U.S. SECURITIES & EXCHANGE COMMISSION
Litigation Release No. 18261 / July 30, 2003
Securities and Exchange Commission v. Danis Yadegar-Mooshiabadi, Action C03-3340 HRL
SEC BRINGS AIDING AND ABETTING CHARGE AGAINST DANIS YADEGAR-MOOSHIABADI FOR AIDING AND ABETTED FRAUD AT UNIFY CORPORATION; YADEGAR AGREES TO PAY $50,000 CIVIL PENALTY
The Securities and Exchange Commission ("SEC") announced that on July 17, 2003 it filed, and simultaneously settled, a civil action in the United States District Court for the Northern District of California against Danis Yadegar-Mooshiabadi ("Yadegar"), the President and Chief Executive Officer of Arsin Corporation ("Arsin"), for aiding and abetting fraud at another company, Unify Corporation ("Unify") that assisted Unify in improperly recognizing nearly $1 million in revenue on transactions with Arsin. Without admitting or denying the SEC's allegations in its complaint, Yadegar consented to the entry of judgment in favor of the SEC on its complaint that Yadegar aided and abetted Unify and two of its former officers to violate certain anti-fraud and other provisions of the Securities Exchange Act of 1934 ("Exchange Act"), and agreed to pay a $50,000 civil penalty. In addition, Arsin and Yadegar consented to the issuance of a SEC administrative order finding that they caused such violations, and which directed them to cease and desist from causing any future violations, in a separate administrative proceeding instituted on July 17.
According to the SEC's Complaint, on two occasions in 2000 Yadegar caused Arsin to enter into contracts that purchased, in total, $1 million of software license rights from Unify. At the time Arsin entered into the contracts with Unify, it lacked the funds to pay for the software. According to the Complaint, in each instance Yadegar provided Unify with a check for the entire amount of the purchase, with the understanding that Unify would show the check to Unify's independent auditors and that Unify would not deposit Arsin's check until Unify had provided Arsin with the funds necessary to cover Arsin's check. Arsin later used funds it received from Unify to pay for the software. Unify initially recognized revenue on the transactions with Arsin, and filed a Form 10-Q for the quarter ended January 31, 2000 and an earnings release for the year ended April 30, 2000 that improperly included this revenue. Later, following an internal investigation, Unify reversed approximately $950,000 of the revenue, as part of a larger restatement of its financial results. The SEC's Complaint alleges that by engaging in such conduct, Yadegar aided and abetted Unify's violations of Exchange Act Sections 13(a) and 13(b)(2)(A) and Exchange Act Rules 12b-20 and 13a-13, and aided and abetted violations by two former Unify officers of Exchange Act Sections 10(b) and 13(b)(5), and Exchange Act Rules 10b-5, 13b2-1, and 13b2-2. Yadegar, without admitting or denying the allegations in the complaint, consented to a judgment ordering him to pay a civil penalty of $50,000.
On July 23, 2003, pursuant to Yadegar's consent, United States Magistrate Judge Howard R. Lloyd entered judgment in favor of the SEC on its Complaint and ordered Yadegar to pay a $50,000 civil penalty, in SEC v. Danis Yadegar-Mooshiabadi, .Civil Action No. C-03-3340 HRL (N.D. Cal.).
For information on the SEC's prior action against Unify and two of its former officers, see Securities and Exchange Commission v. Reza Mikailli, Gary Pado, Unify Corporation, Civil Action No. C-02-2426-SI, Lit. Rel. 17522 (May 20, 2002).