Lucent Fires 4 in Its China Unit
Lucent Technologies Inc., the biggest U.S. telephone-equipment maker, said Tuesday that it had fired the president of its Chinese unit and three other employees after discovering potential violations of a U.S. law prohibiting bribes.
The company declined to name the fired employees. Jason Chi was identified as the unit’s president in a Jan. 13 Lucent statement. Lucent said it also had removed the unit’s chief operating officer, a marketing executive and a finance manager. The incidents were uncovered when Murray Hill, N.J.-based Lucent reviewed operations in 23 foreign countries, the company said in a regulatory filing.
Chief Executive Patricia Russo ordered the sweep after the Securities and Exchange Commission and the Justice Department last year began probing allegations that Lucent bribed Saudi Arabian officials to win business.
Lucent said the incidents uncovered at the Beijing-based unit didn’t have a material effect on financial results. But the company added that it could not say how the incidents might affect its business in the long term.
China generated about 11% of Lucent’s $8.47 billion in sales in fiscal 2003, making it the company’s largest non-U.S. source of revenue.
“Lucent is trying to grow their business overseas, and this doesn’t help,” said Timothy Caffrey, an analyst at Barclays Capital Inc. in New York. “It looks like their controls in China aren’t very good.”
Shares of Lucent slipped 10 cents to $4.32 on the New York Stock Exchange. They have risen 52% this year.
The Foreign Corrupt Practices Act makes it a crime for a U.S. company to pay a foreign official to win or keep business. Violations can result in fines and prison time. Among other firms under investigation for possible violation of the law is Titan Corp., a maker of military communications systems that is being acquired by Lockheed Martin Corp.
Lucent said in the filing that its review found “incidents and internal-control deficiencies” in its China unit that may violate U.S. law. Lucent spokesman Bill Price declined to elaborate.
Robert Warstler, Lucent’s president of global sales, will run the Chinese unit until a new president is named.
The probes came after a lawsuit against Lucent by National Group of Communications & Computers Ltd., a Saudi-based company, which alleged that Lucent won favorable treatment from the nation’s telephone agency by paying more than $15 million in bribes.
The lawsuit said the bribes were paid in the late 1990s as Lucent was bidding on a Saudi telecommunications project worth billions of dollars. Saudi Telecom Co. ultimately awarded Lucent most of the work.
