Government must answer questions on NBN following Alcatel bribery fines.

The Gillard Government must immediately respond to revelations that Alcatel-Lucent, the lead technology contractor to the National Broadband Network, has been fined $US137 million by the US Securities and Exchange Commission for allegedly paying bribes at a time when NBN Co CEO Mike Quigley and NBN Co CFO Jean-Pascal Beaufret were both senior Alcatel officers.

Alcatel-Lucent has agreed to the settlement and to the payment of the fines.

The SEC court filing states Alcatel (the predecessor company to Alcatel-Lucent) paid “more than $8 million in bribes to foreign government officials.” It also states that Alcatel was “run by an executive committee made up of very senior officers.”  This executive committee included both Mr Quigley and Mr Beaufret.

Mr Quigley, chosen by Senator Conroy and former Prime Minister Rudd to oversee NBN Co in 2009, was Alcatel’s global president and chief operating officer from 2005 to 2007 and a member of the firm’s executive committee from 2001.

Mr Beaufret was a director and chief financial officer at Alcatel between 1999 and 2007.

The SEC filing states: “A lax corporate control environment aided Alcatel’s improper conduct. Alcatel failed to detect or investigate numerous red flags suggesting that its business consultants were likely making illicit payments and gifts to government officials in these countries at the direction of certain Alcatel employees.”

NBN Co claims neither Mr Quigley nor Mr Beaufret were aware of these bribery schemes.

But both men owe the Australian public a far more detailed explanation.  Each must explain how they could serve in such senior positions and be unaware of millions of dollars of bribes flowing to government officials in Costa Rica, Honduras, Taiwan and Malaysia to secure sales of Alcatel equipments.  They must also outline what financial controls are in place at NBN Co to ensure malpractice cannot be overlooked by senior management, as their denials of any knowledge of the bribery schemes suggest it was at Alcatel.

It is noteworthy that in a statement on 27 December welcoming the $US137 million settlement with the SEC, Alcatel-Lucent’s current general counsel said Alcatel is “a radically different company today: It has different management, including a new CEO, a new executive committee and a different board of directors…”

These revelations raise a series of urgent questions for the Gillard Government:

1.       What formal recruitment and vetting processes were used by the Government and NBN Co in choosing Mr Quigley and Mr Beaufret for their respective roles at NBN Co?

2.       What knowledge of the SEC bribery investigation did the Government have prior to appointing Mr Quigley as CEO in July 2009 and Mr Beaufret as CFO in September 2009?  Did Mr Quigley or Mr Beaufret disclose it was underway?  If the Government was aware of the investigation, as it ought to have been, how did it establish that Mr Quigley and Mr Beaufret were neither directly involved nor indirectly responsible for the “lax corporate control environment” noted by the SEC?

3.       How many current NBN Co executives, employees or consultants were employed by Alcatel or its subsidiaries at any time between 2001 and 2006, when the alleged violations of the US Foreign Corrupt Practices Act took place?

4.       Were any of those individuals involved in authorizing, executing or recognising revenue from any Alcatel contracts in Costa Rica, Honduras, Taiwan or Malaysia?

5.       Given Mr Quigley, Mr Beaufret and other NBN Co executives were previously employed by Alcatel, what arrangements did NBN Co directors and management put in place to prevent any conflicts of interest from arising during the process that selected Alcatel as the NBN’s lead technology contractor?  Was any former Alcatel employee directly involved in recommending or approving this decision?

6.       What is the dollar value of all existing contracts between Alcatel and its subsidiaries and NBN Co and its subsidiairies?

7.       What steps have the Government and the board of directors of NBN Co taken to ensure the company’s internal controls and financial governance are robust, and the interests of Australian taxpayers are fully and properly protected?

 The Government has repeatedly declined to be open and transparent with the Australian people over the NBN, the most expensive infrastructure project in our history:

• It has refused to undertake a proper cost-benefit analysis of the project.
• It has refused to submit it to Infrastructure Australia; refused to publish the full NBN Co business plan and financial projections.
• It has refused to explain how mandatorily reduced competition in the fixed line broadband will be of benefit consumers.
• It has refused to identify what the applications are which require valuable existing communications infrastructure to overbuilt and scrapped.
• And it has refused to detail exactly how Australian households will make the transition to the NBN or what retail prices they will pay for service once they do.

Now is the time for the stone-walling to end.  The Government must quickly and clearly answer the serious questions raised by this week’s revelations.