U.S. Securities and Exchange Commission
Litigation Release No. 21480 / April 7, 2010
Accounting and Auditing Enforcement Release No. 3126 / April 7, 2010
SEC v. Symbol Technologies, Inc., et al., 04 CV 2276 (SJF)(EDNY)
TWO MORE FORMER EXECUTIVES OF SYMBOL TECHNOLOGIES, INC. SETTLE SEC ACTION, CONCLUDING LIABILITY PROCEEDINGS IN THE 12-DEFENDANT ACCOUNTING CASE
The Honorable Sandra J. Feuerstein, United States District Judge for the Eastern District of New York, has entered final consent judgments against Frank Borghese and Michael DeGennaro, the last two defendants in the Commission's enforcement action against Symbol Technologies, Inc. ("Symbol") and its former executives. The Commission's settlement with DeGennaro also included the issuance of an administrative cease-and-desist order. The Commission's federal court complaint, filed on June 3, 2004, alleges that from 1998 until early 2003, Symbol and the eleven individual defendants engaged in fraudulent accounting practices aimed at falsifying Symbol's reported financial results. The judgments and the administrative order imposed the following relief, to which both Borghese and DeGennaro consented without admitting or denying the allegations of the Commission's complaint and, in DeGennaro's case, the findings in the administrative order:
Frank Borghese, formerly Symbol's Senior Vice President of Worldwide Sales and Services, consented to a judgment, entered on February 22, 2010, that requires him to disgorge a total of $450,000 and waives imposition of a civil monetary penalty based on his demonstrated financial inability to pay additional amounts. The consent judgment also prohibits him from acting as an officer or director of a public company and permanently enjoins him from violating the relevant antifraud, corporate reporting, books and records and internal control provisions of the federal securities laws. Specifically, Borghese is permanently enjoined from violating, or aiding and abetting violations of, 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-1, 13a-13, and 13b2-1. The complaint alleges that, as head of sales, Borghese spearheaded Symbol's various "channel stuffing" and other fraudulent revenue recognition practices.
Michael DeGennaro, formerly Symbol's Senior Vice President of Finance, consented to a final judgment, entered on April 6, 2010, that requires him to pay a civil penalty of $40,000. In addition, on April 2, 2010, the Commission issued an order finding that DeGennaro was a cause of Symbol's violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act -- the corporate books and records and internal control provisions of the Exchange Act -- and directing DeGennaro to cease and desist from causing such violations in the future. The Commission's order finds that: (i) In 2000 and 2001, Symbol created and used certain "restructuring" charges and related reserves in contravention of generally accepted accounting principles ("GAAP"), causing Symbol to misstate its operating expenses and net income on its books and records and in its financial statements; and (ii) DeGennaro was one of the executives who determined how these charges were recorded, and he failed to take the requisite steps to ensure that the charges and the uses of associated reserves were properly recorded and accounted for in accordance with GAAP.
Consent judgments were previously entered against each of the other ten defendants, with the exception of Tomo Razmilovic, Symbol's former Chief Executive Officer. On December 23, 2009, the Court entered a default judgment against Razmilovic as a sanction for his refusal to appear for his court-ordered deposition in the United States. Razmilovic currently resides in Sweden and has been a fugitive from justice since being indicted on parallel criminal charges in the Eastern District of New York. The Court has commenced an evidentiary hearing to determine the relief to be imposed against Razmilovic pursuant to the default judgment. The Commission is seeking permanent injunctive relief, an officer-and-director bar, disgorgement plus prejudgment interest, and civil monetary penalties. The hearing is scheduled to resume on May 10, 2010. The Commission's complaint alleges that Razmilovic orchestrated the fraud at Symbol to create the false appearance that Symbol was achieving the aggressive financial performance targets imposed by Razmilovic.
The Commission acknowledges the assistance and cooperation of the United States Attorney's Office for the Eastern District of New York and the U.S. Postal Inspection Service in this matter.