January 20, 2011

Alcatel-Lucent wins dismissal of $200 million RICO action that grew out of an FCPA investigation and criminal settlement with the U.S. government. 

On January 18, Willkie client Alcatel-Lucent, the French telecommunications company, won dismissal of a $200 million RICO action that grew out of a Foreign Corrupt Practices Act (FCPA) investigation and criminal settlement with the U.S. government.  The lawsuit alleged that, over a period of several years, executives at Alcatel-Lucent subsidiaries paid bribes to various employees of Plaintiff El Instituto Costarricense de Electricidad (ICE), a Costa Rican state-owned telecommunications provider, in exchange for contracts to provide telecommunications equipment and services in Costa Rica.  As a result of the bribery scheme, the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) launched tandem investigations that ultimately led to three Alcatel-Lucent subsidiaries pleading guilty in December 2010 in Miami federal court to criminal violations of the FCPA arising from a bribery scheme extending from Costa Rica to Nigeria and Taiwan.  Alcatel-Lucent also entered into a deferred prosecution agreement with the DOJ and agreed to pay a  total of $137 million in criminal and civil penalties and disgorgement.   

In April of 2010, ICE filed a complaint against Alcatel-Lucent and three subsidiaries in Florida state court, asserting Florida RICO and Florida common law claims.  In essence, ICE alleged that Alcatel-Lucent had operated a racketeering enterprise whose purpose was to gain business by the use of bribes and kick-backs in Costa Rica and elsewhere.  Through the Florida lawsuit, ICE sought approximately $200 million from Alcatel-Lucent pursuant to RICO’s treble damages provision.

Willkie moved to dismiss on several grounds, including forum non conveniens.    The Court heard argument on Willkie’s motion on December 9, 2010 and January 18, 2011, and on January 18, dismissed ICE’s complaint on forum non conveniens grounds.    The Court accepted each of Willkie’s arguments in support of dismissal, including that ICE is a Costa Rican government entity that should sue in its own courts for its injuries that occurred in Costa Rica.  In particular, the Court ruled that ICE could not bootstrap the criminal prosecution into civil RICO claims "because civil RICO claims do not apply extraterritorially to a foreign plaintiff’s foreign injury for bribes made abroad to foreign officials."  Rather, because "the public interest has already been fully served by $137 million in fines and disgorgement . . ., ICE’s civil action would unnecessarily impose burdens on Florida courts and taxpayers."

Willkie’s victory is profiled in the January 19 Am Law Litigation Daily in a feature article entitled "Alcatel Wins Dismissal of Costa Rica’s FCPA-Based Florida Racketeering Case" and in a January 19 Law360 article entitled "Utility’s RICO Suit Over $149M Alcatel-Lucent Pact Nixed."

The case was handled by partners Richard Bernstein, Robert Meyer and James Dugan, and associates Benjamin Shapiro and Allison Fraser.