Struggling telecommunications equipment company Lucent Technologies may soon be charged by the U.S. Securities and Exchange Commission (SEC) in a civil lawsuit that alleges the company used improper accounting techniques to inflate its sales.
According to published reports, the SEC's enforcement division will soon be sending Lucent a "Wells notice," advising the company of the SEC's plans to file civil charges against it.
A Wells notice informs a company of the charges filed against it and gives that company the opportunity to respond directly to the SEC regarding the charges.
A Lucent spokesman said that the company has not received a Wells notice and is not aware of any plans by the SEC to file charges, but that the company would continue to cooperate with the SEC even if one is issued.
"This is nothing new. These are the same issues that we brought to (the SEC's) attention. We fully expected them to investigate this themselves," said company spokesman Bill Price.
Lucent announced two years ago that it had discovered accounting problems in its fiscal 2000 earnings statement. The company subsequently announced that it was revising its earnings downward for the year by US$679 million.
In February of 2001 the SEC announced that it was investigating Lucent, but it has so far held off on filing charges.
Among the improper accounting practices that Lucent is alleged to have engaged in are recording revenue for the sale of systems that had not been shipped to customers and recording fictional sales on its books.
The company is also said to have booked revenue for equipment sold to distributors such as Winstar Communications Inc. but ultimately returned to Lucent, according to charges filed in a shareholder lawsuit against the company. Lucent executives are reported to have forged private agreements with Winstar that absolved them of the responsibility of paying for equipment they did not sell.
On October 23, 2002, the Murray Hill, New Jersey, company reported a net loss of US$2.81 billion, or $0.84 per share, for its fourth fiscal quarter of 2002, ended Sept. 30, compared with an $8.8 billion net loss, or $2.59 per share in the same period a year ago. It was the company's tenth consecutive losing quarter.