Telekom Malaysia Bhd (TM) has set up a board sub-committee to investigate the Alcatel Lucent SA (ALU) kickbacks scandal which implicates two Malaysian officials in a US$85 million (RM263.5 million) contract given out by the local telecoms giant.
Regional mobile phone service provider Axiata Bhd has also promised to investigate the bribery case as it occurred in 2006 when it was a TM division known as Telekom Malaysia International (TMI).
Both public-listed companies, which share a common shareholder —sovereign wealth fund Khazanah Nasional Berhad — announced their respective investigations in filings to Bursa Malaysia last night.
Their statements came after the Malaysian Anti-Corruption Commission (MACC) said it wanted to verify the allegations despite the United States’ Securities and Exchange Commission (SEC) and the Department of Justice (DoJ) fining ALU US$137 million for the global bribery case.
It is understood that TM’s sub-committee will investigate allegations of improprieties in the ALU contract for Celcom’s 3G services which were launched in 2005 as reported by The Malaysian Insider yesterday.
The equipment was later scrapped, sources told The Malaysian Insider.
In TM’s statement to Bursa Malaysia, the telecoms giant referred to ALU’s settlement with the SEC and DoJ which it said “involve alleged improper payments to TM’s employees”.
“We take these allegations seriously and we will extend all necessary co-operation where required to the relevant authorities. Through a proposed board sub-committee, we will further conduct a thorough internal investigation to safeguard the integrity of our procurement process and Code of Business Ethics.
“TM has a zero tolerance policy towards such improprieties and will take appropriate action in the event that any of our employees were indeed involved,” the company said in the filing.
TM also said that it “believes that it has a robust and transparent procurement policy and adheres to policy, processes and current best practices”.
In a separate filing, Axiata said although “there was no specific mention of any contract relating to Axiata or its subsidiaries, there may be a potential indirect link as this matter allegedly occurred between October 2004 and February 2006 prior to the demerger of TM Group”.
“We view these potential allegations seriously and will investigate this matter,” said the company which controls 10 mobile operators in the region, including Celcom, Singapore’s M1 and Indonesia’s Excelmindo.
“As a responsible corporate citizen, Axiata, and its subsidiaries, upholds the highest standards of integrity and ethical standards in all its dealings and does not condone or tolerate any breach of code of conduct by its employees, subsidiaries, partners or vendors,” said Axiata which was formed in 2008.
The SEC and DoJ revealed that between December 2001 and June 2006, Alcatel 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.
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.”
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.
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 vs Alcatel-Lucent France SA et al, 10-cr-20906 and Securities and Exchange Commission vs Alcatel Lucent SA, 10-cv-24620, in the US District Court for the Southern District of Florida.
