U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18615 / March 9, 2004
Accounting and Auditing Enforcement
Release No. 1971 / March 9, 2004
Securities and Exchange Commission v. William H. Rinehart, Jonathan A. Beck, and Kevin P. Clark, Civil Action No. C-02-4105 (WHA) (N.D. Cal.)
SEC SETTLES WITH FORMER CRITICAL PATH EXECUTIVE CHARGED WITH FINANCIAL FRAUD AND INSIDER TRADING
The Securities and Exchange Commission today announced a settlement with Jonathan A. Beck, a former sales vice president at Critical Path, Inc., a California company that provides email services. The Commission's complaint-filed in August 2002-alleged that Beck fraudulently participated in a scheme to inflate Critical Path's revenue and earnings for fiscal 2000, and then illegally sold 27,348 shares of the company's stock based on non-public information about the fraud and the company's true financial condition.
Without admitting or denying the Commission's allegations, Beck consented to the entry of a Final Judgment-entered by the United States District Court for the Northern District of California on March 1, 2004-that (1) permanently enjoined Beck from violating Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rule 10b-5 and 13b2-1, and from aiding and abetting violations of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B); and (2) ordered Beck to disgorge $586,368 in losses he avoided from transactions in the securities of Critical Path, Inc., together with pre-judgment interest. Based on Beck's sworn representations in his Statement of Financial Condition, and other documents submitted to the Commission, the Court waived payment of all but $26,500 of the disgorgement, waived pre-judgment interest, and did not impose a civil penalty.
In a related criminal case-prosecuted by the United States Attorney for the Northern District of California-Beck pleaded guilty to insider trading in Critical Path stock. On January 14, 2004, United States District Judge Alsup sentenced Beck to three months in prison, and to two years of supervised release.
Beck is the fifth former Critical Path executive to have settled fraud charges brought by the Commission. In February 2002 the Commission filed a settled civil injunctive action against Critical Path's former president David A. Thatcher and a former sales vice president, Timothy J. Ganley (Litigation Release No. 17353). The Commission also suspended Thatcher from practicing before the Commission as an accountant (Exchange Act Release No. 45683). In August 2002 the Commission filed a civil injunctive action against William Rinehart (the former head of Critical Path's North and Latin American sales forces), Kevin P. Clark (a former regional vice president of sales at the company), and Beck (Litigation Release No. 17701). Rinehart and Clark settled with the Commission simultaneously with the filing of the complaint.
In February 2002 the Commission instituted and settled cease-and-desist proceedings against Critical Path (Exchange Act Release No. 34-45393).