Jump to content Jump to menu
Why Register?

Shearman FCPA Website: Cases Logo Shearman & Sterling LLP FCPA.Shearman.com: The One-Stop Resource on the Foreign Corrupt Practices Act

U.S. v. Magyar Telekom, Plc

 
:
Magyar Telekom - Magyar Telekom, Plc
:
DOJ Criminal
:
December 29, 2011
:
U.S. v. Magyar Telekom, Plc
:
U.S. v. Magyar Telekom, Plc, No. 11-cv-597 (E.D. Va. 2011)
:
Telecommunications-Other/Multi
:
2005; 2006
:
Macedonian political parties; Macedonian government officials; Montenegrin government officials.
:
Magyar Telekom, Plc was a publicly traded Hungarian corporation operating fixed line and cellular phone businesses in Hungary, Montenegro, Macedonia and elsewhere. During the relevant period, Magyar Telekom's American Depository Receipts were traded on the New York Stock Exchange. Deutsche Telekom was Magyar Telekom's parent company, owning approximately 60% of its shares.

According to the criminal Information, Magyar Telekom’s scheme in Macedonia stemmed from potential legal changes being made to the telecommunications market in that country. In early 2005, the Macedonian government tried to liberalize the Macedonian telecommunications market in a way that Magyar Telekom deemed detrimental to its Macedonian subsidiary, Makedonski Telekommunikacii AD Skopje ("MakTel"). Throughout the late winter and spring of 2005, Magyar Telekom executives, with the help of Greek intermediaries, lobbied Macedonian government officials to prevent the implementation of the new telecommunications laws and regulations.

Magyar Telekom eventually entered into an agreement with certain high-ranking Macedonian government officials to resolve its concerns about the legal changes. In the secret agreement, a so-called “protocol of cooperation,” Macedonian government officials agreed to delay the entrance of a third mobile license into the Macedonian telecommunications market, as well as other regulatory benefits. Magyar Telekom executives signed two copies of the protocol of cooperation, each with high-ranking officials of the different ruling parties of Macedonia. The Magyar Telekom executives then kept the only executed copies outside of Magyar Telekom’s company records.

According to the Information, in order to secure the benefits in the protocol of cooperation, the Magyar Telekom executives engaged in a course of conduct with consultants, intermediaries and other third parties, including through sham consultancy contracts with entities owned and controlled by a Greek intermediary, to pay bribes under circumstances in which they knew, or were aware of a high probability that circumstances existed in which, all or part of such payment would be passed on to Macedonian officials. The sham contracts were recorded as legitimate on MakTel’s books and records, which were consolidated into Magyar Telekom’s financials. Deustche Telekom, which owned approximately 60 percent of Magyar Telekom, reported the results of Magyar Telekom’s operations in its consolidated financial statements.

Additionally, the Information charges Magyar Telekom with falsifying its books and records in regard to its activity in Montenegro. According to the court filing, Magyar Telekom made improper payments in connection with its acquisition of a state-owned telecommunications company in Montenegro. These payments were documented on Magyar Telekom’s books and records through the execution of four bogus contracts.
:
Anti-bribery (Issuer), Books and records (Issuer)
:
Deferred-prosecution Agreement, Fine
:
Magyar Telekom entered into a two-year deferred prosecution agreement with the DOJ, under which it agreed to pay a monetary penalty of $59,600,000. Magyar Telekom's parent company Deutsche Telekom entered into a separate non-prosecution agreement with the DOJ, for failure to keep books and records that accurately detailed the activities of Magyar Telekom. Deutsche Telekom agreed to pay a $4.36 million monetary penalty under the NPA.

Separately, the SEC brought a civil complaint against Magyar Telekom, Deutsche Telekom, and three of Magyar Telekom's executives. Magyar Telekom and Deutsche Telekom consented to entry of final judgment without admitting or denying the SEC's allegations, under which Magyar Telekom agreed to pay $31.2 million in disgorgement and pre-judgment interest.
:
59,600,000
:
0
:
Issuer
:
Foreign
:
Hungary
:
Other Business Advantage, Tax
:
Not stated.
:
Cash, Wire/check
:
Sales Agent/Consultant, Shell entity, Subsidiary Company
:
12,000,000
:
Macedonia, Montenegro
:
Cyprus, Greece, Macedonia, Mauritius, Montenegro, Seychelles
:
No
:
No