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Wednesday, December 29, 2010

MACC says it will ‘verify’ Alcatel kickbacks

A filing in the United States’ Securities and Exchange Commission (SEC) said two Malaysian consultants were paid a total of US$700,000 for “non-public information” related to competitors’ pricing and bids. – Reuters file pic
KUALA LUMPUR, Dec 29 – The Malaysian Anti-Corruption Commission said today it will “verify with parties concerned” before proceeding with any potential probe into the Alcatel international bribery scandal despite the telecommunication giant’s admission that it had paid off Malaysian officials.

The Malaysian Insider reported today that the telecommunications giant had paid US$700,000 for “non-public information” on bids related to Celcom Malaysia’s 3G mobile services.

Telekom Malaysia Bhd (TM) has vowed to probe the bribery accusations which led to a US$85 million (RM263.12 million) contract for Alcatel Lucent SA, which sources said surfaced in 2007 but was never investigated.

Alcatel agreed on Monday to pay more than US$137 million to settle US charges that it paid millions of dollars in bribes to foreign officials to win business in Latin America and Asia.

The telecommunications equipment maker was accused of making payments to government officials in countries including Costa Rica, Honduras, Taiwan and Malaysia to win or keep contracts worth tens of millions of dollars, the SEC and Justice Department said.

The anti-graft body requested the media today not to speculate about the scandal.

“MACC views the allegations very seriously and will verify with the parties concerned to obtain details of the allegations before appropriate action can be taken.

“MACC seeks the cooperation of the media to not speculate before the details of this claim can be verified,” its corporate communications unit said in a statement.

A filing in the United States’ Securities and Exchange Commission (SEC) said two Malaysian consultants were paid a total of US$700,000 for “non-public information” related to competitors’ pricing and bids, believed to be for TM’s then subsidiary Celcom Malaysia’s new 3G mobile services which were launched in 2005.

“The matter was brought up as the deal did not follow procedure. But nothing was done then,” a source told The Malaysian Insider.

The Malaysian Insider understands that TM director Datuk Nur Jazlan Mohamed quit as audit committee chairman after the irregularities were discovered but not investigated. The Pulai MP who is now UDA chairman confirmed his resignation but declined to comment due to corporate confidentiality rules.

Celcom and its parent Telekom Malaysia International (TMI) were hived off from TM in 2008. TMI is now known as Axiata Bhd and is listed in local bourse Bursa Malaysia. Its chairman is Tan Sri Azman Mokhtar, who is also Khazanah’s managing director.

A company source said Alcatel won the deal to supply third-generation or 3G-related mobile services equipment despite the company not having experience in that sector of the industry. The equipment was later scrapped, the source added.

It is understood that there could be more cases of irregularities in TM acquisitions from Alcatel that were not covered by the SEC probe.

Between December 2001 and June 2006, the company used consultants who funnelled more than US$8 million in bribes to officials, and Alcatel also improperly hired third-party agents in countries like Nigeria to help win deals, authorities said.

Overall, the company admitted it earned about US$48.1 million in profits as a result of the improper payments, the US Justice Department said.

The company agreed to pay US$92 million to settle the criminal charges filed by the Justice Department and also pay more than US$45 million to settle the SEC’s civil charges.

In 2006, France’s Alcatel bought Lucent Technologies Inc, including its famous Bell Laboratories, which was the pioneer of many communications technologies. The company said the bribery violations occurred before the combination.

The filing on Malaysia titled “The Malaysia Bribery Scheme” was eight paragraphs long and reported that “from October 2004 to February 2006, Alcatel bribed government officials in Malaysia to obtain confidential information relating to a public tender that Alcatel ultimately won, the result of which yielded a telecommunications contract valued at approximately US$85 million.”

It noted that TM was owned by the government, who had the status of a “special shareholder” while most senior TM officers were political appointees, including the “Chairman and Director, the Chairman of the Board of the Tender Committee, and the Executive Director”.

“Between October 2004 and February 2006, Alcatel Malaysia personnel paid bribes to employees of Telekom Malaysia in exchange for non-public information. This non-public information included important documents and budget information relating to ongoing bids and competitor pricing information.

“Alcatel Malaysia’s management consented to these payments,” the filing said, adding “these bribes assisted Alcatel Malaysia in obtaining a contract with a potential value of US$85 million.”

The filing said the TM employees who received bribes were ‘foreign officials’ within the meaning of the US Foreign Corrupt Practises Act and “were in a significant position to influence the policy decisions Telekom Malaysia made.”

It added the Basel-based Alcatel Standard made significant lump-sum payments through US bank accounts to two consultants labelled “Malaysian Consultant A” and “Malaysian Consultant B”, purportedly for market research.

“Alcatel Standard paid US$200,000 to Malaysian Consultant A in 2005 for a series of ‘market reports’ describing conditions in the Malaysian telecommunications market. Similarly, Alcatel Standard paid US$500,000 to Malaysian Consultant B in 2005 for a ‘strategic intelligence report.

“However, the work product these consultants prepared could not justify the size of Alcatel Standard’s payments. In fact, Malaysian Consultant A and Malaysian Consultant B did not appear to render any legitimate services to Alcatel Malaysia in connection with these payments,” the filing said.

It added these consultants also worked for Alcatel Malaysia before formal agreements were finalised and executed, under what was called ‘gentlemen’s agreements’, which required that consulting agreements be entered into retroactively.

“This process allowed consultants to work for Alcatel Malaysia without being properly vetted through Alcatel Standard’s due diligence process,” it said.

The case is the latest in a series of bribery cases brought by the Obama administration to crack down on illegal payments by businesses to win contracts.

The cases are: USA v. Alcatel-Lucent France SA et al, 10-cr-20906 and Securities and Exchange Commission v. Alcatel Lucent SA, 10-cv-24620, in the US District Court for the Southern District of Florida. - Malaysian Insider

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