Securities and Exchange Commission
Securities Exchange Act of 1934
Release No. 49641 / April 30, 2004
Accounting and Auditing Enforcement
Release No. 1997 / April 30, 2004
File No. 3-11471
In the Matter of Keith M. Roberts
SEC Institutes Proceedings Against Former CFO of Health Care Software Company
The Securities and Exchange Commission today announced that it has instituted public administrative cease-and-desist proceedings against Keith Roberts, the former Chief Financial Officer and General Counsel of QuadraMed Corporation, a Virginia health care software company (formerly based in San Rafael, California). The Commission's order alleges that Roberts, 39, of San Francisco, California, caused QuadraMed to inflate its 1998 and 1999 financial results by negotiating two $5 million "roundtrip" transactions with a startup company, in which QuadraMed essentially paid for its own products by funding the customer's purchases. As a result of these sales, the Division of Enforcement charges, QuadraMed improperly boosted its revenue for the third quarter of 1998 by 10%, and inflated its revenue for the first quarter of 1999 by 9%. QuadraMed also understated its net loss from operations by 218% and 12%, respectively, for the same quarters.
According to the order, in the September 1998 transaction, Roberts caused QuadraMed to fund the startup's entire $5 million purchase by executing a guarantee for a line of credit which the startup used to pay for the software license; the customer had no independent ability to pay for the license. The order further alleges that, in March 1999, Roberts arranged for QuadraMed to wire funds that the startup used to cover a second $5 million purchase from QuadraMed.
The order charges Roberts with causing QuadraMed's violations of the corporate reporting and record keeping provisions of the federal securities laws, circumventing internal controls and causing records to be falsified, and lying to QuadraMed's outside auditors (Sections 13(a), 13(b)(2)(A) and 13(b)(5) of the Securities and Exchange Act of 1934 and Rules 12b-20, 13a-1, 13a-13, 13b2-1 and 13b2-2 thereunder). Roberts is currently the Executive Vice President, General Counsel and CFO of a privately held California company.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order Instituting Proceedings are true, to provide Roberts an opportunity to dispute these allegations, and to determine whether Roberts should be ordered to cease and desist from future violations.
Pursuant to the Commission's Rules of Practice, an initial decision shall be issued by the administrative law judge within 300 days from service of the Order Instituting Proceedings upon Roberts.
SEC Order in this matter