2006-10-16 sec-litreleases litigation_release 66 KB 2,536 chars

SEC v. Romulus S. Pereira; Robert B. Stanton; L. John Kern; Andrew D. Feldman; William F. McFarland; and Lori H. Cornmesser, No. LR-19869, Northern District of California (Oct. 16, 2006) — Press Release

raw: Romulus S. Pereira et al.

Romulus S. Pereira et al., No. 3:06-CV-06384-MHP (Oct. 16, 2006)

Caption
SEC v. Romulus S. Pereira, et al.
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summary

Former Riverstone Networks officers Romulus S. Pereira, Robert B. Stanton, L. John Kern, Andrew D. Feldman, William F. McFarland, and Lori H. Cornmesser concealed side agreements granting customers return or contingent resale rights, fraudulently recognizing $30 million in revenue from June 2001 to June 2002, leading to SEC charges for securities fraud and accounting violations.

paragraph

The SEC charged six former Riverstone Networks executives with orchestrating a financial fraud scheme from June 2001 to June 2002 by concealing side agreements that gave customers return, exchange, or contingent payment rights, resulting in the improper recognition of nearly $30 million in revenue. This misconduct caused quarterly revenue overstatements between 14.3% and 23.1% across four fiscal periods, while defendants falsified accounting records, circumvented internal controls, and misled external auditors. The SEC alleged violations of Section 10(b) and Rule 10b-5 for securities fraud, as well as Sections 13(a), 13(b)(2), and 13(b)(5) of the Exchange Act and related reporting and recordkeeping rules.

narrative

From June 2001 to June 2002, six former Riverstone Networks executives—CEO Romulus S. Pereira, CFO Robert B. Stanton, EVP of Sales L. John Kern, VP of Marketing Andrew D. Feldman, VP of Finance William F. McFarland, and Director of Sales Operations Lori H. Cornmesser—engaged in a coordinated scheme to inflate the company’s reported revenues. They concealed side agreements with customers that granted full return, exchange, or contingent resale rights, violating Generally Accepted Accounting Principles by recognizing revenue on sales that were not bona fide. As a result, Riverstone fraudulently reported nearly $30 million in revenue, causing quarterly overstatements ranging from 14.3% to 23.1% across four fiscal periods. To conceal the fraud, the defendants falsified accounting records, bypassed internal controls, and deliberately misled the company’s external auditors. The SEC filed a civil complaint in the Northern District of California, charging Pereira, Stanton, Kern, Feldman, and McFarland with violating Section 10(b) and Rule 10b-5 of the Securities Exchange Act, as well as aiding and abetting violations of Sections 13(a), 13(b)(2), and 13(b)(5) and related rules. Cornmesser was charged with aiding and abetting these violations. The scheme ultimately undermined the integrity of Riverstone’s financial disclosures and triggered regulatory enforcement action.

Enriched metadata

Scheme
financial-fraud (100%)
Court
Northern District of California
Case No.
3:06-CV-06384-MHP
Entity
Riverstone Networks, Inc.
Classified financial-fraud(confidence 100%). EDGAR detection: forms 10-K/10-Q/8-K/NT 10-K· recall 67% / precision 23%. detection rule →
Statutes
Section 10(b) of the Securities Exchange ActRule 10b-5
Parties
Securities and Exchange CommissionRomulus S. PereiraRobert B. StantonL. John KernAndrew D. FeldmanWilliam F. McFarlandLori H. Cornmesser
Keywords
romulus pereirariverstoneexchangesecurities exchangevice presidentpereirariverstone'ssalesromulusrevenuesexchange commissionformer officersriverstone networkssales transactionsriverstone improperly

Exhibits & Attached Documents (1)

Extracted insights

Dollar amounts 1
  • $30.00M $30 million $10M–$100M
Entities 10
  • person Andrew D. Feldman
  • person L. John Kern
  • person Lori H. Cornmesser
  • company riverstone networks, inc.
  • organization Riverstone Networks, Inc.
  • person Robert B. Stanton
  • person Romulus S. Pereira
  • agency Securities and Exchange Commission
  • organization United States District Court For The Northern District Of California
  • person William F. McFarland
Triples 3
  • SEC filed a complaint against five former officers and one former employee of Riverstone Networks, Inc. for financial fraud
  • SEC charges former officers of Riverstone Networks, Inc. with financial fraud
  • Riverstone Networks, Inc. was a California-based company that, until recently
PDF (from attached: pdf)
Securities and Exchange Commission v. Romulus S. Pereira Et Al. · Source
Text layers
Extracted body text (2,536c) 
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 19869 / October 16, 2006 SEC v. Romulus S. Pereira et al., Civil Action No. 3:06-CV-06384-MHP (N.D. Cal., filed October 12, 2006) SEC Charges Former Officers of Riverstone Networks, Inc. with Financial Fraud The Securities and Exchange Commission ("Commission") announced today that it has filed a complaint in the United States District Court for the Northern District of California against five former officers and one former employee of Riverstone Networks, Inc. ("Riverstone"), a California-based company that, until recently, was a worldwide provider of communications routers, as a result of their roles in a scheme to inflate Riverstone's net revenues. The complaint alleges that, from June 2001 through June 2002, chief executive officer Romulus S. Pereira, chief financial officer Robert B. Stanton, executive vice president of sales L. John Kern, vice president of marketing Andrew D. Feldman, vice president of finance William F. McFarland, and director of sales operations Lori H. Cornmesser negotiated, reviewed, approved, or were otherwise aware of sales transactions for which Riverstone improperly recognized revenues in contravention of Generally Accepted Accounting Principles. Specifically, Riverstone improperly recognized revenues on sales transactions that involved side agreements with purchasers, under which the customer's payment for Riverstone product was contingent upon resale or the purchaser was granted full return, exchange, or cancellation rights. Due to the defendants' actions and omissions, the side agreements were concealed from Riverstone's outside auditors. Riverstone reported almost $30 million of fraudulent revenues as a result of these contingent sales, causing revenue overstatements in four fiscal quarters ranging between 14.3 and 23.1 percent. In furtherance of the fraudulent scheme, the defendants also circumvented Riverstone's internal accounting controls, falsified Riverstone's accounting records, and lied to Riverstone's outside auditors. The Commission's complaint charges Pereira, Stanton, Kern, Feldman, and McFarland with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint further charges various defendants with violating, or aiding and abetting violations of, Sections 13(a), 13(b)(2), and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, 13b2-1, and 13b2-2 thereunder. SEC Complaint in this matter
OCR text (2,536c · plain-text · 99% conf) 
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 19869 / October 16, 2006 SEC v. Romulus S. Pereira et al., Civil Action No. 3:06-CV-06384-MHP (N.D. Cal., filed October 12, 2006) SEC Charges Former Officers of Riverstone Networks, Inc. with Financial Fraud The Securities and Exchange Commission ("Commission") announced today that it has filed a complaint in the United States District Court for the Northern District of California against five former officers and one former employee of Riverstone Networks, Inc. ("Riverstone"), a California-based company that, until recently, was a worldwide provider of communications routers, as a result of their roles in a scheme to inflate Riverstone's net revenues. The complaint alleges that, from June 2001 through June 2002, chief executive officer Romulus S. Pereira, chief financial officer Robert B. Stanton, executive vice president of sales L. John Kern, vice president of marketing Andrew D. Feldman, vice president of finance William F. McFarland, and director of sales operations Lori H. Cornmesser negotiated, reviewed, approved, or were otherwise aware of sales transactions for which Riverstone improperly recognized revenues in contravention of Generally Accepted Accounting Principles. Specifically, Riverstone improperly recognized revenues on sales transactions that involved side agreements with purchasers, under which the customer's payment for Riverstone product was contingent upon resale or the purchaser was granted full return, exchange, or cancellation rights. Due to the defendants' actions and omissions, the side agreements were concealed from Riverstone's outside auditors. Riverstone reported almost $30 million of fraudulent revenues as a result of these contingent sales, causing revenue overstatements in four fiscal quarters ranging between 14.3 and 23.1 percent. In furtherance of the fraudulent scheme, the defendants also circumvented Riverstone's internal accounting controls, falsified Riverstone's accounting records, and lied to Riverstone's outside auditors. The Commission's complaint charges Pereira, Stanton, Kern, Feldman, and McFarland with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint further charges various defendants with violating, or aiding and abetting violations of, Sections 13(a), 13(b)(2), and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, 13b2-1, and 13b2-2 thereunder. SEC Complaint in this matter

Related documents (1)