Legal Worries Return to Lucent

Looks like Lucent's (LU) legal worries might not be behind it after all.

The troubled New Jersey telecom-gear giant said late Friday that U.S. authorities are investigating the company's operations in Saudi Arabia. The disclosure comes a week after a Saudi telecom firm sued Lucent, alleging it bribed top officials in the Middle Eastern country to secure a lucrative contract.

Lucent said it is cooperating with the Justice Department and Securities and Exchange Commission inquiries, which cover possible violations of the Foreign Corrupt Practices Act. On Friday, Lucent shares slipped 2 cents to $1.84.

The probes started this month after a lawsuit was filed against Lucent in U.S. District Court for the Southern District of New York. The suit, filed by National Group for Communications & Computers, accused Lucent of paying $15 million in bribes to Ali Al-Johani, a former minister of Saudi Arabia's Ministry of Post Telephone and Telegraph. Lucent said last week it believed the claims were baseless.

Earlier this year Lucent shares staged a modest rally, into the mid-$2 range, as the company began to clear its plate of the many legal challenges that arose during a long slide from glory. In just the first quarter of 2003, Lucent settled a whistleblower lawsuit, reached terms over a separate SEC investigation and agreed to pay as much as $420 million to close out a massive shareholder lawsuit. Those actions helped to resolve the business and accounting missteps of a management team that departed unceremoniously nearly three years ago.

Still, the company has yet to arrest the erosion of its core telecom-equipment business. Lucent recently posted a weaker-than-expected third quarter, a shortfall that once again pushed back its timeline for returning to profitability. Lucent's stream of quarterly red ink now reaches back some three years, a period during which the stock has lost more than 90% of its value.

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