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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

CASE NO. lO-CR-20906-COOKE CASE NO. lO-CR-20907-COOKE

UNITED STATES OF AMERICA

vs.

ALCATEL-LUCENT FRANCE, S.A, fIkIa 'Alcatel CIT, S.A.," ALCATEL-LUCENT TRADE INTERNATIONAL, AG.,

fIkIa "Alcatel Standard, A.G.," and ALCATEL CENTROAMERICA, S.A, fIkIa "Alcatel de Costa Rica, S.A,"

Defendants.

____________________________ ~I

UNITED STATES OF AMERICA

vs.

ALCATEL-LUCENT, S.A., f/k/a "Alcatel, S.A,"

Defendant.

------------------------------,/

GOVERNMENT'S MEMORANDUM IN SUPPORT OF THE PROPOSED PLEA AGREEMENTS AND DEFERRED PROSECUTION AGREEMENT

The United States, through the undersigned attomeys, respectfully files this memorandum

in support of the proposed plea agreement and deferred prosecution agreement in the above-

captioned cases. The proposed resolution of these two cases before the Court reflects the

seriousness of the conduct, promotes respect for the law, and provides for just punishment for the

offenses committed. In fact, the proposed $92 million criminal penalty is one of the largest in

history for a violation of the Foreign Corrupt Practices Act, and had it been proposed just three years

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ago, it would have been the largest in history. This criminal penalty is in addition to more than $45 million in disgorgement of profits and prejudgment interest already paid to resolve a related civil case with the U.S. Securities and Exchange Commission ("SEC"). The proposed resolution also includes an enhanced compliance program to ensure that future violations are prevented, and it requires the retention of an independent compliance monitor to review and ensure the effective implementation of the enhanced compliance program. This resolution is comprehensive, and it was only reached after careful and considered analysis. The government asks this Court to accept the proposed plea agreements in conjunction with the deferred prosecution agreements, render sentences in accord with the plea agreements, and bring this matter to a conclusion.

OVERVIEW OF THE DEFENDANTS

Defendant Alcatel-Lucent, S.A., is a corporation organized under the laws of France with its principal offices in Paris, France. In late 2006, a subsidiary of Alcatel, S.A. ("Alcatel"), merged with Lucent Technologies, Inc. in the United States (hereinafter the "2006 Merger") and Alcatel, S.A., changed its name to Alcatel-Lucent, S.A. In the time period before the merger, which was when the vast majority of the illegal conduct charged in this case occurred, Alcatel was a worldwide provider of a wide variety of telecommunications equipment and services and other technology products. From 2001 to 2005, Alcatel employed between 55,000 and 100,000 employees through the Alcatel Group, which operated in more than 130 countries, directly and through certain wholly owned and indirect subsidiaries, including in France, the United States, and many other countries such as Costa Rica, Honduras, Malaysia, and Taiwan. From at least 1998 until late 2006, American Depositary Shares of Alcatel were registered with the SEC and traded on the New York Stock Exchange as American Depositary Receipts (typically known as ADRs). For purposes of this

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memorandum, the company prior to December 2006 will be referred to as Alcatel, and the company after December 2006 will be referred to as Alcatel-Lucent.

Defendant Alcatel-Lucent France, S.A., is a corporation organized under the laws of France with its principal offices in Paris, France. Prior to the 2006 Merger, it was known as Alcatel CIT, which was incorporated in France and was a wholly owned subsidiary of Alcatel. In the 1990s and continuing until the 2006 Merger, Alcatel CIT was a commercial arm of Alcatel and was responsible for contracting with telecommunications providers, including many that were owned and controlled by foreign governments, to sell telecommunications equipment and services and other technology products.

Defendant Alcatel-Lucent Trade International, A.G., is a corporation organized in Switzerland. Prior to the 2006 Merger, it was known as Alcatel Standard, which was a wholly owned subsidiary of Alcatel and was incorporated in Switzerland. Alcatel Standard was responsible for entering into most agreements with consultants worldwide on behalf of Alcatel CIT and other subsidiaries of the Alcatel Group.

Defendant Alcatel Centro america, S.A., is a corporation organized under the laws of Costa Rica. Prior to the 2006 Merger, it was known as Alcatel de Costa Rica ("ACR"), which was a wholly owned subsidiary of Alcatel and was formed under the laws of Costa Rica. ACR was responsible for the day-to-day commercial operations of the Alcatel Group in Costa Rica and Honduras during the relevant time period.

For purposes of this memorandum, the three wholly owned subsidiaries of Alcatel-Lucent charged in the above-captioned matter will be referred to as the "Defendant Subsidiaries." In discussing the facts underlying the criminal charges here, for ease of reference the names of these

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three entities at the time of the crimes will be used, that is, A1cate1 CIT, A1cate1 Standard, and

A1cate1 de Costa Rica or ACR.

BACKGROUND ON THE FOREIGN CORRUPT PRACTICES ACT

The Foreign Corrupt Practices Act of 1977 (hereinafter the "FCP A"), as amended, Title 15,

United States Code, Section 7 8dd -1, et seq., is comprised of anti -bribery and accounting provisions.

The anti-bribery provisions prohibit (1) issuers, (2) domestic concerns, and (3) other persons

(including companies), "while in the territory" of the United States, from corruptly authorizing,

offering, or making payments to foreign government officials to influence such officials in their

official duties in order to assist the offeror or another in obtaining or retaining business. Insofar as

relevant here, an issuer includes any entity that issues securities on a U.S. exchange and is subject

to the registration and reporting requirements of the Securities Exchange Act of 1934. See 15 U.S.C.

§§ 78dd-l(a), 781, and 78o(d). At all relevant times, Alcate1-Lucent (and before the 2006 Merger,

Alcate1), the parent company ofthe Defendant Subsidiaries, was an issuer within the meaning ofthe

FCPA. Further, each of the Defendant Subsidiaries was subject to the anti-bribery provisions of

the FCP A insofar as each acted within the territory of the United States in furtherance of corruptly

authorizing, offering, or making a prohibited payment. See 15 U.S.C. § 78dd-3(a).

The accounting provisions of the FCP A are comprised of a books and records provision and

an internal controls provision. The FCPA's books and records provision prohibits knowing

falsification of an issuer's books, records, or accounts, and requires an issuer to make and keep

books, records, and accounts that accurately and fairly reflect transactions and disposition of the

issuer's assets. 15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(5), and 78ff(a). Insofar as the Defendant

Subsidiaries' financial results were consolidated with those of A1catel (and later Alcatel-Lucent),

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that is, their issuer-parent, for purposes of its filed financial statements, then the Defendant Subsidiaries' books and records would be deemed to be part of the issuer's books and records.

Finally, the FCPA's internal controls provision requires that issuers maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to (I) permit preparation of financial statements in conformity with generally accepted accounting principles or any other applicable criteria, and (II) maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorizations; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals, and appropriate action is taken with respect to any differences. 15 U.S.c. § 78m(b )(2)(B). The FCP A prohibits the knowing circumvention or failure to implement a system of internal accounting controls. 15 U.S.C. §§ 78m(b)(5) and 78ff(a). Accordingly, Alcatel(andlater Alcatel-Lucent) was required to maintain a system of internal accounting controls, and it was unlawful to knowingly fail to implement that system and for the Defendant Subsidiaries to knowingly circumvent that system.

PROCEDURAL BACKGROUND

On December 27,2010, a criminal Information was filed against the Defendant Subsidiaries charging each of them with conspiracy to commit offenses against the United States, to wit: violating the anti-bribery provisions, the books and records provisions, and internal controls provisions of the FCPA, as amended, Title 15, United States Code, Section 78dd-l, et seq., in

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violation of Title 18, United States Code, Section 371. (DE 1 ~~ 80-171Y In addition, the

government also filed a criminal Information against Defendant Alcatel-Lucent on December 27,

2011. (ALU DE 1.) On February 22, 2011, a plea agreement for each ofthe Defendant Subsidiaries

was filed in which each agreed to plead guilty to conspiring to violate the FCP A, pursuant to Rule

II(c)(I)(C) of the Federal Rules of Criminal Procedure. (DE 10, DE 11, DE 12.) Also on February

22, 2011, the government filed a deferred prosecution agreement ("D P A") in the case against

Defendant Alcatel-Lucent. (ALU DE 10.)

The case against the Defendant Subsidiaries and the related case against Defendant Alcatel-

Lucent were consolidated before the Honorable Patricia A. Seitz, who held a hearing on March 1,

20 11, at which time Judge Seitz determined that she had a conflict (or at least the appearance of

conflict), and the government, Defendant Subsidiaries, Defendant Alcatel-Lucent, and counsel for

Instituto Costarricense de Electricidad, S.A. ("ICE") agreed that the best course of action would be

for Judge Seitz to recuse herself from both cases and have them transferred to another judge. (See

DE 3, DE 15, DE 16. See also ALU DE 9.)

On March 4, 2011, the case against the Defendant Subsidiaries was transferred to this Court,

and the Court immediately set a status hearing for March 9, 2011. (DE 18.) On March 9, 2011, after

hearing from the government, the Defendant Subsidiaries, and counsel for ICE, the Court directed

the U.S. Probation Office to prepare a memorandum, which would review the proposed plea

1 All "DE" citations refer to the pleadings in the case against the Defendant Subsidiaries.

Citations to the related case against the parent company, Defendant Alcatel-Lucent, will be cited as "ALU DE" for ease of reference.

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agreements with the Defendant Subsidiaries and address the victim/restitution issues.' (DE 20 at

19-21.) On March 17,2011, this Court accepted the transfer of the case against the parent company,

DefendantAlcatel-Lucent. (ALU DE 13.) On April 27, 2011, the Court scheduled a status hearing

for May 11, 2011. On May 2nd and May 3rd, ICE filed a petition and memorandum of law in

support of that petition, which, in part, criticized the proposed overall resolution. (DE 22, DE 24.

ALU DE 16, ALU DE 17.) At the May 11th status hearing, the Court heard from the government,

counsel for ICE, and counsel for Defendant Alcatel- Lucent and Defendant Subsidiaries, and set June

1, 2011, for a change of plea.

FACTUAL BACKGROUND

The criminal Information against the Defendant Subsidiaries alleges that Alcatel CIT, Alcatel

Standard, and ACR conspired to violate the anti-bribery, books and records, and internal controls

provisions of the FCPA by entering into agreements with business "consultants" who were retained

primarily to pay bribes to government officials for assistance in obtaining or retaining contracts,

falsely recording such payments in their books and records, and knowingly circumventing Alcatel' s

internal accounting controls in the process. (See DE 1 ,-r,-r 80-171.) The charges against Alcatel CIT,

2 ICE suggests that the purpose of the government and the Defendant Subsidiaries suggesting that the Court waive the pre-sentence investigation report was to "sidestep" procedures to avoid awarding ICE restitution. (Mem. at 17.) That is simply not true. In fact, the Federal Rules of Criminal Procedure contemplate such a situation. Rule 32( c )(1 )(A)(ii) of the Federal Rules of Criminal Procedure permits the Court to impose a sentence without the preparation of a pre-sentence investigation report if the Court finds "that the information in the record enables it to meaningfully exercise its sentencing authority under 18 U.S.C. § 3553, and the court explains its finding on the record." This situation is not unusual in large corporate criminal matters. See, e.g., United States v. BP Products North America Inc., 610 F. Supp. 2d 655, 723 (S.D. Tex. 2009) ("Presentence reports, while often an important resource, are not a mandatory part of the sentencing process.") (quoting United States v. Brown, 557 F.3d 297, 299 (6th Cir. 2009)).

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Alcatel Standard, and ACR are based on their conduct in Costa Rica, Honduras, Taiwan, and Malaysia. The Defendant Subsidiaries have all agreed that the facts alleged in the Information and contained in the detailed Statements of Facts are true and accurate. (See DE 10, DE 11, DE 12.) In addition, the criminal Information against Defendant Alcatel-Lucent alleges that it violated the books and records and internal control provisions of the FCPA. (See ALU DE 1 ~~ 118-21.) Defendant Alcatel-Lucent has agreed that the facts alleged in the Information and contained in the detailed Statement of Facts are true and accurate, including the conduct in the four aforementioned countries and conduct in a number of additional countries. (See ALU DE 10 ~ 2, Attachment A)

Overview of the Conspiracy

While the conduct in each country is unique to the country, the manner and means employed in each country to accomplish the unlawful objects of the overall conspiracy were the same, principally the use of third-party agents to funnel bribes payments to foreign officials to obtain or retain business in circumvention of internal controls and then falsely recording those payments. Starting in the 1990s and continuing through at least late 2006, Alcatel pursued many of its business opportunities around the world through the use of third-party agents and consultants. This business model was shown to be prone to corruption, as consultants were repeatedly used as conduits for bribe payments to foreign officials (and business executives of private customers) to obtain or retain business in many countries. Alcatel also suffered from a de-centralized business structure, which permitted the different Alcatel employees around the world to initially vet the third-party consultants, and then rely on personnel at Alcatel Standard to perform due diligence on them. In practice, this de-centralized structure and approval process permitted corruption to occur, as the local employees were more interested in obtaining business than ensuring that business was won

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ethically and legally. Meanwhile, personnel at Alcatel Standard performed limited, if any, due diligence of substance and often remained, at best, deliberately ignorant of the true purpose behind the retention of and payments to many of the third-party consultants.

In many instances, Alcatel Standard would contract with the third-party consultant and then Alcatel CIT would pay the consultant, to the extent that Alcatel CIT was the responsible legal entity. Typically, when Alcatel received payment for its telecommunications services and equipment from its customers (which were often foreign governments or agencies or instrumentalities of foreign governments), Alcatel CIT would then pay the consultant who assisted in securing that business. As such, the payments by Alcatel CIT to the agents retained by Alcatel Standard OCCUlTed over a number of years, and because of the value of many of these contracts, the payments made to these consultants involved millions of dollars paid out over many years. To pay this money, among other things, Alcatel CIT maintained a bank account at ABN Amro Bank in New York, New York, which was used, in part, to pay third-party consultants located around the world.

Often, senior executives at Alcatel CIT, Alcatel Standard, and ACR, among others, knew bribes were being paid, or were aware of the high probability that many of these third-party consultants were paying bribes, to foreign officials to obtain or retain business. For example, in a significant number of instances, the consultant contracts were executed after Alcatel had already obtained the customer's business, the consultant commissions were excessive, and lump sum payments were made to the consultants that did not appear to correspond to anyone contract. In other instances, the same person would establish more than one consulting company, and Alcatel Standard would retain those multiple companies (knowing or purposefully ignoring that they were owned and operated by the same person). This would make it appear that the commission rate paid

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to the consulting company was not excessive, when in truth and in fact, the aggregate commission rate was exorbitant, thereby enabling the consultant to make payments to foreign officials.

Alcatel CIT, Alcatel Standard, ACR, and certain employees of Alcatel CIT, Alcatel Standard, and ACR knew, or purposefully ignored, that many of the records relating to consultants did not accurately reflect the true nature and purpose of the agreements. Likewise, Alcatel CIT, Alcatel Standard, ACR, and certain employees of Alcatel CIT, Alcatel Standard, and ACR knew, or purposefully ignored, that many of the invoices submitted by various third-party consultants falsely claimed that legitimate work had been completed, while the true purpose of the monies sought by the invoices was to funnel all or some of the money to foreign officials, directly or indirectly. Moreover, Alcatel CIT, Alcatel Standard, ACR, and certain employees of Alcatel CIT, Alcatel Standard, and ACR knew, or purposefully ignored, that the payments in connection with the consultants were going to be passed to foreign officials. These transactions were designed to circumvent Alcatel' s internal controls system and were further undertaken knowing that they would not be accurately and fairly reflected in Alcatel CIT, Alcatel Standard, and ACR's books and records, which were included in the consolidated financial statements that Alcatel filed with the SEC.

The Government's Investigation and the Company's Cooperation

The investigation that gave rise to the instant case began in the fall of 2004. In late September 2004, press reports surfaced in Costa Rica alleging that a consultant of Alcatel had bribed Costa Rican officials. In early October 2004, the Fraud Section of the Criminal Division of the Department of Justice and the SEC made inquiries of Alcatel, and Alcatel through its counsel agreed to cooperate with the government's investigations. Between October 2004 and November 2006,

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Alcatel (on behalf of itself and the Defendants) and its outside counsel conducted an internal

investigation, which was slow, plagued with problems, and was non-responsive to many repeated

inquiries by the government.

In late 2006, however, two significant events occurred that changed the course of the

investigation. First, on November 20,2006, a former A1catel CIT executive, Christian Sapsizian,

was detained on a material witness warrant during a layover at the Miami International Airport. On

December 1,2006, Sapsizian was charged via a criminal complaint with violating the FCP A. On

December 19,2006, a grand jury in the Southern District of Florida returned an indictment against

Sapsizian for violating the FCP A and laundering money. That case was assigned to the Honorable

Patricia A. Seitz.' (United States v. Sapsizian, et al., 06-20797 -CR-SEITZ(s).) Sapsizian agreed to

plead guilty in early 2007, and he began cooperating against his former employer. Sapsizian later

pleaded guilty, received a substantial 65% reduction from Judge Seitz for his cooperation following

the government's motion for a downward departure, and was sentenced to 30 months' incarceration.

(Sapsizian, 06-20797-CR-SEITZ(s), at DE 47, DE 65, DE 69.)

Second, in December 2006, A1catel and Lucent Technologies merged. Following this

merger, the leadership of the combined new entity, Alcatel-Lucent, changed, and the company

changed outside counsel. In the ensuing three years, at the request of the government, the new

company undertook a "Global Review" to evaluate its relationships with agents, interactions with

government officials, and gifts, travel, and entertainment provided in countries around the world.

Through this process, Alcatel-Lucent discovered that it had serious problems. It uncovered improper

3 Because Sapsizian had been assigned to Judge Seitz, the government initially sought to consolidate the cases against Defendant Alcatel-Lucent and the Defendant Subsidiaries before Judge Seitz.

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payments, inaccurate books and records, and violations of its internal controls on a number of continents, and the new management embraced the need to fully investigate the corrupt conduct. In the end, the new company of Alcatel-Lucent conducted a credible investigation, dramatically improved its compliance program, embraced a culture of compliance at the highest levels within the company, and made significant remediation efforts, which are detailed below. In particular, Alcatel- Lucent (on behalf of itself and the Defendant Subsidiaries) and its outside counsel conducted investigations in 34 countries around the world to uncover potential misconduct. The internal investigation examined Alcatel-Lucent's agent and consultant approval, review, and termination processes, the activities of a number of terminated agents, and the knowledge and involvement of senior management in any potential wrongdoing. This effort was closely coordinated with the govemment. At the same time, Alcatel-Lucent has cooperated with investigations conducted by govemment authorities in other countries regarding the matters that have been under investigation by the government in the United States.

• Wide-Ranging Investigations

After Alcatel-Lucent retained new outside counsel, substantially larger resources were used to complete - and in some instances re-do - the internal investigation. Alcatel-Lucent's investigation was subsequently expanded a number of times. For example, the "Global Review" mentioned above was expanded to ten countries. Later in 2007, the investigation expanded again when the government requested that A1catel-Lucent conduct a detailed investigation into the company's conduct in Nigeria and any country for which Sapsizian had responsibility or in which he had dealings, which amounted to a total of 17 additional countries. Alcatel- Lucent and its outside counsel presented a series of reports on their findings with respect to each country.

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Separately, Alcatel- Lucent voluntarily undertook a lengthy review of its agent and consultant approval process in 2007. As part of this review, Alcatel-Lucent retained an independent investigative firm to review all of Alcatel-Lucent's 300 then-existing agents and consultants. Based on reports from the investigative firm, Alcatel-Lucent decided to terminate certain agents immediately and to cease working with other agents in the future. Alcatel-Lucent also undertook a detailed Terminated Agents Review to review the activities of 11 former agents for evidence of potential bribery or other wrongdoing. Alcatel-Lucent reported to the government on its findings related to these agents, several of which are now reflected in the criminal Information and Statement of Facts against Defendant Alcatel-Lucent.

Additionally, in June 2008, Alcatel-Lucent commenced a review of its Board of Directors' and other senior management's knowledge of, and involvement in, any of the wrongdoing. As part of this review, interviews were conducted of26 individuals who were either current high-ranking members of Alcatel- Lucent's management, former high-ranking members of Alcatel' s management, or were in a position to provide information relevant to the review. Alcatel-Lucent and its counsel also reviewed documents collected from these individuals. Alcatel-Lucent and its counsel reported to the government on their findings regarding the Senior Management Review in March 2009.

Overall, Alcatel-Lucent's outside counsel interviewed over 330 witnesses as part of these investigations, collected data from 201 individuals, and reviewed over 2 million documents, of which over 200,000 documents were produced to the government.

• Substantial Remedial Actions and Ongoing Compliance

Beyond the investigation discussed above, Alcatel- Lucent took substantial remedial actions to correct past improper conduct and establish a centralized compliance program designed to prevent

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future misconduct. After the allegations in Costa Rica were publicized, Alcatel (on behalf of itself

and the Defendant Subsidiaries) began to take disciplinary action against the employees responsible

for the conduct, up to and including dismissal from Alcatel-Lucent's andlor the Defendant

Subsidiaries' employ. Currently, virtually all of the individuals who were substantially involved in

or knowledgeable about prior misconduct either are no longer employed by Alcatel-Lucent or have

been disciplined. The disciplinary actions taken by Alcatel-Lucent resulted in significant

management changes at Alcatel-Lucent's operations in a number of countries worldwide. More

recently, Alcatel-Lucent established a new Global Compliance Resolution Process, which is

designed to ensure that employees at all levels of Alcatel-Lucent are held accountable for their

actions and that discipline is meted out consistently across the board, with escalation of reported

misconduct to senior management or the Board of Directors as appropriate.

Alcatel-Lucent also enhanced its compliance program in a number of other ways. The

company appointed its first Chief Compliance Officer ("CCO") on January 9, 2006, and tasked the

CCO with reporting to the Board of Directors at least twice per year. Additionally, Alcatel-Lucent

has hired Regional Chief Compliance Officers, whose jobs are to oversee and reinforce

Alcatel-Lucent's compliance policies in each region. In January 2007, Alcatel-Lucent began to

implement an enhanced and comprehensive Compliance Management System, which is regularly

reviewed and updated by the CCO. Some of the enhancement goals are summarized below:

• Establish clear and adequate policies and procedures to detect and prevent all violations oflaw, not just criminal violations;

• Emphasize through the "tone-at-the-top" the importance of an organizational culture that encourages ethical conduct and a commitment to compliance with the law;

Commit adequate resources to the program and delegate

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appropriate authority to those responsible for its execution;

• Create an effective training program for employees at all levels of the company to be trained at period and regular intervals;

• Conduct ongoing risk assessment and take appropriate steps to reduce the risk of violations of law, including audits customized to the company's risk areas;

Establish a system in which the organization's employees and agents may report or seek guidance regarding potential or actual violations oflaw without fear of retaliation, including mechanisms to allow for anonymous reporting, and engage in periodic evaluations of the effectiveness of the system;

• Enforce standards consistently through appropriate disciplinary mechanisms and take precautions to ensure no negative consequences for reporting misconduct; and

• Upon discovery of any misconduct, consider changes to operational practices andlor modifications to its compliance program.

On the day that the merger between Alcatel and Lucent was finalized, Alcatel-Lucent

released its new Statement of Business Principles in eleven languages. In May 2008, the company

supplemented the Statement of Business Principles with publication of the Alcatel-Lucent Code of

Conduct. The Code of Conduct is the cornerstone of Alcatel-Lucent's new ethics and compliance

program and articulates the company's standards for ethical business conduct. The Code of Conduct

is reviewed and revised on an ongoing basis.

Alcatel- Lucent has made a thorough and sustained effort to communicate its new compliance

policies to employees through enhanced anti-corruption training. Formal training on anti-corruption

laws, policies, and requirements has been rolled out in two formats: web-based training and live

training. Web-based training was deployed initially in 2007 to over 14,000 employees, including

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all senior executives and employees who interact or interface directly or indirectly with external parties. Live training is also delivered in person (or via teleconference) by anti-corruption counsel and subject matter experts, and is customized for each particular audience. In total, over 16,850 employees have completed the training to date.

• Pledge to Phase Out Sales Agents and Consultants

Finally, Alcatel-Lucent determined that the risk of corruption inherent in using sales agents and consultants was too great. On its own initiative and at a substantial financial cost, Alcatel-Lucent determined as a matter of company policy to no longer use third party sales agents or consultants in conducting its worldwide business. In November 2008, the company announced its extraordinary decision to phase out the use of sales agents and consultants by the end of 2010. Since the announcement, Alcatel-Lucent has fulfilled its pledge to end all such third party relationships. From the government's perspective, this commitment is an unprecedented remedial action and a bold compliance statement from the most senior executives at Alcatel-Lucent, and it merits recognition in the disposition of this matter to encourage other companies to undertake similar robust compliance commitments.

OVERVIEW OF THE PROPOSED RESOLUTIONS

The proposed plea agreements for the Defendant Subsidiaries and the DP A with Defendant Alcatel-Lucent were not reached lightly. This overall resolution was reached after considered and extended negotiations, a full analysis of the facts and circumstances, including the strengths and weaknesses ofthe government's case, and a comprehensive review of the aggravating and mitigating factors relating to the criminal conduct. In accordance with its internal policies, the government considered a number of factors in deciding the appropriate overall disposition. See U. S. Attorney's

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Manual § 9-28.300. Those factors included, but were not limited to, Defendant Alcatel-Lucent's

cooperation and remediation efforts, as well as any collateral consequences, such as whether there

would be disproportionate harm arising from the prosecution to shareholders, pension holders,

employees, and other persons not personally culpable. The principle features of this proposed

comprehensive resolution include the following provisions:

(1) a deferred prosecution agreement with Defendant Alcatel-Lucent, the parent company;

(2) three guilty pleas pursuant to plea agreements with the Defendant Subsidiaries, which are all wholly owned subsidiaries of Defendant Alcatel-Lucent;

(3) a total criminal penalty of $92 million, apportioned as follows: $90.5 million paid by Defendant Alcatel- Lucent and a $500,000 fine for each of the Defendant Subsidiaries, which were directly involved in the corrupt conduct;

(4) continued obligations to provide full, complete, and truthful cooperation to DO] and SEC and other law enforcement agencies, domestic and foreign;

(5) implementation of rigorous compliance enhancements, including periodic testing of those enhancements, with a recognition that Defendant Alcatel-Lucent has already implemented substantial compliance changes in response to the problems discovered during the investigation; and

(6) the retention of an independent corporate compliance monitor who will, over a three-year term, conduct a review of the compliance code, Defendant Alcatel-Lucent's internal controls and related issues, and will prepare periodic reports on his reviews for submission to the government.

The government believed this was a hard fought and worthy resolution. ICE's counsel appeared to

agree: ICE's counsel initially congratulated the government on the :filing of the instant cases. (Jan.

4, 2011 Email from B. Wiand to C. Duross, Ex. I ("Congratulations on the filing of your Alcatel

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case.").) ICE leveled no criticisms ofthe plea agreements or DPA until after the government wrote

ICE's counsel saying that it did not believe ICE was a victim. Then ICE found a myriad of reasons

to criticize the proposed resolution, including everything from the number of counts (Mem. at 1) to

the types of charges (Mem. at 15) to the limited number of individuals charged (Mem, at 15-16) to

the Guideline calculations (Mem. at 17) to the use of a DPA 4 (Mem. at 1). But to the extent ICE is

even considered a victim, which is addressed in a separate pleading filed simultaneously, its right

to be heard under the Crime Victim Rights Act ("CVRA"), 18 U.S.C. § 3771, does not give it veto

power overprosecutorial decisions, strategies, or tactics. 18 U.S.C. § 3771 (d)(6) ("Nothing in this

chapter shall be construed to impair the prosecutorial discretion of the Attorney General or any

officer under his direction."); United States v. Rubin, 558 F. Supp. 2d 411, 417-18 (E.D.N.Y. 2008)

("Although the CVRA is meant to be liberally construed within the confines of the rights

guaranteed, there is absolutely no suggestion in the statutory language that victims have a right

independent of the government to prosecute a crime, set strategy, or object to or appeal pretrial or

in limine orders entered by the Court whether they be upon consent of or over the objection of the

government. ... In short, the CVRA, for the most part, gives victims a voice, not a veto."). Indeed,

contrary to ICE's suggestion otherwise (Pet. at 11), the purpose of the conferral right under the

CVRA is not to give victims a right to approve or disapprove a proposed plea in advance or to

participate in the plea negotiations. United States v. BP Products North America Inc., 610 F. Supp.

2d 655, 727 (S.D. Tex. 2009); see also In re Acker, 596 F.3d 370,372-73 (6th Cir. 2010) (victims

were not entitled to mandamus relief under CVRA to alleged right to earlier notice prior to filing

4 Regardless ofICE's objections, it is unclear what standing, if any, ICE has to object to the DPA proposed in this case.

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of charges and direct involvement with government's negotiation of plea agreement, even though

plea agreement accepted by district court made no provision for restitution); In re W.R. Huff Asset

Management, 409 F.3d 555,564 (2d Cir. 2005) ("Nothing in the CVRA requires the Government

to seek approval from crime victims before negotiating or entering into a settlement agreement.").

But see In re Dean, 527 F.3d 391, 395 (5th Cir. 2008) (per curiam). Rather, the purpose of the

conferral right is to permit victims an opportunity "to provide information to the government, obtain

information from the government, and to form and express their views to the government and court."

BP Products North America, 610 F. Supp. 2d at 727.

Putting aside whether ICE has a right to participate in plea negotiations or veto prosecutorial

decisions, it will be for this Court to decide whether this is an appropriate resolution. While ICE has

criticized the proposed resolution, the government believes that once the Court has an opportunity

to review the proposed plea agreements, DP A, and the memoranda prepared by the Probation Office,

the Court will conclude that the comprehensive proposed resolution reflects the seriousness of the

conduct, promotes respect for the law, and provides for just punishment for the offenses committed. 5

The plea agreements are each made pursuant to Rule 11 ( c)( 1)( C) of the Federal Rules of Criminal

Procedure, as the government and the Defendant Subsidiaries have agreed to a specific sentence as

part of the overall corporate criminal resolution. While the government recognizes that the Court

5 Separate from these criminal cases, but still a part of the overall resolution of this matter with Defendant Alcatel-Lucent, the SEC and Defendant Alcatel-Lucent also agreed to resolve related civil FCPA allegations. Defendant Alcatel-Lucent has paid $45,372,000 in disgorgement of profits and prejudgment interest as part of its civil resolution with the SEC. The civil resolution did not include civil penalties in light of this parallel criminal action and $92 million criminal penalty. The civil complaint and proposed consent order was filed on December 27,2010, and assigned to the Honorable Donald L. Graham. Securities and Exchange Commission v. Alcatel-Lucent, S.A., 10-24620-CV-GRAHAM, DE 1. Judge Graham signed the consent order on December 29,2010. Id. at DE 5.

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may accept or reject these plea agreements, Fed. R. Crim. P. II(c)(3), the government believes that these plea agreements separately, and in concert with the provisions of the DPA, serve the cause of justice, and thus, the government asks the Court to accept these plea agreements.

I. Deferred Prosecution Agreement with Defendant Alcatel-Lucent

The DPA was reached with the parent company, Defendant Alcatel-Lucent, taking into consideration, among other things, Defendant Alcatel- Lucent's cooperation, assistance in conducting a global investigation, the remedial measures undertaken by Defendant Alcatel- Lucent including the "no agent" pledge, and the company's continued commitment to cooperate with Department of Justice, SEC, foreign law enforcement authorities and agencies, and multi-lateral development banks. (ALU DE 10 ~~ 4-5.) The agreement by the government to defer the prosecution of Defendant Alcatel- Lucent is conditioned on a number offactors, including the payment of a criminal penalty based on the U.S. Sentencing Guidelines, the implementation of an enhanced compliance program, and the retention of a corporate monitor, all of which are discussed below.

A. Calculation of Criminal Penalty

In reaching the overall criminal penalty reflected in the DP A, the government and Defendant Alcatel-Lucent agreed thatthe 2010 edition of the United States Sentencing Guidelines ("U.S.S.G.") is the appropriate manual to be used. (ALU DE 10 ~ 6.) The government and Defendant AlcatelLucent have agreed that the Guidelines range for Defendant Alcatel-Lucent is $86,580,000 to $173,160,000. (Jd.) The government and Defendant Alcatel-Lucent further agree thata total fine of $92 million, which is within the Guidelines range, is appropriate given the facts and circumstances and is consistent with the Sentencing Guidelines. (!d.) In reaching this penalty, the government considered the nature and extent of Defendant Alcatel-Lucent's cooperation in this

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matter, penalties related to the same conduct in Costa Rica,6 and the extraordinary remedial step of

terminating use of third-party sales and marketing agents. (Id.) The DPA provides for a schedule

of installments made up of three payments of $25 million and one payment of $17 million. (Id.)

F or purposes of calculating the loss under U. S. S. G. Section 2B 1.1 (b )( 1 )(P), the government

combined the pecuniary gain from the corrupt conduct in Costa Rica, Honduras, Malaysia, and

Taiwan (approximately $28.8 million) with the improper payments (approximately $19 million)

made in the other countries and to the agents identified in the Information against Defendant

Alcatel-Lucent. The rationale for using this latter $19 million figure, as opposed to gain, was that

calculating a traditional gain figure here was untenable because, while the payments violated the

books and records/internal controls provisions, the evidence was not clear as to which payments

were passed on as bribes to foreign officials; and thus, the precise amount of the pecuniary gains

received could not be calculated. Accordingly, following the logic and reasoning ofthe commentary

to U.S.S.G. Section 2B 1.1, the agreed-upon figure used here equates to "the value of the benefits

obtained by unintended recipients or diverted to unintended uses, as the case may be." Said

differently, in situations such as this, the commentary supports using the amount of the payments

as an appropriate approximation. Using these figures, the government believes that the total gain

or loss figure for purposes ofthe Sentencing Guidelines calculation is $48.1 million, which is higher

6 In January 2010, Alcatel-Lucent France, one of the Defendant Subsidiaries, entered into a settlement agreement with the Costa Rican government to resolve an action based on the same conduct in Costa Rica. (Jan. 20, 2010 Settlement Agreement Btwn. Office of the Attorney Gen. of the Rep. of Costa Rica and Alcatel-Lucent France, Ex. 2.) As part of this settlement agreement, Alcatel-Lucent France paid approximately $10 million (5.6 billion Costa Rican colones) to the Costa Rican Attorney General's Office, the legal representative of the government of Costa Rica, as reparations for the social damage to Costa Rica arising from this conduct. (Id. ~ 8.)

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than the fine indicated in the Offense Level Fine Table and thus is the operative figure. See U.S.S.G. § 8C2.4(a)(2). Defendant Alcatel-Lucent agrees with this calculation.

The government believes that an overall $92 million total penalty is appropriate to resolve this matter against Defendant Alcatel- Lucent and, as will be described below, against the Defendant Subsidiaries. This penalty is sufficient, among other things, to reflect the seriousness of the offenses, promote respect for the law, provide just punishment for the offenses, and afford adequate deterrence to criminal conduct (with regard to Defendant Alcatel- Lucent, the Defendant Subsidiaries specifically, and other multi-national corporations generally). See 18 U.S.C. § 3553(a). This is particularly true when considered in the context of the disgorgement of profits and prejudgment interest paid to the SEC (over $45.3 million) in the related SEC civil case, which brings the total fines, penalties, and disgorgement to more than $137 million, resulting in one of the largest FCP A penalties in history.

B. Enhanced Compliance Program

As part of the DPA, Alcatel-Lucent has agreed to implement - to the extent not already implemented - an enhanced compliance program designed to deter and detect future violations of the FCPA, the anti-corruption provisions of French law, and other applicable anti-corruption laws. At a minimum, as further described in Attachment C to the DP A, this compliance program should include, but not be limited to, (1) a clearly articulated corporate policy against violations of the FCPA, (2) the strong support and commitment of senior management to the company's corporate policy against violations of the anti-corruption laws, (3) the development and promulgation of compliance standards and procedures designed to reduce the prospect of violations of the anti-corruption laws, (4) annual review of its anti-corruption compliance standards and procedures,

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(5) assignment of responsibility to one or more senior corporate executives for the implementation and oversight of the anti-corruption compliance standards and procedures, (6) implementation of a system of financial and accounting procedures, including a system of internal controls, reasonably designed to ensure the maintenance of fair and accurate books, records, and accounts, (7) implementation of mechanisms designed to ensure that its anti-corruption policies, standards, and procedures are effectively communicated to all directors, officers, and employees, (8) establishment of an effective system for providing guidance and advice to directors, officers, and employees on anti-corruption matters, and (9) institution of appropriate disciplinary procedures to address violations of anti-corruption laws and the company's policies and procedures. (ALU DE 10 at C-1 - C-6.) These provisions are consistent with other enhanced compliance programs entered into in other FCPA cases. See, e.g., United States v. Tyson Food, Inc., No. l:ll-cr-00037-RWR (D.D.C. Feb. 10,2011) at DE 1-1 at 20; United States v. Panalpina World Transport (Holding) Ltd, No. 10- CR-769 (S.D. Tex. Nov. 4, 2010) at DE 5-3. In addition, they are in accord with international guidelines. See, e.g., Organisation for Economic Co-operation and Development (OECD), Good Practice Guidance on Internal Controls, Ethics, and Compliance (Feb. 18, 2010) available at: http://www.oecdorg/dataoecd/5/5J/44884389.pdj

C. Independent Corporate Compliance Monitor

Given the pervasiveness of the corrupt conduct uncovered by the investigation, the long period during which the conduct occurred, and the repeated circumvention of the internal controls of Defendant A1catel- Lucent's predecessor, Alcatel, the government and Defendant Alcatel- Lucent agree that Defendant Alcatel-Lucent's retention of an independent corporate compliance monitor, as required by the DPA, is appropriate in this matter. (ALU DE 10'1'110-13.) The monitor will

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have a demonstrated expertise in helping companies comply with the FCP A and other applicable

anti-corruption laws. For a period of three years, the monitor will evaluate, in the manner set forth

in Paragraphs 2 through 11 of Attachment D to the DP A, the effectiveness of Defendant

Alcatel-Lucent's internal controls, record-keeping, and financial reporting policies and procedures

as they relate to Defendant Alcatel-Lucent's current and ongoing compliance with the books and

records, internal accounting controls, and anti-bribery provisions of the FCP A, the anti-corruption

provisions of French law, and other applicable foreign law counterparts. (Id.) To carry out its

mandate, the monitor will conduct annual reviews and prepare annual reports, to include

recommendations to improve the company's anti-corruption compliance procedures, for each of the

three years, for a total of three reviews and three reports. (Id. at D-3.)

Because of a unique feature of French law known as the Blocking Statute and in recognition

that Defendant Alcatel-Lucent is a French company subject to the laws of France, the compliance

monitor will be a French national, and the monitor's reports will be transmitted to the Department

of Justice and the SEC through a French magistrate judge from the Central Service for the

Prevention of Corruption (Service Central de Prevention de la Corruption). 7 The French magistrate

judge was designated by the French Ministry of Justice with which the government worked to

identify the proper vehicle by which to comply with French law while achieving the proper oversight

of Defendant Alcatel-Lucent's compliance with its obligations.

7 ICE suggests that the use of a French compliance monitor "essentially removes any oversight from the United States." (Mem. at 19.) That is simply not true.

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II. Plea Agreements with the Defendant Subsidiaries

As part of the overall resolution of the criminal conduct, in addition to the DP A with Defendant Alcatel-Lucent, each of the three Defendant Subsidiaries directly involved in the majority of the misconduct has agreed to waive indictment and plead guilty to a one-count criminal Information charging each subsidiary with conspiracy to violate the anti-bribery, books and records, and internal control provisions of the FCP A in violation of Title 18, United States Code, Section 371, involving conduct in Costa Rica, Honduras, Taiwan, and Malaysia. Each of the three plea agreements filed with the Court contains a certificate of corporate resolutions indicating the agreement has been approved by the subsidiary's Board of Directors (Exhibit 1 to each plea agreement), an agreement to institute an enhanced compliance program (Exhibit 2 to each plea agreement), and a statement of facts detailing the underlying conduct (Exhibit 3 to each plea agreement). (See DE 10, DE 11, DE 12.)

A. Calculations of Criminal Penalty

Each of the Defendant Subsidiaries has agreed to pay a fine of $500,000 and a special assessmentof$400 within 10 business days after sentencing. (DE 10~ 15, DE 11 ~ 15, DE 12 ~ 15.) As discussed above with regard to Defendant Alcatel-Lucent, the total pecuniary gain from the conduct in Costa Rica, Honduras, Malaysia, and Taiwan was already taken into account in the Guidelines calculations for Defendant Alcatel-Lucent reflected in the DPA, resulting in an overall $92 million penalty. This is appropriate because the Defendant Subsidiaries' financials were ultimately consolidated with Defendant Alcatel-Lucent for financial reporting purposes. Accordingly, the government believes it would be "double counting" in these circumstances to count the pecuniary gain against each of the Defendant Subsidiaries in addition to counting it against

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Defendant Alcatel-Lucent in reaching the $92 million figure. Because of this, the government did

not count the pecuniary gain against the Defendant Subsidiaries a second time in its Guideline

calculations.

Although the Guidelines do not straightforwardly address this unique situation, the spirit of

Application Note 4 to Section 8C2.4 suggests that counting the pecuniary gain twice against

affiliated companies should be avoided." Because Defendant Alcatel-Lucent and the Defendant

Subsidiaries are related entities, apportionment of gain in determining the applicable offense level

is appropriate here. Here, the profits should be apportioned to the parent company, Defendant

Alcatel-Lucent, as properly reflected in the DPA, because Defendant Alcatel-Lucent ultimately

received and benefitted from the profits. As such, the plea agreements contain a proposed fine of

$500,000, which is in accord with the overall resolution and the Guideline calculations:

• Alcatel-Lucent France:

Base Offense:

Base offense level (2Cl.l(a)(2)): 12

More than One Bribe (2Cl.l(b)(1)): +2

High-Ranking Official (2Cl. I (b)(3)): +4

=====================================

TOTAL

18

Base Fine (8C2.4(d)): $350,000.

8 Application Note 4 explains that when determining an organization's base fine according to the Offense Level Fine Table in Section 8C2.4( d), "the applicable offense level is to be determined without regard to apportionment of the gain from or loss caused by the offense" in a case involving multiple participants. However, Application Note 4 also indicates parenthetically that this rule would not apply to sentencing an organization and an individual associated with the organization, which is analogous to a situation like this one involving multiple affiliates of one organization.

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Culpability:

Base culpability:

More than 5,000 Employees:

Acceptance of responsibility:

5 +5 -1

====================================

TOTAL

9

Calculation of Fine Range:

Base fine:

Multipliers:

Fine range:

$350,000

1.8 (min) / 3.6 (max) $630,000 to $1,260,000

• Alcatel-Lucent Trade:

Base Offense:

Base offense level (2Cl.l(a)(2)): 12

More than One Bribe (2Cl.l(b)(I)): +2

High-Ranking Official (2Cl.l(b)(3)): +4

====================================

TOTAL

18

Base Fine (8C2.4(d)): $350,000.

Culpability:

Base culpability: 5 10 or More Employees (but less than 50): +1 Acceptance of responsibility: -1

====================================

TOTAL

5

Calculation of Fine Range:

Base fine:

Multipliers:

Fine range:

$350,000

1 (min) /2 (max) $350,000 to $700,000

• Alcatel Centroamerica:

Base offense:

Base offense level (2Cl.l(a)(2)): 12

More than One Bribe (2Cl.l(b)(1)): +2

High-Ranking Official (2C1.1(b)(3)): +4

====================================

TOTAL

18

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Base Fine (8C2.4(d)): $350,000.

Culpability:

Base culpability: 5

50 or More Employees (but less than 200): +2 Acceptance of responsibility: -1

====================================

TOTAL

6

Calculation of Fine Range:

Base fine:

Multipliers:

Fine range:

$350,000

1.2 (min) / 2.4 (max) $420,000 to $840,000

U sing this Guidelines calculation, the advisory fine ranges for the Defendant Subsidiaries

is $630,000 to $1,260,000 for Alcatel-Lucent France, $350,000 to $700,000 for Alcatel-Lucent

Trade, and $420,000 to $840,000 for Alcatel Centroamerica. The statutory maximum sentence that

the Court can impose for a violation of Title 18, United States Code, Section 371, is a fine of

$500,000 or twice the gross pecuniary gain or gross pecuniary loss resulting from the offense,

whichever is greatest, 18 U.S.C. § 3571; five years' probation, 18 U.S.C. § 3561; and a mandatory

special assessment of $400, 18 U.S.C. § 3013. The government believes that, in light of (a) the

overall dispositions with Defendant Alcatel-Lucent and the Defendant Subsidiaries, including a

criminal penalty of $92 million, and (b) the interrelationship among the charges and conduct

underlying those dispositions, an application of the Alternative Fines Act, 18 U.S.C. § 3571(d),

would result in no different outcome of total amounts by Alcatel- Lucent entities, and that a fine of

$500,000 for each of the Defendant Subsidiaries is appropriate. Here, trying to apportion the gain

among Defendant Alcatel-Lucent and among the Defendant Subsidiaries would unduly complicate

and prolong the sentencing process. See 18 U.S.C. § 3571(c)(3).

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B. Enhanced Compliance Program

As part of the three plea agreements with the Defendant Subsidiaries, each of the Defendant

Subsidiaries has agreed to work with its parent corporation in fulfilling the obligations of the

enhanced compliance program that Defendant Alcatel-Lucent has agreed to as part of the DPA,

which is designed to detect and deter violations of the FCPA and other anti-corruption laws." (DE

10 ~ 5(g), DE 11 ~ 5(g), DE 12 ~ 5(g).)

LEGAL ANALYSIS OF PROPOSED RESOLUTION

In imposing a sentence, a court shall impose a sentence sufficient, but not greater than

necessary, to comply with the purposes set forth in Section 3553(a)(2):

(2) the need for the sentence imposed-

(A) to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense;

(B) to afford adequate deterrence to criminal conduct;

(C) to protect the public from further crimes of the defendant; and

(D) to provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner.

18 U.S.C. §§ 3553(a). A court shall also consider: the nature and circumstances ofthe offense and

the history and characteristics of the defendant; the kinds of sentences available; the kinds of

sentence and the sentencing range established for in the Sentencing Guidelines; any pertinent policy

9 The government believes that, in light of the fact that (a) each of the Defendant Subsidiaries has a compliance and ethics program currently through Defendant Alcatel-Lucent and has committed to making additional enhancements under their respective plea agreements (in addition to the commitment in the DPA), (b) an independent corporate monitor is being imposed for a three-year period under the DP A, and (c) that the fines and special assessments are to be paid within 10 days of the date of sentencing, a period of probation does not appear warranted in this matter. See U.S.S.G. § 8D 1.1 (factors requiring organizational probation).

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statements issued by the Sentencing Commission; the need to avoid unwarranted sentence disparities

among defendants with similar records who have been found guilty of similar conduct; and the need

to provide restitution to an victims of the offense. 18 U.S.C. §§ 3553(a)(1) - (a)(7). In addition to

the factors set forth in Section 3553(a), in determining a whether to impose a fine, and the amount,

time for payment, and method of payment of a fine, a court shall consider the following factors:

(1) the defendant's income, earning capacity, and financial resources;

(2) the burden that the fine will impose upon the defendant, any person who is financially dependent on the defendant, or any other person (including a government) that would be responsible for the welfare of any person financially dependent on the defendant, relative to the burden that alternative punishments would impose;

(3) any pecuniary loss inflicted upon others as a result of the offense;

(4) whether restitution is ordered or made and the amount of such restitution;

(5) the need to deprive the defendant of illegally obtained gains from the offense;

(6) the expected costs to the government of any imprisonment, supervised release, or probation component of the sentence;

(7) whether the defendant can pass on to consumers or other persons the expense of the fine; and

(8) if the defendant is an organization, the size of the organization and any measure taken by the organization to discipline any officer, director, employee, or agent of the organization responsible for the offense and to prevent a recurrence of such an offense.

18 U.S.C. § 3572(a).

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Here, the proposed resolution properly addresses these factors, in spite of ICE's various claims. See BP Products North America Inc., 610 F. Supp. 2d at 727 (accepting proposed corporate guilty plea despite objections of victims); see also Acker, 596 F.3d at 372-73 (upholding plea agreement accepted by district court that made no provision for restitution). There is no dispute that this case involves a serious offense. The Defendant Subsidiaries arc each pleading guilty to felony violations. The total penalty here is equally serious: the $92 million total penalty is one of the largest criminal penalties ever assessed under the FCP A and is derived from a reasonable calculation of the pecuniary gain that Defendant Alcatel-Lucent and the Defendant Subsidiaries earned collectively from the criminal offenses. See 18 U.S.C. § 3553(a)(2)(A). While the penalty is recordsetting, it appropriately takes into consideration the size and financial condition of the company, the pecuniary gain from the conduct, the disgorgement of profits, the remediation by the company, and the reparations already paid to Costa Rica, among other things. 18 U.S.C. § 3572(a). In short, it is consistent with the factors set forth in Section 3572(a).

Moreover, by the Defendant Subsidiaries pleading guilty and accepting responsibility for the conduct of their employees, respect for the law is promoted - both within the respective organizations and within the international business community at large. See 18 U.S.C. § 35 53( a)(2)(A). While this overall resolution may be demanding and even viewed as harsh by some, it is nevertheless just. See id. As an initial matter, it is consistent with the Sentencing Guidelines. 18 U.S.C. § 3553(a)(4). The need for the independent corporate monitor and an enhanced compliance program are also justified even though the vast majority ofthe illegal conduct occurred before the 2006 Merger. While the imposition of a corporate monitor may be viewed as a draconian penalty, in appropriate circumstances, such as those here, it serves an important purpose. Indeed,

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under the watchful eye of the independent monitor, the enhanced compliance program under which

Defendant Alcatel-Lucent and the Defendant Subsidiaries will operate to deter and detect future

violations of the FCP A, the anti-corruption provisions of French law, and other applicable anti-

corruption laws, and thereby protect the public from further crimes. See 18 U.S.C. § 3553(a)(2)(C).

In fact, one aspect of the enhanced compliance program includes periodic training and annual

certifications, which will provide an important mechanism by which to stop violations before they

occur. See 18 U.S.C.§ 3553(a)(2)(D). In addition, Defendant Alcatel-Lucent and the Defendant

Subsidiaries have phased out the use of third party sales agents or consultants in conducting their

worldwide business, which has dramatically reduced the potential for future violations ofthe FCP A

(and other anti-corruption laws) that gave rise to the instant charges.

For all the reasons set forth above, the proposed resolution reflects the seriousness of the

offense, promotes respects for the law, provides just punishment for the offense, affords adequate

deterrence to criminal conduct, and protects the public from further crimes of the defendant. See

18 U.S.C. § 3553(a)(2).

CONCLUSION

WHEREFORE, the government respectfully requests that the Court accept the Defendant

Subsidiaries' plea agreements in conjunction with the deferred prosecution agreement with

Defendant Alcatel- Lucent.

DENIS J. McINERNEY Chief, Fraud Section

By: sl Charles E. Duross

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CHARLES E. DUROSS Deputy Chief

Court No. A5500618

ANDREW GENTIN Trial Attorney

Court No. A5501174

Fraud Section, Criminal Division U.S. Department of Justice

1400 New York Avenue, N.W. Washington, D.C. 20005

Tel: (202) 353-7691

Fax: (202) 514-7021

Email: charles.duross@usdoj.gov Email: andrew.gentin@usdoj.gov

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CERTIFICATE OF SERVICE

I HEREBY CERTIFY that I electronically filed the foregoing document with the Clerk of

the Court, defense counsel, and ICE's counsel using CM/ECF on May 23, 2011.

By: sf Charles E. Duross

CHARLES E. DUROSS Deputy Chief

Court No. A5500618

Fraud Section, Criminal Division U.S. Department of Justice

1400 New York Avenue, N.W. Washington, D.C. 20005

Tel: (202) 353-7691

Fax: (202) 514-7021

Email: charles.duross@usdoj.gov

34