* Ex-Magyar Telekom execs must face civil charges
* Deutsche Telekom, Magyar Telekom reached $95.2 mln accord
By Jonathan Stempel and Aruna Viswanatha
Feb 8 A Manhattan federal judge said the U.S.
Securities and Exchange Commission may pursue civil bribery
charges against three former executives at a Hungarian unit of
Deutsche Telekom AG.
Friday's decision by U.S. District Judge Richard Sullivan is
a win for the SEC, following several rocky years for U.S.
authorities in their attempts to police individuals accused of
Sullivan rejected the motion of former Magyar Telekom Plc
Chief Executive Elek Straub, director of central strategic
organization Andras Balogh and director of business development
and acquisitions Tamas Morvai to dismiss the SEC case alleging
violations of the Foreign Corrupt Practices Act.
The defendants were charged in December 2011 when Deutsche
Telekom and its 60-percent owned Magyar Telekom agreed to pay
$95.2 million to settle U.S. criminal and civil probes into the
bribery of government officials in Macedonia and Montenegro.
U.S. investigators said Magyar executives had in 2005 and
2006 used sham contracts to funnel millions of dollars of
payments intended for government officials.
These officials would in turn would help Magyar Telekom
obtain regulatory benefits, win business and keep rivals out of
the market, the investigators said.
The SEC said its anti-bribery claims were based solely on
allegations involving Macedonia. The $95.2 million payout
included $64 million of criminal penalties assessed by the
Justice Department and a $31.2 million civil penalty by the SEC.
Lawyers for Straub, Balogh and Morvai did not immediately
respond to requests for comment.
SEC Assistant Chief Litigation Counsel Robert Dodge said,
"We're very pleased with the court's ruling, which rejected all
of the defendants' arguments. We look forward to pressing
forward with the case."
Mary Jo White, nominated last month by President Barack
Obama to become the SEC's next chairman, had represented
Deutsche Telekom in the case.
The defendants had argued that because the case hinged on
only a few emails that were routed through U.S. servers, the SEC
did not have jurisdiction to sue them in the United States.
But Sullivan said there was enough to suggest the defendants
intended harm in the United States. He noted that Deutsche
Telekom and Magyar Telekom made regular filings with the SEC,
and had American depositary receipts listed on U.S. exchanges.
"Defendants knew or had reason to know that any false or
misleading financial reports would be given to prospective
American purchasers of those securities," he wrote.
Sullivan also rejected the defendants' arguments that the
SEC waited too long to sue, and did not allege enough facts to
suggest their actions violated the FCPA.
"The court has little difficulty finding that ... the
complaint states with particularity the circumstances
constituting the alleged fraud as to each defendant," he wrote.
Friday's decision follows recent setbacks for U.S.
investigators probing foreign bribery.
Last year the Justice Department dropped a high-profile
prosecution of more than a dozen defendants in the military
equipment industry, after prosecutors failed to convince two
juries that what they did was illegal.
And in December, a Houston federal judge overseeing an SEC
case against former executives of oil driller Noble Corp
dismissed part of the lawsuit, including some conduct that
happened before 2007, but allowed the SEC to amend its case.
Defense lawyers have said U.S. enforcement agencies are
increasingly overreaching in efforts to fight foreign bribery,
typically by going after alleged misconduct that occurred long
ago, took place entirely outside the United States or involved
minor payments not covered under the law.
The case is SEC v. Straub et al, U.S. District Court,
Southern District of New York, No. 11-09645.