Deutsche Telekom in US$95m US bribery settlement

  • Business
  • Saturday, 31 Dec 2011

NEW YORK: German phone company Deutsche Telekom AG and a Hungarian unit will pay more than US$95mil to settle US criminal and civil probes into the bribery of government officials in Macedonia and Montenegro.

The settlements resolve US Department of Justice and US Securities and Exchange Commission (SEC) charges that Deutsche Telekom and its 60%-owned Magyar Telekom unit violated the federal Foreign Corrupt Practices Act.

US investigators said former Magyar executives arranged in 2005 and 2006 for the payment of 12.2 million euros (US$15.8mil) to intermediaries, expecting some of it to be funnelled to the government officials in exchange for benefits to help it run or expand its business.

The SEC filed separate civil charges against three former Magyar executives: chief executive Elek Straub, director of central strategic organisation Andras Balogh, and director of business development and acquisitions Tamas Morvai.

“Magyar Telekom's senior executives used sham contracts to funnel millions of dollars in corrupt payments to foreign officials who could help them keep competitors out and win business,” Kara Novaco Brockmeyer, chief of the SEC enforcement division's unit handling Foreign Corrupt Practices Act FCPA, said in a statement.

Thursday's settlements include US$64mil of criminal penalties assessed by the Justice Department and a US$31.2mil civil penalty imposed by the SEC.

The Justice Department also agreed not to prosecute both companies if they comply with the law over the next two years. Both companies also agreed to improve compliance programmes.

Deutsche Telekom will pay US$4.36mil of the criminal penalty. Magyar will pay the remaining US$59.6mil, plus more than US$31.2mil in disgorgement and interest to the SEC.

Magyar said it previously set aside the full US$90.8mil it owed in the settlements, and had taken several steps to improve its practices.

Deutsche Telekom also confirmed the settlements. The executives plan to challenge the SEC's charges. - Reuters

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