Please explain Alcatel bribes, Turnbull tells Quigley


Shadow Communications Minister Malcolm Turnbull has demanded an explanation from the chief executive and chief financial officers of the National Broadband Network Company over the bribery scandal which has engulfed their former employer and now key equipment supplier, French networking giant Alcatel-Lucent.

The US Securities and Exchange Commission revealed this week that Alcatel-Lucent had paid US$137 million to settle criminal and other charges arising from what it said were bribes paid to government officials in South-East Asia and Latin America between 2001 and 2006, with the aim of securing telecommunications contracts.

During that period, both NBN Co CEO Mike Quigley and CFO Jean-Pascal Beaufret held top-level roles in the French company, but NBN Co has issued a statement denying any links between the pair and the bribery, and the SEC did not mention either in its legal documents.

“NBN Co claims neither Mr Quigley nor Mr Beaufret were aware of these bribery schemes,” said Turnbull in a statement issued this afternoon. “But both men owe the Australian public a far more detailed explanation.”

Turnbull highlighted the SEC’s statement that Alcatel-Lucent had “a lax corporate control environment” that had allowed the improper conduict to take place, with the company not detecting or investigating numerous red flags regarding such activities.

“Each must explain how they could serve in such senior positions and be unaware of millions of dollars of bribes flowing to government officials in Costa Rica, Honduras, Taiwan and Malaysia to secure sales of Alcatel equipment,” claimed Turnbull. “They must also outline what financial controls are in place at NBN Co to ensure malpractice cannot be overlooked by senior management, as their denials of any knowledge of the bribery schemes suggest it was at Alcatel.”

Turnbull questioned what formal recruitment and vetting processes were used to hire the pair, and whether the Labor Government was aware, “as it ought to have been”, of the investigation and if so, how it established the two executives were not directly involved or indirectly responsible for what the SEC described as a “lax corporate control environment”.

In addition, the Liberal MP questioned what steps the Government and NBN Co had taken to ensure strong corporate controls within NBN Co, and the company’s relationship with supplier Alcatel-Lucent and any relationship with individuals employed by the French company during the period when the alleged bribes took place.

In June, Alcatel-Lucent won a contract to supply NBN Co with up to $1.5 billion of optical and ethernet aggregation equipment. However, the company has stated consistently that neither Quigley nor Beaufret were involved in selecting the company, due to potential conflicts of interest.

The office of Communications Minister Stephen Conroy has not yet responded to an invitation today to respond to Turnbull’s comments. However, NBN Co issued a statement denying any links between its executives and the bribery case.

“Neither Mike Quigley nor Jean-Pascal Beaufret had any involvement in the matters which were the subject of the recent US Securities and Exchange Commission announcement relating to Alcatel-Lucent,” the company said. “In fact the actions of a number of individual Alcatel Lucent employees detailed in the SEC’s statement fell outside the accountability and jurisdiction of both Mr Quigley and Mr Beaufret.”

NBN Co stated that if the US regulators had believed either Quigley or Beaufret were accountable with regards to the matter, they would have said so, and “presumably sought to interview them” as part of the investigation.

“They did not,” the company said. “The US authorities make no finding or allegation against either Mr Quigley or Mr Beaufret.”

Image credit: Office of Malcolm Turnbull


  1. Seriously Malcolm.

    If you were orchestrating sales in a company like Alcatel-Lucent, and wanted to start an illegal scheme of bribes/kickbacks to help win more sales, and earn more commissions for your increased sales, would you go around telling the CEO and CFO all about it?

    Quigley and Beaufret have not be implicated in any way whatsoever.

    It’s your “job” to attack the NBN, but you’ve misfired on this one.

  2. Pathetic, dishonourable and insulting smear tactics from the Coalition’s propaganda expert, Mr Turnball. What else is new?

  3. What’s wrong in questioning and finding out the corporate controls setup by NBNCo? The CEO & CFO were ex Alcatel and Alcatel was the sole winner of a $1.5billion dollar contract!!!

    • Nothing wrong at all with questioning them about it.

      However, NBN Co have responded, and the SEC have confirmed that Quigley and Beaufret were not implicated.

      “The US authorities make no finding or allegation against either Mr Quigley or Mr Beaufret” seems a fairly clear statement to me. Unless Turnbull has some other piece of evidence/information regarding the matter, his comments are fairly irrelevant.

  4. It is more than likely that everything is legit, but the number of probity issues is starting to mount. Having probity issues doesn’t mean that anything is wrong, it just means that things aren’t obviously and proveably right.

    Issue 1: A company headed by ex-Alcatel guys selects an Alcatel solution, and one that isn’t selling brilliantly well in the wider market.

    Issue 2: NBNCo contracts with a lot of people who know the ex-Alcatel guys well. This could be because these guys “get it” and understand the vision, but outwardly it doesn’t look obviously good.

    Issue 3: NBNCo has gone through a vast amount of money ($600M+) and has connected remarkably few subscribers (400-ish?). I would have thought that normally vendors seeking to sell 10M lines worth of a solution would be falling over each other and not require up-front payments to be interested.

    None of this points to Quigley et al having done anything wrong. It does mean that their probity people haven’t done their job to a standard that would prevent these questions being raised. Now that the questions are raised they need to be investigated.

    • Issue 1 – the solution was selected after a competitive tender, all of the major players operating in the market for this kind of solution submitted bids. Nobody – (particularly the failed tenderers) – has made any suggestion that anything untoward occurred.

      Issue 2 – NBN Co also contracts with other hardware and software vendors that are NOT Alcatel-Lucent, including Cisco, EMC, SAP, Oracle, VMWare and Huawei.

      Issue 3 – Much of the $600m spent already involves setting up the company, establishing base infrastructure, paying salaries and other expenses. This is a company like any other – initial startup costs are always going to be relatively high per customer while the services are designed, tendered, acquired, and finally established. They have to build two data centres, provisioning systems, corporate systems, payroll systems. You have to understand how a telco works before you can complain that $600m has only connected a few hundred customers in a pilot rollout.

  5. I understand that a company will encounter some setup costs. $600M is 12,000 man years of work at the average wage. The company employs 300-odd staff and has existed for a little over a year. I do have a deep and long understanding of telco environments. It is time to ask some questions. The path this company is following seems most unusual.

  6. Quigley was involved and responsible. If not criminal, then inept and incompetent.
    People here are getting hung up on the protocol of how a large (non USA) corporation is caught and then the people responsible like Quigley are giving time to make and exit, find a bolthole.
    And we see the same culture of secrecy and deceit occuring again in the NBN.
    Quigley is not even a good CTO, let alone capable of being a CEO of a 40b enterprise.
    He has already proved incompetent and incapable of providing public confidence or trust.
    The facts are re Quigley – to paraphrase other reporting on this in quotes so its as found.
    “The actual court document in the United States says this of the bribes Alcatel paid:
    The respective heads of several Alcatel subsidiaries and geographic regions, some of whom reported directly to Alcatel’s executive committee authorized extremely high commission payments ………
    All these high-level employees therefore knew, or were severely reckless in not knowing, that Alcatel paid bribes to foreign government officials”. (ie Quigley was implicated as responsible and accountable)

    It also said this.
    “Unless restrained, Alcatel is reasonably likely to continue to engage in the acts and practices set forth in this complain and in acts and practices of similar purport and object”.
    Alcatel is desperate for fixed line business – in world shifting to mobile, new forms of communication and cheaper and better alternatives especially from Asia..
    And what big mistake did Australia make, it handed the money and influence keys to a basically an inept if not corrupted set of spivs and crooks already fleeing from their last scandal and a decade of tax welfare to an already obselete design and set of vendors. This is a far bigger crime.
    “NBNCo says in its press release about the charges that “neither Mike Quigley nor CFO Jean-Pascal Beaufret had ‘any involvement’ in the matters that were the subject of the SEC announcement……the actions of a number of individual Alcatel Lucent employees detailed in the SEC’s statement fell outside the accountability and jurisdiction of both Mr Quigley and Mr Beaufret.””

    But that is just Labor NBN desperate spin wording because the facts actually are :
    “But the SEC says Alcatel was run by an executive committee made up of very senior officers, including the CEO and CFO.
    In every bribery scheme described in this complaint, the head of the relevant subsidiaries and geographic regions were aware of or ignored significant red flags that indicated that Alcatel employees were using business consultants to pay bribes to foreign government officials.”
    The crimes that Alcatel has been fined over happened because of incomptent if not corrupt management. Quigley and Beaufret WERE the Management at the time.
    So here we have the NBN just like the BER, Pink Batts, Green Loans, failure in Health (again) and all the other deciet of this Gillard Labor govt.
    Conroy lied about his associated to Kaiser (found guilty by the Criminal Misconduct Commission).
    They lied about Tasmania, later Anderson on the Board ‘had to go after it became a shocking mess.
    They lied about speeds, pricing, packaging, rollout – and very selective use of the truth or ommission of facts they knew were relevant but unrevealed. (the ‘business plan’ is full evidence of that).
    Quigley has shown here to be a liar and also incompetent.
    So the NBN is a farrago of lies, deciet, crooks, spivs, incompetence, secrecy.
    When is the Royal Commission ?

  7. lots of comments on this.
    Judge for yourself. Was Quigley knowingly corrupt or just incompetent?
    Here is the fuller text of the findings edited only to reduce the text.
    Alcatel bribed Costa Rican Presidents and went over the line in Malaysia, Taiwan, Honduras, Kenya, Nigeria, Bangladesh, Ecuador, Nicaragua, Angola, Ivory Coast, Uganda and Mali. No senior executives have been criminally charged, although few believe they weren’t aware of what was going on – especially Mike Quigley.
    Australian politicians battling the NBN finally realized that NBN head Mike Quigley was in charge of much of Alcatel when the bribes were paid. They probably will be reluctant to fire him (but may have little choice otherwise).
    The opposition leader in Parliament just attacked him. Investigations have (finally) begun in Malaysia and other countries. Alcatel meanwhile has terminated the use of sales agents and other consultants that are frequently used as middlemen. Maybe why they’ve lost some big contracts in India lately.
    Department of Justice findings
    Office of Public Affairs
    Monday, December 27, 2010
    Alcatel-Lucent S.A. and Three Subsidiaries Agree to Pay $92 Million to Resolve Foreign Corrupt Practices Act Investigation
    Coordinated Enforcement Actions by Department of Justice and SEC Result in Penalties of more than $137 Million
    WASHINGTON – Alcatel-Lucent S.A. and three of its subsidiaries have agreed to pay a combined $92 million penalty to resolve a Foreign Corrupt Practices Act (FCPA) investigation into the worldwide sales practices of Alcatel S.A. prior to its 2006 merger with Lucent Technologies Inc., the Department of Justice announced.

    As part of the agreed resolution, the department today filed a criminal information in U.S. District Court for the Southern District of Florida charging Alcatel-Lucent 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. The department and Alcatel-Lucent agreed to resolve the charges by entering into a deferred prosecution agreement for a term of three years.

    The department also filed a criminal information charging 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. The three subsidiaries were each charged with conspiring to violate the anti-bribery, books and records, and internal controls provisions of the FCPA. Each of the three subsidiaries has agreed to plead guilty to the charges.

    “Foreign bribery weakens economic development, erodes confidence in the marketplace and distorts competition,” said Mythili Raman, Principal Deputy Assistant Attorney General of the Criminal Division. “The resolutions announced today and our related prosecutions of corporate executives demonstrate our sustained commitment to combating such conduct wherever we find it.”

    In addition to the $92 million penalty, Alcatel-Lucent and its three subsidiaries agreed to implement rigorous compliance enhancements. Alcatel-Lucent 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 Department of Justice. 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.

    According to court documents, Alcatel-Lucent was formed in late 2006 after Lucent Technologies merged with Alcatel, a French telecommunications equipment and services company. Starting in the 1990s and continuing through late 2006, Alcatel pursued many of its business opportunities around the world through 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.

    Alcatel-Lucent’s 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.

    Specifically, Alcatel CIT won three contracts in Costa Rica worth a combined total of more than $300 million as a result of corrupt payments to government officials and from which Alcatel reaped a profit of more than $23 million, according to court documents. Alcatel CIT wired more than $18 million to two consultants in Costa Rica, which had been retained by Alcatel Standard, in connection with obtaining business in that country. According to court documents, more than half of this money was then passed on by the consultants to various Costa Rican government officials for assisting Alcatel CIT and Alcatel de Costa Rica in obtaining and retaining business. As part of the scheme, the consultants created phony invoices that they then submitted to Alcatel CIT. According to court documents, senior Alcatel executives approved the retention of and payments to the consultants despite obvious indications that the consultants were performing little or no legitimate work.

    In addition, according to court documents, Alcatel Standard hired a consultant in Honduras who was a perfume distributor with no experience in telecommunications. The consultant was retained after being personally selected by the brother of a senior Honduran government official. Alcatel CIT executives knew that a significant portion of the money paid to the consultant would be paid to the family of the senior Honduran government official in exchange for favorable treatment of Alcatel CIT. As a result of these payments, Alcatel CIT was able to retain contracts worth approximately $47 million and from which Alcatel earned $870,000.

    In addition, according to court documents, Alcatel Standard retained two consultants on behalf of another Alcatel subsidiary in Taiwan to assist in obtaining an axle counting contract worth approximately $19.2 million. Alcatel and its joint venture paid these two consultants more than $950,000 despite the fact that neither consultant had telecommunications experience. In fact, according to court documents, Alcatel Standard’s purpose for hiring the consultants was so that Alcatel SEL could funnel payments through the consultants to Taiwanese legislators who had influence in the award of the contract. Alcatel earned approximately $4.34 million from this contract.

    In a related case, two former Alcatel executives, Christian Sapsizian, a French citizen and Alcatel CIT executive, and Edgar Valverde Acosta, a Costa Rican citizen and president of Alcatel de Costa Rica, were charged in March 2007 with conspiring to violate the FCPA, making corrupt payments in violation of the FCPA, and laundering the bribe payments through a third-party. Sapsizian was arrested in Miami in late 2006 and pleaded guilty on June 6, 2007, to FCPA violations. He was sentenced on Sept. 23, 2008, in the U.S. District Court for the Southern District of Florida to 30 months in prison. Sapsizian admitted that from February 2000 through September 2004, he conspired with Valverde and others to make millions of dollars in bribe payments to Costa Rican officials in order to obtain a telecommunications contract on behalf of Alcatel. Valverde remains a fugitive, and is considered innocent until proven guilty in a court of law.

    In a related matter, the U.S. Securities and Exchange Commission (SEC) reached a settlement filed today in which Alcatel-Lucent consented to the entry of a permanent injunction against FCPA violations and agreed to pay $45,372,000 in disgorgement and prejudgment interest. Alcatel-Lucent also agreed with the SEC to comply with certain undertakings regarding its FCPA compliance program.

    In January 2010, Alcatel-Lucent also agreed to pay $10 million to settle a corruption case brought by the government of Costa Rica arising out of the bribery of Costa Rican officials by the company. The settlement marked the first time in Costa Rica’s history that a foreign corporation agreed to pay the government damages for corruption.

    The case is being prosecuted by Deputy Chief Charles E. Duross and Trial Attorney Andrew Gentin of the Criminal Division’s Fraud Section. The department also acknowledges the significant contributions to this investigation by Assistant U.S. Attorney Mary K. Dimke, formerly of the Fraud Section. Significant assistance was provided by the SEC’s Miami Regional Office, the Criminal Division’s Office of International Affairs, the U.S. Attorney’s Office for the Southern District of Florida, the FBI, U.S. Immigration and Customs Enforcement, the Office of the Attorney General in Costa Rica, the Fiscalia de Delitos Economicos, Corrupcion y Tributarios in Costa Rica, the French Ministry of Justice, the Tribunal de Grande Instance de Paris, and Service Central de Prévention de la Corruption.
    Alcatel-Lucent welcomes the settlements with U.S. authorities regarding previously reported violations of Foreign Corrupt Practices Act
    Paris, December 27, 2010 —Alcatel-Lucent concluded its settlements with the U.S. Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”) following their investigations of violations of the Foreign Corrupt Practices Act. The initial agreements in principle with the two U.S. government agencies were disclosed in public filings last year and as part of the company’s year end 2009 results filing issued Feb. 11, 2010. Alcatel-Lucent, S.A., formerly known as “Alcatel S.A.,” entered into a deferred prosecution agreement with the DOJ by which the company will be criminally charged with violations of the books and records and internal controls provisions of the FCPA, but prosecution of those charges will be deferred for a three-year period. In addition, three Alcatel-Lucent subsidiaries will each plead guilty to a criminal information charging one count of conspiracy to commit anti-bribery, books and records, and internal controls violations of the FCPA. Alcatel-Lucent also agreed to resolve related civil anti-bribery, books and records, and internal controls charges filed by the SEC. Alcatel-Lucent recognized a provision of €93 million in connection with these FCPA investigations in the fourth quarter 2009 so it will not impact this year’s results. Early next year the settlements will be submitted to the U.S. Federal Court for formal approval.
    In reference to the conclusion of this settlement, Steve Reynolds, Alcatel-Lucent General Counsel, has the following statement:
    “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.
    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.
    Alcatel-Lucent, created as a result of the merger of Alcatel and Lucent Technologies at the end of 2006, is a radically different company today:
    * It has different management, including a new CEO, a new executive committee and a different Board of Directors.
    * It has a zero-tolerance policy regarding bribery and corruption and has a system in place with strong processes and Internet-based and live training designed to prevent these types of situations in all aspects of our business.
    * As the first in its industry to do so, Alcatel-Lucent announced in 2008 that it would terminate the use of sales agents and consultants — the primary means by which certain former employees made the improper payments involved in the violations described in the DOJ and SEC settlement papers.”

    Net : Alcatel- Lucent binned the previous incompetent if not corrupted management.
    Quigley and Beaufret were the two most senior roles accountable at the time of these corruption scandals.

  8. Looks like Quigley has to be shot, based on the facts above. What a mess.
    Labor is now wide open to the valid claim that the people in charge of the NBN have a history of incomptence and lack of integrity. This is like Batts or BER all over again.
    Wait until big business comes out and says it doesnt want to deal with these people because they are tainted – and previous decisions or understandings are invalid.
    To be frank Labor had it coming and the great Humpy Dumpty NBN is rocking off the wall.

  9. we need a ‘perfume distributer’ to help this NBN – (middle in prev SEC statement),
    Quigley and Beaufret smell like Pepe Le Pew when you read the findings.

  10. It’s painfully obvious that the people above who are painting Quiqley as a criminal, or incompetent, are the same type of people that cherry pick every little bit of bullshit they can to bash the NBN wherever possible. i.e. snotty nosed little Liberal party supporters.

    What ever happened to innocent until proven guilty? Not only are you insultingly suggesting the man was involved in a criminal conspiracy, but you’re also ignoring the fact that his name has already been completely cleared of these matters and he is NOT under investigation.

    Unless you’re saying you know better than the US authorities on this one? If so where’s your evidence?

  11. A) not sure what an entirely seperate case, regarding subsidiaries has to do with the NBN?
    > Straw clutching to support an argument, perhaps?

    B) no other tenderer has raised any concerns regarding the process.
    > This is pretty damning for the conspiracy. Given the amounts involved, it’s unusal that an apparently “corrupt” deal hasn’t a bunch of vendors crying foul.

    BP dumped a ton of oil in the Gulf-of-Mexico so it’s Australian arm is inept and corrupt. See, I can draw a long bow conclusion as well. Doesn’t make me any more “correct” in the process.

    The NBN is under an increasingly rigorous spotlight. Just as it SHOULD be. Politicans are certainly not above using their ‘protected’ postion to claim all manner of evil. And just because Mr Turnbull says there is something dodgy going on, doesn’t make it so.

    The Libs are hell bent of discrediting the NBN; if they can’t play the game at a technical level, then they’ll damn well play the man. Were the scenario reversed, you can bet Labour would be attempting just as much of a hatchet job.

    Without factual evidence that clearly implicates Quigly (or anyone else involved in the NBN, for tha matter) it’s at best ‘hearsay’ and at worst a clear attempt at FUD without any clear evidence of wrongdoing.

    Lastly, the BER/ Batts horse has asked if it can kindly stop being beaten; politics has a long history of mixed results for some policies. Using it as a one-size-fits-all reason to can all Labour policies and actions (frankly) weakens any argument against (it’s not like the Libs are innocent in this respect).

  12. hi Brendan, read the full SEC statement and then what the new management of Alcatel Lucent actually said (SEC statement implicating Quigley). They didnt discredit the Aust NBN, just stated some facts.

    Quigley and Beaufret had the responsibilities and authorities at the time of the corruption and bribery charges. The COO, CFO accountability is for the companies actions and behaviours.
    They were not retained (and it says that politely, but very clearly) and seen as part of the ‘problem’.

    These two had to authorise and approve the payments, recognise the sales, mask the corruption.
    The amounts were very large and would have been clearly visible to these roles.
    They cant hide behind that it was a subsidary, nothing to do with them, they didnt know about it – that is not what any COO or CFO can avoid. These roles were fully accountable at the time.

    They cant continue in any current role in the NBN.
    Its just a matter of time before they are replaced in the public interest.
    Imagine any CEO or CFO in charge of $40b key national project – who at their previous employer was accountable for issues and matters causing a formal SEC corruption charge acrossing many countries and systematic in the culture and behaviour of the organsation…. Its just untenable.
    Whether they are likeable, smart, wasnt their fault, whatever, doesnt matter, their position is untenable.

    And its not going to go away,. Malaysia and other countries are doing their own individual investigations and the truth and public record of these bribery and corruption scandals will only make any attempt to retain Quigley and Beaufret even more problematic.

    The question for Australia to consider :
    This investigation was a well known and easily checked matter in the industry or any basic legal, ex employer or third party reference check.
    The minister Conroy and the NBN Board would be fully aware of this matter and decision dates.
    So a fact is that Quigley was hired with this well known time stamped grenade around his neck.
    Why would Conroy knowingly do that.. ?
    Well that is the Labor party way – to have someone to blame if it falls into a heap, or dispose of if going well, and put some more political appointments in.
    It is standard form for Labor Gillard (or Conroy who has been mute) to blame any party for stating the obvious and then accuse them of wrecking etc. This is how they manage and manipulate media.
    If you dont think the Labor party is that sly or treacherous to one of their ‘own – ‘ firstly Quigley is not one of them, and secondly just look at other events.
    Quigley was always going to be a fall guy, no matter whether he did a good job or not.
    He was hired timebombed to be exactly that.
    So Brendan, vent your anger on Conroy and Labor, rather than people just stating the obvious or whats on the public record.

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