Routing of emails exposes trio to US bribery action

The aggressive stand being taken in the US against bribery and corruption has been underlined by a federal court ruling on three executives said to have used dishonest tactics in a foreign telecoms deal.

The men, employed by the Hungarian company Magyar Telekom, were accused of orchestrating the bribery of Macedonian and Montenegrin government officials to block competitors from entering certain markets.

The US Securities & Exchange Commission (SEC) says this enabled Magyar to acquire majority ownership of a formerly state-owned telecoms company.

The SEC accuses the Magyar employees of paying the bribes under the guise of sham contracts, which were not accurately recorded in the company’s books, and of making false representations to the auditors.

The three executives claimed the SEC’s civil enforcement action accusing them of bribery should be dismissed on the grounds that they were outside US jurisdiction and their transaction was conducted more than five years earlier, placing them beyond the statute of limitations period.

However, the federal district court in New York ruled that the emails involved in the transaction, though sent and received in Europe, were electronically routed through or stored in the US, bringing them into US jurisdiction.

Whether the defendants were aware or otherwise of the servers’ location, and whether they intended such servers to be used, was judged to be irrelevant.

Judge Richard Sullivan observed: “The court does not disagree with [the] defendants that ‘the internet is a huge, complex, gossamer web’, but that is all the more reason why it should be foreseeable to a defendant that internet traffic will not necessarily be entirely local in nature.”

Furthermore, Judge Sullivan said Magyar’s securities and those of the parent company Deutsche Telekom were publicly traded on the New York stock exchange.

Judge Sullivan said: “Because these companies made regular quarterly and annual consolidated filings during that time, [the] defendants knew or had reason to know that any false or misleading reports would be given to prospective American purchasers of those securities.”

When considering the statute of limitations claim, he agreed that five years had elapsed since the transaction but said the limit is valid only if defendants are “found within the US” during that time, and they were clearly elsewhere.

Judge Sullivan rejected the three executives’ case and the hearing will be resumed on 3 April.

Magyar and Deutsche Telekom have already settled with the Department of Justice and the SEC by paying $95m (£62m, €72m) to resolve civil claims and criminal charges against them.