Lucent Technologies Inc. was fined $25 million by securities regulators Monday in a settlement of civil fraud allegations because it failed to fully cooperate in an investigation of its accounting.
The Securities and Exchange Commission also charged nine current and former executives of the telecom equipment maker, along with one former official of Winstar Communications, with securities fraud and aiding and abetting Lucent’s alleged violations of securities laws in the accounting irregularities.
In a civil lawsuit filed in federal court in Newark, N.J., the SEC alleged that Lucent “fraudulently and improperly” booked some $1.1 billion in revenue in 2000.
Lucent, based in Murray Hill, N.J., neither admitted to nor denied wrongdoing in its settlement with the SEC.
“Since bringing this matter to the SEC’s attention, we have addressed these issues with increased controls and disclosures in our organization,” Lucent chairman and CEO Patricia Russo said in a statement. “We are closing this chapter in our history, putting it behind us and focusing on moving our business forward.”
Similarly, three of the former Lucent executives agreed to settle the allegations without admitting or denying the allegations.
The settlement with Lucent resolves an SEC investigation that began in late 2000, when the company disclosed that it had prematurely booked $679 million in revenues.
The company reached a tentative settlement agreement in February 2003. The SEC initially found Lucent to be cooperative and did not intend to fine the company but only to issue a cease-and-desist order against it. But the company’s subsequent lack of cooperation prompted the agency to levy a fine, the source said.
The SEC is sending a message to corporate America that insufficient cooperation will be punished. In March, the agency fined Banc of America Securities, a division of Bank of America Corp., $10 million because it allegedly failed to promptly furnish documents requested by SEC attorneys. That amount already was a record fine for a violation of that type.
Lucent disclosed the $25 million civil fine in March.
Lucent’s alleged improper accounting for revenue came during the start of the telecom industry slump, and former chief executive officer Richard McGinn was pushing the sales staff to meet optimistic targets despite warnings from some executives that it couldn’t be done.
After spectacular growth throughout the late 1990s, the company’s fortunes reversed — forcing massive layoffs, sales of parts of its business, and quarter after quarter of hefty losses. McGinn was fired.
In the fall of 2000, Lucent voluntarily informed the SEC about the accounting problems and restated earnings figures it had previously reported.
Several other telecom companies, including Global Crossing and Qwest Communications, are still under investigation for alleged improper accounting.
Lucent announced last month that it was firing four senior executives at its division in China after finding possible violations of U.S. bribery laws. The company said the investigation was among two dozen done of its foreign operations, which were prompted by earlier bribery allegations involving its Saudi Arabian operations.
Lucent said it found, and referred to the SEC and the Justice Department, “incidents and internal control deficiencies” in its operations in China that potentially involve violations of the Foreign Corrupt Practices Act.
A Saudi company, Silki-La-Silkia National Telecom Ltd., sued Lucent last August, alleging that company executives bribed Saudi Arabia’s former telecommunications minister with cash and gifts worth $15 million to $21 million from 1995 through 2002. The suit said that Lucent paid to gain billions of dollars of business from the Saudi Telecommunications Co., the country’s monopoly wireless provider.
The U.S Securities and Exchange Commission is expected to charge at least five former Lucent Technologies executives for their roles in accounting problems at the telecommunications equipment maker, the Wall Street Journal said on Monday.
As soon as Monday, the SEC will also file a civil fraud case against Lucent charging that it improperly recognized revenue and levy a $25 million fine for failure to cooperate with inquiries, the Journal said, citing people familiar with the matter.
In March Lucent had announced the $25 million penalty, adding that it will not need to restate any financial results relating to the accounting probe. At that time, the company said it neither admitted nor denied liability.
The SEC will charge some of the former Lucent employees because the authorities said they helped falsely pump up revenue with aggressive sales practices and made false documents, the Journal said.
A Lucent representative was not immediately available to comment to Reuters.