REUTERS - Deutsche Telekom AG (DTEGn.DE) will pay more than $95 million to settle U.S. criminal and civil charges that a Hungarian unit and three former executives schemed to bribe government officials in Macedonia and Montenegro.
Regulators said the charges arose from the company’s Magyar Telekom MTEL.BU unit having in 2005 and 2006 arranged payments of 12.2 million euros to intermediaries, expecting some or all of the money to be funneled to the officials in exchange for business benefits.
This violated the Foreign Corrupt Practices Act, a U.S. law designed to thwart bribery of foreign officials, according to the U.S. Department of Justice and U.S. Securities and Exchange Commission, which announced Thursday’s settlements.
The SEC filed related charges against the three former Magyar executives: Chief Executive Elek Straub, director of central strategic organization Andras Balogh, and director of business development and acquisitions Tamas Morvai.
Magyar agreed to pay a $59.6 million criminal penalty and enter a two-year deferred prosecution agreement with the Justice Department. It also agreed to pay more than $31.2 million of disgorgement and interest to settle with the SEC.
Deutsche Telekom agreed to pay a $4.36 million penalty and enter a two-year nonprosecution agreement with the Justice Department for failing to maintain accurate books and records.
Both entities also agreed to improve compliance programs, and voluntarily disclosed the FCPA violations.
The German phone company was charged because the payments were reflected improperly on its financial statements, which are filed with U.S. regulators. Deutsche Telekom and Magyar also had American depository receipts that traded at the time.
Magyar on Thursday said it previously set aside the full $90.8 million (21.8 billion forints) to settle, and has taken several remedial steps to improve its practices.
Deutsche Telekom was not immediately available for a comment. Lawyers for the executives either had no immediate comment or did not immediately return phone calls seeking comments.
Deutsche Telekom is also the parent of T-Mobile USA. AT&T Inc (T.N) last week ended its bid to buy that unit for $39 billion.
Regulators said the Magyar executives used sham consulting contracts to pay 4.88 million euros in 2005 and 2006 to an intermediary, who would funnel money to Macedonian officials as part of a plan to keep a rival out of that country’s market and win regulatory benefits.
Meanwhile, in Montenegro another 7.35 million euros were paid in 2005 to consultants under four sham contracts, under a plan to help Magyar complete the purchase of state-owned Telekom Crne Gore AD on favorable terms, the SEC said.
The Justice Department filed its case with the U.S. district court in Alexandria, Virginia, while the SEC filed with the U.S. district court in Manhattan.
The cases are U.S. v. Magyar Telekom Plc, U.S. District Court; Eastern District of Virginia, No. 11-cr-00597; SEC v. Magyar Telekom Plc et al, U.S. District Court, Southern District of New York, No. 11-09646; and SEC v. Straub et al, U.S. District Court, Southern District of New York, No. 11-09645. (US$1 = 0.774 euros) (US$1 = 240.3 forints) (Reporting by Jonathan Stempel in New York; Additional reporting by Jeremy Pelofsky in Washington, D.C.; Marton Dunai in Budapest; and Peter Maushagen and Maria Sheahan in Frankfurt, editing by Dave Zimmerman and Matthew Lewis)