Veritas Software Forces CFO to Quit
By MICHAEL LIEDTKE
AP BUSINESS WRITER
Thursday, October 3, 2002
SAN FRANCISCO -- Veritas Software Corp. forced its chief financial officer to resign Thursday after the company learned he lied about his education - a revelation that rankled investors fed up with deceitful executives.
A tip e-mailed to a Veritas board member exposed Kenneth E. Lonchar, the Mountain View-based company's CFO since 1997.
After investigating Lonchar's resume, Veritas discovered the executive had fabricated some of his academic credentials, including a Stanford University MBA that he never received.
The discovery gave Lonchar little choice but to resign, said Gary Bloom, Veritas' chief executive officer.
"This is something we are not going to tolerate within this corporation," Bloom assured analysts during a conference call Thursday. "We took very swift action because of it."
Investors punished Veritas' stock, even though Bloom said the company stood by all the financial results reported during Lonchar's tenure. Bloom also said Veritas expected to meet its third-quarter profit projections.
The company's shares plunged $2.77, or 19 percent, to close at $11.73 on the Nasdaq Stock Market. The shares hit a new 52-week low of $11.53 during Thursday's session.
Veritas hopes to hire a new CFO by the end of this year. Jay A. Jones, the company's chief administrative officer, will handle the job until a replacement is found.
Wall Street's backlash to Veritas' bombshell will likely add a new concern to the credibility issues facing corporate America, said Ellwood Oakley, an associate professor specializing in ethics for the Robinson College of Business at Georgia State University.
"A lot of companies are going to be sending out internal e-mails during the next few days asking for executives to re-inspect their resumes for accuracy," Oakley predicted. "There really is no excuse for this kind of thing."
Lonchar, a certified public accountant, is hardly the first person caught lying on his resume.
In a highly publicized case of resume fraud, the University of Notre Dame hired George O'Leary as its football coach, only to later learn he had fabricated some of his academic and athletic background. O'Leary also was forced to resign.
In corporate America, Oakley said the most common lies occur when executives inflate their salaries at past jobs in hopes of getting more money from another employer. This practice has become so prevalent that some companies demand verification of past wages.
Fabricating an MBA can help an employee make more money, although Lonchar's motives for his lies are unclear.
Lonchar, 44, received $615,000 in salary and bonuses last year, according to Securities and Exchange Commission documents. He also owned 394,148 Veritas shares and stock options as of March 18, according to the SEC documents.
Beside his job at Veritas, Lonchar also is a board member at Citrix Systems Inc., a Fort Lauderdale, Fla.-based software maker. Lonchar remains "a board member in good standing," Citrix spokesman Joe Orine said Thursday.
Citrix's shares gained a penny to close at $5.99 on the Nasdaq.
Veritas hadn't checked Lonchar's background until receiving the outside tip because the company inherited him as an employee as part of a 1995 acquisition of another software maker, OpenVision.
Bloom, who became Veritas' CEO in late 2000, said the company conducts extensive checks of all new applicants today and feels comfortable with the backgrounds of his other top executives.
"I'm hopeful at this stage that this is a pretty isolated situation," Bloom said.
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