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SEC drops bribery allegations against Deutsche Telekom subsidiary

Magyar Telekom had been accused of offering bribes in exchange for regulatory changes

Foreign Corrupt Practices Act (FCPA) enforcement has been up so far in 2014 with companies such as Mead Johnson and Avon recently getting caught in the snare, but for now, telecom company Deutsche Telekom AG will not be joining the party.

The Securities and Exchange Commission (SEC) announced on March 10 that it was dropping allegations that Deutsche Telekom executives bribed officials in Montenegro in exchange for regulatory changes that would block the company’s competition. According to an SEC official, it will continue to pursue a second set of civil allegations in the case.

The issue with Deutsche Telekom rose from an affiliate, Hungary-based Magyar Telekom. Former Magyar Telekom CEO Elek Straub and two former senior executives were accused of offering payments to officials in 2005. At the time, the company was in the process of gaining a controlling interest in Telekom Crne Gore A.D., a telecom company controlled Montengrin state.

According to the Wall Street Journal, one of the main reasons the SEC dropped the case was due to the sheer complexity and scope of the investigation. The case involves hundreds of witnesses in six different countries, with witnesses speaking 12 different languages. At one point, said regulators, the case contained 26 million documents to review.

The long investigation period made both regulators and courts antsy. At one particular hearing in the case, a judge said, “This is an old case…in terms of the underlying facts and nobody is getting any younger and the evidence is not going to be any fresher.”

This isn’t the first time that Deutsche Telekom and its Magyar Telekom affiliate have been cited for potential FCPA violations. In late 2011, the company paid $95 million to settle allegations that Magyar Telekom executives had bribed officials in Macedonia and Montenegro in 2005 and 2006.


For more on bribery cases in the news, check out these InsideCounsel articles:

Chinese Premier outlines new anti-corruption strategy

Mead Johnson investigating potential FCPA violations

Avon could spend $132 million to settle FCPA investigation

Brazil’s new anti-corruption law: What you need to know

Assistant Editor

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Zach Warren

Zach Warren is Assistant Editor of InsideCounsel magazine, where he oversees online content submissions and administers InsideCounsel's enewsletters. Zach specializes in new media and multimedia...

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