Veraz to Pay $300,000 Fine for Allegedly Bribing Foreign Officials

Six weeks ago, Veraz Networks announced a merger with privately held Dialogic in an effort to stem its weakening business position. But its troubles do not seem to have ended: The VoIP solutions manufacturer will pay a $300,000 fine to the U.S. Securities and Exchange Commission to settle charges that it the bribed Chinese government officials to obtain contracts.

Veraz hired a Chinese consultant who allegedly gave gifts and payments totaling $40,000 to officials of a government-controlled Chinese telecommunications company in order to win Veraz contracts. A Veraz executive authorized the gifts, describing them in an internal email as a "gift scheme." Veraz also allegedly made payments to the CEO of a government-controlled telecommunications company in Vietnam.

The federal court action alleges that Veraz violated various provisions of the Foreign Corrupt Practices Act by not declaring the illegal payment in its accounts and failing to take measures to prevent such payments. Veraz agreed to refrain from making any such payments in the future while not admitting to having made them in the past. It also agreed to pay the fine.

Veraz was founded in 2001 as a spin-off of ECI Telecom's NGTS (next-generation telephony solutions ) division, which merged with VoIP solutions company NexVerse Networks.

Today, it is a leading provider of bandwidth optimization and next-generation switching products, while continuing to market its original products.

Veraz was floated on the NASDAQ in 2007 and raised $72 million by issuing nine million shares at $8 a share. The share has plummeted by 85% since, and recently traded at $1 a share.

In 2009, Veraz posted income of $75.1 million, as against $93.4 million in 2008 and $125.8 million in 2007. Based on its income to date, this year will show a continued decline in the company's fortunes.

The merged company, however, is expected to post income of $250 million.

In May, Veraz announced that it would merge with Dialogic by issuing shares of its common stock to each Dialogic shareholder, such that Dialogic shareholders would own 70% of the new company and Veraz shareholders 30%.

The merged firm will be called Dialogic and be publicly traded. The transaction is expected to close in the second half of 2010.