Washington (June 4, 2004) -- Symbol Technologies Inc. agreed to pay a total of $138 million in settlements to resolve accounting fraud allegations by the Securities and Exchange Commission and to settle a class-action shareholder lawsuit.
The company also entered into an agreement with the U.S. Attorney's Office to avoid criminal charges.
The SEC charged Symbol Technologies Inc. with securities fraud and violating federal securities laws and charged 11 of its former executives in connection with their roles in the accounting fraud, which it alleged went on for at least five years.
The Holtsville, N.Y.-based company was under investigation for accounting issues related to the timing and amount of revenue it recognized from January 2000 through December 2001, and for the accounting for certain reserves, restructurings, certain option programs, and several categories of cost of revenue and operating expenses. In February, Symbol restated results for the years 1998 through 2001 and the first three quarters of 2002.
The SEC's complaint alleged that Symbol and the 11 defendants -- who include former president and CEO Tomo Razmilovic and former CFO Kenneth Jaeggi, schemed for at least five years to inflate the company's revenue and earnings to meet Wall Street estimates by using accounting gimmicks such as "cookie jar reserves" and "channel stuffing." The SEC said the accounting scandal resulted in an impact of over $230 million on Symbol's reported revenue and over $530 million on its pre-tax earnings. Symbol did not admit or deny the SEC's allegations.
The agreements with the SEC and the U.S. Attorney's Office call for Symbol to pay $37 million in cash to a restitution fund and $3 million to the U.S. Postal Inspection Service Consumer Fraud Fund.
Symbol also agreed to continue to cooperate with the U.S. Attorney's investigation; to retain an independent examiner to review its internal controls, financial reporting practices and its compliance with the settlement agreement; and to establish an annual training and education program. Symbol said the agreement resolves the SEC's investigation into its accounting.
Symbol also agreed to pay an additional $98 million -- $1.75 million in cash and $96.25 million in stock -- to settle a class-action shareholder lawsuit. The company said its co-founder and former chairman, Jerome Swartz, agreed to pay $4 million in cash to the class to settle that suit. In addition, and subject to his dismissal in another case, Swartz agreed to pay $7.2 million in cash to Symbol and to either forfeit stock options valued at $2.9 million or to exercise those options and pay the company $2.9 million in cash or stock.
-- WebCPA staff
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access