U.S. Securities and Exchange Commission
Litigation Release No. 18394 / October 6, 2003
Accounting and Auditing Enforcement Release No. 1891
SEC v. Richard P. Vatcher, Civil Action No. 02-CV-11245 (REK) (D. Mass.)
United States v. Richard P. Vatcher, Crim. Action No. 03-CR-10270 (RCL) (D. Mass.)
Former Inso Corp. Vice President Pleads Guilty To Securities Fraud In Connection With Accounting Scheme
The Commission announced today that, on September 30, 2003, Richard P. Vatcher pleaded guilty to five counts of securities fraud and causing false reports to be filed with the Commission in connection with charges brought by the United States Attorney for the District of Massachusetts. Vatcher, a former officer of Inso Corporation, Inc., later known as eBT International, Inc., a now defunct software company headquartered in Boston, Massachusetts, is scheduled to be sentenced on January 12, 2004. Vatcher faces a maximum penalty of 10 years in prison, followed by a 3 year term of supervised release, and a $1,000,000 fine on each count.
Vatcher, of Framingham, Massachusetts, was vice president of international sales at Inso. Vatcher admitted during his plea hearing before a Massachusetts federal court that on multiple occasions in or about 1998, he made, and caused others to make, false and misleading reports that his sales group had completed certain agreements for the sale of Inso products valued at more than $3.6 million. In fact, Vatcher admitted that he had provided customers with side agreements that gave the purported customers the right to cancel or modify sales. Because the customers had the right to cancel the sales, the revenue from these transactions should not have been included in Inso's reported financial results. Vatcher further admitted to deliberately concealing the side agreements from Inso's finance department with the intention of causing Inso to recognize revenue for the phony sales. As a result of Vatcher's actions, Inso materially overstated its revenues for the quarters ended March 31, 1998, June 30, 1998, and September 30, 1998 in press releases and in Forms 10-Q filed with the Commission.
Previously, on June 21, 2002, the Commission filed a civil enforcement action against Vatcher in the United States District Court for the District of Massachusetts based on the same conduct. Simultaneous with the filing of the complaint, Vatcher consented, without admitting or denying the allegations in the complaint, to entry of a final judgment permanently enjoining him from future violations of Section 17(a) of the Securities Act, Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(5) of the Exchange Act and Rules 10b-5, 12b-20, 13a-13, and 13b2-1 thereunder and ordering him to pay a $25,000 civil penalty.
For more information see Litigation Release No. 17578 (June 21, 2002).