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Lucent settles accounting probe

US regulators have charged Lucent Technologies with conducting an accounting fraud of more than $1.1bn, 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 $25m fine for lack of co-operation. The settlement was announced by the US Securities and Exchange Commission a statement that laid out a slew of charges against the telecommunications equipment company.

The SEC began investigating Lucent  in late 2000 after it announced that it had found accounting problems. A settlement was agreed to last year, but regulators decided earlier this year to levy a fine for lack of co-operation.

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 past and present 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 financial year 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 misled 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 $125m in software purchases in the fourth quarter of Lucent's 2000 financial year.

As part of the settlement, Plunkett was fined a civil penalty of $110,000 and has agreed to be barred permanently from acting as an officer or director of a public company for five years.

Two other Lucent employees have also settled, agreeing to pay hefty civil penalties, while the SEC said that it was litigating the case against seven remaining defendants.

As part of the settlement, Lucent employees are neither admitting or denying the allegations, and the company will not be making any financial restatements.

Lucent chairman and chief executive officer Patricia Russo said the company was closing this chapter in its history and putting the matter behind it.

Scarlet Pruitt writes for IDG News Service


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