Victims in federal criminal cases typically get restitution. After an SEC case they may get payments from a fair fund. Not in FCPA cases. In FCPA cases the billions of dollars DOJ and the SEC now collect annually in settlements are paid to the U.S. treasury. This may change.
In the Alcatel-Lucent criminal FCPA case a motion was recently filed by Instituto Costaricense de Electricidad (“ICE”), the Costra Rican power company whose officials were bribed. U.S. v. Alcatel-Lucent S.A., Case No. CR-20907 (S.D. Fla. Dec. 27, 2010); see also SEC v. Alcatel-Lucent, S.A., Case No. 1:10-cv-24620 (S.D. Fla. Dec. 27, 2010). ICE is objecting to the plea agreement and requests that the court protect its rights as a victim since DOJ did not.
The FCPA cases: The Department of Justice and the SEC settled FCPA cases with Alcantel-Lucent S.A., a company formed in a November 30, 2006 merger involving Paris, France based Alcantel, S.A. and U.S. based Lucent Technologies, Inc. The cases allege violations of the anti-bribery, books and records and internal control provisions of the FCPA between December 2001 and June 2006 by Alcantel-Lucent S.A. subsidiaries.
Prior to the 2006 merger Alcatel, a French telecommunications equipment and services company, conducted much of its business through subsidiaries. Those subsidiaries in turn retained local business agents who helped the company secure business. Using this business model, the company paid bribes in Costa Rica, Honduras, Malaysia and Taiwan. The cases also involved violations in other countries (here).
Bribes were paid in Costa Rica according to the court papers. There Alcatel CIT (now known as Alcatel-Lucent France S.A.) obtained three contracts worth more than $300 million which yielded profits of over $23 million. About $18 million was paid to two consultants retained by Alcatel Standard A.G. (now known as Alcatel-Lucent Trade International A.G.). About half of that sum was passed to government officials. Phony invoices were used to conceal the scheme. ICE was the company involved.
To settle with DOJ, the parent company entered into a deferred prosecution agreement. The two count information charged violations of the FCPA internal controls and books and records provisions. Under the terms of the agreement, the company will pay a $92 million criminal fine and a monitor will be installed for three years. In addition, subsidiaries Alcatel-Lucent France S.A., Alcatel-Lucent Trade International A.G., and Alcatel Centroamerica S.A. (formerly known as Alcatel de Costa Rica S.A.) each agreed to plead guilty to a one count information charging conspiracy to violate the anti-bribery, books and records and internal control provisions of the FCPA. The company also agreed to pay $45.372 million as part of its settlement with the SEC. In January 2010, Alcatel-Lucent agreed to pay $10 million to settle a corruption case brought by the government of Costa Rica for bribing government officials. The case is the first in Costa Rica’s history in which a foreign corporation paid damages to the government for corruption.
The motion: ICE’s motion may well be the first of its kind and, depending on its resolution, the beginning of new settlement procedures in FCPA cases. The company requests that the court reject the DOJ settlement. According to the motion an order should be entered declaring the power company a victim of the criminal conduct of Alcatel-Lucent and its subsidiaries. In addition, ICE is seeking order stating that it is entitled to all the rights of a victim including restitution. Accordingly, a full pre-sentence report should be prepared and ICE would be permitted to present evidence of its damages to the Probation officer so it can secure restitution. Finally, the motion requests an order requiring DOJ to comply with the provisions of Section 3771 of Title 18 and its obligations to ensure that ICE secures all the rights of a victim of the crimes involved in the case.
The motion is based on ICE’s contention that it was victimized and damaged by the corrupt conduct of Alcant-Lucent. According to the motion papers ICE is an autonomous legal entity established by Costa Rica in 1949. The company is responsible for providing electrical power and telecommunications services in Costa Rica. In that country Alcant-Lucent, through its subsidiary, used three consultants. Money was funneled from the company to the consultants that was used to corruptly induce five decision makers affiliated with ICE to award the Alcant-Lucent telecommunications contracts. Over $18 million was given to the consultants who paid the bribes over the course of several years. The contracts were valued at over $400 million.
The activities of Alcant-Lucent were first revealed in the Costa Rican press in 2004 according to the motion papers. An official of Alcant-Lucent admitted paying bribes to an ICE official. ICE promptly terminated the five individuals involved. All were prosecuted by the Costa Rican government with the assistance of the company. All of this conduct caused huge losses for ICE according to the motion.
During the years of investigation neither DOJ nor the SEC contacted ICE regarding these matters. The company thus contacted both, identifying itself as a victim. DOJ referred to a policy of not recognizing foreign governments although no such written policy has been identified. The SEC denied a request for a fair fund without offering any explanation.
If this motion is granted the position of DOJ and perhaps the SEC may well change in the future. Indeed, settlement procedures in FCPA cases may well change significantly as a result of the motion brought by ICE and its Florida counsel, Wiand Guerra King P.L.