U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 18758 / June 22, 2004

Accounting and Auditing Enforcement
Release No. 2044 / June 22, 2004

SECURITIES AND EXCHANGE COMMISSION v. Arthur A. Goodwin, William J. Burke and Christopher P. Whalen, (United States District Court for the District of Massachusetts) (Civil Action No. 02-11913-JTL)

The Commission announced today the entry of a final judgment in a financial fraud case against the company executive responsible for financial reporting. On June 16, 2004, The Honorable Joseph L. Tauro, United States District Judge for the District of Massachusetts entered a judgment by consent against William J. Burke (Burke), the former chief financial officer of Interspeed, Inc. (Interspeed), a now defunct Internet hardware developer formerly located in North Andover, Massachusetts. Burke, of Andover, Massachusetts, without admitting or denying the Commission's allegations, settled the matter by consenting to the entry of an injunction against future violations of the antifraud, periodic reporting, record keeping and internal controls provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rules 10b-5, 12b-20, 13a-13 and 13b2-1, and Rule 13b2-2, which prohibits officers of a company from lying to auditors. In addition, Burke agreed to pay disgorgement of a performance bonus in the amount of $41,240, plus prejudgment interest in the amount of $9,804 and a civil penalty of $25,000, for a total of $76,044 and to be permanently barred from serving as an officer or director of a public company.

The Commission's complaint alleged that Burke recorded contingent sales as revenue even though he was aware of side terms which made revenue recognition improper. In addition, the complaint alleged that Burke altered accounting records to keep Interspeed's outside auditors from discovering that the sales were shams. Through the alteration, the complaint alleged, Burke made it appear that Interspeed was receiving payment for one of the sales when in fact Interspeed itself was providing funds to the customer to make the payments, a fraudulent practice known as "round-tripping."

According to the complaint, Interspeed's directors uncovered the fraudulent scheme in late September 2000, and the company restated its financial results for the first three quarters of its fiscal year ended September 30, 2000, reducing its originally reported revenue of $14 million to $5 million. Burke resigned in August 2000.

Earlier, in a related criminal case, Burke pleaded guilty and was sentenced to three years probation and a $10,000 fine in connection with criminal charges filed against him by the U.S. Attorney for the District of Massachusetts arising from the same fraudulent reporting scheme.

For further information see Litigation Releases Nos. 17758, 18180 and 18468.


http://www.sec.gov/litigation/litreleases/lr18758.htm


Modified: 06/22/2004