Financial Statement Accounting Fraud. The New York Times reports that Prabhat Goyal, former CFO of Network Associates, will face criminal charges in connection with a scam to dupe investors. Essentially, the scam entailed recording revenue for product shipped to distributors before the product was sold to consumers. Distributors were paid "excess inventory fees" for the returned products.

The alleged chicanery began in 1998 when the government says Goyal decided Network Associates should book revenue based on the amount of product sold to distributors instead of on the amount of inventory that ended up being bought by consumers and businesses. Network Associates changed its accounting method in 2001 after Goyal stepped down as CFO.

Even though this controversy is overshadowing Network Associates, their stock has held its value. This suggests that investors have not changed their views on the company's ability to produce cash flow in the future.