SEC Announces Settlement With Aspen Technology
FOR IMMEDIATE RELEASE
Washington, D.C., July 31, 2007 - The Securities and Exchange Commission today charged Aspen Technology, Inc., with fraudulently inflating revenue over a three-year period. The SEC's order finds that Aspen's former senior management, motivated by a desire to boost revenues and meet securities analyst earnings expectations, was directly involved in negotiating and improperly recognizing revenue on transactions.
The SEC's order directs Aspen, a software company based in Cambridge, Mass., to cease and desist from violating various provisions of federal securities laws, and requires Aspen to retain an independent consultant to review the company's financial and accounting policies and procedures. Aspen consented to the issuance of the order without admitting or denying any of the SEC's findings.
"Companies must take seriously their obligations to accurately report their financial results to their shareholders who depend on that information to make investment decisions," said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement. "The management of reported earnings through premature revenue recognition will not be tolerated."
David P. Bergers, Director of the SEC's Boston Regional Office, added, "Aspen took significant remedial steps and cooperated extensively with the Commission's investigation. Aspen promptly self-reported the misconduct, conducted a thorough internal investigation, and shared the findings of that investigation with the staff. Consistent with the principles announced in the Commission's January 2006 Statement Concerning Financial Penalties, the Commission considered Aspen's remediation and cooperation, among other things, in deciding not to impose a penalty."
According to the SEC's order, Aspen - often acting through its former Chief Executive Officer, Chief Financial Officer and Chief Operating Officer - improperly recognized revenue on at least 19 different software license transactions involving at least 15 different customers worldwide. According to the order, the scheme involved premature recognition of revenue not recognizable under generally accepted accounting principles in the quarterly reporting periods claimed by Aspen either because contracts were not signed within the appropriate quarter or because the earnings process was incomplete due to side letters or other contingency arrangements. The SEC's order finds that, in several reporting periods, Aspen would not have met analysts' earnings expectations without the improperly recognized revenue.
The Commission previously filed a civil injunctive action on Jan. 8, 2007, against three former executives of Aspen in United States District Court for the District of Massachusetts. That case is still pending. (See LR-19960) In addition, on March 26, 2007, one of the former executives pleaded guilty to one count of conspiracy and one count of securities fraud in connection with related charges brought by the United States Attorney's Office for the Southern District of New York. (See LR-20059)
The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation.
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For more information, contact:
David P. Bergers
Boston Regional Office
John T. Dugan
Associate Regional Director
Boston Regional Office
Additional materials: Administrative Proceeding No. 33-8827