U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17521 / May 20, 2002
Accounting and Auditing Enforcement Release No. 1560 / May 20, 2002
SECURITIES AND EXCHANGE COMMISSION v. ALAN K. ANDERSON, United States District Court for the Northern District of California, Civil Action No. C 02-2425 JCS
SEC Charges Former Quintus CEO With Financial Reporting Fraud
The Securities and Exchange Commission today announced fraud charges against former Quintus CEO Alan K. Anderson, 40, of Walnut Creek, Calif.
Quintus was a Dublin, California, based developer of customer relationship management software. According to the complaint, from December 1999 through October 2000 Anderson personally forged contracts, e-mails, purchase orders, letters, and an audit confirmation in order to boost Quintus' financial results. Anderson created three fake transactions that ranged in value from $2 million to $7 million, for a total of $13.7 million in nonexistent sales. In addition, Anderson caused Quintus to recognize improperly $3 million in revenue on a barter transaction, which was contingent on Quintus' agreement to purchase $4 million of product from its customer. In each case, Anderson caused Quintus to recognize revenue in violation of generally accepted accounting principles (GAAP).
In one instance, Anderson altered a $1.5 million purchase order to make it appear that the customer had actually ordered $6 million worth of Quintus products and services. In another, Anderson forged a contract and a purchase letter to make it appear that the a reseller had agreed to pay Quintus $7 million up-front, rather than the truth-that the reseller would pay Quintus only if the reseller was able to sell Quintus product to end users.
As a result of Anderson's fraud, Quintus overstated its revenue in three fiscal quarters in amounts ranging from 37% to 60% per quarter. In February 2001, NASDAQ delisted Quintus' stock, and the company is now being liquidated through bankruptcy proceedings.
The complaint charges Anderson with violations of certain antifraud provisions of the federal securities laws (Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder) and with lying to Quintus' outside auditors (Rule 13b2-2 of the Exchange Act). The complaint also seeks an injunction against future violations, disgorgement of bonuses Anderson received based on the company's fraudulent financial performance, monetary penalties and an order barring Anderson from serving as an officer or director of any publicly traded company.
In addition, the U.S. Attorney's Office for the Northern District of California today announced that it has charged Anderson with one count of securities fraud, based on the fraud at Quintus.