Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, December 28, 2010

Alcatel Settles FCPA Charges for $137 Million

The SEC and Alcatel-Lucent, S.A. (Alcatel) settled charges that  Alcatel violated the anti-bribery, books and records, and internal controls provisions of the Foreign Corrupt Practices Act (FCPA) by paying bribes to foreign government officials to obtain or retain business in Latin America and Asia.

Alcatel, the provider of telecommunications equipment and services, has offered to pay a total of $137.372 million in disgorgement and fines, including $45.372 million in disgorgement to the SEC.  In a related action, Alcatel will pay a $92 million criminal fine to the U.S. Department of Justice.

The SEC’s complaint, filed in the Southern District of Florida, alleges that Alcatel’s bribes went to government officials in Costa Rica, Honduras, Malaysia, and Taiwan between December 2001 and June 2006.  An Alcatel subsidiary provided at least $14.5 million to consulting firms through sham consulting agreements for use in the bribery scheme in Costa Rica.  Various high-level government officials in Costa Rica received at least $7 million of the $14.5 million to ensure Alcatel obtained or retained three contracts to provide telephone services in Costa Rica.

The SEC alleges that the same Alcatel subsidiary bribed officials in the government of Honduras to obtain or retain five telecommunications contracts.  Another Alcatel subsidiary made bribery payments to Malaysian government officials in order to procure a telecommunications contract.  An Alcatel subsidiary also made illegal payments to various officials in the government of Taiwan to win a contract to supply railway axle counters to the Taiwan Railway Administration.

According to the SEC’s complaint, all of the bribery payments 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.

Without admitting or denying the SEC’s allegations, Alcatel has consented to a court order permanently enjoining it from future violations of these statutory provisions; ordering the company to pay $45.372 million in disgorgement of wrongfully obtained profits, and ordering it to comply with certain undertakings, including an independent monitor for a three year term.

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