International bribery scandal, Alcael-Lucent barred from Celcom Asiata, TM deals


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Can Malaysia prevent another international bribery scandal?

By Friday Reflections – By B.K. Sidhu

ALCATEL-LUCENT has been blacklisted for 12 months.

Axiata Group and Telekom Malaysia Bhd (TM) will avoid dealing with them till early next year. This ban affects both the international company, Alcatel-Lucent SA, and the Malaysian operations, Alcatel-Lucent Malaysia Sdn Bhd.

Alcatel has a big office at Wisma Denmark, Kuala Lumpur, and a pool of engineers, some of whom are expatriates. Internally, they must be counting their lucky stars that it is only 12 months, not 12 years, or else they may have to pack and return to France.

Other vendors who find Alcatel a challenger must be rejoicing as it is one vendor out of the race at a time when telcos/celcos are preparing for the next-generation network awards.

To recap, two days after Christmas last year, the international bribery scandal involving Alcatel broke out. The French giant, to avoid prosecution, decided to pay US$137mil to settle US charges that it paid millions of dollars in bribes to foreign officials to win and maintain contracts in Costa Rica, Hondurus, Taiwan and Malaysia.

The documents released by the US Department of Justice and Securities Exchange Commission (SEC) stated that Alcatel paid improper payments to secure contracts with Celcom Axiata Bhd, a unit of Axiata Bhd. Then, Celcom was a unit of TM and it awarded a telecoms contract to Alcatel that ended in 2009. The bribes totalled US$700,000 and were paid between 2004 and 2006 to consultant A and B. No details are available as to who these consultants are but purportedly said to be TM employees. They got paid off for supplying information on competitor’s pricing.

After the scandal broke out, Malaysian Anti-Corruption Commission (MACC) had to jump in to investigate and the agency literally housed itself in TM and Alcatel for several days to weeks, interviewing dozens of people and fine-combed tonnes of documents to nab the culprit. At the same time, TM and Axiata conducted their own internal investigations.

In all these investigations, it would be good to see if there was any potential conflict of interest.

This week, MACC suggested that vendors who pay bribes be blacklisted and both TM and Axiata jumped in to blacklist the French company.

But the story does not end here.

The giver has been punished and the question on many people’s lips is if any evidence has been unearthed to nab the takers those who took or shared the US$700,000. Will they be brought to the book or will this be hushed-up and some people get away scot-free? The names of the consultants are awaited by some with abated breadth.

For one, MACC has not finished its investigations and may announce more details next week or the coming weeks. The men are still at work and we just need to be patient.

Punishing Alcatel and making sure it does not have new business for a year or so can be bad for the company, but will it deter others and prevent a similar episode?

In Alcatel’s case, it had to swallow the bitter pill for what it did. Why this bribery case happened is because there is a precedent set in the industry. It is a global thing in the world of telecoms some expect, some like to give, some ask.

Can it be prevented in the future?

A vendor representative says there is a need for greater transparency at all levels of the tender process from the technical evaluations right up to the commercial bidding and if no one takes, no one will give.

Another said: “To stop the spiral of cronyism and corruption and not let things build up until there are ugly consequences for our leaders, the Government and the nation, we need to call for open and transparent tender processes for all procurement for government-linked companies and government departments and agencies.”

Talk is cheap but execution is tough. However, if we are serious, then we have to prevent abuse and curb corruption at every step of the way. And if we need to learn from others, we should, as we can easily borrow some of SEC’s books and force a rigorous audit process. That will get us somewhere or we can just sit down and do damage control every time it happens. The choice is really in our hands.

Deputy news editor B.K. Sidhu wonders why dropped and failed calls have become so rampant these days.

Alcatel-Lucent barred from Celcom Axiata, TM deals for a year

By LEONG HUNG YEE  hungyee@thestar.com.my

PETALING JAYA: Both Axiata Group Bhd and Telekom Malaysia Bhd (TM) have barred Alcatel-Lucent from participating in tenders, contracts or joint ventures for a year following the call from Malaysian Anti-Corruption Commission (MACC).

“Alcatel-Lucent welcomes the MACC recommendation and is committed to earning back our customers’ trust,” it said in a statement in response to the 12-month suspension.

Axiata said the suspension runs for 12 months from Feb 18 while TM’s suspension was effective Jan 5.

Analysts said the probe set up by TM to investigate the improper payment and suspension was good for investors as well in the efforts to improve corporate governance.

“The suspension will send a strong message that graft is not tolerated here,” an analyst said, adding that the move would safeguard foreign perception and demonstrate that the Government took such allegations seriously in its efforts to promote foreign direct investments.

Another analyst said it would also strengthen and reinforce internal procurement policies and uphold the integrity of dealings with equipment vendors.

However, some are saying that it was unfair that only Alcatel-Lucent was penalised in this situation. Analysts believe the call made by MACC was the first move and would probably shed more light with regard to allegations that TM employees received payments from Alcated-Lucent.

TM said the actions or solutions with regard to the alleged improper payments received by TM employees were pending the outcome of the MACC investigation.

The equipment vendor said the recommendation followed Alcatel-Lucent’s settlement with the United States Department of Justice and Security Exchange Commission that was announced in December 2010. However, Alcatel-Lucent said it focused on activities occurring from 2004 to 2006, prior to the merger of Alcatel and Lucent Technologies in 2006.

Alcatel-Lucent, previously known as Alcatel, was investigated over allegations that it had used the services of consultants and made illicit payments to win or keep multi-million dollar telecommunication contracts in several countries including Malaysia.

Alcatel-Lucent and three of its subsidiaries had to pay more than US$137mil (RM423mil) in fines and penalties to settle US charges.

According to court documents, Alcatel-Lucent agents were alleged to have paid bribes to officials in Malaysia to obtain or retain a telecommunications contract worth US$85mil (RM263mil) .

Subsequently, TM set up a task force to investigate the alleged improper payments from Alcatel-Lucent to its staff regarding bids for the then Celcom Bhd‘s 3G mobile services.

In a filing on Bursa Malaysia Wednesday, TM said there was no financial impact apart from the cost of investigation and related administrative expenses, as a result of the investigation.

It said the contract in question related to a technology that TM did not operate anymore so there are no immediate impact on operations.

“TM also does not foresee any major impact on existing operations as the board agreed that TM will honour prior contractual obligations entered into with Alcatel Lucent and its group of companies,” TM said.

It said the TM board considered and deliberated the findings of the investigation and agreed that the report by KPMG Corporate Services Sdn Bhd be submitted to the MACC which was duly furnished on March 1, 2011.

Both Axiata and TM said they might review Alcatel-Lucent’s suspension from time to time subject to the latter providing assurances and evidence satisfactory to the TM group that it had implemented clear enforceable policies and measures to prevent a recurrence of any improper acts.

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One Response to “International bribery scandal, Alcael-Lucent barred from Celcom Asiata, TM deals”

  1. Amir Hamzah bin Amha Says:

    Thank you for the article. I was wondering if there is a directive for companies not to do business with fraudulent companies?

    Like


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