The final two defendants in a long-running accounting fraud case involving 11 former executives at handheld device maker Symbol Technologies have settled charges with the SEC.
Michael DeGennaro, the former senior vice president of finance at the Holtsville, N.Y.-based bar code scanner company now owned by Motorola, consented to a final judgment, entered on April 6, 2010, that requires him to pay a civil penalty of $40,000. The SECs settlement with DeGennaro also included the issuance of an administrative cease-and-desist order.
Frank Borghese, formerly Symbols senior vice president of worldwide sales and services, consented to a judgment, entered on Feb. 22, 2010, that requires him to disgorge a total of $450,000 and waives imposition of a civil monetary penalty based on his demonstrated financial inability to pay additional amounts.
The Commissions federal court complaint, filed on June 3, 2004, alleges that from 1998 until early 2003, Symbol and the eleven individual defendants engaged in fraudulent accounting practices aimed at falsifying Symbol's reported financial results. Borghese and DeGennaro consented without admitting or denying the allegations of the SECs complaint and, in DeGennaro's case, the findings in the administrative order.
The SEC found that in 2000 and 2001, Symbol created and used certain restructuring charges and related reserves in contravention of U.S. GAAP, causing Symbol to misstate its operating expenses and net income on its books and records, and in its financial statements. DeGennaro was allegedly one of the executives who determined how these charges were recorded, and he failed to take the requisite steps to ensure that the charges and the uses of associated reserves were properly recorded and accounted for in accordance with GAAP.
Consent judgments were previously entered against each of the other 10 defendants, with the exception of Tomo Razmilovic, Symbols former CEO. On Dec. 23, 2009, the court entered a default judgment against Razmilovic as a sanction for his refusal to appear for his court-ordered deposition in the United States. Razmilovic currently resides in Sweden and has been a fugitive from justice since being indicted on parallel criminal charges in the Eastern District of New York. The court has commenced an evidentiary hearing to determine the relief to be imposed against Razmilovic pursuant to the default judgment. The SEC is seeking permanent injunctive relief, an officer-and-director bar, disgorgement plus prejudgment interest, and civil monetary penalties. The hearing is scheduled to resume on May 10, 2010. The SECs complaint alleges that Razmilovic orchestrated the fraud at Symbol to create the false appearance that Symbol was achieving the aggressive financial performance targets that he imposed.
Symbol was acquired by Motorola in September 2006 for approximately $3.9 billion.
