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Date Issue Title
17th May 2004 Fraud Investigation SEC Charges Lucent Employees

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CHICAGO (Reuters) - Nine current and former employees of Lucent Technologies Inc. and another individual on Monday were charged with securities fraud for their roles in accounting problems at the telecommunications equipment maker.

The civil case dates back to the company's fiscal year 2000, during which the U.S. Securities and Exchange Commission charged Lucent, one of the world's largest suppliers of telecoms gear, with fraudulently and improperly recognizing sales of $1.15 billion and $470 million in pretax income.

Also on Monday, Lucent finalized a settlement and will pay a $25 million civil penalty in the case for failure to cooperate with government investigators.

Under the deal, which includes three of the former employees, the Murray Hill, New Jersey-based company does not admit or deny the allegations, the SEC said. The agency said it will pursue the charges against the remaining seven defendants.

Although the stock was down more than 4 percent, analysts viewed it as a positive development for a company that has in past years suffered from declining demand for its products that forced it to slash jobs, sell noncore assets and ring up $30 billion in combined losses during the downturn. The SEC matter was seen as one of the last problems dogging it.

"This is a good thing. All of Lucent's responsibilities in this case have been brought to a close," said Bernstein Research analyst Paul Sagawa, who has an "outperform" rating on the stock.

Lucent, which initially announced terms of the deal in February and March, said it will not restate any financial results as part of the deal.

"We have addressed these issues with increased controls and disclosures in our organization," Lucent Chief Executive 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."

Three current Lucent employees as well as six former employees were charged with aiding and abetting Lucent's violations. A 10th individual, a former employee of telecoms company WinStar Communications, which filed for bankruptcy in 2001, also was charged.

The SEC said Lucent's violations "were due to the fraudulent and reckless actions of the defendants and deficient internal controls that led to numerous accounting errors by others."

The defendants include current and former Lucent employees Nina Aversano, Jay Carter, Leslie Dorn, William Plunkett, John Bratten, Deborah Harris, Charles Elliott, Vanessa Petrini and Michelle Hayes-Bullock, as well as former WinStar employee David Ackerman.

Aversano, the former head of North American sales, sued Lucent in December 2000 for wrongful termination, claiming she was forced into retirement for criticizing the company's sales goals as too aggressive. She settled out of court in January 2003 with the company.
Under the settlement, Lucent, Plunkett, Harris and Petrini agreed to permanent injunctions against future violations of the anti-fraud, reporting, books and records and internal controls provisions of the federal securities laws.

In addition to Lucent's fine, Plunkett, Harris and Petrini will pay penalties of $110,000, $100,000 and $60,000, respectively, the SEC said. Plunkett has been permanently barred from acting as an officer or director of a public company, while Harris is barred for five years. Petrini will give back $109,505 in profits related to the conduct in the complaint, as well as $23,487 in interest.

Lucent's shares were off 14 cents at $3.14 in late trading on the New York Stock Exchange.



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