A Possible Introduction Via the FCPA: Alcatel Meet Caremark

On December 27, the SEC charged Alcatel-Lucent, S.A., with several Foreign Corrupt Practices Act (FCPA) violations claiming the company was bribing foreign government officials to obtain business illegally. According to the press release:

The SEC alleges that Alcatel’s subsidiaries used consultants who performed little or no legitimate work to funnel more than $8 million in bribes to government officials in order to obtain or retain lucrative telecommunications contracts and other contracts. Alcatel agreed to pay more than $45 million to settle the SEC’s charges, and pay an additional $92 million to settle criminal charges announced today by the U.S. Department of Justice.

The SEC also stated that "the bribery scheme was the product of a lax corporate control environment at the company” and that the company "failed to detect or investigate numerous red flags." 

Jones Day has a nice list of "ten questions "Ten Questions Every Director Should Ask About FCPA Compliance" (available here) that I suspect Alcatel directors are wishing they had considered right about now.  Given that $133 million were need just to settle the various civil and criminal charges, I have to imagine that a shareholder derivative suit is already in the works, notwithstanding significant questions about the merit of most such cases.  Regardless of what you think about these types of claims (and the obvious difficulty of winning such claims), this kind of oversight failure just screams "Caremark!"

--JPF