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The Department of Justice and the SEC settled FCPA cases with Alcantel-Lucent S.A., a company formed in a November 30, 2006 merger involving Paris, France based Alcantel, S.A. and U.S. based Lucent Technologies, Inc. U.S. v. Alcatel-Lucent S.A., (S.D.Fla. Dec. 27, 2010); U.S. v. Alcatel-Lucent France S.A., (S.D.F.a. Dec. 27, 2010); SEC v. Alcatel-Lucent, S.A., Case No. 1:10-cv-24620 (S.D.Fla. Dec. 27, 2010). The cases allege violations of the anti-bribery, books and records and internal control provisions of the FCPA between December 2001 and June 2006. Until November 30, 2006 Alcatel's ADRs were registered with the Commission and traded in New York.
Prior to the 2006 merger Alcatel, a French telecommunications equipment and services company, conducted much of its business through subsidiaries. Those subsidiaries in turn retained local business agents who helped the company secure business. Using this business model the company paid bribes in Costa Rica, Honduras, Malaysia and Taiwan. It also violated the internal control provisions of the FCPA related to hiring third party agents in Kenya, Nigeria, Bangladesh, Ecuador, Nicaragua, Angola, Ivory Coast, Uganda and Mali.
Specifically, during the time period, the court filings stated that:
All of these payments were improperly recorded in the books and records of the subsidiaries and the parent company. This resulted, according to the court papers, from a lax system of internal controls.
To settle with DOJ the parent company entered into a deferred prosecution agreement. The two count information charged violations of the FCPA internal controls and books and records provisions. Under the terms of the agreement the company will pay a $92 million criminal fine and a monitor will be installed for three years. In addition, subsidiaries Alcatel-Lucent France S.A., Alcatel-Lucent Trade International A.G., and Alcatel Centroamerica S.A. (formerly known as Alcatel de Costa Rica S.A.) each agreed to plead guilty to a one count information charging conspiracy to violate the anti-bribery, books and records and internal control provisions of the FCPA.
The parent company settled with the SEC by consenting to the entry of a permanent injunction prohibiting future violations of Exchange Act Sections 30A, 13(b)(2)(A), 13(b)(2)(b) and 13(b)(5). The company also agreed to pay disgorgement of $45.372 million and to comply with its undertakings including the appointment of an independent monitor for three years.
According to DOJ the settlement reflects the cooperation of the company after the merger. Prior to the merger there was "limited and inadequate" cooperation. Following the merger cooperation improved significantly. In addition, the company on its own initiative and at substantial cost undertook an "unprecedented pledge" to alter its business model and stop using third-party sales and marketing agents in its world wide business.
Previously, two former Alcatel executives were charged with FCPA violations. One, Christian Sapsizian, a French citizen and Acatel CIT executive, pleaded guilty to FCPA violations and was sentenced to 30 months in prison in September 2008. Edgar Valverde Acosta, a citizen of Costa Rica and former president of Alcatel de Costa Rica, has not been arrested. In January 2010 Alcatel-Lucent agreed to pay $10 million to settle a corruption case brought by the government of Costa Rica based out of the bribery of government officials. The case is the first in Costa Rica's history in which a foreign corporation paid damages to the government for corruption.
For more cutting edge commentary on developing securities issues, visit SEC Actions, a blog by Thomas Gorman.