U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19624 / March 28, 2006

Accounting And Auditing Enforcement
Release No. 2400 / March 28, 2006

Securities and Exchange Commission v. Gregory A. Brady, et al, Civil Action No. 3:05-CV-1416-D, United States District Court for the Northern District of Texas, Dallas Division.

SEC Settles Charges Against Former I2 Technologies Executive Reagan L. Lancaster

On March 23, 2006, the Commission settled civil charges against Reagan L. Lancaster, a former officer of Dallas-based i2 Technologies, Inc. and a defendant in the Commission's July 2005 enforcement action against three former i2 officers arising from an alleged scheme to overstate i2's revenues. Without admitting or denying the Commission's allegations, Lancaster has consented to the entry of a final judgment enjoining him from violating or aiding and abetting violations of the antifraud, record-keeping, reporting and internal-controls provisions of the federal securities laws. Lancaster also has consented to pay a civil penalty and disgorgement, with prejudgment interest. The settlement is subject to approval by the United States District Court for the Northern District of Texas, the Honorable Sidney A. Fitzwater presiding.

The Commission's Complaint alleges that, over the four years ended December 31, 2001 and the first three quarters of 2002, i2 misstated approximately $1 billion of software license revenue, including over $125 million of revenue it never should have recognized. The Complaint further alleges that Lancaster participated and assisted others in a fraudulent revenue-recognition scheme by (1) selling software that needed substantial modification, adaptation or customization, from which i2 recognized license revenue upfront, contrary to generally accepted accounting principles; (2) attending i2's internal quarterly revenue meetings without mentioning that i2 was selling software that needed substantial modification, adaptation or customization, facts that would have defeated upfront revenue recognition; and (3) assuring analysts that i2's customer relations were "good" when he knew they were not. The Complaint also alleges that Lancaster profited by trading on the basis of material nonpublic information. Lancaster filed a motion to dismiss the Commission's charges.

The proposed Judgment to which Lancaster has consented, without admitting or denying the Commission's allegations, enjoins Lancaster from violating or aiding and abetting violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-1 thereunder. The proposed judgment also orders Lancaster to pay disgorgement and prejudgment interest of $1,172,355 and a third-tier civil penalty of $120,000.

For further information about the Commission's action against the former i2 executives, see Litigation Release No. 19306 (July 18, 2005) and Accounting and Auditing Enforcement Release No. 2279 (July 18, 2005).

The Commission acknowledges the assistance of the United States Attorney's Office for the Northern District of Texas and the United States Postal Inspection Service.