Murray Hill, N.J. (May 18, 2004) -- The Securities and Exchange Commission charged Lucent Technologies with securities fraud and violating federal securities laws and charged nine current and former Lucent employees and a former Winstar Communications officer in connection with the fraud.
The SEC said Lucent agreed to pay a $25 million civil penalty for its failure to cooperate with the probe into revenue recognition issues. In its complaint, the SEC said the company "undermined both the spirit and letter" of an agreement in principle with the staff to settle the case.
The settlement, filed Monday in Federal District Court in Newark, included three Lucent employees. Neither the company nor the employees admitted or denied any wrongdoing. Lucent said it won't be required to make any financial restatements.
"We are closing this chapter in our history, putting it behind us and focusing on moving our business forward," Patricia Russo, Lucent Technologies chairman and CEO, said in a statement Monday.
In its complaint, the SEC alleged that Lucent improperly recognized roughly $1.15 billion in revenue and $470 million in pre-tax income in fiscal year 2000. The SEC said the defendants improperly granted, and/or failed to disclose "extra-contractual commitments" in at least 10 transactions in fiscal 2000 to induce customers to buy Lucent products. The SEC said Lucent violated generally accepted accounting principles by recognizing revenue on the transactions where it couldn't be recognized under GAAP and by recording the revenue earlier than the accounting rules permitted.
The complaint alleges that the defendants "violated and circumvented Lucent's internal accounting controls, falsified documents, hid side agreements with customers, failed to inform personnel in Lucent's corporate finance and accounting structure of the existence of the extra-contractual commitments or, in some instances, took steps to affirmatively mislead them."
-- WebCPA staff
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