Risk & Compliance

Alcatel-Lucent Settles Its Own “Travel-Gate”

Before merging with the French telecom giant, Lucent allegedly spent $10 million in three years entertaining Chinese officials.
Stephen TaubDecember 26, 2007

Alcatel-Lucent has agreed to pay $2.5 million to settle bribery charges with United States federal regulators. The French telecommunication giant will pay a $1.5 million civil penalty to the Securities and Exchange Commission and a $1 million fine as part of a non-prosecution agreement with the U.S. Department of Justice.

The settlement relates to payments made by Lucent Technologies, before it merged with Alcatel in 2006, to cover the travel and entertainment expenses of Chinese officials. The SEC’s complaint alleges that from at least 2000 to 2003, Lucent spent over $10 million on about 1,000 Chinese foreign officials who were traveling to the United States and elsewhere.

The commission also claims that the majority of the trips were ostensibly designed to allow the Chinese officials to inspect Lucent’s factories and gain experience using Lucent equipment. However, the SEC charges that on many of the trips, the Chinese officials spent little or no time Lucent’s facilities. Instead, they visited tourist destinations such as Hawaii, Las Vegas, the Grand Canyon, Niagara Falls, Disney World, Universal Studios, and New York City.

According to the SEC’s claim, the Chinese government enterprises for whom the officials worked were either entities to which Lucent was seeking to sell its equipment and services or existing Lucent customers. The Chinese officials who traveled at Lucent’s expense were often identified by Lucent in its internal documents as “decision makers” with respect to awarding new business, the regulator noted.

The commission alleged that Lucent lacked the internal controls to detect and prevent trips that were intended for sightseeing, entertainment and leisure, rather than business purposes. In addition, Lucent failed, for years, to properly train its officers and employees to understand and appreciate the nature and status of its customers in China in the context of the Foreign Corrupt Practices Act, the regulator charges.