RealTime IT News

Veritas Dinged For $30M

Veritas Software will pay $30 million to investors harmed by its fraudulent earnings management scheme as stipulated in a settlement with the Securities and Exchange Commission (SEC).

The settlement also closes charges that Veritas, which Symantec   acquired in 2005, committed securities fraud in improper round-trip transactions with AOL and two other companies, as well as helped AOL commit securities fraud.

The SEC said in a statement Veritas artificially inflated reported revenues in connection with a $20 million transaction with AOL and transactions with two other Internet companies.

In the round-trip transaction, Veritas agreed to "buy" online advertising in exchange for the customer's agreement to purchase software from Veritas at inflated prices. Veritas structured and documented the round-trip as if it were two separate transactions to conceal its true nature.

The SEC also said the company lied to and withheld material information from its independent auditors about the AOL transaction and the other two transactions.

And because AOL improperly recognized revenue on the round-trip transaction and reported materially misstated financial results to its own investors, the SEC found that Veritas aided and abetted AOL's fraud.

Finally, the SEC found that Veritas engaged in three improper accounting practices to manage its earnings and artificially smooth its financial results from 2000 to 2003.

Specifically, the SEC said Veritas improperly recorded and maintained excess accrued liabilities and stopped recognizing professional service revenue it had earned upon reaching internal targets.

Veritas settled, without admitting or denying the allegations, with the SEC in the U.S. District Court for the District of Columbia, agreeing to an injunction and to pay the civil penalty.

The SEC said it will distribute the $30 million to harmed investors pursuant to the Fair Funds provision of the Sarbanes-Oxley Act of 2002.

The settlement ends another chapter in a long saga of corporate malfeasance that government regulators are trying to get a handle on. While Veritas' transgressions were unique, they represent an undercurrent of financial shenanigans that run throughout corporate America.

These days, stock option tricks, such as backdating, are getting most of the attention, with the SEC indicting executives at Brocade Communications  and Monster.com  and investigating other companies for similar actions.