telecommunications authority in Costa Rica. He had pleaded guilty in June 2007 to two counts of violating the Foreign Corrupt Practices Act.
Sapsizian, a French citizen, was a 20-year Alcatel employee and served as the company’s deputy vice president for Latin America. Before being fired in 2004, he caused Alcatel to wire $14 million in “commission” payments to a consultant, who then transferred $2.5 million to a government official in Costa Rica.
Sapsizian admitted to conspiring with Edgar Valverde Acosta, a citizen of Costa Rica who was Alcatel’s senior country officer there, to arrange the bribes. Acosta was indicted with Sapsizian on June 14, 2007. He’s an FCPA fugitive, last known address: Costa Rica.
The U.S. indictments of Sapsizian and Acosta resulted from bribery investigations by Costa Rican authorities. In October 2004, Alcatel learned of the investigations. It fired Sapsizian and Acosta and disclosed to U.S. authorities that it had uncovered payments from employees and consultants to government officials and political parties.
Lucent, meanwhile, settled Foreign Corrupt Practices Act charges of its own in December 2007 with the DOJ and SEC. Its violations occurred before the merger with Alcatel. The settlement included a $1 million criminal fine and $1.5 million in civil penalties. Lucent’s offenses involved payment of travel expenses for Chinese government officials from 2000 to 2003.
In April 2009, Alcatel-Lucent signed agreements in Washington, D.C. worth $1.7 billion with China Mobile and China Telecom to help the Chinese companies roll out 3G technology.
In February this year, Alcatel-Lucent said in its consolidated financial statements that it had reached agreement in principle with the Justice Department and the Securities and Exchange Commission to settle Foreign Corrupt Practices Act offenses.
Alcatel-Lucent also paid $10 million in January to settle corruption charges brought by the government of Costa Rica.
The SEC’s civil complaint said all of Alcatel-Lucent’s bribes were “undocumented or improperly recorded as consulting fees in the books of Alcatel’s subsidiaries and then consolidated into Alcatel’s financial statements. The leaders of several Alcatel subsidiaries and geographical regions, including some who reported directly to Alcatel’s executive committee, either knew or were severely reckless in not knowing about the misconduct.”
Alcatel-Lucent’s common stock trades on the NYSE under the symbol ALU.
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View the DOJ’s December 27, 2010 release here.
Download the criminal information in US v. Alcatel-Lucent, S.A. here.
Download the deferred prosecution agreement in US v. Alcatel-Lucent, S.A. here.
Download the criminal information in US v. Alcatel-Lucent France, S.A. et al here.
Download the plea agreement in US v. Alcatel Centroamerica, S.A. (Costa Rica) here.
View the SEC’s Litigation Release No. 21795 (dated December 27, 2010) in SEC v. Alcatel-Lucent, S.A., Civil Action No. 1:10-CV-24620-GRAHAM (S.D. FL.) here.
Download the SEC’s civil complaint here.
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