Lucent Purges China Leaders

Lucent Technologies Inc. (NYSE: LU) announced this morning that is has found possible violations of the Foreign Corrupt Practices Act (FCPA) and has fired four employees based in China who may be involved with those violations.

Lucent said it had fired the president, the chief operating officer (COO), a marketing executive, and a finance manager of the company’s China operations. The news was disclosed in an 8-K filing with the Securities and Exchange Commission (SEC).

Lucent would not confirm the names of those fired. According to the Lucent Website, Jason Chi was listed in a Lucent press release as president of Lucent Technologies China as recently as January 2004. Michael Kwan was named chief operating officer of its operations in China in 2001 and served in that position as recently as February 2004.

The FCPA is a set of federal laws aimed to prevent corrupt business practices by U.S. multinationals operating in foreign countries.

Lucent said that “deficiencies” in complying with the FCPA in its Chinese divison led to the dismissals, and it is now cooperating with the U.S. Department of Justice and the SEC in an ongoing investigation. Lucent said it found these problems in audits performed on operations in 23 foreign countries, including Brazil, China, India, Indonesia, the Philippines, and Russia, a U.S.-based operation that supports sales in China, and other global operations.

The market had a muted reaction to the news, as if to shrug and say, "Really? Bribery in China? You must be kidding." Lucent shares were off a smidge, trading down $0.03 (0.67%) to $4.39.

The move does strike a blow to Lucent’s Asian operation at a time when competition for business in China is red-hot. The firings cast some doubt on Lucent’s recent success in China, which has been touted by Lucent executives and was the key to its financial performance in its last quarter (see China Deals Brighten Lucent's Day and China, Wireless Save Lucent .

Steve Levy, an analyst at Lehman Brothers, qualified the news as a minor negative.

”Our first reaction is that this is a headline negative for LU,” wrote Levy in a research note issued this morning. “For reference, Lucent's sales to China represent around 10 percent of total sales. We are optimistic that the reorganization and new policies implemented in Lucent's China operations should not materially disrupt business.”

Lucent started the audit of its global operations after discovering potential violations with the FCPA, it disclosed in the filing. It said these potential problems came to light after similar charges were reported in its operations in Saudi Arabia, which is the subject of a government investigation and a lawsuit between Lucent and Silki La Silki National Telecommunications Ltd. a consulting company that has sued Lucent (see Saudi Firm Sues Lucent for Bribery).

On an interim basis, Lucent’s Chinese operations will report to Robert Warstler, president of global sales, said the company.

— Scotti La Scotti Raynovich, US Editor, Light Reading

Scott Raynovich 12/5/2012 | 2:06:56 AM
re: Lucent Purges China Leaders >Does anybody know who these four people were?

Lucent was not naming the employees. In the story above, we named the individuals who most recently held those positions.
dodo 12/5/2012 | 2:06:56 AM
re: Lucent Purges China Leaders That's what is called "palm greasing"
This practice must have gone over the edge for Lucent to give the boot to 4 execs.
Machavelli 12/5/2012 | 2:06:53 AM
re: Lucent Purges China Leaders Dodo,

Not all bribery is illegal according to US law.

The Foreign Corruption Practices Act states it is illegal for a US corporation or individual to pay or compensate a foreign decision maker (or government official) to swing a major contract your way. In other words, the law is designed to prevent unfair competition.

Minor bribes: Like paying a custom official to expediate your shipment or paying a minor government official to do their job or do their faster is called a "grease payment" and is perfectly legal under USA law.

whyiswhy 12/5/2012 | 2:06:46 AM
re: Lucent Purges China Leaders Follow the money....

LU is just saving those sales bonuses they would have otherwise have had to pay to those dismissed. Of course, the funds will now have to go to the BOD, who have done such a noble thing by uncovering this high crime.

mdwdm 12/5/2012 | 2:06:44 AM
re: Lucent Purges China Leaders Follow the money is right in this case.

The money of the fled 8,000 is enough to heat up some local real estate market in LA. FBI knows
who is who(it is quite easy to spot them in
some places in LA). Canada is still refusing
to turn over someone who stole $1B to China.


Corruption crackdown led to hundreds of Communist party suicides

Jonathan Watts in Beijing
Friday January 30, 2004
The Guardian

More than 1,200 Communist party members killed themselves and 8,000 fled overseas during an anti-corruption crackdown in the first six months of last year, the Chinese media reported yesterday.

The extraordinary number of deaths and the flight of dirty money appears to have been the direct result of a drive by the new president, Hu Jintao, to curb the endemic graft that undermines the legitimacy of China's ruling party.

Despite the high toll, the clean-up campaign is thought to have barely scratched the surface of the problem. Last year top officials were punished at the rate of one a month, but most are too powerful to expose.

Miscarriages of justice and faked suicides are believed to be common. Among the most prominent alleged suicides was that of Zhu Shengwen, a former deputy mayor of the north-eastern city of Harbin, who was sent to jail for taking -ú62,000 of bribes.

The official version of his death is that he threw himself out of a prison window only months before he was due to be released on parole. His family dispute this, saying he was killed to cover up his investigation into embezzlement by officials.

The biggest target of investigators was Zhou Zhengyi, a Shanghai property tycoon, whose influential political contacts - thought to include the former president Ziang Zemin - have so far kept the prosecutors at bay. Instead, lower ranking party members have taken the brunt of the blame.

According to the state-run Wen Wei Po daily, 1,252 party members killed themselves, 8,371 absconded and 6,528 disappeared in the first half of 2003. Countless others were given the death penalty or sent to prison.

The worst affected province was the richest - Guangdong, where 1,240 cadres fled overseas with illicitly earned fortunes. Many are known to be the sons and daughters of party officials, who have exploited their parents' power to secure state assets.

President Hu is said to be planning new moves to extradite these "princelings" and seize their overseas assets, estimated at more than -ú3.8bn. In the latest scandal Cai Xiaohong, the son of a former justice minister, was arrested for selling state secrets to Britain.

During two decades of free market reform, the 65 million-strong party has maintained its grip on power but lost its ideological sense of mission, providing the ideal breeding ground for corruption.

Although the economy is growing at more than 8% a year, income gaps between the rich and poor are widening. Yet party officials are still paid according to an egalitarian scale that gives little recognition of their authority. The difference between the salaries of a junior clerk and a division chief is typically less than -ú5 a month.

During the heyday of China's revolution, the model Communist cadre was supposed to pursue the goal of a socialist utopia, work for the good of the people, and retire with the respect due to a lifelong servant of the country.

But today many are likely to buy their way up the career ladder, enrich themselves through bribes, and then either flee the country or kill themselves in disgrace.

The higher the position, the greater the potential for graft. In Shenyang last year a court heard how the post of transport bureau director had been bought for -ú16,500, while that of director of the tobacco monopoly bureau went for -ú13,000. The holders of both positions were given the death penalty.

OptixCal 12/5/2012 | 2:06:43 AM
re: Lucent Purges China Leaders wow...talk about getting caught with your hand in the cookier jar...
truelight 12/5/2012 | 2:06:39 AM
re: Lucent Purges China Leaders No big deal its the same as Enron, MCI, Tyco, martha......
flam 12/5/2012 | 2:06:28 AM
re: Lucent Purges China Leaders ... toss the hired help overboard.

dodo 12/5/2012 | 2:05:20 AM
re: Lucent Purges China Leaders sorry for the delay-was travelling
1. Michael Kwan -COO
2. Jason Chi- President, Chairman
3. Jackson Huang - Financial Chief

Don't know the identity of the Mktg chap
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