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Union Questions Alcatel-Lucent Compliance |
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Friday, 13 April 2007 |
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Faced with concerns from a labor union, the Senate Banking Committee is examining whether Alcatel-Lucent is violating a U.S. government security agreement that the telecommunications software and equipment company put in place last year to gain regulatory approval for its $11.8 billion combination.
by Ron Orol in Washington
The Committee on Foreign Investment in the United States, an interagency panel charged with examining the national security implications of cross-border deals, approved the takeover by France's Alcatel SA of Lucent Technologies Inc. in November after the companies agreed to create a separate U.S. division to handle sensitive contracts with the Department of Defense and other government agencies. Following the instructions of the "mitigation agreement," Alcatel-Lucent created the LGS Innovations Inc. division to manage those contracts.
But the Communications Workers of America, a labor union representing roughly 2,500 Alcatel-Lucent workers, has since expressed concern to the Senate Banking Committee that the telecom equipment maker may be breaching the mitigation agreement by refusing to transfer between 65 and 100 union-represented telecom installers with security clearances to the new entity. CWA officials have questioned whether these installers are being required to continue to do their jobs outside of LGS and in violation of the government security agreement.
The mitigation agreement raised concerns among international dealmakers last year because it was the first with an "evergreen" clause that would allow the federal government to unwind a merger at any time if the merged company was found to be out of compliance.
Alcatel-Lucent spokeswoman May Lou Ambrus said the telecom equipment company is fully compliant with the government agreement. She added that there is no condition in its collective bargaining agreement or the government mitigation agreement requiring Alcatel-Lucent to transfer union jobs to the LGS unit. Ambrus added that CWA-represented installers can still perform their secure work and not be in violation of the government agreement because LGS has the ability to contract that work from Lucent.
Despite that, the Senate Banking Committee initiated an inquiry into the matter after CWA sent Committee Chairman Christopher Dodd, D-Conn., a letter on March 23 expressing their concerns. The banking committee has jurisdiction over CFIUS-related matters and is currently considering legislation to reform the interagency panel. After receiving the letter, committee staffers began looking into the matter, said committee spokesman Marvin Fast. Committee staff met with both CWA officials and on April 4 with Alcatel-Lucent representatives to discuss the matter, he added.
"The staff expects to hold follow-up meetings with all parties after reviewing the information received to date," Fast said. "We intend to continue to look into these workers' concerns."
Alcatel-Lucent has already transferred executives, sales officials and engineers all with security clearances to LGS, but so far have not moved the union-represented officials, said Ralph Maly, vice president of communications and technologies at CWA. Maly added that he believes Alcatel-Lucent decided not to move the employees to the LGS division because it frees the division of the union, and also gets the company out of the wage and benefit packages given to the union-represented officials. "These employees have extensive knowledge of and background in military and government security work," Maly said.
It's unclear at this stage whether Alcatel-Lucent's decision not to transfer the union member employees is a violation of their agreement with the U.S. government. Clif Burns, a partner at law firm Powell Goldstein LLP in Washington, said that these type of government agreements typically require that only U.S. citizens with security credentials have access to classified technical data, but they do not stipulate whether any must be union members.
Nancy McLernon, senior vice president of the Organization for International Investment in Washington, said it appears CWA could be taking advantage of the CFIUS process for political gain. McLernon questioned whether CWA is trying to use the CFIUS process as leverage to protect union jobs, something well beyond the panel's scope. "It does not seem that this is based on national security concerns but on union jobs," McLernon said. "CWA is worried about the deal's economic impact, which is not a CFIUS concern."
McLernon added that this case is something that lawmakers should consider as Congress considers reforming the CFIUS process. She has concerns that if Congress expands CFIUS' disclosure responsibilities beyond the committees of jurisdiction, it could make it easier for some to game the system for their own gain in a way that has nothing to do with national security. "It seems CWA is trying to accomplish something here that they were not able to accomplish otherwise," McLernon said.
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