Auditing

Lucent Fires Four on Bribery Suspicions

A finance manager was among the China-based executives dismissed for possible violations of the Foreign Corrupt Practices Act.
Stephen TaubApril 7, 2004

Telecommunications equipment maker Lucent Technologies announced in a regulatory filing that it has fired four executives based in China due to possible violations of the Foreign Corrupt Practices Act (FCPA).

The names of the fired executives were not disclosed, but Lucent’s filing with the Securities and Exchange Commission identified them as the president, the chief operating officer, a marketing executive, and a finance manager for its China operations. The possible violations were not detailed either, but The New York Times notes that the FCPA forbids U.S. citizens or their agents from bribing foreign officials to secure or retain business, and it requires accurate recordkeeping and adequate controls for company transactions.

According to Lucent, the deficiencies in China were uncovered during the company’s FCPA compliance audits stemming from an investigation into its practices in Saudi Arabia. In an August 2003 filing, the Murray Hill, New Jersey, company announced that it had been informed of an investigation by the Department of Justice and the SEC following allegations made by the National Group for Communications and Computers Ltd., a Saudi-based company. Lucent allegedly paid $15 million in bribes to a Saudi minister in exchange for favorable treatment, according to claims by National Group.

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After its August announcement, Lucent initiated compliance audits of its operations in 23 foreign countries, including Brazil, China, India, Indonesia, the Philippines, and Russia; in a U.S.-based operation that supports sales in China; and in other functions in the United States that support non-U.S. activities. These examinations, stated Lucent, confirmed the effectiveness of the company’s FCPA compliance controls and policies in all of these operations and functions other than China.

The company added that it has improved its controls and policies to help prevent such incidents from recurring. In addition, Lucent said that it has reported these findings to the Justice Department and the SEC and is cooperating with those agencies.

The company’s China operations will report to Robert Warstler, president of global sales, until a new president is named.

Lucent stated that it believes the deficiencies and incidents did not have a material impact on its financial results. The company added, however, that it cannot yet ascertain whether there will be an impact on the company’s future business operations in China.