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Lucent to Settle With SEC

Lucent Technologies Inc. (NYSE: LU) is on the verge of closing the books on an investigation of its accounting practices by the U.S. Securities and Exchange Commission (SEC) (see Lucent, SEC Reach Understanding).

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

fhe 12/5/2012 | 12:33:19 AM
re: Lucent to Settle With SEC to get them off their back?

"Lucent merely has to sign an agreement, promising to go in peace and sin no more." is not enough for regular shareholders, knowing that Rich McGinn is holding his millions and can't stop laughing.
WiserNow 12/5/2012 | 12:32:52 AM
re: Lucent to Settle With SEC Give Henry Schacht credit here. He revised an earnings statement before it was popular. By doing that, he probably averted a real issue now. Give credit where credit is due, Henry proably saved LU from BK.

The SEC doesn't really care about McGinn's ar any of the other "old boy's and girl's" millions. That is probably part of the pending shareholder lawsuit.

The SEC was looking to find if Lucent intensionally lied to shareholders and whether they excercized appropriate measures to proactively identify errors. That is the beauty. Lucent honestly told shareholders they were paying McGinn and other execs millions. The SEC can't fault them there.
BobbyMax 12/5/2012 | 12:32:42 AM
re: Lucent to Settle With SEC Lucent has fallen from the sky like a rotten apple.A company of the calibre of Lucent does not lose very easily. But Lucent has thrown in the towel. In my judgement a hearing needs to be held to understand as to what happened to Lucent. Who were the people entrusted to run the company. At the minimum the following needs to be investigated:

1. Why was "Dr." Schacht appointed as the chairman of Lucent? What special qualifications does he have?

2. Composition of the Board. Why should they serve on the board? What special qualificationd do theyhave to serve on the board?

3. Why was decision made to spin off Avaya and Agere?

4. Why was the president of Bell Labs, Netavali, was appointed as President of Bell Labs, but resigned from the job.

5. Why was "dr" MCginn President and CEO of Lucent) appointed as President and Chairman of Lucent in spite of the fact he does not have any background in telecommunications)

6. MCGinn is still being paid million dollars year without doing anything.

7. Why is Lucent not able to maintain its productivity level?

8. Why did it had to take help from Cisco? Why did it sell its honor and respect to Cisco?

9. Why is Pat Russo gining herself bonuses and stock options? Why is she bleeding the company to death?

I think questionnaire nned to be submitted to Pat Russo and the board members to get an answer.




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