U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20916 / February 26, 2009
Accounting and Auditing Enforcement Release No. 2940 / February 26, 2009
Securities and Exchange Commission v. Lawrence B. Evans et al., Civil Action No. 07-CV-10027-JLT (D. Mass) (January 8, 2007)
FINAL JUDGMENT ENTERED AGAINST FORMER ASPEN TECHNOLOGY CFO CHARGED IN CORPORATE ACCOUNTING FRAUD
The Securities and Exchange Commission ("Commission") announced today that on February 25, 2009, the United States District Court for the District of Massachusetts entered a final judgment by consent against former Aspen Technology, Inc. ("Aspen") Chief Financial Officer Lisa W. Zappala, the last remaining defendant in a case filed by the Commission in January 2007. The Commission's action charged Zappala with, among other things, securities fraud in connection with her participation in a revenue inflation scheme with two other senior officers of Aspen, a Cambridge, Massachusetts software company. Without admitting or denying the allegations in the Commission's complaint, Zappala consented to the entry of a final judgment enjoining her from violating the anti-fraud and other provisions of the securities laws and ordering her to pay a total of $145,000 in disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.
According to the Commission's complaint, Zappala and two other defendants caused Aspen to report inflated revenue in the company's publicly-filed financial statements and in press releases on at least six software transactions during fiscal years 1999 through 2002. The Complaint alleged that the three defendants caused Aspen to recognize revenue during the relevant period despite knowing that Aspen was prohibited from doing so under Generally Accepted Accounting Principles because contracts were not signed within the appropriate quarter and/or the earnings process was incomplete due to contingency arrangements which changed the terms of the customers' payment commitments under the contracts. The Complaint alleged that, as a result of the fraudulent scheme, Aspen overstated license revenue for its fiscal year ended June 30, 2000 by 5.5% and for the fiscal year ended June 30, 2001 by 9.3%. The Complaint further alleged that, as a result of prematurely recognized revenue from those earlier periods, license revenue for the fiscal years ended June 30, 2002, 2003, and 2004 was understated by 1.8%, 13.9%, and 4.0% respectively.
The final judgment imposed permanent injunctions prohibiting Zappala from violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934, and Exchange Act Rules 10b-5, 13b2-1 and 13b2-2; and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Exchange Act Rules 12b-20, 13a-1, 13a-11 and 13a-13. In addition, the final judgment ordered Zappala to pay a $75,000 civil penalty, $49,653 in disgorgement, and $20,347 in prejudgment interest, and barred Zappala from serving as an officer or director of any public company for two years. Zappala has also consented to the suspension of her privilege of appearing or practicing before the Commission as an accountant, with the right to apply for reinstatement after two years, in related administrative proceedings to be instituted after entry of the permanent injunctions.
The Commission acknowledges the assistance of the U.S. Attorney's Office for the Southern District of New York and the FBI.
For further information, please see: Litigation Release No. 19960 (January 8, 2007), Litigation Release No. 20059 (March 29, 2007), Administrative Proceeding Release No. 33-8827 (July 31, 2007), and Litigation Release No. 20803 (November 13, 2008).