Alcatel-Lucent to pay $137 million to settle Justice Department Foreign Corrupt Practices Act lawsuit
The federal government has yet again successfully enforced the Foreign Corrupt Practices Act (“FCPA”) as Alcatel-Lucent, the large Paris-based telecommunications company, has agreed to pay more than $137 million to settle charges brought against it by the Securities and Exchange Commission (“SEC”) and Department of Justice (“DOJ”). The SECs complaint can be read here.
The company was accused of violating the FCPA by paying bribes to foreign government officials in various Latin American and Asian countries to win business. $45 million will go to the SEC, while $92 million will go to settle criminal FCPA charges brought by the DOJ.
Alcatel-Lucent subsidiaries had used third-party agents and consultants to obtain business in foreign countries. These agents and consultants were conduits for bribe payments to foreign officials to obtain or retain business. The bribes went to government officials in Costa Rica, Honduras, Malaysia and Taiwan between 2001 and 2006. The Company had listed the payments in its books and records as “consulting fees”. According to the government, leaders of Alcatel-Lucent subsidiaries either knew, or were reckless in not knowing, about the misconduct. Two executives with the company have been prosecuted, and one was sentenced to 30 months in prison.
As stated by Robert Khuzami , director of the SECs division of enforcement, “Alcatel and its subsidiaries failed to detect or investigate numerous red flags suggesting their employees were directing sham consultants to provide gifts and payments to foreign government officials to illegally win business.”
The settlement with the government is still subject to court approval. However, the case emphasizes that in todays charged enforcement environment, companies must do adequate due diligence to ensure that their overseas agents, consultants and distributors are not engaging in corrupt payments on their behalf to gain business. Red flags must be investigated and resolved to managements satisfaction. Our firm is experienced in conducting such due diligence investigations.