Union questions Alcatel-Lucent compliance by Ron Orol in Washington

 

TOP DEAL HEADLINES

 

Connecticut Senator Christopher Dodd

 

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.

 

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.