Sapient said Wednesday that disarray in its finance department, which was run by three different CFOs during 2006, resulted in lack of accounting expertise that constituted a material weakness under the reporting requirements of Sarbanes-Oxley.
In addition to high CFO turnover, the company said its finance department’s woes in 2006 included a lack of accountants and people with financial reporting expertise, “significant turnover” of finance positions, the outsourcing of accounting positions to India, and an ongoing backdating investigation and restatement. As a result, Sapient said, it did not have enough finance or accounting resources to keep up with its financial reporting requirements.
The company it began adding to its accounting and finance staff in the second half of 2006 and put in place additional reviews of its financial statement closing process. That process continued in 2007, as the company hired and trained additional key personnel in corporate accounting, purchasing, financial planning and analysis, Sarbanes-Oxley compliance, human resources and other open roles, led by the newly established function of a Chief Operations and Administrative Officer, to resolve the issues with core transaction accounting. It said it also added a significant number of people to help stabilize the finance and accounting teams in India and providing additional processes and controls there.
Last October, Jerry A. Greenberg resigned as co-chairman and chief executive officer, and Sue Cooke resigned as interim chief financial officer.
At the time, Sapient said that although an internal investigation was not yet complete, its audit committee had identified option grants that had incorrect measurement dates and were not appropriately accounted for. These options were awarded principally during the period from 1997 through 2001. In its filing Wednesday, Sapient said it would take an additional stock-based compensation expense of $47 million as a result of restating prior results from 1996 through 2005.
The technology consulting firm also said it plans to file by its quarterly report for the period ended March 31, 2007 by June 15, which would bring its periodic filings up to date.
Sapient was one of the many companies that saw its stock surge and collapse amid the 1990s tech bubble. However, unlike most of the others, it survived, although its stock plummeted from a high of more than $70 to 75 cents.