Alcatel-Lucent Under Scrutiny After Found Bribing Officials in Latin America, Asia

Jack Humphrey, Regulatory journalist
December 28, 2010 /

Paris-based telecommunications company, Alcatel-Lucent, has seen the ire of US Securities and Exchange Commission (SEC) as authorities filed a lawsuit charging the firm’s subsidiaries of bribing government officials in Costa Rica, Honduras, Malaysia, and Taiwan from December 2001 to June 2006 to retain business in these areas.

SEC’s lawsuit alleged that Alcatel-Lucent’s subsidiary in Costa Rica bribed government officials in the country through sham consulting firms, to which the telecom company paid at least $14.5 million, with $7 million of the amount having gone to the officials to guarantee the firm that its three contracts in the country would continue.

Alcatel-Lucent employed similar fraudulent scheme in Honduras and Malaysia to obtain and retain its telecommunications contracts there, SEC said. It added that Alcatel-Lucent also acquired a contract to supply railway axle counters in Taiwan by paying government officials in the country.

According to authorities, Alcatel-Lucent failed to provide proper documentations of these “consulting fees” that its subsidiaries reported, which the firm included in its financial statements.

Robert Khuzami, Director of the SEC’s Division of Enforcement, said executives from Alcatel-Lucent were reckless for failing to detect that “their employees were directing sham consultants to provide gifts and payments to foreign government officials to illegally win business,” blaming the “lax corporate control environment at the company.”

According to the complaint, Alcatel-Lucent violated Section 30A of the Securities Exchange Act of 1934 with the more $8 million in bribes it funneled with its sham consultants to win telecommunications contracts in several countries in Latin America and Asia. The SEC also cited other violations of Alcatel-Lucent against the Exchange Act by failing to detect and investigate the bribery and improperly recording the payments to its books.

Alcatel-Lucent settled SEC’s charges by paying more than $45 million in disgorgement of ill-gotten gains and another $92 million to settle the Department of Justice’s criminal charges. An independent body will closely monitor the operations of Alcatel-Lucent for three years as part of the court’s order.

 

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