Verifone Settles with FTC on Cookbook Charges

VeriFone settles accounting irregularities charges



SAN JOSE, Calif. -PIN Payments News Blog— VeriFone Holdings Inc. on Tuesday agreed to settle regulators’ charges that it falsified accounting records by pledging to never violate federal securities laws. A VeriFone employee implicated in the accounting debacle will pay a $25,000 fine.





The Securities and Exchange Commission charged VeriFone, a provider of electronic pay services, and a former supply chain controller, with overstating operating income by 129 percent by improperly accounting for its inventory.



In February 2007, VeriFone discovered that in the fiscal first quarter ended Jan. 31 its gross margin fell unexpectedly to 42.8 percent, or about 4 percentage points lower than the forecast provided to Wall Street analysts.



The SEC said senior management were convinced prior forecasts were correct. The agency claimed the company then directed employees to search for and fix the problem to avoid what an executive called an “unmitigated disaster.”

The SEC said 38-year-old Paul Periolat of Rocklin, Calif., manipulated inventory levels to boost margins — and thereby income as well — so VeriFone wouldn’t miss expectations. The company said Periolat acted without scrutiny or authorization from more senior management.



“Through poor oversight and controls, VeriFone senior management allowed an employee to make millions of dollars of unsubstantiated accounting adjustments that enabled the company to meet its guidance to Wall Street,” Marc Fagel, San Francisco regional director for the SEC, said in a statement.



From Verifone Website:

VeriFone Statement on Securities and Exchange Commission Settlement

VeriFone Holdings, Inc. (NYSE: PAY - News) announced that it has entered into a settlement with the Securities and Exchange Commission in connection with the previously disclosed investigation into the Company’s 2007 restatement of certain of its quarterly financial results.



SAN JOSE, Calif. - VeriFone Holdings, Inc. (NYSE: PAY - News) announced that it has entered into a settlement with the Securities and Exchange Commission in connection with the previously disclosed investigation into the Company’s 2007 restatement of certain of its quarterly financial results.



The SEC’s complaint recognizes that the Company’s restatement resulted principally from incorrect inventory accounting adjustments made by a former employee, but does not accuse the Company of intending to misstate its financial results or to mislead anyone. 



Without admitting or denying the SEC’s allegations, VeriFone has agreed to a permanent injunction against future violations of certain reporting, books and records and internal accounting control provisions of the federal securities laws. No other charge or monetary penalty was assessed against VeriFone, which cooperated fully with the Commission’s investigation. This settlement is subject to court approval and concludes the SEC’s investigation of this matter with respect to VeriFone.



“VeriFone is pleased to have resolved this matter with the SEC. We will continue to focus on serving our customers, growing our businesses, and creating a more secure electronic payment environment,” said Douglas G. Bergeron, VeriFone’s Chief Executive Officer. “Over the past 18 months, the Company has substantially improved its governance and internal controls in order to prevent a recurrence of this type of event.”



Additional resources: http://ir.verifone.com