NBN chief takes broad approach to truth

NBN Co chief executive Michael Quigley has made a number of major contradictions or errors over his knowledge of corrupt activities engaged in by his previous employer, Alcatel. While Quigley and the NBN chief financial officer Jean-Pascal Beaufret, who also came from Alcatel (now Alacatel-Lucent) have never been accused of direct participation or involvement in the Alcatel illegalities, almost every statement Quigley has made about Acatel's involvement in corruption has turned out to be exaggerated or incorrect when compared with official court records and proceedings. Communications Minister Stephen Conroy has claimed that sections of the media are running a smear campaign against the man he chose to run the much-criticised NBN Co but it is now apparent that Senator Conroy appointed Quigley without informing himself of the dimension of the Alcatel corruption scandal or Quigley's role in that organisation. According to the US Department of Justice and Securities and Exchange commission, Acatel allegedly violated the US Foreign Corrupt Practices Act between 2001 and 2006 by paying millions of dollars in bribes to foreign officials in more than a dozen countries to win deals. The Act prevents US firms from using bribery in foreign markets. It applies to US companies and foreign companies (such as Alcatel) which raise money or borrow in the US. Hundreds of companies and a far smaller number of individuals have been charged, most since 1998. Corruption by Alcatel was initially exposed in the Costa Rican press in 2004 and investigated by local authorities. Quigley was President of Alcatel Americas (including Latin America) from March 2001 to December 2002, President of Alcatel North America from January 2003 to April 2005, and Alcatel's President and Chief Operating Officer (or effective number two) from April 2005 to late 2006, when the merger with Lucent occurred. He left Alcatel-Lucent in August 2007. Quigley became NBN Co's CEO in July 2009. Beaufret joined Alcatel as Deputy Chief Financial Officer in late 1999 and became Chief Financial Officer in 2002. He left in November 2007. Beaufret became NBN Co's CFO in September 2009. In 2004 and 2006 Acatel itself conducted an investigation into bribery and other malpractice in its operations, finding little. Both the US authorities and Alcatel later agreed the investigation was: ``limited and inadequate co-operation for a substantial period of time''. The US Securities and Exchange Commission has accused Alcatel of ``many years of stalling mechanisms,'' and the US Department of Justice claims Alcatel continued to utilize bribery and other illegal actions in its business through this period. The company has not disputed these claims. The stalling ended in late 2006 when Alcatel merged with the US firm Lucent to form Alcatel-Lucent. More importantly, Christian Sapsizian, Alcatel's Latin America deputy head (and one of only two individuals charged in the matter) began cooperating with prosecutors, providing the US authorities with hundreds of documents pointing to bribery and corruption in at least 20 countries. These documents had not been uncovered by the internal investigation. The documents suggested Alcatel's behaviour in Costa Rica was part of an organised business model where tens of millions of dollars were paid to corrupt officials through sham ``consultants'' employed by Alcatel and supposedly `vetted' by Alcatel Standard, a subsidiary based in Switzerland. In return for the bribes, Alcatel was awarded contracts worth hundreds of millions of dollars and received inside information about rival bidders. In December 2010, Alcatel-Lucent agreed to pay $US137 million to settle the SEC and DOJ allegations which The Wall Street Journal described as one of the biggest foreign corruption cases in history. A so-called deferred prosecution agreement, agreed to and signed off by US authorities and Alcatel-Lucent, details agreed facts including corruption in 15 countries including Ecuador, Nicaragua, Honduras and Nigeria. In Senate estimates on Thursday night, Quigley denied suggestions of an endemic culture of bribery and lax controls at Alcatel-Lucent saying: ``I understood we had strict guidelines on ethics and business practices.'' ``We had some very tight controls but some fraudulent activity took place.'' He repeatedly vouched for Beaufret's ``integrity and competence''. He was not concerned any similar activities would happen at NBN Co: ``I have a lot of faith that the people employed in this company are honest, hardworking individuals. I don't expect to have to sit on everyone's shoulders.'' He expressed ``responsibility and regret'' for Alcatel's illegal conduct. He admitted illegal activity continued for two years after the Costa Rica matter, but refused to take direct responsibility, saying all of Alcatel's management committee were ``incredibly disappointed'' at what happened. (The management committee comprised the eight most senior executives of Alcatel. Four of them, including Quigley and Beaufret, left between mid-2007 and early 2008, after the merger with Lucent was finalised.) On December 31, NBN Co issued a statement which said: ``the actions of a number of individual Alcatel Lucent employees detailed in the SEC's statement fell outside the accountability and jurisdiction of both Mr Quigley and Mr Beaufret.'' Quigley agreed on January 6, saying: ``I was looking after North America. They weren't interested in us.'' But on May 13 he said: ``I have today been advised by Alcatel Lucent that, contrary to previous advice, Costa Rica was among the many countries and territories in North, Central and South America that were part of my wide-ranging portfolio of responsibilities in the period March 2001 to January 2003, including operations involving approximately 15,000 staff.'' Further, he admitted on June 16 that he also had responsibility for Honduras. He also appears confused about who initiated the investigation, saying on May: ``The investigation was in fact initiated by Alcatel reporting to the authorities that there was a suspicion that two individuals, one in Costa Rica and one in France, had committed an illegal act.'' Alcatel's 2009 US corporate filing makes it clear the inquiry started elsewhere: ``Beginning in early October 2004, Alcatel-Lucent learned that investigations had been launched in Costa Rica by the Costa Rican prosecutors and the National Congress, regarding payments alleged to have been made by consultants on behalf of Alcatel CIT...'' In an article in The Australian on May 5, Quigley wrote: ``When the company became aware of this illegal activity it notified the relevant authorities, including the SEC.'' On May 17, he admitted to the Joint Committee on the NBN that this statement was false. He also said in his May 5 article that: ``What is instructive is how the company responded. As soon as the executive committee became aware of these events it publicly launched an inquiry and took immediate steps to inform and co-operate fully with all authorities.'' But the Department of Justice press release of December 27, 2010 says: ``The charging documents and penalty reflect, among other things, that there was limited and inadequate cooperation by the company for a substantial period of time, but that after the merger, Alcatel-Lucent substantially improved its cooperation with the department's investigation.'' Again, Quigley said in The Australian on May 5 that: ``I did not raise the investigation of Alcatel-Lucent during my recruitment to NBN Co because it was resolved to the satisfaction of the SEC and Department of Justice well before NBN Co even existed.'' (Former prime minuster Rudd and Conroy announced formation of NBN Co on 7 April 2009. Quigley was appointed CEO of NBN Co on 25 July 2009.) But Alcatel filed a report with the SEC in March 2009, stating: ``Neither the DOJ, the SEC nor the French authorities have informed us what action, if any, they will take against us and our subsidiaries.'' In regard to the alleged acts in Costa Rica it states: ``We intend to defend these actions vigorously and deny any liability or wrongdoing with respect to these claims.'' In March 2010, Alcatel filed a report with the SEC stating that in-principle agreement by the SEC and DOJ to a plea deal was not obtained until December 2009. As late as December 2010 the SEC stated: ``unless restrained and enjoined, Alcatel is reasonably likely to continue to engage in the acts and practices set forth in this complaint (of corruption) and in acts and practices of similar purport and object''. The facts as offered by both Senator Conroy and Quigley are clearly at odds with the official record. More questions need to be asked about Conroy's rush to appoint Quigley and Quigley's selection of his former deputy as chief financial officer of the NBN Co.