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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. Symbol Technologies, Inc., et al.,

Accounting and Auditing Enforcement Release No. 3064 / November 4, 2009

SEC v. Symbol Technologies, Inc., et al., , 04 CV 2276 (SJF)(EDNY)

THREE FORMER EXECUTIVES OF SYMBOL TECHNOLOGIES, INC. SETTLE SEC ACTION BY AGREEING TO PERMANENT INJUNCTIONS, MONETARY PENALTIES AND OTHER RELIEF

FORMER CHIEF FINANCIAL OFFICER TO PAY $3.3 MILLION

On November 2, 2009, the United States District Court for the Eastern District of New York, Honorable Sandra J. Feuerstein, United States District Judge, entered final judgments against three defendants in the pending enforcement action against former executives of Symbol Technologies, Inc. ("Symbol"). The Commission's complaint, filed on June 3, 2004, alleges that from 1998 until early 2003, the defendants engaged in a fraudulent scheme to inflate revenue, earnings and other measures of financial performance in order to create the false appearance that Symbol had met or exceeded its financial projections. The three judgments imposed the following relief, to which each of the three defendants consented without admitting or denying the allegations of the Commission's complaint:

Kenneth Jaeggi, Symbol's Chief Financial Officer, consented to entry of a judgment that requires him to disgorge a total $3,091,539, consisting of $2,274,935 in ill-gotten gains he obtained as a result of the conduct alleged in the complaint and $816,604 in prejudgment interest, and to pay a civil penalty of $250,000. The consent judgment also prohibits him from acting as an officer or director of a public company for a five year period and permanently enjoins him from violating the relevant antifraud, corporate reporting, books and records and internal control provisions of the federal securities laws. Specifically, Jaeggi is permanently enjoined from violating, or engaging in conduct that would make him liable for violations of, Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2), and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-13, 13a-14, 13b2-1 and 13b2-2. The complaint alleges that Jaeggi: (i) spearheaded what was known within Symbol as the "Tango sheet" process, through which baseless accounting entries were made in order to conform the company's raw quarterly results to management's projections; (ii) engaged in channel stuffing and other revenue recognition schemes; and (iii) manipulated restructuring charges, operations reserves and inventory levels to boost reported earnings.

Christopher DeSantis, Symbol's former Vice President of Sales Finance, consented to entry of a judgment that requires him to pay a civil penalty of $40,000 (plus $1 of disgorgement), and that permanently enjoins him from violating the relevant antifraud, corporate reporting, books and records and internal control provisions of the federal securities laws. Specifically, DeSantis is permanently enjoined from violating, or engaging in conduct that would make him liable for violations of, Sections 10(b), 13(a), 13(b)(2) and 13(b)(5) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-13 and 13b2-1. The complaint alleges that DeSantis carried out aspects of the channel stuffing scheme and other fraudulent revenue recognition practices, as well as the manipulation of reported inventory levels and accounts receivable data to conceal the adverse side effects of the revenue recognition schemes.

James Heuschneider, Symbol's former Director of Customer Service, consented to entry of a judgment that requires him to pay a civil penalty of $35,000 and to disgorge $3,587, consisting of $2,280 in ill-gotten gains as a result of the conduct alleged in the Commission's complaint and $1,307 in prejudgment interest. The consent judgment also permanent enjoins him from violating the relevant antifraud, corporate reporting, books and records and internal control provisions of the federal securities laws. Specifically, Heuschneider is permanently enjoined from violating, or engaging in conduct that would make him liable for violations of, Sections 10(b), 13(a), 13(b)(2) and 13(b)(5), of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-13 and 13b2-1. The complaint alleges that Heuschneider engaged in improper practices to overstate the customer service department's revenue and earnings.

On February 27, 2008, in a parallel criminal proceeding brought by the United States Attorney's Office for the Eastern District of New York ("USAO"), Jaeggi pled guilty to one felony count of mail fraud for filing a false disclosure form with the Commission in connection with his exercise of Symbol stock options, and he was sentenced to three years of probation and ordered to pay $450,000 in restitution. On December 16, 2005, DeSantis pled guilty to misprision of a felony in the same criminal proceeding, and on July 16, 2009 he was sentenced to three years of probation.

Final consent judgments were previously entered against the following defendants in the Commission's civil enforcement action: On June 3, 2004, Symbol consented to entry of a final judgment imposing, among other relief, a permanent injunction and a civil penalty in the amount of $37 million, and James Dean, Symbol's former Manager and Director of Operations Finance, consented to entry of a partial final judgment imposing permanent injunctive relief. On February 17, 2005, Brian Burke, Symbol's former Senior Vice President, consented to entry of a partial final judgment imposing permanent injunctive relief and a bar prohibiting him from acting as an officer or director of a public company. On February 7, 2006, Leonard Goldner, Symbol's former General Counsel, consented to entry of a final judgment imposing permanent injunctive relief and an officer-and-director bar. In addition, on May 11, 2005, Robert Korkuc, Symbol's former Chief Accounting Officer, consented to entry of a partial final judgment imposing permanent injunctive relief and an officer-and-director bar in a separate action filed by the Commission on June 19, 2003. Korkuc also settled an administrative proceeding pursuant to Rule 102(e) of the Commission's Rules of Practice by consenting to entry of an order suspending him from appearing or practicing before the Commission as an accountant.

The litigation is continuing with respect to the remaining defendants, and the Court has set a trial date of January 11, 2010. The Commission acknowledges the assistance and cooperation of the USAO and the U.S. Postal Inspection Service in this matter.

 

http://www.sec.gov/litigation/litreleases/2009/lr21277.htm


Modified: 11/04/2009