Deutsche Telekom settles U.S. bribery probes

Deutsche Telekom AG will pay more than $95 million to settle U.S. criminal and civil charges that a Hungarian unit and three former executives schemed to bribe government officials in Macedonia and Montenegro. Regulators said the charges arose from the company’s Magyar Telekom unit having in 2005 and 2006 arranged payments of $15.8 million to intermediaries, expecting some or all of the money to be funneled to the officials in exchange for business benefits.



Deutsche Telekom AG will pay more than $95 million to settle U.S. criminal and civil charges that a Hungarian unit and three former executives schemed to bribe government officials in Macedonia and Montenegro. Regulators said the charges arose from the company’s Magyar Telekom unit having in 2005 and 2006 arranged payments of $15.8 million to intermediaries, expecting some or all of the money to be funneled to the officials in exchange for business benefits.


This violated the Foreign Corrupt Practices Act, a U.S. law designed to thwart bribery of foreign officials, according to the U.S. Department of Justice and U.S. Securities and Exchange Commission, which announced Thursday’s settlements.


The SEC filed related charges against the three former Magyar executives: Chief Executive Elek Straub, director of central strategic organization Andras Balogh, and director of business development and acquisitions Tamas Morvai.


Magyar agreed to pay a $59.6 million criminal penalty and enter a two-year deferred prosecution agreement with the Justice Department. It also agreed to pay more than $31.2 million of disgorgement and interest to settle with the SEC.


Deutsche Telekom (Bonn, Germany) agreed to pay a $4.36 million penalty and enter a two-year no prosecution agreement with the Justice Department for failing to maintain accurate books and records. Both entities also agreed to improve compliance programs, and voluntarily disclosed the FCPA violations.


The German telecom company was charged because the payments were reflected improperly on its financial statements, which are filed with U.S. regulators. Deutsche Telekom and Magyar also had American depository receipts that traded at the time.


Magyar on Thursday said it previously set aside the full $90.8 million to settle, and has taken several remedial steps to improve its practices.


Deutsche Telekom was not immediately available for a comment. Lawyers for the executives either had no immediate comment or did not immediately return phone calls seeking comments.


Deutsche Telekom is also the parent of T-Mobile USA. AT&T Inc last week ended its bid to buy that unit for $39 billion.


 (Reporting by Jonathan Stempel in New York; Additional reporting by Jeremy Pelofsky in Washington, D.C.; Marton Dunai in Budapest; and Peter Maushagen and Maria Sheahan in Frankfurt, editing by Dave Zimmerman and Matthew Lewis)