WASHINGTON (Reuters) - A subsidiary of Alcatel-Lucent SA has agreed to pay $4.2 million to settle allegations by the U.S. government that it submitted misleading information while working on a military contract, the U.S. Justice Department said on Friday.

The unit, Lucent Technologies World Services Inc, was awarded a $250 million U.S. Army contract in 2004 to design and build an emergency communications system in Iraq, the department said.

The company in early 2005 said that it had successfully tested the system's radio transmission sites and the system as a whole, but those certifications were inaccurate, the department said.

Stuart Delery, acting head of the Justice Department's civil division, said in a statement that the integrity of government contracts is important, "especially where contractors have been engaged to supply critical support for the work of stabilizing Iraq and Afghanistan."

Alcatel-Lucent cooperated with the investigation and its contracting subsidiary remains in good standing with the government, the company said in a statement.

"We agreed to pay the government $4.2 million to fully and completely resolve this matter and avoid the heavy cost of future litigation with the U.S. government," the company said.

A whistleblower who had been a contract manager for the project, Geoffrey Willson, started the case in December 2008 under the False Claims Act.

The law allows a whistleblower to collect a share of the recovery in cases of improper government payments, and Willson will receive $758,000, the Justice Department said.

(Reporting by David Ingram; editing by Lisa Von Ahn and Matthew Lewis)