May 18, 2004 By Marcy Gordon Ap Business Writer 4 min read

WASHINGTON (AP) – Federal regulators fined Lucent Technologies Inc. $25 million Monday in a settlement of civil fraud allegations after the company failed to fully cooperate in an investigation of its accounting. The Securities and Exchange Commission (SEC) also charged nine current and former executives of the telecom equipment maker, along with one 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 some $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 a Lucent and a Winstar official engaged in a scheme that led to Lucent improperly recording a $125 million software purchase by Winstar.

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 future such violations.

“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 William Plunkett, Deborah Harris and Vanessa Petrini – are paying a total $270,000 in civil fines. The other seven 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 SEC attorneys. 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 the fall of 2000, Lucent voluntarily informed the SEC about the accounting problems.

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.

Lucent’s shares were down 12 cents at $3.16 on the New York Stock Exchange.

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On the Net:

Securities and Exchange Commission: http://www.sec.gov

Lucent Technologies Inc.: http://www.lucent.com