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Magyar Telekom unit in Montenegro focus of investigation

Magyar Telekom Nyrt's unit in Montenegro is at the center of an investigation which has delayed the company's AGM for months, and six members of Telekom Montenegro's board have been sacked as a result, Manager Magazin writes in its latest issue, citing unnamed sources.

Magyar Telekom announced in March that it is “currently inquiring into certain contracts, totaling approximately Ft 700 million, by one of its subsidiaries, to determine whether they have been entered into force in violation of company policy or applicable law or regulation.” The announcement did not name the subject of the investigation. Until the investigation is completed, Magyar Telekom's annual report from 2005 cannot be audited, therefore it cannot be presented for shareholder approval.
Manager Magazin writes that Magyar Telekom's auditor has refused to complete the audit of last year's financial report because of two contracts Telekom Montenegro signed in autumn 2005, one for legal counsel with a Montenegrin company and the other for market research performed by an offshore company. Payment of a combined Ft 700 million related to the contracts was transferred at the end of 2005 to accounts held by two offshore companies. Magyar Telekom's auditor complained about this method of payment and argued that the fees were incommensurate with the amount of work completed, Manager Magazin said.
US legal counsel White and Case has been conducting the investigation for months, and Hungary's State Financial Supervisory Authority (PSzÁF) has told Magyar Telekom's owner, Deutsche Telekom, to inform shareholders about the matter by August.