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January 5, 2010

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UTStarcom pays high price

UTSTARCOM Inc has reached an agreement with United States regulators to pay US$3 million in fines for bribing employees of "Chinese state-owned telecommunications companies" through free American trips and other items of value, Shanghai Daily learned yesterday.

UTStarcom, a telecommunications equipment maker that is listed on NASDAQ, arranged and paid for the Chinese clients to travel to popular tourist destinations including Hawaii, Las Vegas and New York City from 2002 to 2007.

The company then falsely recorded these trips as "training expenses."

"The true purpose for providing these trips was to obtain and retain lucrative telecommunications contracts in China," the company said in a statement on its Website.

In the period, UTStarcom paid US$7 million for 225 US trips and sent clients expensive wines.

Under agreements with the US Justice Department's Criminal Division and the Securities and Exchange Commission, UTStarcom will pay two separate US$1.5 million penalties and implement internal controls to prevent such activities from recurring.

As a result, the department has agreed not to prosecute the company or its subsidiaries for the making of improper payments.

US-based UTStarcom, whose income has been lifted by China's Little Smart business in recent years, did not mention which Chinese companies were involved in the cases.

China Telecom and China Netcom, the top two Chinese fixed-line phone carriers, were major developers of Little Smart, a cordless phone based on the fixed-line networks.

The Chinese regulator has ordered the carriers to stop providing Little Smart services before 2011.


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