Hungary’s Magyar Telekom has reserved about $62 million for an expected settlement of FCPA-related charges with the SEC, according to reports by Reuters and others.
The company’s internal investigation found potentially illegal payments of about $44 million by its Montenegrin or Macedonian units.
Magyar Telekom — Hungary’s largest telecommunications firm — is a consolidated subsidiary of Germany’s Deutsche Telekom.
“The Company, without admitting or denying the allegations against it, would consent to a U.S. court order permanently enjoining it from any future FCPA violations and to the payment by the Company of disgorgement and a conditional civil penalty,” Magyar’s statement said.
The company said it is still trying to resolve the case with the DOJ.
Magyar Telekom’s SEC Form 6-K, Report of Foreign Private Issuer, filed December 3, 2009 said:
- Between 2000 and 2006, a small group of unnamed former senior executives from headquarters and a Macedonian affiliate spent €24 million through over twenty consultancy, lobbying, and other contracts that were probably phony.
- The contracts were used to create a pool of unaccounted cash.
- The purpose of the contracts and slush fund was to “obtain specific regulatory and other benefits from the government of Macedonia.”
- The scheme worked. Magyar “generally received the benefits sought and then made expenditures under one or more of the suspect contracts.”
- Lawyers hired by Magyar’s audit committee couldn’t track down who got the illicit cash. “[T]he Investigation did not uncover evidence showing receipt of payments by any Macedonian government officials or political party officials.”
- The company couldn’t say whether it violated the Foreign Corrupt Practices Act’s antibribery provisions. But it did commit accounting offenses. “These contracts were not appropriately recorded in the books and records of the Company and its relevant subsidiaries. . . . the Company has already reclassified . . . the accounting treatment relating to certain of these contracts to more accurately account for these expenditures.”
Magyar Telekom’s American Depositary Shares trade over the counter in the pink sheets under the symbol MYTAY.PK.