Minister asks TM to explain kickback allegations

  • Business
  • Thursday, 30 Dec 2010

PETALING JAYA: The Government views the allegations of kickbacks of US$700,000 paid to Malaysians by Alcatel Lucent SA for it to win a US$85mil telecoms contract between 2004 and 2006 very seriously and Information, Communications and Culture Minister Datuk Seri Dr Rais Yatim wants the Malaysian Anti- Corruption Commission (MACC) to investigate the matter.

“It does not speak very well in terms of our international image, so the pursuing act we need is to have more details on how and where (all this occurred); otherwise we would appear to be a whole lump of graft givers,'' Rais told StarBiz when contacted yesterday.

Documents made public by the US Securities and Exchange Commission (SEC) and the US Department of Justice on Monday alleged that French equipment supplier Alcatel paid bribes to employees of Telekom Malaysia Bhd (TM) in exchange for non-public information.

It said the information included important documents and budget information relating to ongoing bids and competitor pricing information. Because of the bribes, it claimed, Alcatel won a US$85mil contract. The contract is said to be for the deployment of equipment for Celcom's 3G rollout under phase 2 in 2006. Celcom was then TM's unit and since the demerger, it is now a unit of Axiata Group Bhd.

Alcatel and two other international vendors were the losers for the first phase of 3G deployment as the contract then went to Nokia Networks Malaysia and China's Huawei Technologies.

The SEC alleged that Alcatel Malaysia's management consented to these payments and those who got the kickbacks were two consultants who received payments of US$200,000 and US$500,000 through US bank accounts purportedly for market research.

“It is alarming if it is true and this is the first time it exposes Malaysia as a participating element (to graft). We look at this seriously and I have (instructed) the Malaysian Communications & Multimedia Commission to be on the watchout for telcos in Malaysia so that this is not (standard) practice,'' Rais said.

The MACC also issued a statement yesterday saying that it would “verify with parties concerned” before proceeding with any potential probe into the Alcatel international bribery scandal despite the telco's admission that it had paid off Malaysian officials.

Irregularities were found relating to the contract and this matter was raised during a meeting at TM, but it was purportedly brushed aside. It was reported that TM director Datuk Nur Jazlan Mohamed quit as audit committee chairman after the irregularities were found but not investigated.

Rais said since TM was mentioned directly in the documents, it should explain its position and come out with a due process so that things were more transparent and responsibly laid out as TM was a public listed company.

“We take these allegations seriously and will further conduct thorough internal investigations to safeguard the integrity of our procurement process and ensure adherence to our Code of Business Ethics. Upon any substantive findings, we will inform the relevant authorities and will extend all necessary cooperation, where required,'' TM said in response to the SEC allegations.

TM said “it had zero tolerance policy on improper and irregular practices and will take appropriate action in the event that any of our employees were indeed involved. It said it is fully committed to a fair and transparent procurement policy and adheres to current best practices”.

“We have very strict and thorough procurement processes that involve technical assessment of any contract scope, together with stringent requirements on the equipment, support and vendor credentials,'' TM said.

Even Axiata has responded by saying that “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 as Axiata and its subsidiaries uphold the highest standards of integrity and ethical standards in all its dealings and do not condone or tolerate any breach of code of conduct by its employees, subsidiaries, partners or vendors,'' Axiata said.

Alcatel agreed on Monday to pay more than US$137mil to settle US charges that it paid millions of dollars in bribes to foreign officials to win business in Latin America and Asia.

Alcatel has been accused of making payments to government officials in countries including Costa Rica, Honduras, Taiwan and Malaysia to win or keep contracts worth millions of dollars, the SEC document said. Between December 2001 and June 2006, the company allegedly used consultants who funnelled more than US$8mil in bribes to officials, and Alcatel also improperly hired third-party agents in countries like Nigeria to help win deals.

The SEC, in its three-page section on Malaysia, alleged that the “TM employees who received bribes were “foreign officials'' within the meaning of Foreign Corrupt Practices Act of 1977 and were in a significant position to influence the policy decision TM made. Alcatel Standard also made significant lump-sum payments through US bank accounts to two consultants purportedly for market research.''

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 document said Alcatel admitted it earned about US$48.1mil in profits as a result of the improper payments.

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