Deutsche Telekom Charged in Corruption Probe

Deutsche Telekom AG, a Hungarian unit and three former executives were charged by a U.S. regulator in a corruption case involving bribery of government officials in Macedonia and Montenegro.

The U.S. Securities and Exchange Commission said executives at the company's Magyar Telekom unit arranged payments in 2005 and 2006 of 4.88 million euros to Macedonian officials, under the guise of bogus consulting and marketing contracts, to keep a rival out of the market and win regulatory benefits.

According to the regulator, the same executives in 2005 arranged a second scheme in which 7.35 million euros were paid to third-party consultants under four sham contracts, expecting some of the funds to be funneled to Montenegrin officials to help Magyar complete the purchase of Telekom Crne Gore AD.

The SEC also filed charges against the three former Magyar Telekom executives: former Chief Executive Elek Straub, and strategy executives Andras Balogh and Tamas Morvai.

It alleged violations of the Foreign Corrupt Practices Act, saying that the payments were recorded improperly on Magyar Telekom's books, and that those false entries were incorporated into Deutsche Telekom's financial statements, which are filed with the SEC.

The SEC filed its charges in a federal court in New York.

It is unclear whether the matter has been settled, or whether the U.S. Department of Justice is filing parallel charges, as it often does in FCPA cases.

An SEC spokesman declined to comment. The Justice Department had no immediate comment. Deutsche Telekom had no immediate comment. A lawyer for Magyar Telekom declined to comment. The executives could not immediately be reached.

The cases are SEC v. Magyar Telekom Plc et al, U.S. District Court, Southern District of New York, No. 11-09646; and SEC v. Straub et al in the same court, No. 11-09645. (Reporting by Jonathan Stempel in New York; Additional reporting by Jeremy Pelofsky in Washington, D.C., and Peter Maushagen and Maria Sheahan in Frankfurt, editing by Dave Zimmerman; +1 646 223 6317; Reuters Messaging: