DOJ, SEC hit Lucent with $2.5M in fines

The U.S. Department of Justice and the U.S. Securities and Exchange Commission hit Lucent Technologies Inc. with separate fines, totaling $2.5 million, for providing goods and services to Chinese government officials and improperly accounting for them in company records.

Lucent entered an agreement with the DOJ late last week to resolve allegations that it violated the Foreign Corrupt Practices Act (FCPA), according to the U.S. Attorney's Office in Washington. The agreement concluded what the government called a "multiyear investigation" into whether Lucent, before its November 2006 merger with Alcatel SA, provided $1.3 million worth of travel to Chinese government officials and then improperly accounted for those corporate expenditures on behalf of the Chinese officials in company books and records.

The DOJ also noted that in a related matter, the SEC filed a settled complaint against Lucent late last week as well. Lucent consented to the entry of a permanent injunction and agreed to pay $1.5 million in civil penalties in connection with similar conduct.

In the agreement, Lucent admitted to the government's findings, according to a DOJ statement.

"We have cooperated fully with the SEC and the DOJ throughout the investigation, and we're glad to now put this matter behind us," Mary Ward, a Lucent spokesperson, told Computerworld. "We look forward to continued and successful business dealings with China."

Alcatel, which was based in France, had a long, successful history with China before the company merged with Lucent. Today, Alcatel Shanghai Bell is the flagship company of Alcatel-Lucent in China, according to a company Web site. Alcatel-Lucent has about 10,000 employees, with more than 4,000 of them focused on research and development in China.

According to the DOJ, from 2000 to 2003, Lucent spent millions of dollars on about 315 trips, which mostly were for sightseeing and leisure for Chinese government officials. "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.," noted the DOJ in a written report.

The global communications company failed to provide internal controls to monitor the provision of travel and other things of value to officials with the Chinese government, U.S. government officials charged.

Lucent acknowledged to the DOJ that the company provided Chinese government officials with pre-Alcatel-sale trips to the U.S. In 2002 and 2003 alone, there were 24 Lucent-sponsored, presale trips for Chinese government customers. Of those 24 trips, at least 12 were largely for sightseeing. Lucent, according to government records, spent more than $1.3 million on at least 65 presale visits in a three-year period.

The DOJ also noted that Lucent tried to account for some of the trips to the U.S., Europe, Australia and Canada by saying Chinese officials needed to inspect its factories. However, by 2001, the company had outsourced most of its manufacturing and no longer had any Lucent factories for anyone to tour. Instead of touring factories, the government pointed out that officials mainly were visiting tourist spots like Disneyland, Universal Studios and the Grand Canyon. Each trip, the DOJ reported, lasted about 14 days and cost between $25,000 and $55,000.

Copyright © 2007 IDG Communications, Inc.

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