Case 3-Lucent Technologies: What Does FCPA Stand for Again? (30 points Read \"Lu

Question

Case 3-Lucent Technologies: What Does FCPA Stand for Again? (30 points Read "Lucent Technologies: What Does FCPA Stand for Again?" pages 317-319 in Understanding Business Ethics. Thoroughly answer the questions that follow the Case Summary below Case Summary The Lucent Technologies case is an excellent example to show how the actions by one party to guarantee a contract from another party can slowly move from being "helpful” to giving bribes Lucent Technologies was very helpful” to Dr Ali Al-Johan by flying hirn from Saudi Arabia to Seattle for cancer treatment and donated $2 million to the cancer center. Dr. Al-Johani was in charge of making the decisions on the type of telecommunications that would be used in Saudi Arabia. One of Lucent's former partners in Saudi Arabia, Silki-La-Silki sued Lucent because Lucent had taken over the subcontracting finction that Silki-La-Silki had previously performed Silki-La-Silki claimed that Lucent used its influence it had with the Saudi government to have the Saudis cancel the subcontract with Silki-La-Silki. Silki-La-Silki claimed that Lucent was guilty of extortion and bribery by paying decision makers within the Saudi government in order to receive preferred treatment when telecommunications contracts were going up for bid 607-26-3

Explanation / Answer

1. Explain the Foreign Corrupt Practices Act

Purpose

The Foreign Corrupt Practices Act (FCPA), enacted in 1977, generally prohibits the payment of bribes to foreign officials to assist in obtaining or retaining business.

Coverage Area

The FCPA can apply to prohibited conduct anywhere in the world and extends to publicly traded companies and their officers, directors, employees, stockholders, and agents. Agents can include third party agents, consultants, distributors, joint-venture partners, and others.

Requirements

The FCPA also requires issuers to maintain accurate books and records and have a system of internal controls sufficient to, among other things, provide reasonable assurances that transactions are executed and assets are accessed and accounted for in accordance with management's authorization.

Sanctions

The US Securities & Exchange Commission (SEC) may bring civil enforcement actions for violations of the anti-bribery or accounting provisions of the FCPA.

Penalties

Repay the ill-gotten gains plus pay prejudgment interest and substantial civil penalties.

Companies may also be subject to oversight by an independent consultant.

Enforcers

The US Securities & Exchange Commission (SEC) and the Department of Justice

Source: https://www.sec.gov/spotlight/foreign-corrupt-practices-act.shtml

2. Why would Lucent’s top management get involved with these types of arrangements?

Lucent bribed a state official in the late 1990s to win networking business with Saudi Telecom Co. (STC). Lucent paid $15 million in bribes to Ali Al-Johani, a former minister of Saudi Arabia's Ministry of Post Telephone and Telegraph. In return, he allegedly encouraged the STC, which his office oversaw during its privatization in 1998, to make decisions in favor of Lucent. Lucent was given permission to end a contract it had signed with the National Group, costing it more that $63 million in losses.

Lucent profited a great deal in the late 1990s through 2001 from its relationship with STC. In a June 1998 press release, Lucent announced it had been awarded two contracts with STC valued at a total of $810 million. STC spent $699 million on Lucent gear to build its GSM mobile phone network. Lucent was also awarded a $111 million contract to modernize STC's telephone switch systems, covering more than 900,000 telephone lines. More Lucent/STC contracts, totaling over $400 million, followed in 2001 for fixed network expansion, optical networking, data infrastructure, and GSM equipment.

Alcatel pursued many of its business opportunities around the world through the use of third-party agents and consultants. 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 company adopted a de-centralized structure and approval process permitted corruption to occur, as the local employees were more interested in obtaining business than ensuring that business was won ethically and legally

Source: http://old.themoscowtimes.com/sitemap/free/2003/8/article/lucent-caught-in-15m-saudi-bribery-probe/236372.html

http://fcpaprofessor.blogspot.in/2011/01/analyzing-alcatel-lucent_06.html

https://www.albawaba.com/business/us-targets-lucent-technologies-saudi-bribery-probe

3. Do you think Lucent’s top management properly examined the consequences of their actions? Explain.

Lucent’s top management was focused on gaining business and increasing its profitability. They failed to understand the underlying sanctions and penalties of FCPA and the impact on good will of the company if the bribery and corrupt practices come to the limelight. Lucent failed to,

These failures indicate that the company had internal control problems which led to the violation of FCPA.        

Source: https://blog.theodorewatson.com/foreign-corrupt-practices-act-fcpa-penalties/

http://fcpaprofessor.blogspot.in/2011/01/analyzing-alcatel-lucent_06.html

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