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Entries in Alcatel (39)

Tuesday
Dec282010

Alcatel-Lucent Settles Bribery Case

Paris-based Alcatel-Lucent S.A. will pay $137 million to the DOJ and SEC for bribing officials in Costa Rica, Honduras, Malaysia, and Taiwan.

Click to read more ...

Wednesday
Oct062010

ABB In, Titan Out

ABB joins the list of top ten FCPA settlements of all time, and Titan Corporation drops to number eleven. Here's the latest list, with a few candidates that may join soon.

Click to read more ...

Thursday
May202010

Feds Call Time Out

There hasn't been a new FCPA enforcement action from the DOJ since Daimler's on April 1 and only Dimon's from the SEC. That's strange. The first three months of this year were the busiest in FCPA history. But since then, hardly a peep.

With around 150 cases pending and pressure building to resolve long-standing actions involving Panalpina, Technip, ENI, ABB, Alcatel-Lucent, Pride International, Inc., Alcoa, the medical device makers, and pharmas, you have to ask: Where are the enforcement actions for April and May?

In a typical year, we'd expect a couple of actions a month; this year, we'd expect more. So what's happening?

Here are a few guesses:

  • Changing horses. Mark Mendelsohn, head of the DOJ's FCPA unit, left government service in mid-April. His departure would be a natural time for those still there or newly arrived to take inventory -- to use the white board to plot their present location and itinerary for the coming year.
  • Resources are stretched. With all the pending prosecutions, including the 22-defendant shot-show case, the DOJ's FCPA group has to be stretched. Maybe they're taking a couple of months to catch their breath, bring in reinforcements, and lift their eyes above the trenches to make sure they aren't about to make any big mistakes.
  • A new strategy. Could the DOJ be assessing its overall enforcement approach? Looking, perhaps, at how decisions are made to prosecute corporations (which are defenseless because of respondeat superior)? Or whether financial penalties that punish innocent stakeholders make sense? Or if enforcement should zero in on individuals, or find new ways to spotlight foreign officials who demand bribes . . . ?

There's precedent for the current FCPA moratorium. In February and March 2008, the DOJ also came to a dead stop. The reason was never announced but it could have been the controversy over the unregulated appointment of compliance monitors. Former Attorney General John Ashcroft's $52 million gig with Zimmer in a domestic kickback case threw Washington into a spin. The storm blew over and the DOJ was back in the FCPA business after about two months.

Wednesday
Apr142010

Goodbye, Mr. Mendelsohn

As head of the DOJ's Foreign Corrupt Practices Act enforcement unit, Mark Mendelsohn transformed the FCPA from a legal backwater to a headline practice. He's leaving the Justice Department Friday after a dozen years, and leaving behind the most aggressive overseas anti-bribery regime in the world.

In November last year, Mendelsohn's boss, Assistant AG Lanny Breuer, called him an "exceptional public servant and a visionary steward of the FCPA program." In private practice, he's expected to earn between $2.5 and $3 million a year. 

Mendelsohn's view of the FCPA and American anti-corruption policy wasn't complicated. He pushed enforcement against corporations of any size and from any country -- including U.S.-government contractor KBR, German industrial giants Siemens and Daimler AG, British-based BAE Systems, and France's Alcatel-Lucent. Financial penalties ballooned during Mendelsohn's time, topped by Siemens' $800 million payment to the DOJ and SEC in December 2008.

He also led the government's charge against individual FCPA defendants -- among them KBR's Jack Stanley, entrepreneur Frederic Bourke, and the 22 shot-show defendants. 

During his term, no corporations mounted a courtroom defense against FCPA charges; instead all made deals with the DOJ to settle their cases. That gave Mendelsohn extraordinary power -- in the FCPA realm, he and the DOJ became prosecutor, judge, and jury. That's more power than most mortals can handle, but he did just fine. 

Like all top cops, he was criticized from every direction. Some said he was overzealous, that his expansive view of the FCPA went far beyond Congress' original intent. Others complained that corporations enjoyed easy settlements, based not on bribery charges but only related offenses, and never resulting in debarment from U.S. government business. But his fans cheered because nearly all corporate defendants were given second chances.

Above all, Mendelsohn was an honest advocate for compliance, not only at home but abroad. That may be his most important contribution. His steady hand encouraged prosecutors in other countries to fight public sleaze. And his FCPA team partnered with counterparts in England and Germany, Italy and France, Switzerland, Hungary, Costa Rica, Nigeria and elsewhere, forging ties that led to the first real global enforcement actions. Those cases helped change attitudes everywhere.

His boss was right. Mark Mendelsohn was an extraordinary public servant and an FCPA visionary.

Wednesday
Mar032010

Where The Money  Is

The Justice Department on Monday described BAE's $400 million FCPA-related settlement as one of the biggest ever.

Here, by our reckoning, are the other big payouts:

Siemens' $800 million resolution with the DOJ and SEC in December 2008 is the most expensive so far.

Kellogg Brown & Root and Halliburton settled their case last year for $579 million.

Then comes BAE's $400 million payment.

Followed by Baker Hughes' 2007 price tag of $44.1 million.

Willbros paid $32.3 million last year.

Chevron's violations related to the U.N.'s oil-for-food program cost it $30 million, also last year.

Titan Corporation held the record after it paid $28.5 million in 2005 for its FCPA settlement.

Vetco's resolution cost it $26 million in 2007.

Lockheed paid $24.8 million in 1994, the biggest case of its time.

York International spent $22 million last year to end its enforcement action.

Statoil paid $21 million in 2006.

AGCO Corporation paid $19.9 million in 2009 to settle oil-for-food offenses.

AB Volvo's 2008 case settled for $19.6 million.

Novo Nordisk A/S paid $18 million in 2009 to settle oil-for-food offenses.

ABB's violations cost it $16.4 million in 2004.

Schnitzer Steel agreed to pay $15.2 million in 2006.

And Flowserve paid $10.5 million in 2009.

Several cases in the settlement pipeline, if they go as expected, will rank high on the list:

Technip said recently it has reserved €245 million (about $330 million) for a potential settlement of FCPA offenses with the DOJ and SEC for its role in the TSKJ Nigeria joint venture (see KRB / Halliburton above).

Daimler AG reportedly will pay around $200 million for its FCPA settlement.

Alcatel-Lucent said last month it will pay $137.4 million in a settlement that's agreed in principle with the DOJ and SEC.

Pride International, Inc. said it has set aside $56.2 million for an expected settlement with both U.S. agencies.

And Innospec Inc. disclosed last month that it hopes to settle bribery charges related to the U.N.'s oil-for-food program with the DOJ, SEC and the U.K.'s Serious Fraud Office for between $28.8 million and $40.2 million.

Comments about this list and corrections to it are welcome.

Friday
Feb192010

Alcatel-Lucent Headed For Settlement

According to its latest consolidated financial statements, Alcatel-Lucent has reached agreement in principle with the Justice Department and the Securities and Exchange Commission to settle Foreign Corrupt Practices Act offenses related to Costa Rica, Taiwan and Kenya. If the settlement goes ahead, the company will pay a $92 million criminal fine (payable over three years) and a $45.4 million in disgorgement to the SEC.

The settlement with the DOJ would be structured similar to Siemens', with the company entering into a three-year deferred prosecution agreement for accounting and internal controls offenses, while three subsidiaries — Alcatel-Lucent France, Alcatel-Lucent Trade and Alcatel Centroamerica — would each plead guilty to violating the FCPA’s antibribery, books and records and internal controls provisions. The DOJ agreement would require appointment of a French compliance monitor (in Siemens' case, the monitor was German).

The Paris-based telecommunications company was formed with the 2006 merger of French-firm Alcatel and the American company Lucent Technologies Inc. Before the merger, Alcatel had American depositary receipts traded on the New York Stock Exchange and Lucent was also listed on the NYSE. The merged company's shares trade on the NYSE under the symbol ALU.

We've written about both companies before.

In September 2008, former Alcatel executive Christian Sapsizian, 62, was sentenced to 30 months in prison, three years of supervised release, and forfeiture of $261,500 for bribing employees of the state-owned telecommunications authority in Costa Rica. He had pleaded guilty in June 2007 to two counts of violating the Foreign Corrupt Practices Act.

Sapsizian, a French citizen, was a 20-year Alcatel employee and served as the company's deputy vice president for Latin America. In August 2001, Alcatel received a $149 million cellular network contract from Costa Rica's El Instituto Costarricense de Electricidad (ICE). Sapsizian had promised to pay an ICE board member and other officials up to 2 percent of the value of the contract. Before being fired in 2004, he caused Alcatel to wire $14 million in “commission” payments to a consultant, who then transferred $2.5 million to the ICE official.

Sapsizian admitted to conspiring with Edgar Valverde Acosta, a citizen of Costa Rica who was Alcatel’s senior country officer there, to arrange the bribes. Acosta was indicted with Sapsizian on June 14, 2007. He's an FCPA fugitive, last known address: Costa Rica.

The U.S. indictments of Sapsizian and Acosta resulted from bribery investigations by Costa Rican authorities. In October 2004, Alcatel learned of the investigations. It fired Sapsizian and Acosta and disclosed to U.S. authorities that it had uncovered payments from employees and consultants to government officials, ICE employees, and political parties.

Lucent, meanwhile, settled Foreign Corrupt Practices Act charges in December 2007 with the DOJ and SEC. Its violations occurred before the merger with Alcatel. The settlement included a $1 million criminal fine and $1.5 million in civil penalties. Lucent's offenses involved payment of travel expenses for Chinese government officials from 2000 to 2003. The FCPA includes an affirmative defense that allows payment or reimbursement of expenses of foreign officials that are directly related to “the promotion, demonstration, or explanation of products or services." 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A). Many of Lucent's payments, however, were not directly related to legitimate business purposes and were not recorded accurately in its books and records.

In April 2009, Alcatel-Lucent signed agreements in Washington, D.C. worth $1.7 billion with China Mobile and China Telecom to help the Chinese companies roll out 3G technology.

Here's part of the company's disclosure from its latest Form 10-K:

As previously disclosed in its public filings, Alcatel-Lucent has engaged in settlement discussions with the DOJ and the SEC with regard to the ongoing FCPA investigations. These discussions have resulted in December 2009 in agreements in principle with the staffs of each of the agencies. There can be no assurances, however, that final agreements will be reached with the agencies or accepted in court. If finalized, the agreements would relate to alleged violations of the FCPA involving several countries, including Costa Rica, Taiwan, and Kenya.

Under the agreement in principle with the SEC, Alcatel-Lucent would enter into a consent decree under which Alcatel-Lucent would neither admit nor deny violations of the antibribery, internal controls and books and records provisions of the FCPA and would be enjoined from future violations of U.S. securities laws, pay U.S. $45.4 million in disgorgement of profits and prejudgment interest and agree to a three-year French anticorruption compliance monitor to evaluate in accordance with the provisions of the consent decree (unless any specific provision therein is expressly determined by the French Ministry of Justice to violate French law) the effectiveness of Alcatel-Lucent's internal controls, record-keeping and financial reporting policies and procedures. Under the agreement in principle with the DOJ, Alcatel-Lucent would enter into a three-year deferred prosecution agreement (DPA), charging Alcatel-Lucent with violations of the internal controls and books and records provisions of the FCPA, and Alcatel-Lucent would pay a total criminal fine of U.S. $ 92 million—payable in four installments over the course of three years.

In addition, three Alcatel-Lucent subsidiaries—Alcatel-Lucent France, Alcatel-Lucent Trade and Alcatel Centroamerica—would each plead guilty to violations of the FCPA’s antibribery, books and records and internal accounting controls provisions. The agreement with the DOJ would also contain provisions relating to a three-year French anticorruption compliance monitor. If Alcatel-Lucent fully complies with the terms of the DPA, the DOJ would dismiss the charges upon conclusion of the three-year term.

Tuesday
Sep012009

The FCPA's Most Wanted

People charged with a Foreign Corrupt Practices Act-related offense either cop a plea or fight the case in court. Except for those who choose the third option. They run. If they're living outside the U.S. when indicted, they might plan to never come back. That strategy can only work if they happen to be in a country that won't extradite them, which is harder to predict in practice than on paper. Others have tried to find someplace new that's friendly and beyond the reach of the U.S. Justice Department. But as Viktor Kozeny's uncomfortable years in the Bahamas demonstrate, that's not easy either, even with millions of dollars to make it happen.

The first FCPA fugitives appeared in 1982 and the latest this summer. Over the years, plenty have been caught and handed over to U.S. authorities. Others have eventually turned themselves in, deciding a life spent looking over their shoulder isn't for them after all ("Hey there. Small world, isn't it?").

Yet some people facing FCPA charges, including the twelve mentioned below, are still at large, doing whatever they can to stay out of the jurisdiction of the U.S. federal courts.

Let's meet them:

Ousama Naaman, Canadian, intermediary for a U.S. chemical company. Indicted August 2008; arrested July 30, 2009 in Frankfurt, Germany. Now in Germany.

Jeffrey Tesler, British, intermediary for Kellogg Brown & Root (KBR). Indicted February 2009; arrested March 5, 2009 in London, England. Now in the U.K.

Wojciech Chodan, British, salesman for a KBR affiliate. Indicted 2009. Location unknown.

James K. Tillery, American, executive of Willbros International. Indicted 2008. Location unknown.

Edgar Valverde Acosta, Costa Rican, Alcatel’s former senior country officer there. Superseding indictment issued March 2007. Last known location: Costa Rica.

Viktor Kozeny, Czech-born, Irish passport, president and chairman of Oily Rock Group Ltd. Indicted 2005. Now in the Bahamas.

Pablo Barquero Hernandez, Costa Rican, employed by Owl Securities and Investment Ltd. Indicted 2001. Last known location: Costa Rica.

Frerik Pluimers, Dutch, chairman, president and CEO of Saybolt International. Indicted 1998. Last known location: the Netherlands.

Rami Dotan, Israeli, air force officer. Indicted 1994. Last known location: Israel. The brigadier-general in charge of Israeli air force procurement was court martialed in Israel in 1991 and convicted along with two others of bribery, fraud, and theft for skimming at least $10 million from jet engine contracts with General Electric in the U.S. He was demoted to private and sentenced to 13 years' imprisonment. Released in 2003.

Harold Katz, an Israeli and U.S. citizen, Israeli lawyer. Indicted 1994 (with Rami Dotan, above). Last known location: Israel.

Mario S. Gonzalez, Mexican, associated with Grupo Delta, a Mexican corporation acting as intermediary to Pemex. Indicted 1982. Last known location: Mexico.

Ricardo G. Beltran, Mexican, also associated with Grupo Delta. Indicted 1982. Last known location: Mexico.
.

Monday
May182009

Second Chances And More

What a difference a year or so makes. In December 2007, Lucent Technologies Inc. -- which became part of Alcatel SA in November 2006 -- settled Foreign Corrupt Practices Act charges. It had illegally paid millions of dollars for Chinese officials to take more than 300 trips to the U.S., Europe and elsewhere. They were supposed to be business missions but ended up being junkets -- "sightseeing, entertainment and leisure." Lucent paid $2.5 million to resolve the offenses.

But last month, Alcatel-Lucent signed agreements in Washington, D.C. worth $1.7 billion with China Mobile and China Telecom. The company said the agreements are the first of many that will help Chinese companies roll out 3G technology.

We've said before that we believe in corporate redemption and second chances. It looks like Alcatel-Lucent is making the most of its freshly cleaned slate. The winners will be its stakeholders, Chinese partners, and the Chinese people who'll benefit from upgraded technology. (And we like its nifty 3D logo, above.)

* * *
Corruption in Iraq is so bad that it's blocking the country's recovery. The New York Times' Sam Dagher wrote a great story about it (here). Here's how he started:

Iraq’s main anticorruption watchdog has no shortage of cases, as its new report makes clear: embezzlement of $80 million; tampering with government tea imports; the theft of 50 Italian-made Beretta pistols; procuring forged Ph.D.’s; and scores of other crimes.

The real problem is the difficulty of prosecuting people for corruption, which is so widespread that it has become one of the main obstacles to stability and progress in Iraq, according to Iraqi and American officials. Among the barriers, the officials say, are laws that give ministers the right to pardon offenders, as well as partisan and sectarian interference, pressure, infighting, vendettas, blackmail and death threats.

* * *
The expense-account scandal in the British Parliament sure is . . . grubby. Petty corruption always looks that way. And that goes for FCPA-compliant "facilitating payments" too.

* * *
Mahatma Gandhi's 1948 message about graft in India is universal:

Corruption will go when the large number of persons given unworthily to it realize that the nation does not exist for them to exploit but that they exist to serve the nation. This requires morals, and extreme vigilance on the part of those who are free of the taint. Indifference will be criminal…
* * *
Our friends at Trace International sent us "Toxic Transactions: Bribery, Extortion and the High Price of Bad Business," their hour-long anti-bribery training video. The interviews with current and former prosecutors and others make one thing clear -- those who pay bribes are likely to be caught and punished, with jail a real possibility. So compliance is the only option that makes sense. Great message. Congratulations to Alexandra Wrage and Trace. Clips from the video can be seen here.

* * *
The FCPA has been around for more than 30 years now and, as Trace's video shows, people are getting better at talking about it. That includes those from government, private practice and corporations. So the subject seems a lot less mysterious than it used to and more accessible. That's good news. It's also a gentle plug for the books at the right -- Bribery Abroad and the newly released Bribery Everywhere (both are in stock and can be ordered now). Anyway, we're glad people are more comfortable these days talking about the FCPA in a way that's less formal and not so legalistic.
.

Tuesday
Sep232008

French Citizen Jailed For FCPA Offenses

Former Alcatel executive Christian Sapsizian, 62, has been sentenced to 30 months in prison, three years of supervised release, and forfeiture of $261,500 for bribing employees of the state-owned telecommunications authority in Costa Rica. Sapsizian had pleaded guilty in June 2007 to two counts of violating the Foreign Corrupt Practices Act. Under his guilty plea, he faced a maximum sentence of 10 years in prison, a $250,000 fine, and $330,000 in forfeiture.

Sapsizian, a French citizen, was a 20-year Alcatel employee and served as the company's deputy vice president for Latin America. In August 2001, Alcatel received a $149 million cellular network contract from Costa Rica's El Instituto Costarricense de Electricidad (ICE). Sapsizian had promised to pay an ICE board member and other officials up to 2 percent of the value of the contract. Before being fired in 2004, he caused Alcatel to wire $14 million in “commission” payments to a consultant, who then transferred $2.5 million to the ICE official.

Sapsizian admitted to conspiring with Edgar Valverde Acosta, a citizen of Costa Rica who was Alcatel’s senior country officer there, to arrange the bribes. Acosta was indicted with Sapsizian and on June 14, 2007, the federal court in Miami transferred him to fugitive status.

Alcatel learned in October 2004 that Costa Rican authorities were investigating payments from its consultants to government officials, political parties, and officials of ICE. The company's internal investigation led to the firing of employees and consultants who were involved and its self-disclosure to the U.S. Justice Department and the Securities and Exchange Commission. Until late 2006, when it merged with Lucent, Alcatel was a French company with American depositary receipts traded on the New York Stock Exchange. It's now called Alcatel-Lucent.

The Justice Department said an ongoing investigation is being conducted by the FBI and Immigration and Customs Enforcement. It also said it received help from Costa Rican and French law enforcement authorities.

View the DOJ's September 23, 2008 release here.

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