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Alcatel settles bribe case

January 6, 2011

French telecommunications company Alcatel-Lucent agreed to pay $137 million last week to settle a foreign bribery investigation spearheaded by the U.S. Justice Department over illegal payments made to Costa Rica, Honduras, Taiwan and Malaysia. Former Alcatel officials allegedly paid an estimated $9.6 million in bribes to Costa Rican officials.

The bribery case against Rodríguez, scheduled for Jan. 10, was postponed one week. A previous trial date was also postponed last April due to a medical emergency of one of the nine government officials accused of accepting bribes.

Alcatel’s international bribes, which helped earn the company an estimated $48.1 million in revenue, violated the U.S. Foreign Corrupt Practices Act, investigators charged. The company will pay $92 million as penalty for the criminal suit and $45 million in civil damages to the U.S. Securities and Exchange Commission (SEC). 

“We take responsibility for and regret what happened, and have implemented policies and procedures to prevent these violations from happening again,” said Steve Reynolds, Alcatel-Lucent general counsel, in a statement released last week.

“The violations largely occurred prior to the merger of Alcatel and Lucent Technologies and involved improper activities in several countries. We are pleased to have reached these settlements and look forward to putting these matters behind us,” Reynolds said.

Alcatel’s settlement is the final chapter in a scandal that lasted nearly a decade and resulted in preventive detention for Rodríguez, as well as an investigation of former President José María Figueres (1994-1998), who continues to live abroad and has refused to return to Costa Rica since being accused.

“Costa Rica has a huge job [which is] to clean all of this [up],” said Antonio Barrios, a political analyst with the National University, at the height of the scandal in 2004. “It must demonstrate before the world that its [political] system is effective” (TT, Oct. 22, 2004).

In a somewhat tongue-in-cheek remark during the same time period in 2004, then-President Abel Pacheco, who was also questioned about accepting funds from Alcatel, remarked about corruption within the upper echelons of government:  “We have been victims of a barbarous crash in our democracy. There isn’t a corrupt person in public service without a corruptor from the private sector” (TT, Oct. 8, 2004).

The Alcatel bribes in Costa Rica were originally used to obtain a contract with the Costa Rican Electricity Institute (ICE), the state-run telecommunications company. ICE awarded Alcatel a $149 million mobile telephone contract in August 2001 for 400,000 GSM cell phone lines. During that time, Alcatel allegedly paid bribes to Rodríguez and several other Costa Rican officials, including former ICE board member José Antonio Lobo and his wife, U.S. citizen Jean Gallup (TT, Oct. 8, 2004). Lobo admitted to receiving payments. 

Lobo testified that Rodríguez accepted 60 percent of a $2.4 million “prize” allegedly paid by Alcatel in 2001. Rodríguez served a five-month preventive detention sentence in Costa Rica’s La Reforma penitentiary from November 2004 to March 2005, but says he did not accept any payments from Alcatel.

“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,” said Robert Khuzami, director of the SEC’s Division of Enforcement, in the statement. “Alcatel’s bribery scheme was the product of a lax corporate control environment at the company.”

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