SEC Goes After Deutsche Telekom

Hungarian unit and three former officials charged with bribery

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The Securities and Exchange Commission sued Deutsche Telekom and its Hungarian telecommunications unit Magyar Telekom in federal court in Manhattan on Wednesday, alleging violations of the Foreign Corrupt Practices Act, which prohibits paying bribes to foreign officials. Three former officials of Magyar were also charged in a separate filing with bribery under the act.

Bloomberg reported that former CEO Elek Straub, former Director of Central Strategic Organization Andras Balogh, and former Director of Business Development and Acquisitions in the Central Strategic Organization Tamas Morvai, all three Hungarian citizens, were charged with executing a plan in 2005 and 2006 to bribe government officials in Macedonia to delay or prevent a new competitor from operating in that country and to obtain regulatory benefits.

The complaint stated that Magyar Telekom paid $4.88 million euros ($6.3 million) during that period to an intermediary under the guise of consulting and marketing contracts. In the filing, the SEC said, “The former executives also offered or promised Macedonian political party officials a valuable business opportunity in return for the party’s support of Magyar Telekom’s desired benefits.”

In a Wall Street Journal report, a settlement of the SEC's allegations by the companies was expected to be announced later Thursday. Deutsche Telekom and its majority-owned Magyar Telekom unit had previously said that they had reached an agreement in principle with the SEC's staff regarding a probe into its affiliates in Montenegro and Macedonia, and had set aside $62.4 million for the expected settlement.

The cases are U.S. Securities and Exchange Commission v. Magyar Telekom Plc, 11-cv-9646, and U.S. Securities and Exchange Commission v. Straub, 11-cv-9645, U.S. District Court, Southern District of New York (Manhattan).

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