Lucent to take $300 million charge on lawsuit ruling

Fine comes in bankruptcy proceedings of Winstar

Lucent Technologies Inc. will take a US$300 million charge on its first quarter of 2006 financial statement after a judge ruled against the company in a bankruptcy case on Wednesday.

Judge Joel B. Rosenthal of the U.S. Bankruptcy Court for the District of Delaware ordered Lucent to pay about $244 million, plus statutory interest and other costs in the bankruptcy proceeding of Winstar Communications Inc. The $300 million charge will be assessed in the 2006 first fiscal quarter, which ends Dec. 31, 2005, said Lucent, a network hardware, software and services vendor based in Murray Hill, New Jersey.

Winstar, a broadband network and service provider, filed for bankruptcy in April 2001. The company sued Lucent for $10 billion, saying its bankruptcy was caused by Lucent's breach of obligations in a strategic partnership between the two companies.

The two companies entered into a partnership in 1998. Lucent had an agreement with Winstar to provide telecommunications equipment and services. The judge's ruling focused on two Winstar claims, the breach of contract allegation and a bankruptcy preference claim, with Winstar saying Lucent should return payments Winstar made.

Lucent disagrees with both claims, a company spokesman said.

"We have made strong arguments supporting our view that this suit was without merit," said Lucent general counsel Bill Carapezzi, in a statement. "We are examining the judge's ruling very carefully and will vigorously appeal the decision."

In May 2004, Lucent was fined $25 million by the U.S. Securities and Exchange Commission (SEC), which accused the company of accounting fraud worth $1.1 billion. In part of that investigation, the SEC found that a former Lucent sales executive worked with a Winstar executive to improperly report $125 million in software purchases in Lucent's fiscal year 2000.

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