Wayne M. Carlin (WC-2114)
UNITED STATES DISTRICT COURT
Plaintiff Securities and Exchange Commission ("Commission"), for its complaint against defendant Robert Asti ("Asti"), alleges as follows:
Summary of Allegations
1. From 1999 through March 2001, defendant Asti engaged in a fraudulent scheme that inflated the reported financial results of Symbol Technologies, Inc. ("Symbol"), a publicly traded manufacturer of bar code scanners and related information technology. In press releases and periodic reports filed with the Commission, Symbol reported record revenue and dramatic increases in net income. Asti and others rigged those results by fabricating over $100 million in sales revenue during Asti's tenure as head of Symbol's "sales finance" group, which controlled critical aspects of the revenue recognition process such as the booking of orders and the issuance of invoices and credits.
2. Among other fraudulent accounting practices, Asti and others "stuffed" Symbol's distribution channel at the end of each quarter to help meet revenue and earnings targets imposed by Symbol's president at that time. Together with others, Asti engineered phony sales in which resellers placed large "purchase" orders with the understanding that they would not have to pay Symbol unless and until they resold the product to an end user or could return any unsold product at no cost. In some cases, Asti negotiated the contingent payment terms and unconditional return rights granted to resellers. In other cases, Asti also arranged for Symbol to make payments to resellers to induce them to place orders and accept shipments in excess of their financial means.
3. Asti also employed other fraudulent devices to accelerate revenue on sales to end users when the product the end user wanted was unavailable or could not be shipped before the end of the quarter for other reasons. In addition, Asti and others facilitated the recognition of revenue in connection with the phony reseller sales and other fraudulent quarter-end transactions. Asti coordinated with operations personnel to make sure that the "purchasers" ordered product that Symbol currently had available; he saw to it that the orders were filled and invoiced before the end of the quarter; and he made or directed these and other improper entries to Symbol's accounting system.
4. By virtue of the foregoing conduct, Asti, directly or indirectly, singly or in concert, has engaged in acts, practices and courses of business that constitute violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §§ 78j(b), 78m(b)(5), and Rules 10b-5 and 13b2-1, 17 C.F.R. §§ 240.10b-5, 240.13b2-1; and Asti is also liable pursuant to Section 20(e) of the Exchange Act, 15 U.S.C. § 78t(e), for aiding and abetting violations of Sections 10(b), 13(a) and 13(b)(2) of the Exchange Act, 15 U.S.C. §§ 78j(b), 78m(a), 78m(b)(2), and Rules 10b-5, 12b-20, 13a-1 and 13a-13, 17 C.F.R. §§ 240.10b-5, 240.12b-20, 240.13a-1, 240.13a-13.
5. Unless Asti is permanently restrained and enjoined, he will again engage in the acts, practices, and courses of business set forth in this complaint and in acts, practices, and courses of business of similar type and object.
Jurisdiction and Venue
6. The Commission brings this action pursuant to authority conferred by Section 21(d)(1) of the Exchange Act, 15 U.S.C. § 78u(d)(1), and seeks to restrain and enjoin Asti permanently from engaging in the acts, practices and courses of business alleged herein. The Commission also seeks an order: (a) requiring Asti to disgorge the ill-gotten gains he received as a result of the violations for which he is liable, and to pay prejudgment interest on that amount; (b) requiring Asti to pay civil money penalties pursuant to Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3); and (c) prohibiting Asti, pursuant to Section 21(d)(2) of the Exchange Act, 15 U.S.C. § 78u(d)(2), from acting as an officer or director of a public company.
7. This Court has jurisdiction over this action pursuant to Sections 21(d) and 27 of the Exchange Act, 15 U.S.C. §§ 78u(d), 78aa.
8. Asti, directly and indirectly, has made use of the means or instrumentalities of interstate commerce or of the mails, or of the facilities of a national securities exchange, in connection with the transactions, acts, practices and courses of business alleged herein. Certain of these transactions, acts, practices and courses of business occurred in the Eastern District of New York.
9. Asti, age 44, resides in Suffolk County, New York and was employed at Symbol during the time of the transactions and events alleged herein. From mid-1999 until his departure in March 2001, he was Vice President of Sales Finance for Symbol's The Americas Sales and Services ("TASS") division. Before becoming Vice President, he performed essentially the same duties as Director of Sales Finance for TASS, beginning in 1998.
10. During the time of the transactions and events alleged herein, Symbol was, and remains: (a) a Delaware corporation with principal offices in Holtsville, New York; (b) engaged in the design, manufacture, marketing and servicing of information management systems using bar code scanners and similar devices; and (c) a public company whose common stock is traded on the New York Stock Exchange and registered with the Commission pursuant to Section 12(b) of the Exchange Act.
Symbol's Corporate Culture And Internal Control Deficiencies
11. During the late 1990s, Symbol reported rapid growth in its business, including a $150 million contract in late 1998 with the United States Postal Service. The revenue recorded on that contract contributed to an increase in Symbol's annual revenue of nearly thirty percent over the prior year. There was significant pressure to maintain a comparable reported rate of growth in subsequent years.
12. Symbol's president at the time established ambitious revenue and earnings targets that either drove or mirrored Wall Street expectations, and he aggressively enforced those targets. As a result, Symbol was a "numbers driven" company whose executives and key employees were obsessed with meeting financial projections. Asti reported to the head of TASS, whose main job was to make sure that TASS met the president's targets. During the relevant period, there was often a mad scramble at the end of financial reporting periods to "hit the number."
13. Symbol's lack of adequate internal controls exacerbated the situation. Each area of the company performed its own finance function that fed directly into the financial reporting done at the corporate level. The so-called "sales finance" function had a significant impact on the revenue recognition process at the end of financial reporting periods. For example, members of Symbol's sales and service operation had the authority to decide, in the first instance, whether and when purchase orders and service contracts were booked for revenue recognition purposes. In addition, the sales finance group had virtually unfettered access to Symbol's general ledger through its automated accounting system, known as SAP. As a result, the sales finance function also exercised significant control over the issuance of credits for product returns and the aging of accounts receivable. Asti ran the finance department at TASS during the relevant period.
Symbol's Stated Revenue Recognition Policies
14. According to Symbol's annual reports on Form 10-K for its fiscal years ended December 31, 2000 ("FY 2000") and 2001 ("FY 2001"), Symbol recognized revenue "when products are shipped or services are rendered, the risk of loss has passed to the customer, the sales price is fixed or determinable, and collectibility is reasonably assured." According to Symbol's annual report on Form 10-K for its fiscal year ended December 31, 1999 ("FY 1999"), Symbol's revenue recognition policy was as follows: "Revenue from sales of the Company's products is recognized upon shipment."
Asti's Role In Revenue Recognition
15. Asti's supervisor and other members of senior management looked to Asti and his staff to ensure that any large quarter-end transactions needed to meet the president's targets were structured and documented so that the orders could be processed, and the revenue recognized, that quarter. As a result, Asti often became involved in negotiating the details of transactions. At the same time, he made, or directed his staff to make, the necessary entries to SAP to book the order, generate an invoice and authorize shipment. At the end of each reporting period, Symbol's corporate finance department downloaded the data entered into SAP and consolidated the data to generate the company's financial statements.
The Financial Fraud Scheme
16. Asti, together with others, engaged in a fraudulent scheme to inflate revenue and earnings in order to create the false appearance that Symbol had met or exceeded its financial projections. The scheme took place during Asti's tenure as head of sales finance and continued after his departure from the company in March 2001, resulting in material overstatements of the revenue and earnings reported by Symbol for, among other periods, FY 1999, FY 2000, interim periods within those fiscal years, and the quarter ended March 31, 2001. Asti and others, with blatant disregard for generally accepted accounting principles ("GAAP") and Symbol's stated accounting policies, used a variety of fraudulent practices to align Symbol's reported financial results with senior management's demands.
Asti's Role In Fraudulent Revenue Recognition Practices
17. Asti played a key role in many of Symbol's fraudulent accounting practices, principally "channel stuffing" and other means of fabricating or accelerating revenue. Asti knew that GAAP prohibited the recognition of revenue in these circumstances, and he knew that he and others were engaging in a fraud designed to improve the price of Symbol stock by inflating the company's financial results. Asti maintained a running list of transactions that he considered to be improper and kept members of senior management informed about those transactions.
18. To help meet senior management's targets, the head of TASS counted on a group of resellers to submit to Symbol, at his or his staff's request, large "purchase" orders for product that Symbol had available and could ship before the end of the quarter. Asti and others arranged these transactions to make it appear that Symbol was selling the product to these resellers, while they simultaneously eliminated the resellers' obligation to pay for it. Asti often nailed down the details of these and other sham reseller transactions. Asti also made sure that revenue in the full amount of the orders would be recorded on Symbol's books before the end of the quarter, even though he knew that the resellers had no firm obligation to pay for the product and Symbol was unlikely ever to receive payment, much less the full amount.
Contingent Payment Terms And Return Rights
19. These resellers typically did not need and often could not even afford to pay for the product they ordered, but Asti and others negated any risk to the resellers by granting them contingent payment terms and unconditional return rights. The resellers did not have to pay Symbol unless and until they resold the product and received payment from an end user. The resellers also had the right to return any unsold product to Symbol at no cost. These special terms did not appear anywhere in the purchase orders or resulting invoices, which typically recited Symbol's standard "net 45 day" payment terms.
20. Although the specific contingent payment terms and return rights varied from transaction to transaction, in each case they nullified the purported buyer's obligation to pay for the product. By recognizing revenue on such transactions as though they were genuine sales, Symbol violated both its own stated accounting policies and GAAP.
21. To reduce the risk of detection, Asti and others preferred to keep these side agreements oral, but sometimes the resellers requested and received written confirmation. For example, Asti handled multimillion dollar orders placed by a certain reseller ("Reseller A") in June and September 2000. Although Asti and another Symbol executive both told Reseller A that it could return any unsold product at no cost, Reseller A asked for documentation of the true terms to ensure that Reseller A incurred no risk in placing the orders. Asti sent emails to Reseller A at the end of both quarters agreeing that Reseller A had "stock rotation rights" with "no restocking fee" for these orders. Asti and Reseller A both understood that the phrase "stock rotation rights" meant unconditional return rights, a fact that the latter confirmed in a September 2000 email to Asti: "[A]s we discussed, `stock rotation' as used in your e-mail of the terms means complete stock return privilege." This side agreement superseded the stock rotation terms that Symbol normally granted to channel partners in its standard contracts, which did not permit unlimited returns and provided for a restocking fee in many circumstances.
22. Asti also had a role in structuring a fraudulent warehousing arrangement with a distributor located in South America ("Reseller B"), in which Reseller B placed multimillion orders at the end of multiple quarters for whatever products Symbol had available at the time, even though Reseller B had no need for the ordered products. Symbol did not ship the product to Reseller B in South America or to any of its customers. Instead, Symbol moved the product to warehouses in New York. Asti and others agreed that Reseller B did not have to pay for the warehoused product and could "return" or "exchange" the warehoused product at no cost when it placed new orders for product it actually needed.
23. In many cases, resellers also received substantial price discounts in addition to the standard reseller discount, thereby guaranteeing a huge risk-free profit on any sales they might make to an end user. In most cases, Symbol also agreed to share leads and attempt to arrange for end users to purchase the product held by the resellers. In effect, Symbol offered the resellers a large commission on any future sale to an end user in exchange for storing the product on the resellers' premises. In some cases, Asti also gave resellers immediate "rebates" in the form of credits or cash as compensation simply for placing the order. Some resellers used a portion of the payments to cover the costs of storing and insuring Symbol's product.
24. For example, one reseller ("Reseller C") placed a $5 million order in September 2000 after receiving an email from Asti that specified the identity and quantity of the product it was supposed to order, and that stated as follows: "I agree that should you have to return this product, we will issue full amount [plus] 1%." At the end of the next quarter, Asti confirmed in a letter that Reseller C could use the "$50,000 rebate for our Q3 quarter end-deal" as a credit. Reseller C did not even have to return the product to receive the rebate, because Symbol never shipped the product. Symbol employees called such transactions "ship-in-place" deals, since the product never left Symbol's warehouse.
25. In another instance, Asti and others induced a reseller ("Reseller D") to place and take shipment on a $10 million order in December 2000 by paying what amounted to a cash bribe. Asti told Reseller D that Symbol was in the process of lining up an end user that would buy the product and that Reseller D could return whatever was unsold. In addition, Asti agreed that, as recited in a January 2, 2001 side letter bearing his name, "[Reseller D] will also receive a 1% . . . staging fee . . . for drop shipping the equipment to the end user on Symbol's behalf." The end user never materialized, and Reseller D kept the product in its warehouse for several months before returning it to Symbol. In exchange, Symbol paid Reseller D $100,199, an amount well in excess of the insurance and other expenses that Reseller D incurred.
Three-Way "Candy" Deals
26. Asti and others also employed a channel stuffing device using what were known as "candy" deals. In these three-way transactions, Symbol paid off resellers to "purchase" large volumes of Symbol product from another distributor at the end of a quarter so that Symbol could induce that distributor to place orders to meet this illusory demand. This fraudulent scheme had the following essential components.
27. Asti and others first arranged for a reseller to order a specified volume of Symbol product from a distributor. In exchange, Asti and others agreed that Symbol would cover the cost of the reseller's purchase from the distributor, which included a substantial markup, and pay the reseller an additional amount -- the "candy" -- equal to 1% of the purchase price. Once the reseller placed its purchase order with the distributor, Asti or another Symbol executive solicited an order from the distributor to fill the reseller's order or restock the distributor's supply. The price that Symbol charged the distributor was lower than the cost of repurchasing the product from the reseller, which included both the distributor's mark-up and the "candy" payment.
28. During FY 2000, Asti arranged "candy" transactions in which Symbol's improper payments to the resellers totaled approximately $15 million. Symbol's recognition of revenue on the corresponding purchase orders placed by the distributors was also fraudulent and misleading. Symbol did not actually make any money -- and, in fact, lost money -- on these sham three-way transactions. Moreover, Symbol did not disclose that it generated this revenue by buying back its own products at a higher price and paying a bribe.
Accelerating Revenue On Sales To End Users
29. Asti and others also used fraudulent devices to accelerate revenue on sales to end users when the product the end user wanted was unavailable or could not be shipped before the end of the quarter for other reasons. For example, in June 2000, Asti and others arranged a $3.8 million phony sale to Reseller D because an upgraded version of the product that a supermarket chain planned to purchase was not due to be ready until July 2000. Asti and others arranged for Reseller D to order an equivalent amount of the existing product in June 2000 with the explicit understanding that Reseller D's order would be cancelled and replaced by a real order from the supermarket chain the following quarter for the upgraded product. In an email to the sales and operations employees who would be handling the swap, Asti laid out the logistics and explained that "these orders will ultimately be returned in July, with a net offset for Q3 by the orders placed" by the supermarket chain for the new product.
30. On other occasions when the ordered product was unavailable, Symbol personnel deliberately shipped the wrong product to the customer and manipulated the accounting system to capture the revenue that quarter. To enable the invoice to be generated and revenue to be recognized Asti's staff did one of two things. They either altered the order information on SAP to reflect product that was available or they incorrectly "cycled" excess inventory into the system as the ordered product. When the desired product later became available, Symbol did what was known there as a "zero dollar" return, leaving the original transaction intact.
Recognizing Revenue Before Product Is Shipped
31. Asti and others were also involved in Symbol's fraudulent practice of recognizing revenue on orders that were processed in one quarter but not shipped until the following quarter. From January 2000 through March 2001, Asti had his staff accrue revenue on orders when they attained "post goods issued" ("PGI") status on the SAP system, which indicated that the order was packed by the factory and ready for shipping. Because the shipments did not occur until the next quarter, the practice of accruing revenue based on an order's PGI status prematurely added millions of dollars of revenue to Symbol's reported financial results.
Recognizing Revenue On Shipments Between Symbol Facilities
32. Symbol also improperly recognized revenue before the goods were shipped to the customer and while Symbol still retained the risks of ownership. Under GAAP, delivery of goods to the buyer generally must take place for revenue to be realized or realizable and earned. If delivery to the buyer has not occurred, revenue still may be recognized, but only where, among other things, the risks of ownership have passed to the buyer. The risk of loss is one of the prime indicia of ownership. Asti played an important role in structuring such transactions as well.
33. Symbol often had to perform what were called product "staging" services for a customer before the product was ready for use. Symbol performed these services, such as the loading of software and adding customer-specific configurations, at its own staging facilities. Although Symbol typically invoiced the customer upon shipment to the staging facility, some customers declined to accept the risks of ownership or to agree to pay Symbol until they received the product. With large orders requiring significant staging work, the staging process often continued into the next quarter. To circumvent revenue recognition rules and make it appear as though the sales process was complete in the quarter in which Symbol delivered the product to staging, Asti and others artificially treated transfer of title to the goods as if it were a matter separate from the risk of loss.
34. For example, in September 2000, Symbol agreed in a side letter that "title to the products" ordered by a retailer "transfers upon shipment of the products to Symbol's staging area, provided that Symbol maintains the risk of loss until the products are received at [the retailer's] designated locations." Based on this side agreement, Asti authorized his staff to book the retailer's multimillion dollar order that quarter. Asti and others used a similar agreement to improperly book a multimillion dollar order placed by a private delivery service in November 1999, where the risk of loss remained with Symbol until the finished product was installed in the customer's vehicles.
Facilitating And Covering Up The Fraud
35. The sales finance department further manipulated Symbol's financial reporting and attempted to conceal the fraud by delaying the issuance of credits when the inevitable returns occurred, crediting and rebilling reseller accounts to "refresh" the age of receivables and deleting invoices from SAP after the orders were booked.
36. Asti and others managed the issuance of credits, which reduced net income, to ensure that they did not interfere with the earnings target. For example, in April 2000, a member of Asti's staff issued a memorandum instructing TASS executives that, absent prior approval by the sales finance department, "[t]here will be no processing of credit requests or return authorizations on the last two days and the first two days of a month, and the last two weeks and the first two weeks of a new quarter." Sales finance preferred to defer processing returns and credits during the first two weeks of a quarter for a second reason -- to avoid raising red flags for auditors who might be skeptical about the timing of such entries.
37. Asti and others also used the credit process to conceal the age of certain reseller receivables generated by channel stuffing. For example, in the last two quarters of FY 2000, Asti directed his staff to issue credits to certain resellers whose accounts were overdue and then issue new invoices to them in the same amount. This "credit and rebill" artifice "refreshed" the age of specific receivables and reduced Symbol's overall "days sales outstanding" number, eliminating two additional red flags.
38. To reduce the risk of detection, Asti also directed others to delete invoices totaling approximately $34 million from SAP. These invoices were issued in December 2000 and were deleted in the next quarter. Many of the canceled invoices related to "channel stuffing" and other improper transactions.
Asti's Stock Sales
39. Asti sold Symbol stock while engaged in the scheme to manipulate Symbol's reported financial results. On five occasions from October 26, 1999 to March 2, 2001, Asti sold thousands of shares of Symbol stock that he had acquired by exercising employee stock options priced below the inflated market price.
Symbol's Inflated Financial Results
40. During and with respect to the time in which Asti headed Symbol's sales finance department, Symbol distributed information concerning its quarterly and annual financial results to the public that was materially false and misleading.
41. Symbol issued press releases touting, among other things, dramatic increases in revenue and net income for FY 1999, FY 2000, interim periods within those fiscal years, and the quarter ended March 31, 2001. In addition, Symbol filed periodic reports with the Commission on Form 10-K for FY 1999 and FY 2000 and on Form 10-Q for the interim periods. Due to the conduct of Asti and others, the revenue and net income amounts contained in the foregoing press releases and periodic reports were materially overstated.
42. As outlined in a series of public disclosures by Symbol beginning in October 2002, Symbol is in the process of restating these and other previously reported financial results. The restatement will include reductions in revenue and net income during the time that Asti engaged in fraudulent accounting practices at Symbol. According to press releases, Symbol "believes that the restatement will cover the years 1999 through 2002." Based on the estimates in its public disclosures, Symbol may need to reverse or otherwise adjust as much as ten percent of the annual revenue it previously reported in 1999 and 2000, or $114 million and $140 million, respectively. The $114 million figure is nearly 100 percent of Symbol's reported earnings in 1999 ($116.4 million), and the $140 million figure exceeds Symbol's reported earnings before non-recurring charges in 2000 ($131.9).
43. Symbol's public disclosures about the need for a restatement arise from an internal investigation into the company's financial reporting practices that began in the spring of 2002 at the request of the Commission's staff.
First Claim for Relief
Violations of Section 10(b) of the Exchange Act and Rule 10b-5
44. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 through 43.
45. Asti, directly or indirectly, singly or in concert, by use of the means or instrumentalities of interstate commerce or of the mails, or of the facilities of a national securities exchange, in connection with the purchase or sale of Symbol securities, knowingly or recklessly, has: (a) employed devices, schemes and artifices to defraud; (b) made untrue statements of material fact, or has omitted to state material facts necessary in order to make statements made, in light of the circumstances under which they were made, not misleading; and/or (c) engaged in acts, practices and courses of business which operated or would have operated as a fraud or deceit upon purchasers of Symbol securities and upon other persons.
46. As part and in furtherance of the violative conduct, Asti, directly or indirectly, singly or in concert, knowingly or recklessly, engaged in a fraudulent scheme to inflate Symbol's reported financial results through the creation of phony sales and other improper practices. As described above, Asti supervised and directly participated in the process of generating phony sales, creating false and misleading sales documents and making improper accounting entries on Symbol's books and records.
47. As part and in furtherance of the violative conduct, Symbol issued press releases and filed with the Commission the periodic reports described in paragraph 41 above. Due to the phony sales and other fraudulent practices, these documents contained financial statements that materially overstated Symbol's revenue and net income for the subject reporting periods and other material misstatements concerning Symbol's financial performance. As a result, the press releases and periodic reports described above in paragraph 41 were materially false and misleading.
48. Asti knew or was reckless in not knowing that because of his fraudulent conduct and the fraudulent conduct of others, the press releases and periodic reports described above in paragraph 41 were materially false and misleading.
49. By reason of the foregoing, Asti, singly or in concert, directly or indirectly, has violated, and unless enjoined will again violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5.
50. By reason of the foregoing, Asti, singly or in concert, directly or indirectly, also aided and abetted violations, and unless enjoined will again aid and abet violations, of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5.
Second Claim for Relief
Violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13
51. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 through 50.
52. Symbol failed to file with the Commission, in accordance with the rules and regulations prescribed by the Commission, such annual and quarterly reports as the Commission has prescribed and Symbol failed to include, in addition to the information expressly required to be stated in such reports, such further material information as was necessary to make the statements made therein, in light of the circumstances in which they are made, not misleading, in violation of Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20, 13a-1 and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, 240.13a-13. As allege above, Symbol's annual and quarterly reports described above in paragraph 41 were false and misleading because, among other things, they included financial statements that overstated Symbol's revenue and net income and other material misstatements concerning Symbol's financial performance.
53. Asti, knowingly or recklessly, directly, or indirectly, singly or in concert, engaged in fraudulent practices resulting in: (a) material overstatements of Symbol's revenue and net income on its books and records and in financial statements included in the periodic reports identified above; and (b) other material misstatements in those periodic reports.
54. By reason of the foregoing, Asti, singly or in concert, directly or indirectly, aided and abetted Symbol's violations of Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20, 13a-1 and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, 240.13a-13; and unless he is enjoined, Asti will again aid and abet violations of Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20, 13a-1 and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, 240.13a-13.
THIRD CLAIM FOR RELIEF
Violations of Section 13(b)(2) of the Exchange Act
55. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 through 54.
56. Symbol failed to:
a. make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflected the transactions and dispositions of its assets; and
b. devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that:
i. transactions were executed in accordance with management's general or specific authorization;
ii. transactions were recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and to maintain accountability for assets;
iii. access to assets was permitted only in accordance with management's general or specific authorization; and
iv. the recorded accountability for assets was compared with the existing assets at reasonable intervals and appropriate action was taken with respect to any differences, in violation of Section 13(b)(2) of the Exchange Act, 15 U.S.C § 78m(b)(2). As alleged above, Symbol recorded millions of dollars in phony sales revenue and other improper transactions on its books and records, and Symbol's internal accounting controls were insufficient to reasonably assure that its annual and quarterly financial statements were prepared in conformity with GAAP.
57. Asti, knowingly or recklessly, directly or indirectly, singly or in concert, engaged in fraudulent practices resulting in material overstatements of Symbol's revenue and net income on its books and records and in financial statements included in the periodic reports identified above in paragraph 41.
58. By reason of the foregoing, Asti, singly or in concert, directly or indirectly, aided and abetted Symbol's violations of Section 13(b)(2) of the Exchange Act, 15 U.S.C. § 78m(b)(2); and unless he is enjoined, Asti will again aid and abet violations of Section 13(b)(2) of the Exchange Act, 15 U.S.C. § 78m(b)(2).
Fourth Claim for Relief
Violations of Section 13(b)(5) of the Exchange Act and Rule 13b2-1
59. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 through 58.
60. Asti engaged in fraudulent practices in the course of which he knowingly circumvented or knowingly failed to implement a system of internal accounting controls and knowingly falsified, directly or indirectly, or caused to be falsified books, records and accounts of Symbol that were subject to Section 13(b)(2)(A) of the Exchange Act, 15 U.S.C. § 78m(b)(2)(A). As alleged above, Asti supervised and directly participated in the process of generating phony sales, creating false and misleading sales documents and making improper accounting entries on Symbol's books and records.
61. By reason of the foregoing, Asti has violated, and unless enjoined will again violate, Section 13(b)(5) of the Exchange Act, 15 U.S.C. § 78m(b)(5), and Rule 13b2-1, 17 C.F.R. § 240.13b2-1.
Prayer for Relief
WHEREFORE, the Commission respectfully requests a Final Judgment:
Permanently enjoining Asti, his agents, servants, employees and attorneys and all persons in active concert or participation with him who receive actual notice of the injunction by personal service or otherwise, and each of them, from violating Sections 10(b) and 13(b)(5) of the Exchange Act, 15 U.S.C. §§ 78j(b), 78m(b)(5), and Exchange Act Rules 10b-5 and 13b2-1, 17 C.F.R. §§ 240.10b-5, 240.13b2-1.
Permanently enjoining Asti, his agents, servants, employees and attorneys and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from aiding and abetting violations of Sections 13(a) and 13(b)(2) of the Exchange Act, 15 U.S.C. §§ 78m(a), 78m(b)(2), and Exchange Act Rules 12b-20, Rule 13a-1, and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13.
Ordering Asti to disgorge the ill-gotten gains he received as a result of the violations alleged above, and to pay prejudgment interest thereon.
Ordering Asti to pay civil money penalties pursuant to Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3).
Prohibiting Asti pursuant to Section 21(d)(2) of the Exchange Act, 15 U.S.C. § 78u(d)(2), from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, 15 U.S.C. § 78l, or that is required to file reports pursuant to Section 15(d) of the Exchange Act, 15 U.S.C. § 78o(d).
Granting such other and further relief as the Court may deem just and proper.
Dated: New York, New York
WAYNE M. CARLIN
Attorneys for PlaintiffSECURITIES AND EXCHANGE COMMISSION
New York, New York 10048