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Continue on page 2.. $1.1 Billion Accounting Fraud

In carrying out their fraudulent conduct, according to the complaint, these Lucent officers, executives and employees violated and circumvented Lucent's internal accounting controls, falsified documents, hid side agreements with customers, failed to inform personnel in Lucent's corporate finance and accounting structure of the existence of the extra-contractual commitments or, in some instances, took steps to affirmatively mislead them.

The complaint also alleges that David Ackerman, at the time an officer of Winstar, engaged in a scheme with Plunkett that resulted in Lucent improperly recording a $125 million software purchase by Winstar at the end of Lucent's fourth quarter of fiscal year 2000. His fraud included signing a document that disguised the timing of a side agreement in connection with that sale. By engaging in such conduct, Ackerman aided and abetted Lucent's fraud.

Lucent's Lack of Cooperation Lucent's penalty for its failure to cooperate is based on the following conduct.

Throughout the investigation, Lucent provided incomplete document production, producing key documents after the testimony of relevant witnesses, and failed to ensure that a relevant document was preserved and produced pursuant to a subpoena. As a result, the staff's ability to conduct an efficient and comprehensive investigation was impeded.
 
After reaching an agreement in principle with the staff to settle the case, Lucent's former Chairman/CEO and outside counsel agreed to an interview with Fortune magazine. During the interview, Lucent's counsel characterized Lucent's fraudulent booking of the $125 million software pool agreement between Lucent and Winstar as a "failure of communication" thus denying that an accounting fraud had occurred. Lucent's statements were made after Lucent had agreed in principle to settle this case without admitting or denying the allegations concerning, among other things, the Winstar transaction. Lucent's public statements undermined both the spirit and letter of its agreement in principle with the staff.
 
After reaching an agreement in principle with the staff to settle the case, and without being required to do so by state law or its corporate charter, Lucent expanded the scope of employees that could be indemnified against the consequences of this SEC enforcement action. Such conduct is contrary to the public interest.
 
Lucent also failed over a period of time to provide timely and full disclosure to the staff on a key issue concerning indemnification of employees. Failure to provide accurate and complete disclosure to the staff undermines the integrity of SEC investigations.
 
Settlements

Lucent, Plunkett, Harris and Petrini have reached settlements with the SEC. These defendants have agreed to permanent injunctions against future violations of the anti-fraud, reporting, books and records and internal controls provisions of the federal securities laws.
 
Lucent will pay a penalty of $25 million.
 
Plunkett also will pay a civil penalty of $110,000 and has agreed to be permanently barred from acting as an officer or director of a public company.
 
Harris will pay a civil penalty of $100,000 and has agreed to be barred from acting as an officer or director of a public company for five years.
 
Petrini will pay a civil penalty of $60,000 and disgorge $109,505, representing profits gained as a result of the conduct alleged in the complaint, together with prejudgment interest thereon in the amount of $23,487.

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