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.

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