District Court Grants Summary Judgment for SEC against Corporate CFO and Controller

The U.S. District Court for the Southern District of New York granted the SEC summary judgment against the CFO and Controller of a software company on fraud charges related to the recognition of revenue under GAAP standards.

In its Opinion and Order, the Court found that the CFO of the software company made material misrepresentations in connection with the reporting of a $3 million software sales transaction. The Court found that the CFO relied upon documents that she knew to be backdated. The Court also granted summary judgment against both the CFO and the Controller in connection with the falsification of various documents where a number of separate agreements should have been treated as a single transaction for accounting purposes. Further, in connection with the fraudulent misstatements to the company's auditors, the Court found that the defendant caused ancillary violations, including false books and records, false certifications and failing to maintain a system of internal accounting controls.

As a result, the Court found the CFO liable for fraud and violations of Sarbanes Oxley, and the Court required reimbursement of $430,741 of bonuses to the issuer.