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Lucent hit with $25M fine in SEC settlement

Nine current and former Lucent employees charged with securities fraud

By Scarlet Pruitt
May 18, 2004 12:00 PM ET

IDG News Service - Federal regulators charged Lucent Technologies Inc. yesterday with conducting accounting fraud totaling more than $1.1 billion amid allegations that employees falsified documents, cut secret deals with customers and then hid the transgressions.
Lucent and three of its employees agreed to settle the case, and the company will pay a $25 million fine for lack of cooperation. The settlement, spelled out by the U.S. Securities and Exchange Commission in a sternly worded statement that laid out a slew of charges against the telecommunications equipment vendor, was first announced in March (see story).
The SEC began investigating the Murray Hill, N.J.-based company after it announced accounting problems in late 2000. A settlement was agreed to last year, but regulators decided earlier this year to levy the fine for lack of cooperation. Regulators accused the company of failing to provide proper documentation, withholding evidence and neglecting to disclose to staff key issues concerning indemnification of employees, among other charges.
In what the SEC said were "reckless" actions, nine current and former Lucent employees were also charged with securities fraud for offering incentives to induce Lucent customers to purchase the company's products and then not properly accounting for the deals. The SEC cited at least 10 transactions in Lucent's 2000 fiscal year in which it alleges that employees violated accounting rules "in a drive to realize revenue, meet internal sales targets and/or obtain sales bonuses."
Furthermore, it charged that employees falsified documents, circumvented the company's internal accounting controls and misled or failed to inform the corporate finance structure of the side agreements.
The SEC charged former Lucent sales executive William Plunkett of "engaging in a scheme" with a Winstar Communications Inc. executive in one noncontractual deal that led to the improper reporting of $125 million in software purchases in Lucent's fiscal 2000 fourth quarter. As part of the settlement, Plunkett has been fined a civil penalty of $110,000 and has agreed to be barred from acting as an officer or director of a public company for five years, the SEC said.
Two other Lucent employees have also settled, agreeing to pay hefty civil penalties. Meanwhile, the SEC said it is litigating the case against seven remaining defendants.
As part of the settlement, Lucent employees are neither admitting to nor denying the allegations. Additionally, the company won't be making any financial restatements.
Lucent Chairman and CEO Patricia Russo issued a statement saying that the company is closing this chapter in its history and putting the matter behind it.

Reprinted with permission from Story copyright 2014 International Data Group. All rights reserved.
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