U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21677 / September 30, 2010
Accounting and Auditing Enforcement Release No. 3192 / September 30, 2010
SEC v. Forman, et al., Civil Action No. 07-11151-RWZ (D. Mass.)
Court Enters Final Judgment by Consent against Former Controller of Massachusetts Technology Company
The Commission announced that on September 30, 2010, a Massachusetts federal court entered a final judgment by consent against Steven Forman of Chelmsford, Massachusetts, a defendant in an action filed by the Commission in June 2007. In its complaint, the Commission had alleged that Forman, the former controller of Speechworks International, Inc., then a public company based in Boston, Massachusetts, and others improperly inflated Speechworks’ revenues and misstated other important financial metrics that misled investors as to the company’s true financial condition. In the judgment, Judge Rya W. Zobel enjoined Forman from aiding and abetting violations of the books and records and periodic reporting provisions of the Securities Exchange Act of 1934 (“Exchange Act”) and imposed a $20,000 penalty.
According to the complaint, Speechworks, a manufacturer of voice recognition software, entered into an arrangement with a reseller pursuant to which the reseller made royalty payments prior to its shipment of software to end customers. Among other things, the complaint had alleged that Forman participated in Speechworks’ improper recognition of $2 million in royalty prepayments as revenue, even though the arrangement was not properly documented and did not otherwise qualify for revenue recognition under Speechworks’ policies and generally accepted accounting principles.
Without admitting or denying the allegations in the complaint, Forman consented to the final judgment that was entered by the court. The final judgment enjoined him from aiding and abetting Speechworks’ violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. It also ordered Forman to pay a $20,000 penalty.
For further information, please see Litigation Release Numbers 20164 (June 22, 2007) and 20163 (June 22, 2007); and AAER Release Number 2621 (June 22, 2007).