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Head of Leading Technology Group Charged With Fraud, Corruption

March 11, 1995

PARIS (AP) _ The president of French telecommunications and technology giant Alcatel-Alsthom was charged Friday with fraud and abuse of corporate funds, and ordered removed as head of France’s third-largest corporation.

Pierre Suard was charged with systematically overcharging the French telephone monopoly, France Telecom, and with misusing corporate funds to install a $625,000) security system at his home.

A judicial investigation concluded that Alcatel-Alsthom camouflaged $140 million it siphoned off from 1991-93 by overbilling France Telecom and disguised it as phony payments to three subsidiaries in France, Switzerland and the United States.

Suard was grilled for six hours by Judge Jean-Marie d’Huy on payments by Alcatel-Alsthom, the world’s No. 1 supplier of telecommunications equipment with 13 percent of the global market, ahead of AT&T of the United States and Germany’s Siemens.

D’Huy barred Suard from ``all functions″ in the industrial group and from all contact with others charged in the case and with France Telecom. He also ordered Suard to report his whereabouts.

``The directors of the group express their indignation with respect to the surprising severity and arbitrary nature of the measure taken,″ the firm said in a statement issued late Friday.

It said the board of directors would meet early next week to decide what action to take, ``while awaiting the normal resumption of activities by President Pierre Suard.″

The scandal surfaced after an apparent whistleblower who was fired from Alcatel-Alsthom in July last year began providing documents to investigators detailing the group’s shady transactions with its subsidiaries.

Former Alcatel executive Denis Gazeau has given d’Huy more than 100 compromising accounting documents showing that Alcatel created a worldwide network of phony bills to launder the proceeds from its overbilling, the newspaper Le Parisien reported Friday.

Alcatel allegedly siphoned off the money it overcharged France Telecom to three subsidiaries by commissioning bogus consulting projects.

It was a crushing blow to a captain of French industry whose firm was already embattled with the jailing last year of the head of one of its subsidiaries in connection with the overbilling.

The subsidiary, Alcatel CIT of France, is also under judicial investigation for overcharging France Telecom. The unit’s chairman, Pierre Guichet, was jailed for 11 days last December. He was released after appealing his detention.

One of the parent companies senior executives suggested in an interview published Friday that Gazeau was an industrial spy working for a foreign competitor.

Alcatel-Alsthom ``was the victim of a vast industrial and commercial espionage as well as destabilization operation,″ Director General Francois de Laage de Meux told the newspaper Le Monde.

A British consulting firm warned Alcatel-Alsthom last November that a foreign competitor had mounted an operation to deny the French firm contracts in the Middle East, Africa, Latin America and east Asia, de Laage de Meux said.

The consultant also warned that the competitor had planted or recruited a mole within Alcatel-Alsthom to steal inside information, he said.

Whether true or not, de Laage de Meux’s accusations were likely to generate sympathy as they come only a few weeks after the French government leaked reports of American CIA spying on French technology. U.S. intelligence reportedly has foiled French high-tech contract bids by exposing French spying and bribery to influence decisions.

Alcatel-Alsthom employs 200,000 is one of France’s largest companies and a world leader in telecommunications, transportation, and electric power generating equipment.

It provided 9 million telephone lines to China this year, and was France’s most profitable firm in 1993, earning $1.46 billion on sales of $32.5 billion.

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