The Securities and Exchange Commission has settled charges with four former finance executives of SmartForce related to the software company's overstatement of revenue and income.
SmartForce, now part of e-learning software developer SkillSoft, was charged with overstating revenue by $113.6 million and net income by $127 million during a three-year period ending in mid-2002. The commission complained that SmartForce's financial statements failed to comply with GAAP because the defendants improperly recognized revenue from various kinds of transactions, including multiple-element arrangements, reciprocal transactions and reseller agreements.
Among those who agreed to pay civil penalties was former SmartForce CFO David Drummond, who agreed to forfeit $573,979 and pay a fine of $125,000. He is currently Google's chief legal officer. Other executives charged included two former vice presidents of finance, Patrick E. Murphy and John P. Hayes, along with Patrick T. Chew, the former controller of SmartForce's U.S. subsidiary.
Ernst & Young's Irish branch also agreed to settle with the SEC for $725,000 for inadequately auditing the company's financial statements. The SEC is still investigating option-granting practices at SmartForce prior to its merger with SkillSoft.
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