Federal regulators have charged Lucent Technologies with conducting an accounting fraud of over $US1.1 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 $US25 million fine for lack of cooperation. The settlement was announced by the US Securities and Exchange Commission (SEC) in a sternly worded statement that laid out a slew of charges against the telecommunications equipment vendor.
The SEC began investigating the company after it announced that it had found accounting problems in late 2000. A settlement was agreed to last year, but regulators decided earlier this year to levy a 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 fiscal year 2000 in which it alleged that company employees violated accounting rules in a drive to realise revenue, meet internal sales targets and/or obtain sales bonuses.
Furthermore, it charged that employees falsified documents, circumvented the company's own internal accounting controls and mislead or failed to inform the corporate finance structure of the side agreements.
In one non-contractual deal, the SEC charged former Lucent sales executive, William Plunkett, of "engaging in a scheme" with a Winstar Communications executive which led to the improper reporting of $US125 million in software purchases in the fourth quarter of Lucent's fiscal year 2000.
As part of the settlement, Plunkett had been fined a civil penalty of $US110,000 and agreed to be permanently 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.
The SEC said that it was litigating the case against seven remaining defendants.
As part of the settlement, Lucent employees are neither admitting nor denying the allegations.
Additionally, the company will not be making any financial restatements.
Lucent chairman and CEO, Patricia Russo, said that the company was closing this chapter in its history and putting the matter behind it.