Major telecom companies in trouble

Marcy Gordon

Monday, May 17, 2004 | 10:30 a.m.

WASHINGTON -- Lucent Technologies Inc. is being fined $25 million by securities regulators in a settlement of civil fraud allegations because it failed to fully cooperate in an investigation of its accounting, a source familiar with the negotiations said today.

The Securities and Exchange Commission is also charging at least five former executives of the telecom equipment maker for alleged participation in accounting irregularities in 2000, the source said, speaking on condition of anonymity and confirming a report in The Wall Street Journal.

Lucent spokesman Bill Price, at the company's headquarters in Murray Hill, N.J., declined to comment.

The settlement resolves an SEC investigation that began in late 2000, when Lucent disclosed that it had prematurely booked $679 million in revenues.

The company reached a tentative settlement agreement in February 2003. The SEC initially found Lucent to be cooperative and did not intend to fine the company but only to issue a cease-and-desist order against it. But the company's subsequent lack of cooperation prompted the agency to levy a fine, the source said.

Lucent disclosed the anticipated $25 million civil fine in March.

Lucent's alleged improper accounting for revenue came during the start of the telecom industry slump, and former chief executive officer Richard McGinn was pushing the sales staff to meet optimistic targets despite warnings from some executives that it couldn't be done.

After spectacular growth throughout the late 1990s, the company's fortunes reversed -- forcing massive layoffs, sales of parts of its business, and quarter after quarter of hefty losses. McGinn was fired.

In the fall of 2000, Lucent voluntarily informed the SEC about the accounting problems and restated earnings figures it had previously reported.