January 15, 2002
BellSouth Corp., the third largest U.S. local telephone operator, agreed to pay $150,000 to settle federal charges connected to a Venezuelan unit's payments to offshore companies and a Nicaraguan unit's payments to a legislator's wife. The Securities and Exchange Commission alleged that Atlanta- based BellSouth, which serves nine southeastern U.S. states, violated internal controls and books and records provisions of the Foreign Corrupt Practices Act. The company, which had $26.1 billion in revenue in 2000, neither admitted nor denied the allegations, which were filed in Atlanta federal court, the SEC said.
"This case illustrates the importance of adequate internal controls as companies like BellSouth continue to expand into foreign markets," said Glenn S. Gordon, an SEC attorney in Miami.
OFFSHORE COMPANIES
The SEC alleged that senior executives at BellSouth's Venezuelan unit, Telcel C.A., authorized payments of $10.8 million to six offshore companies that didn't provide any services. The unit, which is Venezuela's leading wireless provider, recorded the payments "based on fictitious invoices," and there were no service or vendor agreements for services provided, the suit said. BellSouth has been unable to reconstruct the circumstances or purpose of the payments or determine the identity of the ultimate recipients, the SEC said.
BellSouth's Nicaraguan unit, Telefonia Celular de Nicaragua SA, improperly recorded payments to a Nicaraguan legislator's wife to work as a lobbyist, the SEC said. The lawmaker, who wasn't named in the SEC complaint, was chairman of the Nicaraguan legislative committee that oversees that country's telecommunications. The wife, who had no legislative experience, lobbied on BellSouth's behalf for repeal of a Nicaraguan restriction on foreign companies' majority ownership of local telecommunications companies.
DRAFTED PROPOSAL
At the same time, her husband drafted a proposal to repeal the prohibition and urged other lawmakers to support it, the SEC said. His proposal was passed by the Nicaraguan National Assembly in December 1999.
BellSouth's Nicaraguan unit improperly recorded payments to the lobbyist as "consulting services," the SEC said. She was retained by BellSouth from October 1998 to May 1999, when she was fired, and was paid a total of $60,000, the suit contended.
The SEC, in deciding on the $150,000 fine, considered that BellSouth disciplined various employees in addition to the Nicaraguan lawmaker's wife and is improving its rule compliance program, the SEC's Gordon said.
BellSouth has expanded its operations into Latin America by acquiring telephone companies in 11 Latin American countries in the last decade. Among these countries are Brazil, Argentina and Colombia.
The Foreign Corrupt Practices Act prohibits U.S. companies and employees from offering payments to officials, governments and political parties in other countries.
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