Alcatel-Lucent Says 'No Thanks' to Middlemen

Posted by: Carol Matlack on January 07

Alcatel-Lucent’s new boss Ben Verwaayen is cutting back on the use of outside consultants to secure customer deals, a practice that has gotten Alcatel-Lucent and some other companies into trouble when middlemen were found to have paid bribes in foreign countries.

The French weekly magazine Le Point, quoting a memo that it says was circulated to Alcatel-Lucent regional managers in November, says the company’s senior management decided “that its commercial strategy will no longer rely on the services of agents and consultants.”

An Alcatel-Lucent spokeswoman, while declining to comment in detail, confirmed to BWOnline that, “After a careful review, the company has decided to reduce the number of outside consultants and agents.” Le Point says the contracts of 348 consultants are being terminated. They are among a total of 5,000 contractor jobs that Verwaayen has promised to eliminate, along with 1,000 managerial positions within Alcatel-Lucent.

Le Point says that some Alcatel-Lucent managers – and, not surprisingly, some of the consultants – are complaining privately that the company will have a hard time competing for business in some countries if it doesn’t get outside help.

Maybe so, but it’s hardly surprising that Verwaayen prefers to do without middlemen. Just last September, a former executive of Alcatel – the French telecommunications equipment group that merged with Lucent of the U.S. in 2006 – was sentenced to 30 months in prison in a case involving bribery in Costa Rica.

The former executive, Christian Sapsizian, pleaded guilty under the U.S. Foreign Corrupt Practices Act to conspiring with a Costa Rican consultant to funnel $2.5 million in bribes to obtain deals with a government-controlled mobile phone operator. Costa Rican officials, who are still investigating, have said that bribes paid by middlemen on Alcatel’s behalf in that country may have totaled $15 million.

Alcatel-Lucent isn’t the only company tarred by such corruption. The use of middlemen figured prominently in a massive bribery scandal at Germany’s Siemens, for which the company is paying fines totaling some $1.6 billion.
Verwaayen, struggling to return Alcatel-Lucent to profitability, has obviously concluded that the company can ill afford the risk of a costly bribery scandal.