Gst, ask Bill how his big pick in Critical Path (Cpth) is doing.
Bill, won't talk to me because he knows I have a good memory.
PART 2--One year later--UPDATE 2-Former tech exec pleads guilty to securities fraud
TUESDAY, FEBRUARY 12, 2002 10:46 PM
- Reuters U.S. Company News
(Adds not guilty plea by second defendant, company unavailable for comment, paragraph 6, prosecutors on punishment, paragraph 8)
By Andrea Orr
PALO ALTO, Calif, Feb 12 (Reuters) - The former president of Critical Path Inc (CPTH) , one of the most prominent companies of the dot-com era, pleaded guilty on Tuesday to securities fraud and said he helped book nonexistent revenue on the company's income statements.
In the latest accounting scandal to stem from questionable ways companies record results, David Thatcher said he participated in a criminal conspiracy with other top officers of the company to inflate revenues to meet targets for its financial performance.
In a plea agreement entered in U.S. District Court in San Francisco, Thatcher said the false reporting occurred during the third and fourth quarters of 2000 and involved Critical Path improperly booking revenues from transactions that were either smaller than represented or did not exist at all.
"I, along with others in senior management, participated in an effort to mislead auditors and others about the facts," Thatcher said in court papers.
Although the company and Thatcher, along with former vice president of sales Timothy Ganley, earlier this month settled fraudulent accounting charges brought by the Securities and Exchange Commission, there had previously been no admission of wrongdoing.
Ganley entered a not guilty plea on Tuesday, said officials from the U.S. Attorneys Office. Officials at Critical Path were unavailable for comment.
Thatcher faces up to five years in prison and a fine of up to $250,000 for the fraud to which he admitted on Tuesday, although prosecutors said his punishment might be reduced in recognition of his cooperation in the case.
San Francisco-based Critical Path is today a struggling software company attempting to stage a turnaround, after it was forced to restate 2000 results.
RICHES TO RAGS
But in 1999 it was a high-profile Internet company, with a fast-growing and celebrated business operating electronic messaging systems so that other companies could in effect outsource their email needs. The company's stock soared 175 percent after it went public in March of 1999 to trade as high as $150.25.
On Tuesday its stock closed at $2.55 a share.
Critical Path's improper accounting practices were exposed in January of 2001, when the company reduced 2000 revenues by some $19.3 million. However, the court papers filed in connection with Thatcher's guilty plea on Tuesday reveal more detail of the ways it made up revenue.
In one case, Thatcher said he helped conceal a "software swap" with another company, Peregrine Systems Inc (PRGN) , to make it look as if Peregrine had actually paid money to Critical Path.
"To avoid the appearance that the transaction was a software swap, Critical Path and Peregrine prepared separate contracts for each purchase, each paid the full amounts owed, and made payments to each other on different days," he said in the plea agreement.
In another instance, he said, he helped Critical Path conceal the amended terms of a software licensing agreement with StarMedia.
"I believed that fully disclosing StarMedia's extension of payment terms to Critical Path's auditors might have prevented Critical Path from recognizing third quarter revenue for this transaction," Thatcher said in the plea agreement.
"I knew... I was participating in an effort to mislead Critical Path's auditors and others."
part 3--THURSDAY, FEBRUARY 14, 2002 7:33 AM
- Reuters U.S. Company News
SAN FRANCISCO, Feb 14 (Reuters) - Critical Path Inc. (CPTH) , a high flier during the Internet bubble, on Thursday said that no one involved in the activities that led to a restatement of results is still with the company.
The announcement comes just two days after the former president of Critical Path, David Thatcher, pleaded guilty to securities fraud and said that he had helped book nonexistent revenue on the company's income statements.
Critical path, Thatcher and former vice president of sales Timothy Ganley, each settled allegations of fraudulent accounting with the Securities and Exchange Commission, SEC, in the beginning of the month without admitting or denying any allegation of wrongdoing..
Critical Path had to restate results for the third and fourth quarters of 2000 as a result of the settlement with the SEC.
The company's improper accounting practices were exposed in January when the company reduced 2000 revenues by some $19.3 million, joining a growing list of companies with accounting scandals resulting from questionable ways companies record results. |
