U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21357 / December 31, 2009
Accounting and Auditing Enforcement Release No. 3093 / December 31, 2009
Securities and Exchange Commission v. UTStarcom, Inc., Case No. CV-09-6094 (JSW) (N.D. Cal. filed Dec. 31, 2009)
SEC CHARGES CALIFORNIA TELECOM COMPANY WITH BRIBERY AND OTHER FCPA VIOLATIONS
The Securities and Exchange Commission today charged Alameda, Calif.-based telecommunications company UTStarcom, Inc. with violations of the Foreign Corrupt Practices Act (FCPA) for authorizing unlawful payments to foreign government officials in Asia.
UTStarcom agreed to settle the SEC's charges and pay a $1.5 million penalty among other remedies. In a related criminal case, the U.S. Department of Justice announced today that UTStarcom agreed to pay an additional $1.5 million fine.
The SEC's complaint, filed in the U.S. District Court for the Northern District of California, alleges that UTStarcom's wholly-owned subsidiary in China paid nearly $7 million between 2002 and 2007 for hundreds of overseas trips by employees of Chinese government-controlled telecommunications companies that were customers of UTStarcom, purportedly to provide customer training. In reality, the trips were entirely or primarily for sightseeing.
The SEC further alleges that UTStarcom provided lavish gifts and all-expenses paid executive training programs in the U.S. for existing and potential foreign government customers in China and Thailand. UTStarcom also purported to hire individuals affiliated with foreign government customers to work in the U.S. and provided them with work visas, when in reality the individuals did no work for UTStarcom. According to the SEC, UTStarcom also made improper payments to sham consultants in China and Mongolia while knowing that they would pay bribes to foreign government officials.
The SEC's complaint charges UTStarcom with violations of the anti-bribery, books and records, and internal controls provisions of the FCPA (Sections 30A, 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, respectively). UTStarcom agreed, without admitting or denying the charges, to the entry of a permanent injunction against FCPA violations and to provide the SEC with annual FCPA compliance reports and certifications for four years, in addition to paying the $1.5 million penalty.
The SEC acknowledges the assistance of the Department of Justice during the investigation.