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U.S. v. Magyar Telekom, Plc

 
:
Magyar Telekom - Deutsche Telekom AG
:
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 government officials.
:
Deutsche Telekom AG ("DT") was a multinational telecommunications company based in Germany, and the parent company of Magyar Telekom, Plc, a Hungarian corporation. DT operated cellular and fixed line phone businesses through various operating subsidiaries, including Magyar Telekom. DT owned approximately 60% of Magyar Telekom and reported the results of its operations in DT's consolidated financial statements. During the relevant time period, DT's American Depository Receipts ("ADR") traded on the New York Stock Exchange, and accordingly, DT was an "issuer" within the meaning of the FCPA. Magyar Telekom's ADRs also traded on the New York Stock Exchange, and thus was also an "issuer" within the meaning of the FCPA.

According to the statement of facts in DT's nonprosecution agreement with the DOJ, in certain senior executives at Magyar Telekom entered into an agreement - a "Protocol of Cooperation" - with high-ranking government officials in Macedonia. The agreement outlined the regulatory benefits the government would provide to Magyar Telekom, including the prevention of a new competitor in Macedonia's mobile phone market. After the agreement was executed, they kept the only copy of the executed agreement outside of Magyar Telekom's records, with a third-party intermediary in Greece. A DT executive was aware of this fact.

Magyar Telekom then made payments to an intermediary under the guise of bogus "consulting" and "marketing" contracts that did not have any legitimate business purpose. The payments were made with the knowledge that, or the awareness of a high probability that circumstances existed in which, all or a portion of the proceeds would be offered, promised or paid to Macedonian government officials. In return, the officials would agree to adopt the regulatory changes outlined in the Protocol of Cooperation. The Magyar Telekom executives also offered or promised Macedonian political party officials a valuable business opportunity. A letter of intent was signed to secure this business opportunity (which ultimately was not developed) but, as with the Protocol of Cooperation, the letter was kept out of Magyar Telekom's books and records.

The false record of the sham contracts in Magyar Telekom's books were consolidated into the books and records of DT.


:
Books and records (Issuer)
:
Non-prosecution Agreement
:
Deutsche Telekom agreed to pay a $4.36 million monetary penalty under the NPA. 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.

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.
:
4,360,000
:
0
:
Issuer
:
Foreign
:
Germany
:
Other Business Advantage, Tax
:
Not stated.
:
Cash, Wire/check
:
Sales Agent/Consultant, Shell entity, Subsidiary Company
:
6,000,000
:
Macedonia
:
Cyprus, Greece, Macedonia
:
No
:
No