U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21795/ December 27, 2010
SEC v. Alcatel-Lucent, S.A., Civil Action No. 1:10-CV-24620-GRAHAM (S.D. FL.) (December 27, 2010)
SEC Files Settled Foreign Corrupt Practices Act Charges Against Alcatel-Lucent, S.A. With Total Disgorgement and Criminal Fines of Over $137 Million
The Securities and Exchange Commission filed a settled enforcement action on December 27, 2010, in the U.S. District Court for the Southern District of Florida to resolve charges that Alcatel-Lucent, S.A. (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.
The SEC’s complaint charges that Alcatel violated Section 30A of the Securities Exchange Act of 1934 by making illicit payments to foreign government officials, through its subsidiaries and agents, in order to obtain or retain business. Alcatel violated Section 13(b)(2)(B) of the Exchange Act by failing to have adequate internal controls to detect and prevent the payments. Alcatel violated Section 13(b)(2)(A) of the Exchange Act by improperly recording the payments in its books and records. Alcatel violated Section 13(b)(5) of the Exchange Act when its subsidiaries knowingly failed to implement a system of internal controls and knowingly falsified their books and records to camouflage bribes as consulting payments. 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.
The SEC acknowledges the assistance of the U.S. Department of Justice, Fraud Section; the Federal Bureau of Investigation; the Office of the Attorney General in Costa Rica; the Fiscalía de Delitos Económicos, Corrupción y Tributarios in Costa Rica; and the Service Central de Prévention de la Corruption in France.
See Also: SEC Complaint