The SEC fines the company $25-million for failing to cooperate fully in an accounting investigation.
By Associated Press
Published May 18, 2004
WASHINGTON - Federal regulators charged nine former and current Lucent Technologies Inc. executives with securities fraud Monday and fined the company $25-million in a settlement, saying Lucent failed to cooperate fully in an accounting investigation.
The Securities and Exchange Commission also charged a 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 $1.1-billion in revenue in 2000.
The executives, pushing to increase revenue, meet sales targets and reap sales bonuses, failed to disclose incentives that Lucent gave customers to induce them to buy its products, the SEC said in the suit.
In the case of Winstar, the SEC alleged that former Lucent sales executive William Plunkett and David Ackerman, a former Winstar executive vice president, engaged in a scheme that led to Lucent prematurely booking $125-million in revenue from a software licensing deal with Winstar. The scheme included postdating letters documenting agreements between the two companies, the SEC said.
Plunkett agreed in a settlement with the SEC to pay a $110,000 civil fine. Ackerman is contesting the SEC's allegations.
Lucent, based in Murray Hill, N.J., neither admitted to nor denied wrongdoing in its settlement with the SEC. The company was not required to restate its earnings. It did agree not to commit such violations again.
"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 three former sales executives - Plunkett, Deborah Harris and Vanessa Petrini - are paying a total $270,000 in civil fines. In addition, Petrini agreed to repay some $109,000 in compensation she received as a result of the alleged misconduct.
The seven other individuals are disputing the SEC's allegations and their cases will be pursued in court.
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 SEC said.
"Throughout the investigation, Lucent provided incomplete document production ... and failed to ensure that a relevant document was preserved and produced pursuant to a subpoena," the agency said Monday. "As a result, the staff's ability to conduct an efficient and comprehensive investigation was impeded."
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 the SEC. That amount already was a record fine for a violation of that type.
"Companies whose actions delay, hinder or undermine SEC investigations will not succeed," said Paul Berger, an associate director of the agency's enforcement division. "Stiff sanctions and exposure of their conduct will serve as a reminder to companies that only genuine cooperation serves the best interests of investors."
Lucent disclosed in March that it expected to be fined $25-million.
Lucent's alleged improper accounting for revenue came during the start of the telecom industry slump. 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.
In fall 2000, Lucent voluntarily informed the SEC about the accounting problems.
In addition to Ackerman, the former Winstar executive, the individuals contesting the SEC's allegations are Nina Aversano, Lucent's former head of North American sales; Jay Carter, former president of Lucent's AT&T customer business; Leslie Dorn, a former Lucent vice president of North American sales; John Bratten, a Lucent vice president of sales; Michelle Hayes-Bullock, a former Lucent finance director, and Charles Elliott, a former Lucent senior manager.
In January, Lucent and Aversano settled the breach-of-contract claim she had filed two years earlier, when Lucent refused to give her $2-million in severance pay after reportedly firing her for complaining about the company's too-rosy financial forecasts. The settlement amount was not disclosed. At the same time, Aversano dropped the whistleblower claims she had filed against the company.
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.
