Regulators are reminding errant executives that they will be vigorously pursued even if their illegal acts took place many years ago and their companies are currently out of business.
Late last week Roys Poyiadjis, a former chief executive officer of defunct software maker AremisSoft Corp., agreed to pay about $200 million to settle fraud charges brought against him in October 2001. That sum, which represents illegal profits from his trading in AremisSoft stock, is among the largest recoveries the SEC has obtained from an individual, according to the agency.
Although the crime took place before the Sarbanes-Oxley Act was passed, the disgorged funds will be distributed to defrauded investors.
Poyiadjis, who settled the charges without admitting or denying the allegations in the SEC’s complaint, also agreed to be permanently enjoined from future violations of the antifraud, reporting, and other provisions of the federal securities laws and to never serve as an officer or director of a public company.
“As this case demonstrates, the SEC will vigorously prosecute illegal conduct both home and abroad that affects U.S. securities markets, will pursue the proceeds from such misconduct, and will enlist foreign authorities in its efforts to do so,” said associate director of enforcement Paul R. Berger, in a statement. Berger added that the commission received assistance from the attorney general of the Isle of Man.
The SEC alleged that AremisSoft, and its co-chairmen and co-CEOs Poyiadjis and Lycourgos Kyprianou, made fraudulent statements in public filings and press releases, including:
• Reporting in AremisSoft’s 2000 financial statements millions of dollars in sales to entities that either did not exist as operating businesses or did not purchase product from AremisSoft.
• Reporting in AremisSoft’s 1999 and 2000 financial statements that the company paid a total of $32.7 million to acquire three software companies, when in fact the actual purchase prices ranged from approximately $100,000 to $300,000.
• Misrepresented the value of and revenue earned from a contract with Bulgaria’s Health Insurance Fund.
The SEC also alleged that Poyiadjis and Kyprianou, acting through offshore entities, engaged in massive insider trading during the period of the fraud, selling millions of shares of AremisSoft stock.
Meanwhile, last week the former chairman of Vari-L Co., a defunct wireless technology company, was indicted by a federal grand jury in Denver on charges of criminal conspiracy, stock fraud. and perjury, according to the Rocky Mountain News.
Joseph Harold Kiser, the fourth individual from the company to face criminal charges, faces as much as 30 years in prison and $4.5 million in fines if he is convicted, according to the report.
Kiser is accused of spearheading an accounting fraud from 1996 to 2000, instructing former chief executive officer David Sherman on how much fraudulent revenue to claim for a given quarter to meet or exceed analysts’ projections, the paper explained.
In 2000, the SEC accused the company of hiding $14 million in losses over the previous four years, according to the report; the company and a number of officers subsequently settled civil charges with the commission.
In addition, two former finance executives were criminally charged with falsifying information to inflate the company’s revenue. Former chief financial officer Jon Clark was charged with making a false statement in a report filed with the SEC; former controller Sarah Hume was charged with one count of falsifying corporate books and records. Both have pleaded guilty and await sentencing.
Sherman faces 13 criminal charges, according to the Post, and recently filed a motion to change his not-guilty plea. The newspaper suggests that Clark, Hume, and Sherman all are cooperating in the case against Kiser.
Vari-L’s former chairman has been charged with one count of conspiracy, two counts of securities fraud, one count of false statements in reports to the SEC, and two counts of perjury, according to the Post. The newspaper adds that he is also accused of selling more than $4 million in Vari-L stock in February 2000, a month after the company issued a release that falsely reported Vari-L was in sound fiscal health.