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Univ. of Toledo College of Law

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Sunday, April 10, 2011

SEC & Comverse Technology Settles FCPA Charges

The SEC and Comverse Technology, Inc. settled charges alleging violations of the books and records and internal controls provisions of the Foreign Corrupt Practices Act (“FCPA”). Comverse has offered to pay a total of approximately $1.6 million in disgorgement and prejudgment interest to the SEC. In a related action, Comverse will pay a $1.2 million criminal fine to the U.S. Department of Justice.

The SEC’s complaint alleges that:

Between 2003 and 2006, Comverse Limited, an Israeli operating subsidiary of Comverse, made improper payments to obtain or retain business. In particular, Comverse Limited made improper payments of approximately $536,000 to individuals connected to OTE, a telecommunications provider based in Athens, Greece that is partially owned by the Greek Government. These payments resulted in contracts worth approximately $10 million in revenues and ill-gotten gain of approximately $1.2 million.

In order to facilitate and conceal the payments, Comverse Limited employed a third-party agent to establish an offshore entity in Cyprus which, in turn, funneled the improper payments to Comverse Limited’s customers. Comverse Limited employees made payments to the agent’s offshore entity and, after taking 15% off the top of these payments, the agent paid the remaining 85% in cash bribes, directly or indirectly, to Comverse Limited’s customers.

These payments were improperly recorded on Comverse’s books and records as “agent commissions,” and in addition, Comverse failed to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions at all levels of the organization were properly recorded. For example, neither Comverse nor Comverse Limited had a process, formal or otherwise, for conducting due diligence of sales agents or for the independent review of agent contracts outside the sales departments.

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