Admission by Alcatel-Lucent of improper payments to obtain telecom contracts in six African countries has shown that corruption in the region’s telecom sector is still rife despite targeted efforts to punish companies and government officials involved in the practice.
The company used third parties in Kenya, Nigeria, Angola, Ivory Coast, Uganda and Mali who acted as conduits for bribing customers and officials in order to obtain telecom contracts. Alcatel S.A. and three of its subsidiaries have agreed to pay a combined US$92 million penalty to resolve a Foreign Corrupt Practices Act (FCPA) led by the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations into the worldwide sales practices of Alcatel S.A. prior to its 2006 merger with Lucent Technologies to form Alcatel-Lucent.
While the bribes were also given out to government officials in other countries besides Africa, the region constituted the majority of countries whose government officials were bribed for telecom contracts resulting in the supply contracts including those funded by the World Bank not given on merit. Many African countries are modernizing their telecom sectors in order to cope with the growing need for improved communication but the selection process of suppliers is always marred by corruption allegations as government officials are bribed by international companies for contracts.
Alcatel-Lucent is the second international company to be taken to court in three years over bribes aimed at obtaining telecom contracts in Africa after Siemens of Germany.
On Dec. 27 last year, the U.S. Department of Justice (DOJ) in the U.S. District Court for the Southern District of Florida charged Alcatel-Lucent with one count of violating the internal control provision of FCPA and one count of violating the books and records provisions of the FCPA.
However, DOJ and Alcatel-Lucent agreed to resolve the charges by entering into a deferred prosecution for three years. The three Alcatel subsidiaries, Alcatel-Lucent France, Alcatel-Lucent Trade International, and Alcatel Centroamerica were charged with criminal information with conspiring to violate the anti-bribery, books and records and internal control provisions of the FCPA. Each of the three subsidiaries agreed to plead guilty to the charges.
Alcatel-Lucent admitted that the company earned approximately $48.1 million in profits as a result of the improper payments to government officials for contracts.
“For a long time now, it’s really been difficulty to understand how Alcatel has been able to get many contracts in Africa including supply contracts for undersea cables. Now it’s clear,” said Amos Kalunga, a telecom analyst from the Computer Society of Zambia.
In 2007, Siemens was convicted by a German court for paying more than $14 million in bribes to three former Nigerian communication ministers and other officials after two company officials were found guilty of corruption. The Nigerian government later canceled the supply contract that was given and suspended dealings with Siemens.
Siemens also agreed to have paid bribes to many other government officials in the region including Egypt and Cameroon in order to obtain telecom contracts supported by the World Bank. The company later committed to paying $100 million to support the bank’s global effort over the next 15 years to fight corruption.
As Siemens, Alcatel-Lucent and its three subsidiaries have also agreed to implement rigorous compliance enhancements in addition to the $92 million penalty.