SEC to fine Lucent $25m
Civil fraud lawsuit
Telecoms equipment maker Lucent is expected to be hit with a civil fraud lawsuit for what the US Securities and Exchange Commission (SEC) claims was the improper recognition of $1bn in revenue.
The move, which was reported in Monday's Wall Street Journal, is said to reflect the new "no holds barred" attitude of SEC regulators, who are attacking corporate misdeeds with vigour after years of scandal on Wall Street. According to the newspaper, the SEC will file civil fraud charges against Lucent for improperly recognising $1bn in revenue and will fine the firm $25m for failing to cooperate with investigations.
It is also reported that five former Lucent employees will be charged in connection with accounting problems at the company. Those to be charged are Nina Aversano, the company's former head of North American sales; William Plunkett, a former senior vice president of sales; Jay Carter, with global sales; Leslie Dorn, vice president of channel sales; and Vanessa Petrini, director of business development in mobile high-speed data.
The $25m fine is the largest ever handed down by the SEC for failing to co-operate with an investigation. At the heart of the SEC's concerns are disputes over Lucent's indemnifying employees under investigation by SEC regulators from some things such as legal fees, fines and penalties, the Wall Street Journal said.
Prior to the SEC's investigation of Xerox earlier this decade, SEC rules covering employee indemnification were less clear. But after the Xerox case, the financial watchdog made its policy on the matter plain by insisting that employees not be protected from fines and legal costs in connection with corporate conduct. The new rules were designed to make executives personally vulnerable to loss if they acted improperly, rather than allowing shareholders to pay the price for such deeds.
In March, Lucent agreed to pay the widely-expected $25m fine, which should conclude the SEC's investigation. The company has also promised not to engage in any further questionable accounting practices. However, Lucent has yet to offer any specific details on the $1bn revenue misstatement, and the company has indicated that it has no plans to do so.