Lucent Settles Accounting Fraud Suits

March 28, 2003 ( - Lucent Technologies has reached a $600 million settlement in accounting fraud class action lawsuits.

The complaint, led by Teamsters West Virginia Pension Trust Funds, charged the telecommunication company of misrepresenting demand for its products and engaging in improper accounting because of these actions.   This was all in an effort to conceal serious problems in the company’s optical networking business from investors, the suit contends, according to a according to a Reuters report.

Lucent’s accounting alchemy led to artificially inflated reported financial results, including booking hundreds of millions of dollars in phony sales, the lawsuit alleged.

Term Deal

Under the terms of the settlement, Lucent, not admitting any wrongdoing, will pay back $600 million to settle the 54 lawsuits.  Lucent said it would pay $315 million in common stock, cash, or both, issue 200 million warrants to purchase an equal number of shares of common stock at a strike price of $2.75 with a three-year expiration from issuance that the company valued at about $100 million.

The final settlement, which still requires the final court nod, would lead to a second-quarter charge of about $420 million, or 11 cents a share, Lucent projected.   However, the company said it would seek partial recovery of the $315 million from its insurance carriers under certain policies that are worth up to $70 million. Lucent’s insurance carriers have agreed to pay $148 million in cash to the settlement fund, and Lucent will pay up to $5 million for the cost of administering the settlement.