Lucent has entered an agreement with the Department of Justice and the Securities and Exchange Commission to pay a $ 2.5 million in fines to resolve allegations that it violated the Foreign Corrupt Practices Act (FCPA) by spending millions of dollars on approximately 315 trips for Chinese government officials that included primarily sightseeing, entertainment and leisure.
According to the DOJ, the 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. Lucent improperly recorded expenses for these trips in its books and records and failed to provide adequate internal controls to monitor the provision of travel and other things of value to Chinese government officials, the DOJ stated.
Lucent acknowledged that it provided Chinese government officials with pre-sale trips to the United States to attend seminars and visit Lucent facilities, as well as to engage in sightseeing, entertainment and leisure activities. In 2002 and 2003 alone, there were 24 Lucent-sponsored pre-sale trips for Chinese government customers. Of these, at least 12 trips were mostly for the purpose of sightseeing. Lucent spent over $1.3 million on at least 65 pre-sale visits between 2000 and 2003. The individuals participating in these trips were senior level government officials, including the heads of state-owned telecommunications companies in Beijing and the leaders of provincial telecommunications subsidiaries, the DOJ stated.
Between 2000 and 2003, Lucent also provided Chinese government officials with post-sale trips that were typically characterized as “factory inspections” or “training” in contracts with its Chinese government customers. By 2001, however, Lucent had outsourced most of its manufacturing and no longer had any Lucent factories for its customers to tour. Nevertheless, Lucent provided individuals with trips for “factory inspections” to the United States, Europe, Australia, Canada, Japan and other countries that involved little or no business content. These trips consisted primarily or entirely of sightseeing to locations such as Disneyland, Universal Studios, the Grand Canyon, and in cities such as Los Angeles, San Francisco, Las Vegas, Washington, D.C., and New York City, and typically lasted 14 days each and cost between $25,000 and $55,000 per trip, the DOJ stated.
In the agreement, Lucent admits to all of this conduct, as well as other instances of providing travel and educational opportunities to Chinese government officials and to the improper recording of those expenses in its corporate books and records. Lucent has agreed to pay a monetary penalty of $1 million to the United States Treasury. The agreement further requires Lucent to adopt new or modify existing internal controls, policies and procedures. Those enhanced internal controls must ensure that Lucent makes and keeps fair and accurate books, records and accounts, as well as a rigorous anti-corruption compliance code, standards and procedures designed to detect and deter violations of the FCPA and other applicable anti-corruption laws. The Justice Department has agreed not to prosecute Lucent if it complies with all of the requirements contained in the agreement over a two-year term.
In a related action, the SEC has filed a settled complaint against Lucent. Lucent consented to the entry of a permanent injunction and agreed to pay $1.5 million in civil penalties in connection with similar conduct.
