Securities and Exchange Commission
Litigation Release No. 18050 / March 25, 2003
Accounting and Auditing Enforcement
Release No. 1745
Securities and Exchange Commission v. Robert Asti, Civ. 03 1417 (LDW) (E.D.N.Y.)
The Securities and Exchange Commission announced today that it filed a civil injunctive action in federal court in Brooklyn, New York charging Robert Asti ("Asti"), a former executive at Symbol Technologies, Inc. ("Symbol"), with engaging in a vast fraudulent scheme to manipulate Symbol's reported financial results. Based in Holtsville, New York, Symbol is a leading manufacturer of bar code scanners and related information technology whose stock is publicly traded on the New York Stock Exchange. The complaint alleges that Asti played a key role in fabricating millions of dollars in sales revenue while heading Symbol's "sales finance" department from 1999 until he left the company in March 2001. Asti, age 44, was Vice President of Sales Finance for The Americas Sales and Services ("TASS") at Symbol, which included Symbol's sales operations in North and South America.
The Commission's complaint alleges that:
Among other fraudulent accounting practices, Asti and others "stuffed" Symbol's distribution channel at the end of each quarter to help meet revenue and earnings targets imposed by Symbol's president at that time. Together with others, Asti engineered phony sales in which resellers placed large "purchase" orders but were given the right not to pay for the products, either orally or in "side letters." Asti also arranged for Symbol to make payments to certain resellers to induce them to place orders and accept shipments in excess of their financial means. Asti also employed other fraudulent devices to accelerate revenue on sales to end users when the product the end user wanted was unavailable or could not be shipped before the end of the quarter for other reasons. Asti and his "sales finance" staff improperly controlled critical aspects of Symbol's revenue recognition process such as the booking of orders and the issuance of invoices and credits.
As a result of these and other fraudulent practices, Symbol falsely reported record revenue and dramatic increases in net income in press releases and periodic reports filed with the Commission and disseminated to the public. Symbol is in the process of restating these and other previously reported financial results. According to Symbol's recent public disclosures, the restatement will cover the years 1999 through 2002, and will include reductions in revenue and net income during the time that Asti engaged in fraudulent accounting practices at Symbol. Based on the estimates in its public disclosures, Symbol may need to reverse or otherwise adjust as much as ten percent of the annual revenue it previously reported in 1999 and 2000, or $114 million and $140 million, respectively.
Symbol's disclosures about the need for a restatement arise from an internal investigation into the company's financial reporting practices that began in the spring of 2002 at the request of the Commission's staff.
In the complaint, the Commission seeks a permanent injunction enjoining Asti from (i) committing, and aiding and abetting, securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5; (ii) falsifying corporate books and records, circumventing internal controls and engaging in other conduct in violation of Section 13(b)(5) of the Exchange Act and Rule 13b2-1; and (iii) aiding and abetting violations of corporate reporting, recordkeeping and internal control provisions of the Exchange Act (Sections 13(a) and 13(b)(2) and Rules 12b-20, 13a-1 and 13a-13). The Commission also seeks an order: (i) requiring Asti to disgorge, and pay prejudgment interest on, his ill-gotten gains; (ii) imposing civil money penalties; and (iii) barring Asti from acting as an officer or director of a publicly traded company.
The Commission's investigation is continuing. 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. The United States Attorney's Office for the Eastern District of New York announced that Asti is scheduled to plead guilty later today to criminal charges based on conduct alleged in the Commission's complaint.
SEC Complaint in this matter