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.

__________________

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.

Prison For Ex-Willbros Execs

FCPA violations: The Justice Department is targeting individuals who pay bribes to foreign officials. Photo by Ken MayerTwo former Willbros managers on Thursday were given jail time for conspiracy to violate the Foreign Corrupt Practices Act. They bribed foreign government officials and employees of state-owned firms to win pipeline work and gain other advantages.

Jim Bob Brown, 48, was sentenced in federal court in Houston to one year and one day in prison and fined $17,500; Jason Edward Steph, 40, was sentenced to 15 months and fined $2,000.

Steph, who once served as general manager of on-shore operations for Willbros International, pleaded guilty in November 2007. He said in his plea that in 2005 he, Brown, and others arranged to pay about $1.8 million in cash to Nigerian officials.

Brown pleaded guilty in September 2006 to conspiracy to violate the FCPA. He and Steph cooperated with the government’s investigation.

Brown said from 1996 to 2004, he and others plotted to negotiate lower Nigerian federal and state taxes in exchange for bribes to revenue officials. And he admitted conspiring to make corrupt payments to officials in the Nigerian court system in exchange for favorable treatment on pending cases. Brown also paid at least $300,000 in bribes to Ecuadorian government officials from PetroEcuador and PetroCommercial in exchange for contracts. The DOJ said all the payments violated the FCPA's antibribery provisions.

In May 2008, Willbros Group and its subsidiary Willbros International paid $22 million and entered into a deferred prosecution agreement with the DOJ to settle criminal FCPA charges in connection with corrupt payments to Nigerian and Ecuadorian officials. Willbros Group also paid $10.3 million (disgorgement of $8.9 million, plus prejudgment interest of $1.4 million) to resolve the SEC's civil enforcement action.

In December 2008, another former executive and an ex-consultant of Willbros International Inc. were charged in the case. Consultant Paul G. Novak, 43, pleaded guilty in November 2009 to conspiracy to violate the FCPA. He's scheduled to be sentenced on February 19. James K. Tillery, 49, a former Willbros International executive, was also charged but remains at large.

In May 2008, the Securities and Exchange Commission charged Steph and former employees Gerald Jansen, Lloyd Biggers, and Carlos Galvez with aiding and abetting Willbros Group's violation of the antibribery, books and records, and internal controls provisions of the FCPA, and knowingly circumventing the FCPA's internal controls and books and records provisions. All four consented to permanent injunctions, with Jansen and Galvez ordered to pay civil penalties of $30,000 and $35,000 respectively. Determination of Steph's civil penalty was deferred pending his sentencing in the criminal case.

*   *   *

Substantive FCPA violations and conspiracy to violate the FCPA both carry a maximum sentence of five years in prison. Here are some recent FCPA-related sentences:

• In November last year, Frederic Bourke, who was convicted at trial, was sentenced to a year and day in jail for conspiracy.

• David Kay and Douglas Murphy started serving their sentences last year for substantive FCPA violations. They were convicted at trial and sentenced to 37 months and 63 months respectively.

• In April 2009, Virginia-based physicist Shu Quan-Sheng was sentenced to 51 months in prison. He pleaded guilty in November 2008 to one count of violating the Foreign Corrupt Practices Act and two counts of violating the Arms Export Control Act.

• In September 2008, two former executives from telecoms company ITXC Corporation avoided prison. Roger Michael Young was sentenced to five years probation with three months home confinement after he pleaded guilty in July 2007 to violating the FCPA and the Travel Act. Steven J. Ott also pleaded guilty and was sentenced to five years probation with six months in a community confinement center and six months home confinement.

• Also in September 2008, Albert "Jack" Stanley, KBR's former CEO, pleaded guilty to a two-count criminal information charging him with conspiracy to violate the Foreign Corrupt Practices Act and conspiracy to commit mail and wire fraud. He agreed to a seven year jail term with a chance for reduction based on his cooperation. 

• In  April 2008, a former World Bank employee, Ramendra Basu, received 15 months in prison for conspiring to award World Bank contracts to consultants in exchange for kickbacks and for helping a contractor bribe a foreign official. He pleaded guilty to conspiring to commit wire fraud and to violating the FCPA.

A copy of the DOJ's January 28, 2010 release is here.

See our prior posts about Willbros and its personnel here.

Novak Pleads Guilty

A former consultant for a subsidiary of Houston-based Willbros Group Inc. pleaded guilty on November 12 to paying $6 million in bribes to officials who worked in the Nigerian government, in government-owned companies, and in a political party there. Paul G. Novak, 43, pleaded guilty in federal court in Houston to one count of conspiracy to violate the Foreign Corrupt Practices Act and one substantive count of violating the FCPA. He's scheduled to be sentenced on February 19, 2010.

The bribes were intended to help Willbros win and keep contracts for the Eastern Gas Gathering System (EGGS) Project, worth about $387 million. The project was a natural gas pipeline system in the Niger Delta.

Novak, along with alleged co-conspirators James Kenneth Tillery, Jason Steph, Jim Bob Brown and three employees from a German construction company based in Mannheim, Germany, agreed to make the corrupt payments to, among others, government officials from the Nigerian National Petroleum Corporation, the National Petroleum Investment Management Services, a senior official in the executive branch of the federal government of Nigeria, members of a Nigerian political party and officials from the Shell Petroleum Development Company of Nigeria Ltd.

To fund the bribes, Steph and others used a Willbros' subsidiary, Willbros West Africa Inc. (WWA), to enter into agreements with two consulting companies Novak represented. Without providing any services, the consulting companies would invoice WWA and be paid from Willbros' bank account in Houston to accounts in Lebanon. Novak then used money from the Lebanese accounts to bribe the Nigerian officials.

In addition to Novak, two Willbros employees have pleaded guilty in the case and Willbros has entered into a deferred prosecution agreement:

On September 14, 2006, Jim Bob Brown, a former Willbros executive, pleaded guilty to one count of conspiracy to violate the FCPA, for his role in making corrupt payments to Nigerian government officials to obtain and retain the EGGS contract and for making corrupt payments in Ecuador. Brown's sentencing is currently scheduled for January 28, 2010.

On November 5, 2007, Jason Steph, also a former Willbros executive, pleaded guilty to one count of conspiracy to violate the FCPA, for making corrupt payments to Nigerian government officials to obtain and retain the EGGS contract. Steph's sentencing is also scheduled for January 28, 2010. See our post here.

On May 14, 2008, Willbros Group Inc. and Willbros International Inc. entered into a deferred prosecution agreement and agreed to pay a $22 million criminal penalty, for the illegal payments to government officials in Nigeria and Ecuador. See our post here.

James K. Tillery was charged, along with Novak, for his alleged role in the bribery scheme in an indictment unsealed on December 19, 2008. According to the indictment, Tillery was a Willbros employee and executive from the 1980s through January 2005. He remains a fugitive. See our post here.

Download the DOJ's November 12, 2009 release here.

Clueless In Quito

Our assigned subject is bribery abroad. So naturally some have wondered why we haven't talked about Chevron's legal tangle in Ecuador and accusations it might have violated the Foreign Corrupt Practices Act there. A couple of readers -- apparently from Ecuador -- even sent us what they said was evidence against the American oil company. It wasn't. We only found news stories from local papers and a copy of our own post about Chevron's $30 million oil-for-food settlement (here).

The reason we haven't talked about the Ecuador case is because we have no idea what it's really about. Like a gargantuan version of Jon & Kate, the back-and-forth charges have left us completely confused -- too addled to have an opinion.

As for facts, here's what we know, or what we think we know:

The case started 16 years ago. A group of Amazon residents alleged that Texaco, which Chevron acquired in 2001, contaminated large areas of rain forest before ending its operations and leaving the country. In a civil suit in the local courts, Chevron is facing damages that could reach $27 billion. The FCPA allegations (coming from sources in Ecuador, including the attorney general) involve an alleged plot by the oil company to bribe the country's leaders and a judge hearing the case.

Chevron says it's the Ecuador government and courts that haven't been honest. As evidence, it released tapes in August that appeared to implicate politicians and the judge in a plot to take $3 million in kickbacks from clean-up contractors if Chevron is found liable. Just how and why the tapes were made and given to Chevron is a mystery. The New York Times quoted Steven Donziger, a lawyer representing the Ecuadorans suing Chevron, as saying: “I suspect this is a Chevron sting operation; there needs to be an investigation into Chevron’s role in this as much as the judge’s. I find it awfully odd that these individuals would secretly film meetings using James Bond devices like a spy watch and a spy pen."

One of the men who made the tapes -- yes, using "watches and pens implanted with bugging devices" -- Diego Borja, was a Chevron contractor providing logistics services. The company said it didn't pay him for the tapes but gave him money to leave Ecuador with his family because of safety concerns. “Chevron had no involvement in the videotaping,” Kent Robertson, a company spokesman, told the New York Times. “Chevron referred this matter to the U.S. Department of Justice and Ecuador’s prosecutor general after making every reasonable effort to verify the evidence that was presented.”

Professor Ralph Steinhardt at George Washington University Law School -- a heavyweight expert in international civil litigation -- told the Times: “For someone who is trying to figure out what you can learn from this, it’s not as though it yields a rational narrative. In trying to appreciate the complexities of this case, you need to have the skills of a poker player rather than the skills of a lawyer.”

OK then. We've often displayed to ourself and others a lack of poker-playing skills. So for now at least, we fold.
.

Two More Ex-Willbros Workers Charged

The Justice Department's aggressive enforcement of the Foreign Corrupt Practices Act against individuals continues. On Friday, a former executive and an ex-consultant of Willbros International Inc., a subsidiary of Houston-based Willbros Group Inc., were charged in connection with a conspiracy to bribe government officials in Nigeria and Ecuador. Former consultant Paul G. Novak, 41, was arrested on arrival at George Bush Intercontinental Airport in Houston. He was returned to the United States from Constantia, South Africa after his U.S. passport was revoked. James K. Tillery, 49, the former Willbros International executive, remains at large.

An indictment unsealed Friday in U.S. District Court in Houston charges Novak and Tillery with conspiring to bribe Nigerian and Ecuadorian government officials to obtain and retain gas pipeline construction and rehabilitation business from state-owned oil companies in those countries. Tillery and Novak face one count of conspiracy to violate the FCPA, two counts of violating the FCPA in connection with the authorization of specific corrupt payments to officials in Nigeria and Ecuador, and one count of conspiring to launder the bribe payments through purported consulting companies controlled by Novak.

If convicted of all charges, they each face up to 35 years in prison and fines of the greater of $250,000 or twice the pecuniary gain or loss from the FCPA offenses and, for the money laundering conspiracy, $500,000 or twice the value of the funds involved in the transfer.

The indictment says Tillery was a Willbros International employee and executive from the 1980s through January 2005. From 2002 until January 2005, he served as executive vice president and later as president of the company. Novak was an employee in the mid-1990s and later worked as an oil and gas consultant in Nigeria, purporting to provide consulting services to companies in that field.

Tillery and Novak, along with a Nigerian working as a consultant and employees of a German engineering firm Willbros had partnered with, conspired to pay more than $6 million in return for a $387 million contract to construct Nigeria's Eastern Gas Gathering System, according to the indictment. From late 2003 to 2005, payments were made and others promised to Nigerian officials. The indictment also alleges that Tillery, Novak and other Willbros employees based in South America paid $300,000 to officials at the state-owned oil company in Ecuador, PetroEcuador, and its subsidiary PetroComercial, in exchange for a $3 million contract to refurbish a 16-mile gas pipeline between Santo Domingo and El Beaterio.

In May this year, Willbros Group and Willbros International paid $22 million and entered into a deferred prosecution agreement with the DOJ to settle criminal FCPA charges in connection with corrupt payments to Nigerian and Ecuadorian officials. Willbros Group also paid $10.3 million (disgorgement of $8.9 million, plus prejudgment interest of $1.4 million) to resolve the SEC's civil enforcement action. As part of the settlement, the Willbros companies have been cooperating with the DOJ's ongoing investigation.

In November 2007, Jason Edward Steph, 37, who once served as general manager of on-shore operations for Willbros International, pleaded guilty to conspiring to violate the FCPA by bribing Nigerian officials. Steph said that in February and March of 2005 he, former Willbros executive Jim Bob Brown, and others arranged to pay about $1.8 million in cash to the officials. Brown also pleaded guilty to a similar charge in September 2006. He and Steph are cooperating with the government’s investigation and are waiting to be sentenced.

In the May 2008 SEC complaint against Willbros Group, Steph and former employees Gerald Jansen, Lloyd Biggers, and Carlos Galvez were named for aiding and abetting Willbros Group's violation of the antibribery, books and records, and internal controls provisions of the FCPA, and knowingly circumventing the FCPA's internal controls and books and records provisions. All four consented to permanent injunctions, with Jansen and Galvez ordered to pay civil penalties of $30,000 and $35,000 respectively. Determination of Steph's civil penalty was deferred pending his sentencing in the criminal case.

Willbros Group, Inc. trades on the New York Stock Exchange under the symbol WG. It provides construction, engineering and other services to the oil and gas industry.
_______

Download the DOJ's Dec. 19, 2008 release regarding Paul G. Novak and James K. Tillery here.

Download the DOJ's indictment of Novak and Tillery here.

Download the DOJ's May 14, 2008 release regarding Willbros Group Inc. here.

View the SEC's Litigation Release No. 20571 (May 14, 2008) in Securities and Exchange Commission v. Willbros Group, Inc., et al., Civil Action No. 4:08-CV-01494 U.S.D.C., Southern District of Texas (Houston Division) here.

Download the SEC's May 14, 2008 civil complaint against Willbros Group Inc., Jason Steph, Gerald Jansen, Lloyd Biggers and Carlos Galvez here.

Download the DOJ's November 5, 2007 release regarding Jason Edward Steph's guilty plea here.

Download Steph's November 5, 2007 Plea Agreement with the DOJ here.
.