Financial Accounting Blog

Wednesday, June 16, 2004

Fraud. The SEC has filed civil fraud charges against Network Associates' ex-CFO Prabhat K. Goyal. He faces
charges in connection with accounting transgressions, [including charges] that he overstated the company's revenue and earnings from the second quarter of fiscal 1998 to the fourth quarter of fiscal 2000 [and] that [he] has sold stock while possessing material non-public information regarding the financial fraud at Network Associates.

The charges against Goyal include using a subsidiary to repurchase products from distributors and making secret payments to distributors to induce them to hold inventory and buy more products. The SEC is seeking disgorgement of gains in the form of salary, bonuses and sales of stock as well as civil money penalties.
It would appear that there will be a continuous stream of "EX-CFO"s charged with accounting transgressions for the foreseeable future. Interestingly, on both sides of all these scandals, the litigation practitioners continue to prosper.