Just as major manufacturers seem to have found steady ground by concentrating on their core competencies and get commitments for carriers to deploy advanced networks, their financial inefficiencies are being exposed.
Nortel Networks Ltd. may have had more money than it thought. Nokia Corp., a bastion of efficiency, shocked telecom stocks to a downward spiral when it showed its handset business was not as buoyant as envisaged. Lucent Technologies Inc. only just survived the probe of the Securities and Exchange Commission. Now, the Murray Hill, N.J.-based company is frantically trying to avoid another searchlight.
Lucent last week fired four executives in its Chinese operations over what it saw as possible violations of U.S. law against overseas bribery, according to a company filing with the SEC. Lucent let go its China operations president, chief operating officer, a marketing executive and a finance manager. The company described the activities of those involved as “internal control deficiencies.”
In the interim, Robert Warstler, the company’s president of global sales, will run the operations.
Lucent may have made the strong stand against the Chinese employees in reaction to an investigation launched by two U.S federal agencies last August over bribery allegations against Lucent operations in Saudi Arabia. In that instance, the allegations involved bribing of a Saudi official with money, gifts and free use of private jets with intent to secure contracts from the Saudi Ministry of Post Telephone & Telegraph.
A U.S. firm, the National Group for Communications and Computers, accused Lucent and Swiss firm ACEC of paying bribes of more than $15 million to Ali Al-Johani of the MPTT to make contract decisions partial to Lucent. Lucent said the allegations were without merit. The SEC is still looking into the matter.
Lucent told the SEC it conducted an internal audit of 23 other offices in foreign countries.
Meanwhile, the SEC last week said it launched a formal investigation into Nortel’s restatements of its financial results. This follows a series of class-action lawsuits from agitated Nortel stockholders.
“Nortel Networks has been fully cooperating with the SEC and will continue to do so in order to bring the inquiry to a conclusion as promptly as possible,” said the company. The news sent the company’s stock down nearly 4.8 percent to $5.99.
Nortel said the SEC had been carrying out an informal inquiry into the company’s financial activities. The vendor has set up its own independent review to find out why the company overstated its losses, an incident that bucks a trend of overstated profits that plunged corporate America into its worst scandals in more than a decade.
Nortel placed two of its top staff on paid leave pending the conclusion of the independent review.
The company announced last October that it had overstated its losses to the tune of almost $1 billion during a period in which it cut its staff, closed plants and restructured some of its priorities. This bad news also coincides with the company’s surge in contracts and general turnaround.
A law firm, Scott + Scott L.L.C., extended the class period in a securities class-action case filed against Nortel in the Southern District of New York.
Nokia also is defending itself against a lawsuit over its financial forecast for the first quarter of the year. That lawsuit claims that Nokia made material misrepresentations that triggered a hike in its share prices.
