Lucent to Settle With SEC
In contrast with recent outcomes of other high-profile investigations in the telecom world, no one's going away in handcuffs or getting served with papers (see Prosecutors' Party at Qwest). Lucent merely has to sign an agreement, promising to go in peace and sin no more.
The SEC's investigation centered on an accounting mess that hit Lucent late in 2000, when an error came to light whereby $125 million in revenue that shouldn't have been booked forced Lucent to revise revenues downward (see Lucent Shares Hammered by $125M Goof). Less than two months later, Lucent took another battering when an audit found the problem was bigger than was originally thought, and the company acknowledged an error (see LR Index: Dead in the Water , Lucent Starts Cleaning Up, and SEC Knocking on Lucent's Door).
Now, Lucent says it's come to an "agreement in principle" with the SEC staffers who conducted the investigation, to "consent to a settlement enjoining the company from future violations of the anti-fraud, reporting, books and records and internal control provisions of the federal securities laws."
The settlement, which still has to be approved by the SEC Commissioners, involves no penalty fees or any need for Lucent to restate its accounting reports. If all goes well, which is highly likely given that the SEC approved Lucent's public statement today, the matter should be fully resolved within several weeks.
The news follows the resolution in January 2003 of a related matter that had been haunting Lucent -- an ex-exec who was originally implicated by Lucent in the accounting mess and wound up filing charges of her own (see Lucent Puts Aversano Suit to Rest).
Indeed, today's resolution is good news that serves to bolster the impression that Lucent, under the guidance of CEO Patricia Russo, is making every effort to get back on its feet (see Russo Rules at Lucent). The impression seems to be working: With the shadow of SEC charges lifted, investors seem a bit cheered. Early today, Lucent's shares rose by $0.06 (4.14%) and were trading at $1.51.
Despite today's progress, Lucent is far from out of the financial woods. Critics continue to batter away at the company's managerial judgment and marketing choices. The ultimate success of ongoing product "rationalization" and alliances (see Lucent & Cisco: Together at Last) remains to be proven.
Lucent also has a couple of other messes to clean up. The company still faces a major shareholder lawsuit in New Jersey, which represents the consolidation of a range of class-action suits brought against the company since 2000. Discussions continue, a Lucent spokeswoman says. No word yet on when an outcome may be reached.
— Mary Jander, Senior Editor, Light Reading