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Ex-Lucent CEO, others could face SEC charges

Federal regulators are considering civil charges against two former executives of Lucent Technologies Inc. and a third ex-employee of the telecommunications gear maker over an alleged bribery scheme involving Saudi Arabian officials.
/ Source: The Associated Press

Federal regulators are considering civil charges against two former executives of Lucent Technologies Inc. and a third ex-employee of the telecommunications gear maker over an alleged bribery scheme involving Saudi Arabian officials.

Lucent's former chairman and chief executive, Richard McGinn, and the former head of Lucent's Saudi Arabian operations, John Heindel, received notices of possible action by the Securities and Exchange Commission.

The case involves allegations that McGinn, Heindel and a third person violated the Foreign Corrupt Practices Act through bribery and by "aiding and abetting the company's alleged violations" of the law's requirements to keep accurate books and maintain proper internal accounting controls.

Murray Hill-based Lucent disclosed the development in a filing with the SEC late Monday.

"We identified these individuals due to the significance of their positions," said Lucent spokesman Bill Price.

A third former employee who was not named in the SEC filing also received what is called a Wells notice, which indicates that the SEC staff is considering recommending civil charges against a person or company. The notice offers them an opportunity to respond beforehand.

"The company has not received a Wells notice, nor have any of its current employees," Price said. Price said Lucent continues to cooperate with the SEC investigators.

Lucent said in its filing that it concerns a previously disclosed investigation by the SEC and Department of Justice into company operations in Saudi Arabia from 1997 through 2000.

Lucent has separately been accused in a lawsuit of bribing Saudi Arabia's former telecommunications minister with cash and gifts worth $15 million to $21 million, from 1995 through 2002, as a way to gain business from the Saudi Telecommunications Co., the country's monopoly wireless provider.

Price could not explain the discrepancy in the years of the alleged scheme cited by federal investigators and in the lawsuit.

The lawsuit was filed by Silki-La-Silki National Telecom Ltd., a telecom company that provides Internet service in Saudi Arabia. It sued Lucent in August 2003 in U.S. District Court for the Southern District of New York, then amended the complaint with further allegations in March 2004. It claims that Lucent cheated the company out of business through the scheme.

Silki-La-Silki, which formally did business as National Group for Communications and Computers Ltd., is seeking $225 million, triple the amount the company claims it lost because Lucent canceled subcontracts with Silki and did the work itself.

That case is still pending, Price said.

McGinn was at the helm of Lucent during the early years of the AT&T spinoff, when it grew spectacularly and the then-Wall Street darling's stock prices soared to $84 per share. McGinn was forced out of his position in fall 2000, when the company disclosed that it had prematurely booked $679 million in revenues in the quarter ending the prior September.

That was at the beginning of the telecom industry slump, when Lucent's fortunes reversed, setting off a spiral of massive layoffs, sales, spinoffs and closures of parts of its business, and three straight years of hefty quarterly losses. This September, Lucent recorded its first profitable year since 2000.

Tentative labor deal reached
Separately, Lucent reached a tentative agreement early Tuesday with two labor unions that cover about 3,250 employees nationwide, a company spokeswoman said.

The deadline for the contract expiration had been extended to 12:01 a.m. Tuesday, and talks continued after the deadline passed.

Lucent spokeswoman Mary Ward did not reveal details of the agreement, but said the company and the unions had bargained over issues like whether retirees should contribute to the cost of their health insurance.

Most of the 3,250 workers are represented by the Communications Workers of America; about 250 are represented by the International Brotherhood of Electrical Workers.

The telecommunications equipment maker has about 31,800 workers worldwide, including about 500 CWA members in New Jersey.

Lucent also has some 70,000 union retirees for whom it was given responsibility when the company was spun off from AT&T Corp. in 1996.

Lucent and the unions had met in Washington since Oct. 7. Their contract expired at the end of October and negotiators agreed at the time to extend talks.

The Federal Mediation and Conciliation Service, an independent U.S. government agency whose mission is to preserve and promote labor-management peace and cooperation, hosted the negotiations.