Washington (Sept. 12, 2002) -- Federal prosecutors in San Francisco have charged Yervant David Lepejian, the founder and former head of San Jose, Calif.-based HPL Technologies Inc., with faking sales before taking the software company public last year and fabricating more than 90 percent of its revenue.
Prosecutors allege that Lepejian inflated HPL's sales by 12 percent in fiscal 2001 and by 77 percent in fiscal 2002, booking more than $28 million of bogus sales, Dow Jones Newswires reported. In July, the company removed Lepejian and began an investigation into accounting irregularities. HPL also called off its pending acquisition of IDS Software Systems and postponed its annual shareholders meeting and the reporting of its fiscal 2003 first quarter results, according to filings with the Securities and Exchange Commission.
Lepejian reportedly settled a companion civil suit filed by the SEC and agreed to be barred from serving as an officer or director of a public company without admitting or denying any of the Commission's allegations. He also may be ordered to return gains from stock options or bonuses, and pay a fine.
According to the report, regulators alleged that Lepejian forged purchase orders and generated phony shipping documents to give the illusion of robust sales before the company went public, and continued cranking out fake orders after the IPO from Canon Sales Co., HPL's exclusive distributor in Japan. The scam reportedly blew up when Canon's lawyers learned of the inflated sales and reported them to HPL's outside auditor, PricewaterhouseCoopers, which alerted HPL's board. An official in the SEC's San Francisco office told Dow Jones that its investigation is continuing.
"Mr. Lepejian accepts full responsibility for his conduct. He deeply regrets any harm he caused others," his attorney Michael Tubach, is quoted as saying.
-- Electronic Accountant Newswire staff
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