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AlcaLu Pays Up in Chinese Bribes Case

Phil Harvey
12/21/2007

The U.S. Department of Justice announced today that Lucent Technologies Inc. -- now Alcatel-Lucent (NYSE: ALU) -- has agreed to pay a $1 million fine "to resolve allegations that it violated the Foreign Corrupt Practices Act (FCPA)."

What the FCPA was that all about?

Well, apparently, after an investigation lasting several years, Lucent was found to have "provided travel and other things of value to Chinese government officials and improperly accounted for certain corporate expenditures on behalf of those officials in company books and records."

Who knew Lucent was such a booster for international tourism?

The DOJ says, in its statement, that "from at least 2000 to 2003, Lucent spent millions of dollars on approximately 315 trips for Chinese government officials that included primarily sightseeing, entertainment and leisure."

And donuts? Were there donuts?

"These trips were requested and approved with the consent and knowledge of the most senior Lucent Chinese officials and with the logistical and administrative assistance of Lucent employees in the United States, including at corporate headquarters in Murray Hill, N.J.

"Lucent improperly recorded expenses for these trips in its books and records and failed to provide adequate internal controls to monitor the provision of travel and other things of value to Chinese government officials," the Justice Department says.

Want details? Keep reading:

"In 2002 and 2003 alone, there were 24 Lucent-sponsored pre-sale trips for Chinese government customers. Of these, at least 12 trips were mostly for the purpose of sightseeing. Lucent spent over $1.3 million on at least 65 pre-sale visits between 2000 and 2003. The individuals participating in these trips were senior level government officials, including the heads of state-owned telecommunications companies in Beijing and the leaders of provincial telecommunications subsidiaries."

Wow. Now that's customer service. Wait, it gets better:

"Between 2000 and 2003, Lucent also provided Chinese government officials with post-sale trips that were typically characterized as 'factory inspections' or 'training' in contracts with its Chinese government customers. By 2001, however, Lucent had outsourced most of its manufacturing and no longer had any Lucent factories for its customers to tour."

Load up the bus, everyone. We're going to do a factory inspection at Disneyland, and some training at Harrah's casino. Oh, you think we made that part up? Keep reading:

"These trips consisted primarily or entirely of sightseeing to locations such as Disneyland, Universal Studios, the Grand Canyon, and in cities such as Los Angeles, San Francisco, Las Vegas, Washington, D.C., and New York City, and typically lasted 14 days each and cost between $25,000 and $55,000 per trip."

Lucent admits to all of the conduct alleged, the agreement says, and has agreed to pay $1 million to the United States Treasury.

The Justice Department has agreed not to prosecute Lucent if it complies with all of the requirements contained in the agreement over a two-year term.

Separately, the Securities and Exchange Commission (SEC) today also settled a complaint against Lucent. In that deal, Lucent agreed to $1.5 million in civil penalties in connection with similar conduct.

Calls to Lucent officials in Disneyland were not returned by press time.

— Phil Harvey, Managing Editor, Light Reading

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DCITDave
DCITDave
12/5/2012 | 2:57:01 PM
re: AlcaLu Pays Up in Chinese Bribes Case
Anyone know of some other companies that regularly offer, say, factory inspections near the Grand Canyon?
bollocks187
bollocks187
12/5/2012 | 2:56:59 PM
re: AlcaLu Pays Up in Chinese Bribes Case
The problem is that some customers accept this as part of gaining their business and in their culture it is not regarded as corruption - ASIA is best served with a 'cash' policy, EMEA is best seved with a 'consultancy' contracts, US is best served with golfing trips or Disney world user group meetings.

'Verizon' as a custmer have a long standing internal policy not to accept anything from vendors even if won at a trade show and trips are double checked by other internal groups.


ssfiberoptics
ssfiberoptics
12/5/2012 | 2:56:59 PM
re: AlcaLu Pays Up in Chinese Bribes Case
all, I repeat ALL International telecom suppliers do this sort of thing.In my experience Ericsson was the worst offender,but Alcatel,Siemens,Nortel all did it.The Chinese demanded both pre-bid qualification tours and post bid manufacturing visits.The US law on this really hurts US manufactuers, and is naive in this case.Out and out cash bribery was the intent of the law--this area is very gray.To make light of it in the way the article was written was also naive and un-professional
waterskin
waterskin
12/5/2012 | 2:56:59 PM
re: AlcaLu Pays Up in Chinese Bribes Case
almost all major business contracts in major industries have deals like this arranged. In US, large ones like IBM, GE, Boeing, medical equipments vendors, auto, engergy industries,etc, In Japan, Mitsubishi, Fujitsu, etc . Most triditional industris had done these for decades. US just opened its tour visa to china 2 months ago and for the past deacades this is pretty much the only way for chinese industy leaders to really tour US.
douggreen
douggreen
12/5/2012 | 2:56:58 PM
re: AlcaLu Pays Up in Chinese Bribes Case
THe only telecom companies that do not pay off Chinese officials are companies who do not get contract in China. It is a requirement and an expected part of doing business.

"Respectable" companies keep their hands clean by hiring "consultants." These consultants are paid large sums of money supposedly for their expertise in dealing with Chinese officials. A large part of the consulting fee goes to bribes, but the "respectable" vendor does not get involved other than paying the consulting fee, which everyone knows is going to pay bribes.

Sounds like Lucent got in trouble for being stupid about the way they executed it and accounted for it.
sigint
sigint
12/5/2012 | 2:56:58 PM
re: AlcaLu Pays Up in Chinese Bribes Case
"THe only telecom companies that do not pay off Chinese officials are companies who do not get contract in China. It is a requirement and an expected part of doing business. "
________________________________________________

This was largely true of India as well. European firms were particularly notorious, since there is nothing equivalent of the FCPA in Europe. Most American companies worked through consultants, aka, middlemen.

Thankfully, with most carriers now being private companies, this is a declining trend. But there still could be some of this happening with BSNL, which is a state owned firm.
whyiswhy
whyiswhy
12/5/2012 | 2:56:58 PM
re: AlcaLu Pays Up in Chinese Bribes Case
When the US President accepts a tour of China, it's building international relations.

He takes the US off the Gold standard, and as a result sends all low wage US jobs and tons of cash to China.

Do as I say not as I do.
sjtechid
sjtechid
12/5/2012 | 2:56:57 PM
re: AlcaLu Pays Up in Chinese Bribes Case
I think the problem is that we go overboard in everything that we do here. We find these financial scandals and we try to tighten up the screws on everything. Business requires people to be creative (not vouching that bribing is right), but I don't see any problem with 'Being Roman when you are in Rome'. I guess in this case, Lucent wasn't creative enough compared to other companies.
Stefan Sip
Stefan Sip
12/5/2012 | 2:56:57 PM
re: AlcaLu Pays Up in Chinese Bribes Case
I think possible solutions to this are:

1) Stop doing business with China, India, Africa, CIS, SE Asia, Latin America, and a few other places. I imagine an embargo like the one impose on South Africa would do the trick. These countries would go back to the stone ages.
2) After Jack Abramoff and Bob Ney get out of prison, send them as trade advisors to these countries and properly explain to these "we are only poor corrupt officials" that taking golf junkets is the acceptable way. Even better, Jack and Bob should conduct seminars on setting up lobbies and make the whole corrupting process fully sanctioned by governments, foreign and domestic.

This could be a moot point soon if the America Peso gets much lower. We will continue to inflate out of our over-spending and beg foreign countries (mostly from corrupt countries) to bail us out on a daily basis. If you thought the optical transmissions market was tough, have you seen our 2/5/10-year debt auctions for the past 3 years? Talking about our proud government bending over and grabbing the ankles. In no time, USD will no longer be viewed as a currency of real value.

Merry Christmas Everyone. May our Savior bless all of us in the coming year.
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