Alcatel-Lucent has agreed to pay $2.5 million in fines to resolve allegations
that it provided Chinese government officials with free trips to Disneyland
and other tourist attractions.

The company has to pay $1 million to resolve U.S. Department of Justice charges
that it violated the Foreign Corrupt Practices Act (FCPA) when providing travel
and other perks to Chinese government officials, the DOJ said Friday. The company
also agreed to pay a $1.5 million civil fine to the U.S. Securities and Exchange
Commission.

The agreement with the DOJ wraps up a multiyear investigation into whether
Lucent, before its November 2006 merger with Alcatel, provided things of value
to the Chinese officials and improperly accounted for the expenses.

The company cooperated fully with the DOJ and SEC investigations, an Alcatel-Lucent
spokeswoman said. The company is "glad to put the matter behind us"
and looks forward to successful business dealings in China in the future, she
said.

From about 2000 to 2003, Lucent spent millions of dollars on more than 300
trips for Chinese government officials that included sightseeing, entertainment
and leisure, the DOJ said. The trips were approved by senior Lucent Chinese
officials, with the support of Lucent employees in the U.S.

Lucent improperly recorded expenses for these trips and failed to implement
internal controls to monitor the provision of travel and other things of value
to Chinese officials, the DOJ said in a press release.

In 2002 and 2003, there were 24 Lucent-sponsored trips for Chinese government
customers, and at least 12 trips were primarily for sightseeing, the DOJ said.
The people participating in these trips were senior government officials, including
the heads of state-owned telecommunications companies in Beijing and the leaders
of provincial telecommunications subsidiaries.

Between 2000 and 2003, Lucent provided Chinese government officials with trips
to the U.S., Europe, Australia and elsewhere that were often characterized as
"factory inspections" or "training," the DOJ said. By 2001,
Lucent had outsourced most of its manufacturing and no longer owned factories
for its customers to tour. These trips were primarily sightseeing tours to locations
such as Disneyland, Universal Studios and the Grand Canyon, and typically lasted
14 days and cost between $25,000 and $55,000 per trip, the DOJ said.

Lucent admits to all of this conduct in the agreement announced on Friday.
The agreement also requires Lucent to adopt new or modify existing internal
controls, policies and procedures. Those internal controls must ensure that
Lucent keeps fair and accurate books, the DOJ said. The agency has agreed not
to prosecute Lucent if it complies with all of the requirements in the agreement
over a two-year term.

IDG News Service

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