Paris-based telecoms equipment giant Alcatel-Lucent SA and three of its subsidiaries have agreed to pay a combined $92 million penalty to settle a Foreign Corrupt Practices Act (FCPA) investigation into the global sales practice of Alcatel S.A. prior to its 2006 merger with Lucent Technologies Inc.

According to the Department of Justice (DOJ), Alcatel S.A. was charged with one count of violating the internal control provisions of the FCPA, and one count of violating the books and records provisions of the FCPA while its three subsidiaries - Alcatel-Lucent France S.A. (formerly known as Alcatel CIT S.A.), Alcatel-Lucent Trade International A.G. (formerly known as Alcatel Standard A.G.) and Alcatel Centroamerica S.A. (formerly known as Alcatel de Costa Rica S.A.) were each charged with conspiring to violate the anti-bribery, books and records, and internal controls provisions of the FCPA.

According to court documents, prior to Alcatel's merger with Lucent, the company pursued many of its business opportunities around the world through its subsidiaries like Alcatel CIT and Alcatel de Costa Rica using third-party agents and consultants who were retained by Alcatel Standard. This business model was shown to be prone to corruption, as consultants were repeatedly used as conduits for bribe payments to foreign officials and business executives of private customers to obtain or retain business in many countries, the DOJ said.

The three subsidiaries paid millions of dollars in improper payments to foreign officials for the purpose of obtaining and retaining business in Costa Rica, Honduras, Malaysia and Taiwan. In addition to the improper payments, Alcatel-Lucent also admitted that it violated the internal controls and books and records provisions of the FCPA related to the hiring of third-party agents in Kenya, Nigeria, Bangladesh, Ecuador, Nicaragua, Angola, Ivory Coast, Uganda and Mali. Overall, Alcatel-Lucent admitted that the company earned approximately $48.1 million in profits as a result of these improper payments.

Each of the three subsidiaries has pleaded guilty to the charges.

The DOJ and Alcatel-Lucent have also agreed to resolve the charges by entering into a deferred prosecution agreement for a term of three years.

In addition to the $92 million penalty, Alcatel-Lucent and its three subsidiaries have agreed to implement rigorous compliance enhancements. Alcatel-Lucent has also agreed to retain an independent compliance monitor for a three-year period to oversee the company's implementation and maintenance of an enhanced FCPA compliance program and to submit yearly reports to the DOJ.

The charging documents and penalty reflect, among other things, that there was limited and inadequate cooperation by the company for a substantial period of time, but that after the merger, Alcatel-Lucent substantially improved its cooperation with the department's investigation. In addition, the charging documents also credit Alcatel-Lucent for, on its own initiative and at a substantial financial cost, making an unprecedented pledge to stop using third-party sales and marketing agents in conducting its worldwide business, the DOJ said in a statement.

In a related matter, the U.S. Securities and Exchange Commission (SEC) has also reached a settlement filed on Monday in which Alcatel-Lucent has consented to the entry of a permanent injunction against FCPA violations and has agreed to pay $45.37 million in disgorgement and prejudgment interest. Alcatel-Lucent has also agreed with the SEC to comply with certain undertakings regarding its FCPA compliance program.

Early next year, the settlements will be submitted to the U.S. Federal Court for formal approval.

“We take responsibility for and regret what happened and have implemented policies and procedures to prevent these violations from happening again. The violations largely occurred prior to the merger of Alcatel and Lucent Technologies and involved improper activities in several countries, Steve Reynolds, general counsel of Alcatel said in a statement.

These settlements resolve the company's FCPA liability with the DOJ and SEC. We are pleased to have reached these settlements and look forward to putting these matters behind us, he added.