From Costa Rican Jail, Ex Alcatel Boss Supports ICE's 'Victim' Claim

A Costa Rican citizen serving jail time there has said in a sworn statement filed in U.S. federal court that no one at the Instituto Costarricense de Electricidad S.A. (ICE) knew about Alcatel's bribery except those directly involved.

Edgar Valverde Acosta, 63, was Alcatel’s president in Costa Rica. In his sworn statement, Acosta said:

I am a citizen of Costa Rica and currently incarcerated and serving twelve months of preventive detention as a result of my recent conviction in criminal court in Costa Rica. My conviction was related to allegations of corruption in connection with the sale of products and services to [ICE] by Alcatel-Lucent S.A. . . . .

The DOJ indicted Acosta in June 2007. He has been an FCPA fugitive since then.

His May 31 declaration was filed by ICE, a Costa Rican state-owned enterprise trying to gain victim's status and receive restitution under U.S. law. ICE intervened in the DOJ's enforcement action against Alcatel-Lucent. Settlement of that case still needs final approval by a federal judge in Florida.

ICE's petition is the first time a U.S. court has been asked to grant victim's status to an overseas government-linked institution in an FCPA enforcement action.

The DOJ is opposing ICE, arguing it isn't a victim. In a court filing last month the DOJ said, "The evidence gathered during the investigation suggests that corruption at ICE was pervasive in the tender process and occurred at the highest reaches of ICE."

In his sworn statement, Acosta said in 2004 the Costa Rican press exposed Alcatel-Lucent's corrupt payments. "Prior to that time," he wrote, "no one at ICE, other than the individuals who were receiving the payments had knowledge of these matters, nor, do I believe, they could have known of these matters. . . . ."

In other court filings, ICE said only three of its directors and three other employees knew about Alcatel-Lucent's bribery.

In September 2008, former Alcatel executive Christian Sapsizian, now 65, was sentenced to 30 months in prison, three years of supervised release, and forfeiture of $261,500 for bribing ICE employees. He pleaded guilty in June 2007 to two counts of violating the Foreign Corrupt Practices Act. He and Acosta were named in a joint superceding indictment.

Sapsizian admitted to conspiring with Acosta to arrange the bribes. He was released from prison in the U.S. on March 18 this year, according to federal records.

Alcatel-Lucent agreed with the DOJ and SEC in December last year to resolve FCPA-related charges by paying $137 million -- $92 million for criminal charges with the DOJ and $45 million in disgorgement to the SEC. In addition to the bribery in Costa Rica, the company admitted making corrupt payments in Honduras, Malaysia, and Taiwan. The settlement isn't final until it's approved in federal court.

Download a copy of Edgar Valverde Acosta's May 31, 2011 sworn statement here.

Costa Rican 'Victim' Objects To Alcatel-Lucent Settlement

[Editor's note:This post exceeds our normal word count. But because the issues raised are new in an FCPA case, we wanted the first impression to be accurate and complete.]

A state-owned company that awarded Alcatel-Lucent more than $300 million in bribe-tainted contracts has asked a federal court in Florida to block Alcatel's FCPA settlement with the U.S. government, saying the terms violate a federal victim's rights law.

Costa Rica's Instituto Costarricense de Electricidad (ICE), which provides electric power and telecommunication services, filed a petition this week for relief and objections to Alcatel-Lucent's plea agreement and proposed deferred prosecution agreement, along with a detailed memorandum of law.

In December last year, Paris-based Alcatel-Lucent S.A. agreed to pay $137 million for bribing officials in Costa Rica, Honduras, Malaysia, and Taiwan. The company and three subsidiaries will pay $92 million to resolve criminal charges with the DOJ and $45 million in disgorgement to the SEC.

By agreeing to plead guilty, Alcatel-Lucent escaped substantive bribery charges. In a two-count criminal information, the DOJ charged the company with violating the internal controls and books and records provisions of the FCPA.

A subsidiary in Costa Rica, the DOJ said, wired about $18 million to two consultants. More than half of the money was then passed to Costa Rican government officials, including five employees at ICE. In Costa Rica alone, the bribes produced contracts worth more than $300 million for Alcatel-Lucent and a profit of more than $23 million.

But Costa Rica's ICE said the settlement "provides no sanctions against any officer, executive director, or employee of Alcatel-Lucent and provides that the illegal proceeds obtained from victims be distributed to the [U.S.] federal government." Additionally, the settlements seek to waive the routine pre-sentence investigation and report, which would allow the court to order restitution. Under the Mandatory Victims Restitution Act (18 U.S.C. § 3663A), restitution is mandatory to the victim of a Title 18 crime. Because Alcatel is pleading guilty to conspiracy, a Title 18 crime, ICE says, restitution is mandatory.

In sum, according to ICE's petition,

the deal between Alcatel Lucent and the government allows the company to conceal the information relating to its criminal conduct; resolve all criminal exposure through the payment of a fine below the legal required minimum; provides immunity for the companies from prosecution beyond paying these insufficient fines; avoid required presentence procedures; avoid a criminal conviction for Alcatel Lucent S.A. and thereby appropriate administrative restrictions applicable to convicted criminals; and further avoid legally required restitution.

The SEC denied without explanation ICE's requests for a Fair Fund -- recovered money paid into the court registry for potential victims. And the DOJ, according to ICE, "has indicated it did not consider ICE a victim, apparently taking a position that companies where employees are bribed are culpable or that ICE is not autonomous and entities that are related to governments cannot be victims."

ICE said it's entitled to the benefit of several federal statutes that provide rights to victims of federal crimes, including the Crime Victims’ Rights Act (18 U.S.C. § 3771) and the Mandatory Victims Restitution Act.  Based on these laws, ICE asked the court to reject Alcatel-Lucent's plea agreements and deferred prosecution agreement. It asked the court to enter an order declaring that ICE is a victim of the criminal conduct of Alcatel-Lucent and its subsidiaries, and "directing that ICE is entitled to all rights of a victim, including restitution."

ICE said it was never contacted by the DOJ or SEC prior to the announcement of the Alcatel-Lucent settlement. "Neither the [DOJ] nor the SEC sought to gather or verify any facts from ICE nor make inquiry with respect to the damages that the company had suffered."

That's the same charge made by defense lawyers in the Lindsey case. As we reported last week, cross examination of an FBI agent heading the investigation revealed that the FBI and prosecutors from the DOJ's FCPA Unit never contacted CFE, the Mexican utility and purported victim of the alleged bribery, or spoke with anyone at CFE about the Lindsey investigation, until nearly four months after the Lindsey indictment was returned.

ICE also alleged that Alcatel-Lucent has already violated both the express terms of the deferred prosecution agreement and the spirit and intent of the plea agreements. Under the terms of the deferred prosecution agreement, Alcatel-Lucent is prohibited from making any public statement in any litigation or otherwise contradicting its acceptance of responsibility for the allegations behind its plea.

But according to ICE, two months after Alcatel-Lucent entered its plea, its lawyer Alejandro Batalla appeared in court in Costa Rica "and flatly denied any criminal responsibility by Alcatel-Lucent companies, claiming instead that all responsibility for the bribery and corruption that occurred in Costa Rica was the responsibility of Christian Sapsizian and Edgar Valverde."

Yet, as ICE points out, this conduct is at odds with the favorable sentencing enhancements given to Alcatel-Lucent, which included a sentencing reduction for acceptance of responsibility for its criminal conduct.
 
Along with the rejection of the plea agreements and deferred prosecution agreement, ICE also seeks the preparation of a pre-sentence report, an order that it is a victim of Alcatel-Lucent’s crimes, and recognition of its rights under the Crime Victims’ Rights Act.

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

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 in June 2007 but since then has been an FCPA fugitive.

ICE is represented by Burton W. Wiand at Tampa's Wiand Guerra King

Download a copy ICE's May 2, 2011 petition for relief pursuant to 18 U.S.C. §3771(d)(3) and objection to plea agreements and deferred prosecution agreement in U.S. v. Alcatel-Lucent S.A. here.

Download ICE's memorandum of law here.

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Download the criminal information in US v. Alcatel-Lucent, S.A. here.

Download the deferred prosecution agreement in US v. Alcatel-Lucent, S.A. here.

Download the criminal information in US v. Alcatel-Lucent France, S.A. et al here.

Download the plea agreement in US v. Alcatel Centroamerica, S.A. (Costa Rica) here.

View the SEC's Litigation Release No. 21795 (dated December 27, 2010) in SEC v. Alcatel Lucent, S.A., Civil Action No. 1:10-CV-24620-GRAHAM (S.D. FL.) here.

Download the SEC's civil complaint here.

Ex Head of State Jailed For Alcatel Bribes

Miguel Angel Rodriguez, ex-president of Costa Rica, was sentenced to five years in prison for briberyThe former president of Costa Rica who took bribes from French telecoms company Alcatel was sentenced to five years in prison this week.

Miguel Angel Rodriguez, 71, was convicted by a court in Costa Rica of accepting at least $800,000 in bribes from Alcatel, according to an AFP report.

Rodriguez was president of the Central American country from 1998 to 2002. He was Secretary General of the Organization of American States in 2004 when the Alcatel scandal forced him to resign.

In December last year, Paris-based Alcatel-Lucent S.A. paid $137 million in an FCPA settlement. The company admitted bribing officials in Costa Rica, Honduras, Malaysia, and Taiwan. In a  two-count criminal information, the DOJ charged the company and three subsidiaries with violating the internal controls and books and records provisions of the FCPA.

It paid $92 million to resolve criminal charges with the DOJ and $45 million in disgorgement to the SEC. The settlement ranks eighth on list of the biggest FCPA settlements of all time and sixth on the list of FCPA disgorgements.

Alcatel-Lucent -- which provides telecommunications equipment and services -- was formed in 2006 after U.S.-based Lucent Technologies merged with Alcatel, a French company. The new company is headquartered in Paris, France.

In Costa Rica, a subsidiary wired about $18 million to two consultants. More than half of the money, the DOJ said, was then passed to Costa Rican government officials. The bribes produced contracts worth more than $300 million for Alcatel-Lucent and a profit of more than $23 million.

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. 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 a government official in Costa Rica.

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 and was last seen in Costa Rica.

Alcatel-Lucent also paid $10 million in January 2010 to settle corruption charges brought by the government of Costa Rica.

Alcatel-Lucent Settles Bribery Case

In one of the biggest Foreign Corrupt Practices Act settlements of all time, Paris-based Alcatel-Lucent S.A. will pay $137 million for bribing officials in Costa Rica, Honduras, Malaysia, and Taiwan.

The company and three subsidiaries will pay $92 million to resolve criminal charges with the DOJ and $45 million in disgorgement to the SEC.

The settlement places Alcatel-Lucent seventh on the top-ten FCPA list. 

By agreeing to plead guilty, Alcatel-Lucent escaped substantive bribery charges. In a two-count criminal information, the DOJ charged the company with violating the internal controls and books and records provisions of the FCPA.

The DOJ and the company entered into a three-year deferred prosecution agreement. Among other things, Alcatel-Lucent pledged to stop using third-party sales and marketing agents in conducting its worldwide business. The DOJ said the unprecedented pledge was made on the company's "own initiative and at a substantial financial cost."

Three subsidiaries were also charged and each agreed to plead guilty to conspiring to violate the antibribery, books and records, and internal controls provisions of the FCPA.

Alcatel-Lucent -- which provides telecommunications equipment and services -- was formed in 2006 after U.S.-based Lucent Technologies merged with Alcatel, a French company. The new company is headquartered in Paris, France.

The illegal conduct started in the late 1990s and continued through 2006.

Prosecutors said Alcatel-Lucent’s three subsidiaries bribed foreign officials to win business in Costa Rica, Honduras, Malaysia, and Taiwan. The company also hired agents without proper controls in Kenya, Nigeria, Bangladesh, Ecuador, Nicaragua, Angola, Ivory Coast, Uganda, and Mali. Overall, Alcatel-Lucent admitted making $48.1 million in profits as a result of its bribery.

In Costa Rica, a subsidiary wired about $18 million to two consultants. More than half of the money, the DOJ said, was then passed to Costa Rican government officials. The bribes produced contracts worth more than $300 million for Alcatel-Lucent and a profit of more than $23 million.

In Honduras, a company subsidiary hired a "consultant" who was a perfume distributor with no experience in telecommunications. He was personally selected by "the brother of a senior Honduran government official," the DOJ said. Alcatel-Lucent won contracts in Honduras worth $47 million, with profit of $870,000.

In Taiwan, the company and its joint venture there hired two consultants with no telecommunications experience. They passed some of their $950,000 payments to Taiwanese legislators. Alcatel-Lucent received a contract worth $19.2 million and earned $4.3 million.

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. 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 a government official in Costa Rica.

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 and political parties.

Lucent, meanwhile, settled Foreign Corrupt Practices Act charges of its own 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.

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.

In February this year, Alcatel-Lucent said in its consolidated financial statements that it had reached agreement in principle with the Justice Department and the Securities and Exchange Commission to settle Foreign Corrupt Practices Act offenses. 

Alcatel-Lucent also paid $10 million in January to settle corruption charges brought by the government of Costa Rica.

The SEC's civil complaint said all of Alcatel-Lucent's bribes 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."

Alcatel-Lucent's common stock trades on the NYSE under the symbol ALU.

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View the DOJ's December 27, 2010 release here.

Download the criminal information in US v. Alcatel-Lucent, S.A. here.

Download the deferred prosecution agreement in US v. Alcatel-Lucent, S.A. here.

Download the criminal information in US v. Alcatel-Lucent France, S.A. et al here.

Download the plea agreement in US v. Alcatel Centroamerica, S.A. (Costa Rica) here.

View the SEC's Litigation Release No. 21795 (dated December 27, 2010) in SEC v. Alcatel-Lucent, S.A., Civil Action No. 1:10-CV-24620-GRAHAM (S.D. FL.) here.

Download the SEC's civil complaint here.

The Hard Timers

Compliance officers will want to keep a copy of the table below close at hand. What better way to answer those who insist that the FCPA is small potatoes, after all, when you look at the relatively few enforcement actions over the past 33 years.

Here are the 22 men (no women so far), most of them former company executives, who've spent time in prison for FCPA-related convictions. Each name that follows represents a terrible tragedy, often with permanent damage extending to families. As the compiler of the list said: "By my count there have been 187 people charged with violating the FCPA. This list will look a little different at the end of the year."

We'd like to thank the generous individual responsible for this post, but that's not possible. He or she has asked to remain anonymous, making this contribution pro bono publico.

The information is compiled from the Federal Bureau of Prisons' inmate locator. Readers with suggestions and corrections are welcome to let us know.

Name	Related Company	Register #	Age Race Sex	Release Date	Location
FERNANDO MAYA BASURTO	ABB Ltd	39135-177	48-White-M	UNKNOWN	HOUSTON FDC
CHARLES PAUL EDWARD JUMET	Ports Engineering Consultants Corporation	75638-083	53-White-M	UNKNOWN	NOT IN BOP CUSTODY
SULEIMAN A NASSAR	Lockheed	45723-019	73-White-M	11/19/1996	RELEASED
DAVID H MEAD	Saybolt	79529-079	72-White-M	7/21/1999	RELEASED
HERBERT STEINDLER	General Electric	02423-061	71-White-M	3/13/2000	RELEASED
HERBERT LAWRENCE TANNENBAUM	Tanner Management Corp	82537-054	85-White-M	4/20/2000	RELEASED
RICHARD G PITCHFORD	Central Asia American Enterprise Fund	26036-016	75-White-M	12/4/2003	RELEASED
ROBERT RICHARD KING	Owl Securities and Investments	14447-045	76-White-M	6/30/2006	RELEASED
STEVEN LYNWOOD HEAD	Titan	95321-198	63-White-M	9/29/2008	RELEASED
YAW OSEI AMOAKO	ITXC Corporation	60267-050	58-Black-M	12/17/2008	RELEASED
PAUL GRAYSON NOVAK	Willbros	43505-279	43-White-M	12/19/2008	RELEASED
ROGER MICHAEL YOUNG	ITXC Corporation	29574-016	49-White-M	4/10/2009	RELEASED
STEVEN JOSEPH OTT	ITXC Corporation	60540-050	50-White-M	6/17/2009	RELEASED
RAMENDRA BASU	World Bank	29254-016	47-White-M	8/7/2009	RELEASED
FAHEEM MOUSA SALAM		28567-016	32-White-M	1/7/2010	RELEASED
MISAO HIOKI	Bridgestone	90290-111	56-Asian-M	11/23/2010	LOMPOC USP
DAVID KAY	American Rice	13749-179	58-White-M	1/27/2011	TEXARKANA FCI
JIM BOB BROWN	Willbros	66158-179	48-White-M	1/29/2011	ATLANTA USP
CHRISTIAN SAPSIZIAN	Alcatel SA	78172-004	63-White-M	3/18/2011	NE OHIO CORR CTR CI
JASON EDWARD STEPH	Willbros	36444-177	40-White-M	3/28/2011	EL RENO FCI
DOUGLAS MURPHY	American Rice	13987-179	53-White-M	12/31/2012	EL RENO FCI
SHU QUAN-SHENG	AMAC International	58250-083	69-Asian-M	2/18/2013	LA TUNA FCI