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SEC v. Magyar Telekom, Plc. and Deutsche Telekom, AG

 
:
Magyar Telekom - Magyar Telekom, Plc.
:
SEC Civil
:
December 29, 2011
:
SEC v. Magyar Telekom, Plc. and Deutsche Telekom, AG
:
SEC v. Magyar Telekom, Plc. and Deutsche Telekom, AG, No. 11-civ-9646
:
Telecommunications-Other/Multi
:
Macedonia, Montenegro
:
2005; 2006
:
Unspecified Macedonian and Montenegrin government officials
:
The SEC alleges that, in 2005 and 2006, former senior executives at Magyar Telekom Plc. ("Magyar"), including its former Chairman and Chief Executive Officer, entered a secret agreement with a senior Macedonian government official to prevent a competitor from entering the Macedonian mobile phone market under a newly enacted law and to mitigate other adverse effects of the new law. The senior executives allegedly promised up to €10 million in bribes. Magyar also purportedly offered Macedonia's minority political party the opportunity to designate the beneficiary of a valuable business opportunity in exchange for that party's support of the benefits sought by Magyar.

According to the SEC, as a result of this agreement, the Macedonian government delayed the introduction of a mobile phone competitor until 2007 and unlawfully reduced the frequency fee tariffs imposed on Magyar's subsidiaries. In exchange, the senior executives authorized Magyar's subsidiaries to pay €4.875 million to the official through a Greek intermediary. These payments made under the guise of bogus "consulting" and "marketing" contracts that were intentionally structured to evade internal controls.

In 2005, the same executives at Magyar allegedly executed a second corrupt scheme in which they authorized payments of €7.35 million to government officials in the Republic of Montenegro. The payments were intended to facilitate Magyar's acquisition of super-majority ownership of Telekom Crne Gore A.D. ("TCG"), a former state-owned public telecommunications services provider in Montenegro, on favorable terms. The Government of Montenegro sold its 51% stake to Magyar though a public tender process, but Magyar was unsuccessful in acquiring shares from the minority shareholders due to a budget set by Deutsche Telekom. The senior executives offered bribes to Montenegrin officials to induce the government to contribute €0.30 per share to private shareholders, which enabled Magyar to acquire an additional 22% of TCG. In exchange, Magyar's subsidiaries made payments totaling €7.35 million under bogus contracts with entities in Mauritius, the Seychelles, the U.S., and the U.K knowing that the payments would be forwarded to Montenegrin officials and the sister of a Montenegrin official.
:
Anti-bribery (Issuer), Books and records (Issuer), Internal controls (Issuer)
:
Civil Settlement, Disgorgement, Injunction/Cease and desist, Prejudgment Interest
:
Magyar, without admitting or denying the allegations against it, consented to a court order permanently enjoining it from any future FCPA violations. The company further agreed to pay $3,211,491 in disgorgement and pre-judgment interest and a $5,000,000 civil penalty. Magyar Telekom also agreed to pay a $59.6 million criminal penalty as part of a deferred prosecution agreement with the DOJ. Magyar's civil penalty was fully offset by its payment of a criminal penalty to the DOJ.

:
31,200,000
:
0
:
Issuer
:
Foreign
:
Hungary
:
Other Business Advantage, Tax
:
Not stated.
:
Cash
:
Family Member, Sales Agent/Consultant, Shell entity, Subsidiary Company
:
15,000,000
:
Greece, Mauritius, Seychelles, United Kingdom, United States
:
:
No
:
Yes
:
Germany, Hungary, Switzerland