[Editor’s note:This post exceeds our normal word count. But because the issues raised are new in an FCPA case, we wanted the first impression to be accurate and complete.]
A state-owned company that awarded Alcatel-Lucent more than $300 million in bribe-tainted contracts has asked a federal court in Florida to block Alcatel’s FCPA settlement with the U.S. government, saying the terms violate a federal victim’s rights law.
Costa Rica’s Instituto Costarricense de Electricidad (ICE), which provides electric power and telecommunication services, filed a petition this week for relief and objections to Alcatel-Lucent’s plea agreement and proposed deferred prosecution agreement, along with a detailed memorandum of law.
In December last year, Paris-based Alcatel-Lucent S.A. agreed to pay $137 million for bribing officials in Costa Rica, Honduras, Malaysia, and Taiwan. The company and three subsidiaries will pay $92 million to resolve criminal charges with the DOJ and $45 million in disgorgement to the SEC.
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.
A subsidiary in Costa Rica, the DOJ said, wired about $18 million to two consultants. More than half of the money was then passed to Costa Rican government officials, including five employees at ICE. In Costa Rica alone, the bribes produced contracts worth more than $300 million for Alcatel-Lucent and a profit of more than $23 million.
But Costa Rica’s ICE said the settlement “provides no sanctions against any officer, executive director, or employee of Alcatel-Lucent and provides that the illegal proceeds obtained from victims be distributed to the [U.S.] federal government.” Additionally, the settlements seek to waive the routine pre-sentence investigation and report, which would allow the court to order restitution. Under the Mandatory Victims Restitution Act (18 U.S.C. § 3663A), restitution is mandatory to the victim of a Title 18 crime. Because Alcatel is pleading guilty to conspiracy, a Title 18 crime, ICE says, restitution is mandatory.
In sum, according to ICE’s petition,
the deal between Alcatel Lucent and the government allows the company to conceal the information relating to its criminal conduct; resolve all criminal exposure through the payment of a fine below the legal required minimum; provides immunity for the companies from prosecution beyond paying these insufficient fines; avoid required presentence procedures; avoid a criminal conviction for Alcatel Lucent S.A. and thereby appropriate administrative restrictions applicable to convicted criminals; and further avoid legally required restitution.
The SEC denied without explanation ICE’s requests for a Fair Fund — recovered money paid into the court registry for potential victims. And the DOJ, according to ICE, “has indicated it did not consider ICE a victim, apparently taking a position that companies where employees are bribed are culpable or that ICE is not autonomous and entities that are related to governments cannot be victims.”
ICE said it’s entitled to the benefit of several federal statutes that provide rights to victims of federal crimes, including the Crime Victims’ Rights Act (18 U.S.C. § 3771) and the Mandatory Victims Restitution Act. Based on these laws, ICE asked the court to reject Alcatel-Lucent’s plea agreements and deferred prosecution agreement. It asked the court to enter an order declaring that ICE is a victim of the criminal conduct of Alcatel-Lucent and its subsidiaries, and “directing that ICE is entitled to all rights of a victim, including restitution.”
ICE said it was never contacted by the DOJ or SEC prior to the announcement of the Alcatel-Lucent settlement. “Neither the [DOJ] nor the SEC sought to gather or verify any facts from ICE nor make inquiry with respect to the damages that the company had suffered.”
That’s the same charge made by defense lawyers in the Lindsey case. As we reported last week, cross examination of an FBI agent heading the investigation revealed that the FBI and prosecutors from the DOJ’s FCPA Unit never contacted CFE, the Mexican utility and purported victim of the alleged bribery, or spoke with anyone at CFE about the Lindsey investigation, until nearly four months after the Lindsey indictment was returned.
ICE also alleged that Alcatel-Lucent has already violated both the express terms of the deferred prosecution agreement and the spirit and intent of the plea agreements. Under the terms of the deferred prosecution agreement, Alcatel-Lucent is prohibited from making any public statement in any litigation or otherwise contradicting its acceptance of responsibility for the allegations behind its plea.
But according to ICE, two months after Alcatel-Lucent entered its plea, its lawyer Alejandro Batalla appeared in court in Costa Rica “and flatly denied any criminal responsibility by Alcatel-Lucent companies, claiming instead that all responsibility for the bribery and corruption that occurred in Costa Rica was the responsibility of Christian Sapsizian and Edgar Valverde.”
Yet, as ICE points out, this conduct is at odds with the favorable sentencing enhancements given to Alcatel-Lucent, which included a sentencing reduction for acceptance of responsibility for its criminal conduct.
Along with the rejection of the plea agreements and deferred prosecution agreement, ICE also seeks the preparation of a pre-sentence report, an order that it is a victim of Alcatel-Lucent’s crimes, and recognition of its rights under the Crime Victims’ Rights Act.
In September 2008, former Alcatel executive Christian Sapsizian, 62, was sentenced to 30 months in U.S. federal prison, three years of supervised release, and forfeiture of $261,500 for bribing ICE employees. He had pleaded guilty in June 2007 to two counts of violating the Foreign Corrupt Practices Act.
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 in June 2007 but since then has been an FCPA fugitive.
ICE is represented by Burton W. Wiand at Tampa’s Wiand Guerra King
Download a copy ICE’s May 2, 2011 petition for relief pursuant to 18 U.S.C. §3771(d)(3) and objection to plea agreements and deferred prosecution agreement in U.S. v. Alcatel-Lucent S.A. here.
Download ICE’s memorandum of law 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.