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Entries in Magyar (12)

Monday
Apr242017

Hungarian telecom execs pay penalties for FCPA offenses

Two former executives of Magyar Telekom who were headed for trial this month against the SEC agreed instead Monday to pay penalties and accept officer-and-director bars to settle FCPA violations.

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Monday
Feb132017

Former Magyar Telekom exec settles with SEC before trial

A former executive of Hungary-based Magyar Telekom settled five-year- old civil allegations that he violated the FCPA.

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Monday
Mar312014

SEC ‘streamlines’ case against Noble execs

As first reported last week by Sam Rubenfeld of the Wall Street Journal, the SEC dropped internal controls charges in a civil FCPA action against a current and a former executive at Noble Corporation in order to “streamline the presentation” of the case.

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Monday
Mar042013

Shorter clock on SEC’s FCPA enforcement actions

Last week, in the case Gabelli v. SEC, the U.S. Supreme Court unanimously held that the Securities and Exchange Commission, when seeking a penalty or fine in connection with a civil enforcement action, must file the action within five years of the completion of the alleged fraud or wrongful conduct.

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Monday
Feb112013

Magyar Telekom execs lose motion to dismiss

A federal district court in New York City issued an order Friday denying a motion to dismiss a civil FCPA enforcement action against three executives of Magyar Telekom Plc.

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Monday
Dec032012

Is a December enforcement surprise on the way?

For most of us, December means giant year-end bonuses, moving to bigger houses, and getaways to the Turks and Caicos. No, that's not true.

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Wednesday
Mar212012

Top Ten Disgorgements (March 2012)

Since we first listed the top ten FCPA disgorgements a year ago, two new companies joined the list -- Johnson & Johnson and Magyar Telekom. They replaced GE and Baker Hughes.

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Thursday
Dec292011

With Magyar In New Top Ten, It's 90% Non-U.S.

Here's the current top ten list for corporate defendants.

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Thursday
Dec292011

Magyar And Deutsche Telekom In $95 Million Settlement

Magyar Telekom Plc. of Hungary and its majority owner Deutsche Telekom AG will pay a combined $63.9 million criminal penalty to the DOJ to resolve Foreign Corrupt Practices Act charges.

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Thursday
Dec292011

Bloomberg: SEC Sues Deutsche Telekom, Magyar, And Three Execs

Thom Weidlich of Bloomberg has just reported from federal court in Manhattan that the SEC has filed a civil suit againt Deutsche Telekom AG and its Magyar Telecom unit for FCPA offenses.

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Monday
Jun272011

Magyar Telekom To Settle With SEC

Hungary's Magyar Telekom has reserved about $62 million for an expected settlement of FCPA-related charges with the SEC, according to reports by Reuters and others.

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Sunday
Dec062009

Magyar's Magnum Opus

We liked it. All 1,162 words. Magyar Telekom's SEC disclosure last week about its internal investigation into fraudulent contracting practices could have been short and bland and very ordinary. A typical corporate blank wall. Instead it was abundant in length and detail  -- one of the most rewarding public disclosures about an internal investigation we've ever read. It appeared in the company's SEC Form 6-K, Report of Foreign Private Issuer, filed December 3, 2009 here. (Another disclosure we admired earlier this year came from Pride International Inc.; it contained 1,168 words.)

What did we learn about Hungary's Magyar? Among other things that:

  • Between 2000 and 2006, a small group of unnamed former senior executives from headquarters and a Macedonian affiliate spent  €24 million through over twenty consultancy, lobbying, and other contracts that were probably phony.
  • The contracts were used to create a pool of unaccounted cash.
  • The purpose of the contracts and slush fund was to "obtain specific regulatory and other benefits from the government of Macedonia."
  • The scheme worked. Magyar "generally received the benefits sought and then made expenditures under one or more of the suspect contracts."
  • The lawyers hired by Magyar's audit committee, White and Case, couldn't track down who got the illicit cash. “[T]he Investigation did not uncover evidence showing receipt of payments by any Macedonian government officials or political party officials.”
  • So the company can't say whether it violated the Foreign Corrupt Practices Act's antibribery provisions. But it did commit accounting offenses. "These contracts were not appropriately recorded in the books and records of the Company and its relevant subsidiaries.  . . . the Company has already reclassified . . . the accounting treatment relating to certain of these contracts to more accurately account for these expenditures."

So that's the news. But why, we wondered, did Magyar put an extra thousand words into its disclosure? Why didn't it stick to the usual script -- "An internal investigation has concluded that improper payments may have been made to influence the award of certain contracts. Remedial action has been taken. Discussions with authorities in the U.S. and other countries are ongoing." Why War and Peace when it could have gotten away with a Hallmark greeting card?

Here are five reasons that come to mind:

The internal report is good news. There's been a dark cloud over Magyar since it discovered the corruption during its 2005 audit and launched the investigation in 2006. But the disclosure brings sunny skies. Why not make the most of it? It cleared everyone now there and pinned the blame on people who are already gone. "Nothing in the Final Report implicates any current senior executive or Board member of the Company in connection with any wrongdoing."

Magyar's management team is young. Executive chairman and CEO Christopher Mattheisen is 47; CFO Thilo Kusch is 43; and COO Róbert Pataki is 37. They've got a lot of open road and ambitious regional plans ahead of them. The detailed disclosure should help them put Magyar's past practices in the rearview mirror.

The CEO is American. His Forbes Profile says Mattheisen "studied economics and finance at Indiana University of Bloomington and at Columbia University. He first came to Hungary in 1990 to start a strategic planning and business consulting company." Expat American CEOs are all "domestic concerns" and are usually savvy about the FCPA and its risks. The mega disclosure may reflect Mattheisen's heightened sensitivity. 

Magyar has a couple of important shareholders. German giant Deutsche Telekom owns 59.52% of the company and the public owns most of the rest. No doubt DT wanted a quick and clean end to Magyar's corruption mess, to avoid the risk of association with another German giant, Siemens. Its corruption made global headlines for most of 2007 and 2008. Then there's the Hungarian government. It still owns a golden share in Magyar (the company was formed from the privatized state phone system). With its EU integration in full swing, Hungary's leaders wouldn't want a lingering corruption scandal either.

Bang for the buck. The internal investigation was expensive -- $28 million last year alone. The detailed disclosure helps management justify the price tag.

*   *   *

What's next for Magyar? It said the U.S. Justice Department and SEC are still investigating the company, along with Macedonia's Inerior Ministry. The company said it can't "predict what the final outcome of those investigations may be or the impact, if any, they may have on [its] financial statements or results of operations." More ominously for the unnamed former senior executives, Magyar said the Hungarian National Bureau of Investigation has started "a criminal investigation into alleged misappropriation of funds  . . ."

Back in the U.S., the DOJ and SEC should be happy with the way management has handled the investigation, disclosure, and remedial steps. The approach has been aggressive -- maybe a bit too aggressive. The company said it faces a new problem  -- "the possible misuse of personal data of employees" duirng the internal investigation. Hungary's authorities are looking into it.

Magyar Telekom Plc's American Depositary Shares trade on the New York Stock Exchange under the symbol MTA.