Alcatel-Lucent agrees to pay fines for China dealings

Alcatel-Lucent agrees to pay fines for providing Chinese government officials with free trips to Disneyland and other places.

Alcatel-Lucent has agreed to pay US$2.5 million in fines to resolve allegations that it provided Chinese government officials with free trips to Disneyland and other tourist attractions.

The company has to pay US$1 million to resolve U.S. Department of Justice charges that it violated the Foreign Corrupt Practices Act (FCPA) when providing travel and other perks to Chinese government officials, the DOJ said Friday. The company also agreed to pay a US$1.5 million civil fine to the US Securities and Exchange Commission.

The agreement with the DOJ wraps up a multiyear investigation into whether Lucent, before its November 2006 merger with Alcatel, provided things of value to the Chinese officials and improperly accounted for the expenses.

The company cooperated fully with the DOJ and SEC investigations, an Alcatel-Lucent spokeswoman said. The company is "glad to put the matter behind us" and looks forward to successful business dealings in China in the future, she said.

From about 2000 to 2003, Lucent spent millions of dollars on more than 300 trips for Chinese government officials that included sightseeing, entertainment and leisure, the DOJ said. The trips were approved by senior Lucent Chinese officials, with the support of Lucent employees in the U.S.

Lucent improperly recorded expenses for these trips and failed to implement internal controls to monitor the provision of travel and other things of value to Chinese officials, the DOJ said in a press release.

In 2002 and 2003, there were 24 Lucent-sponsored trips for Chinese government customers, and at least 12 trips were primarily for sightseeing, the DOJ said. The people participating in these trips were senior government officials, including the heads of state-owned telecommunications companies in Beijing and the leaders of provincial telecommunications subsidiaries.

Between 2000 and 2003, Lucent provided Chinese government officials with trips to the U.S., Europe, Australia and elsewhere that were often characterized as "factory inspections" or "training," the DOJ said. By 2001, Lucent had outsourced most of its manufacturing and no longer owned factories for its customers to tour. These trips were primarily sightseeing tours to locations such as Disneyland, Universal Studios and the Grand Canyon, and typically lasted 14 days and cost between US$25,000 and US$55,000 per trip, the DOJ said.

Lucent admits to all of this conduct in the agreement announced on Friday. The agreement also requires Lucent to adopt new or modify existing internal controls, policies and procedures. Those internal controls must ensure that Lucent keeps fair and accurate books, the DOJ said. The agency has agreed not to prosecute Lucent if it complies with all of the requirements in the agreement over a two-year term.

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