On June 1, 2011, a federal court in Florida found that Costa Rica's Instituto Costarricense de Electricidad ("ICE"), a state-owned enterprise ("SOE") which provides electrical power and telecommunication services, was not a victim of Alcatel-Lucent S.A.'s ("Alcatel-Lucent") bribery, and was consequently not entitled to restitution. Presiding Judge Marcia Cooke held that ICE was "essentially" in a "co-conspirator relationship" with Alcatel-Lucent in the bribery scheme Alcatel-Lucent designed to win lucrative telecommunications contracts from ICE.1 The ruling was subsequently upheld by the Eleventh Circuit Court of Appeals, which denied a petition for writ of Mandamus filed by ICE.2 The Eleventh Circuit held that the district court did not clearly err in holding that ICE was not a crime victim and that it "actually functioned as [a] co-conspirator" because of "the pervasive, constant, and consistent illegal conduct conducted by the 'principals' (i.e., members of the board of directors and management) of ICE."
The case represented one of the first serious attempts by a foreign authority to claim victim status under US laws that provide restitution and other rights to parties harmed by criminal conduct.
As reported in our prior alert, on December 27, 2010, Alcatel-Lucent entered a three-year Deferred Prosecution Agreement ("DPA") with the US Department of Justice ("DOJ"), under which it became obliged to pay a $92 million criminal penalty, cooperate with ongoing investigations, implement compliance program enhancements, and retain a compliance monitor. DOJ will dismiss the criminal information upon expiration of the DPA provided that Alcatel-Lucent has complied with its terms.3 In a separate settlement with the Securities and Exchange Commission ("SEC"), Alcatel-Lucent agreed to disgorge $45.4 million of profits. Three Alcatel-Lucent subsidiaries, Alcatel-Lucent France, Alcatel-Lucent Trade International, and Alcatel-Lucent Centroamerica, all filed plea agreements under which they each plead guilty to conspiring to violate the Foreign Corrupt Practices Act ("FCPA").4
The US government alleged that Alcatel-Lucent, a French telecommunications equipment and services provider, and several of its non-US subsidiaries made improper payments through third-party consultants to officials in Costa Rica, Honduras, Taiwan, Malaysia, and other countries between 2000 and 2006. In exchange for the payments, Alcatel-Lucent obtained lucrative contracts, non-public information concerning public tenders, and other business advantages totaling $48.1 million.5
In Costa Rica, according to the settlement documents, Alcatel-Lucent funneled money as "commission payments" through its subsidiaries to three consulting firms, which then directed payments to five ICE officials in exchange for valuable telecommunications contracts. Through its Costa-Rican consultants, Alcatel-Lucent paid more than $18 million in bribes to three ICE directors and two senior officials, and obtained ICE contracts valued at more than $400 million for wireless telecommunications equipment and maintenance services.
Charges and Jurisdiction
While the DOJ limited its charges against Alcatel-Lucent to criminal violations of the FCPA's internal controls and books and records provisions,6 the SEC charged the parent entity with violations of the FCPA's anti-bribery provision for issuers, as well as its books and records and internal controls provisions.7
The DOJ filed a separate criminal information against several non-US Alcatel-Lucent subsidiaries, including Costa-Rica based Alcatel CentroAmerica, S.A. ("Alcatel de Costa Rica"). The DOJ charged these subsidiaries with conspiracy to violate the FCPA's anti-bribery, books and records, and internal controls provisions. The DOJ cited meetings, e-mails, and phone calls that Alcatel de Costa Rica personnel had with individuals in Miami, Florida, concerning improper third-party payments to show that "at least one of the co-conspirators committed or caused to be committed" various acts in the United States, in order to assert jurisdiction under 15 U.S.C. §17dd-3. The DOJ alleged that each of the charged subsidiaries was a "person other than an issuer ... or a domestic concern."8
Arguments Before the Court
On May 3, 2011, ICE filed a motion with the federal District Court in Florida requesting...