Post by POA on May 18, 2004 3:45:40 GMT -5
SEC accuses Lucent of $1bn dotcom era fraud
David Teather in New York
Tuesday May 18, 2004
The Guardian
The United States securities watchdog yesterday filed fraud charges against Lucent Technologies and nine former workers, for inflating its revenues by $1.1bn (£650m) in the dying days of the dotcom boom.
The securities and exchange commission also levied a $25m fine against the telecom equipment maker for not fully cooperating during the three-year investigation. A former executive at Lucent client Winstar Communications faces separate charges of aiding and abetting the fraud.
Lucent shares, once worth more than $60, were trading more than 7% down at $3.05 during midday trade on Wall Street yesterday.
The settlement with Lucent is the latest in the clean-up of the American telecoms market. It has emerged that when business suddenly fell away in 2000 the industry became a hotbed of fraudulent behaviour as executives scrambled to meet the stubbornly high expectations of Wall Street.
Nortel Networks, Lucent's main rival, said on Friday that it is the subject of a criminal inquiry by the US attorney's office in Dallas, Texas, adding to a handful of investigations already taking place.
The SEC suit alleges that Lucent improperly booked more than $1.1bn in revenue and $470m in profits during 2000. It said the company and nine former workers failed to disclose various schemes, side agreements and incentives to induce clients to buy Lucent products. The aim was allegedly to meet internal sales targets and obtain sales bonuses.
The SEC claims they hid or falsified documents to cover up the side deals attached to at least 10 transactions during that year. The Winstar former executive was also allegedly involved.
Lucent has settled with the SEC, as have three individuals who are paying fines of between $60,000 and $110,000. The watchdog will press ahead with the other seven through the courts.
Lucent chief executive Patricia Russo said the company had since increased internal controls. "We are closing this chapter in our history, putting it behind us and focusing on moving our business forward."
The SEC hopes the $25m fine will send a message to other firms that might be tempted to hinder its investigations.