UT Starcom is making news with charges that it violated U.S. Bribery Laws by giving Chinese cellular network carriers free U.S. vacations.
UT Starcom bribes are resulting in a US $3 million dollar fine and a 'Get-Out-of-Jail-Free Card'. Two separate Settlement Agreements involving UT Starcom have just been reached.
Chinese network carriers allegedly received free U.S. vacations from UT Starcom China, trips to U.S. tourist destinations the cellular Broadband provider then reported as 'training programs'.
U.S. and California-based UTStarcom, the telecommunications equipment vendor, is making news through reaching a legal Settlement Agreement with the U.S. Department of Justice (DOJ ), to pay the DOJ a $1.5 million fine for Bribery for tourist destination trips extended on behalf of UTStarcom China. In the Settlement Agreement, UTStarcom took legal responsibility for UT Starcom China actions. UT Starcom China is the wholly-owned subsidiary through which the California-based U.S. company does business in China.
UTStarcom's legal woes don't end with the DOJ. The Broadband company addtitionally agreed, in separate legal Settlement Agreement, to pay another $1.5 million in separate penalty to the U.S. Securities and Exchange Commission. Those two UT Starcom fines add up quickly for the already-suffering Broadband provider, a 3 million total fine to the company.
The U.S.-based UTStarcom company makes DSL infrastructure, IPTV, and offers other Broadband Services. UTStarcom has been focusing on the Asia-Pacific market, in particular China and India. But the focus on China doesn't seem to be working out too well for the Broadband provider. China-based industry rivals Huawei Technologies and ZTE have been giving UTStarcom China a run for its money. The Broadband provider began to wind down mobile cellular handset operations based in South Korea, just last year, losing nearly 35 million in the third quarter of 2009.
Maybe it was just that desparation that led the suffering UTStarcom Broadband provider to a false hope that bribing Chinese network carriers with free U.S. vacations and trips to tourist destinations might cure the company's suffering. Locations of those booked trips probably didn't help hide those bribes. The Department of Justice says that trips to tourist destinations for employees of state-owned telecommunications carriers in China, including Hawaii, Las Vegas and New York, were allegedly booked for employees of state-owned telecommunications carriers in China.
UTStarcom China reported those tourist trip costs to locations like Hawaii, Las Vegas and New York as: training expenses. Department of Justice begs to differ, claiming the tourist-locale trips were instead provided by UTStarcom China in efforts to win and retain contracts with the cellular network carriers. And what does the Department of Justice deem that?: Bribery. DOJ says UTStarcom violated the U.S. Foreign Corrupt Practices Act law, a law governing bribery of foreign officials. Ouch.
Those U.S. Department of Justice and U.S. Securities and Exchange Commission millions in fines may be big, but things could definitely be worse for UT Starcom. After all, money is money, but freedom is priceless. It seems UTStarcom's at least gotten a 'Get-Out-of-Jail-Free Card', or rather a 'Get-Out-of-Prison-Free Card', considering charges related to a Federal offense.
UTStarcom's will be paying a 3 million dollar fine in the Settlement and has also agreed to "implement rigorous internal controls" in return for not being prosecuted for the Bribes. Seems UTStarcom got off a bit easy on that one, since most would be spending time in prison (not jail, prison). The DOJ says the Broadband company cooperated in the investigation, voluntarily disclosing its violations and cooperating with the department. In the meantime, UTStarcom could not immediately be reached for comment by news sources (and probably won't be making comments anytime soon).
The Settlement Agreement appears to hold some (small) good news for UTStarcom (UTSI), with UTStarcom shareholders seeing shares rise on the Nasdaq stock market last Thursday to $2.19. That NASDAQ shares rise is up $0.02.