Lucent pays a mere $25m in damages, agrees to being enjoined from breaking US securities laws in future, but does not admit or deny any wrong doing. The firm said it will not have to make any restatements of its earnings.
The SEC filed a civil complaint yesterday alleging that Lucent fraudulently and improperly recognized approximately $1.148 billion of revenue and $470 million in pre-tax income during its fiscal year 2000.
As so often happens, the charges and the settlement came at the same time. But the SEC also filed charges of accounting fraud against nine current and former Lucent employees, and one former Winstar employee, and only three have settled.
The SEC alleged that $1.1bn of revenue was recognized inappropriately due to the fraudulent and reckless actions of the defendants and deficient internal controls that led to numerous accounting errors.
According to the SEC, the named employees offered extra-contractual commitments such as side-agreements and other incentives, to induce Lucent’s customers to purchase the company’s products so they could hit sales targets.
At least 10 transactions in fiscal 2000 were affected, the SEC said. The revenue in question either could not be recognized under generally accepted accounting principles, or should have been recognized at a different time under GAAP, the complaint says.
The SEC has filed complaints against Nina Aversano, Jay Carter (Lucent officers), Leslie Dorn, William Plunkett, John Bratten, Deborah Harris, (executives), Charles Elliott, Vanessa Petrini, and Michelle Hayes-Bullock (employees).
Plunkett, Harris and Petrini have settled the charges, each paying between $100,000 and $192,000 in either penalties or penalties combined with the return of profits made from the actions the SEC alleges.
The SEC will continue to sue the remaining seven defendants, including one former Winstar executive who the SEC alleges knowingly signed a document disguising the timing of a deal that allowed Lucent to recognize revenue improperly.
Patricia Russo, Lucent’s chairman and CEO, said in a statement issued yesterday: We are closing this chapter in our history, putting it behind us and focusing on moving our business forward.
