Telecom Executives Agree to Pay Penalties for Foreign Corrupt Practices Act Violation

Sometimes foreign executives forget that U.S. law can reach them and their companies, particularly if they issue securities in the United States. The case of three former executives at Magyar Telekom, a telecommunications provider from Hungary, whom the Securities and Exchange Commission (SEC) charged with having violated the Foreign Corrupt Practices Act (FCPA) is just one example that relates to this statement. In April 2017, Elek Straub and Andras Balogh, two of the three former executives, consented to paying financial penalties and accepting officer and director bars to settle the case.
Magyar Telekom had faced criminal and civil charges of bribing officials in Macedonia and Montenegro to gain business advantages in said countries and exclude competitors in the industry. Its’ parent company, Deutsche Telekom AG, was also charged with violations of the Foreign Corrupt Practices Act.
In December 2011, Magyar Telekom paid a $95 million penalty to settle the charges. But the SEC’s complaint was also directed towards Magyar’s former CEO, and the company’s former chief strategy officer for arranging the use of fake contracts to direct millions of dollars towards corrupt payments and leading secret agreements with a prime minister, amongst others, to shut out competitors.
Elek Straub and Andras Balogh have settled with a $250,000 USD and $150,000 USD penalty respectively. Both agreed to being blocked from serving as an officer or director of any SEC-registered public company for the next five years. The reached settlements are subject to court approval. With the company’s former director of business development and acquisitions, Tamas Morvai, a $60,000 USD settlement had been reached in February 2017. He had manipulated the company’s books and records to conceal the bribery scheme put in place by Straub and Balogh. According to Stephanie Avakin, Acting Director of The SEC’s Divison of Enforcement, the SEC had “(…) persevered in order to hold the (…) overseas executives culpable for corrupting a company that traded in the U.S. market.”
Best regards
und viele Grüße aus Charlotte
Reinhard von Hennigs