Deutsche Telekom, Magyar Unit To Pay $95 Million To Settle FCPA Case

Objavljeno: januar 14, 2012 od strane Ivan Drakic pod Uncategorized

By Samuel Rubenfeld

Deutsche Telekom AG and its Hungarian telecommunications unit agreed to pay more than $95 million in civil and criminal penalties to resolve U.S. probes over alleged bribes by former senior executives to government officials in Macedonia and Montenegro, authorities said Thursday.

The settlement resolves investigations stretching back about five years by the Justice Department and the Securities and Exchange Commission against Deutsche Telekom and its majority-owned Magyar Telekom unit. The Wall Street Journalreported on the settlement, and there’s more hereherehere,herehereherehere,herehere and here.

Under the settlement, Magyar Telekom entered into a two-year deferred-prosecution agreement with the Justice Department and agreed to pay a $59.6 million criminal penalty, along with another $31.2 million in disgorgement and prejudgment interest to the SEC.

The Justice Department filed a document laying out the crimes, which charges Magyar Telekom with one count of violating the substantive provision of the Foreign Corrupt Practices Act, which bans the use of bribes to foreign officials for obtaining or keeping business. The other two counts are associated with violating the books-and-records provisions of the FCPA.

If Magyar complies with the terms of the deferred-prosecution agreement for its duration, the charges will be dropped.

The SEC complaint alleges that Magyar Telekom’s subsidiaries in Macedonia made illegal payments of about $6 million under the guise of bogus consulting and marketing contracts. It says the company tried to head off potential legal changes to the telecom market there by eventually entering into a secret agreement known as a “protocol of cooperation” with Macedonian government officials to delay the entry of a competitor into the mobile-phone market.

Magyar also paid about $9 million through four sham contracts to funnel money to government officials in Montenegro, the SEC said.

“Magyar Telekom’s senior executives used sham contracts to funnel millions of dollars in corrupt payments to foreign officials who could help them keep competitors out and win business,” Kara Novaco Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit, said in a statement.

“They purposely structured the sham contracts to circumvent internal review, and when questions were eventually raised about their use of ‘consulting’ contracts, they reconfigured them as ‘marketing’ contracts to avoid scrutiny and prolong their scheme,” she said.

Neither Deutsche Telekom nor Magyar Telekom admitted or denied the SEC’s allegations when consenting to the final judgements.

The Justice Department also entered a two-year nonprosecution agreement with parent company Deutsche Telekom over its failure to keep books and records that accurately reflected Magyar Telekom’s activities. Deutsche Telekom, under that agreement, agreed to pay a $4.36 million criminal penalty.

The company told the agencies about an internal probe into contracts in Montenegro, and the investigation by law firm White & Case LLP turned up possible violations in Macedonia as well. The Justice Department said in a statement that both settlements acknowledge the voluntary disclosure made by Magyar Telekom and Deutsche Telekom, and that “the agreements highlight that the companies have already undertaken remedial measures.”

Magyar Telekom had set aside $90.8 million for resolving the case. In a statement, it says it “remains fully committed to responsible corporate behavior.”

Also Thursday, the SEC separately sued Elek Straub, the former chairman and chief executive of Magyar Telekom, and two former senior executives in its strategy department. Lawyers for the former executives couldn’t immediately be located by the Journal to comment.


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