sec-litreleases litigation_release 65 KB 3,080 chars

SEC v. Yervant David Lepejian, No. LR-17718 — Press Release

raw: Yervant David Lepejian

Yervant David Lepejian, No. LR-17718

Caption
SEC v. Yervant David Lepejian
Source JSON
summary

Yervant David Lepejian, former President, Chairman, and CEO of HPL Technologies, fabricated over $28 million in fake sales— inflating revenue by 328%—to support its $75 million IPO and quarterly earnings, using forged purchase orders, fake customer confirmations, and laundered funds, leading to SEC charges and a permanent ban from serving as a public company officer or director.

paragraph

Yervant David Lepejian, former President, Chairman, and CEO of HPL Technologies, orchestrated a $28 million fraud by fabricating over 80% of the company’s fiscal 2002 sales, causing a 328% revenue overstatement to inflate financials ahead of and after its $75 million IPO. He created fake customer purchase orders, forged shipping documents and auditor confirmation letters, arranged a fake conference call with an accomplice posing as a customer, and funneled millions from his personal brokerage accounts into HPL to mimic customer payments while doctoring bank records. The SEC charged him with securities fraud (Section 10(b), Rule 10b-5), falsifying books and records, lying to auditors, and causing false filings, and he agreed to a permanent ban from serving as an officer or director of a public company, plus court-determined disgorgement and penalties without admitting or denying the allegations.

narrative

Yervant David Lepejian, former President, Chairman, and CEO of HPL Technologies, began fabricating sales in anticipation of the company’s July 2001 IPO, creating over $28 million in fictitious revenue by generating fake customer purchase orders and forged shipping documents. To conceal the fraud, he doctored bank records to simulate customer payments, borrowed millions from his brokerage accounts secured by his HPL stock, and funneled the money into HPL as phony revenue, while forging letters from customers and arranging a fake conference call with a friend posing as a client to deceive auditors. His fraud escalated quarterly, with over 90% of reported revenue in one quarter being entirely fictitious, ultimately inflating HPL’s fiscal 2002 revenue by 328% and enabling the company to raise over $75 million from investors based on false financials. The SEC charged him with multiple violations, including securities fraud under Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Exchange Act, falsifying books and records (Section 13(b)(5)), lying to accountants (Rule 13b2-2), and causing false filings (Section 13(a)). Without admitting or denying the allegations, Lepejian agreed to a permanent injunction barring him from serving as an officer or director of any public company and accepted court-determined disgorgement and monetary penalties to resolve the SEC’s complaint.

Enriched metadata

Scheme
financial-fraud (100%)
Outcome
settled
Entity
Yervant David Lepejian
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 17(a) of the Securities ActSection 10(b) of the Securities Exchange ActRule 10b-5
Parties
Securities and Exchange CommissionYervant David Lepejian
Keywords
lepejianexchangehplyervant daviddavid lepejianpurchase orderscommissionoverfraudsecuritiescompany'sallegescustomerrecordshpl's

Extracted insights

Dollar amounts 2
  • $75.00M $75 million $10M–$100M
  • $28.00M $28 million $10M–$100M
Entities 1
  • agency the securities and exchange commission
Triples 26
  • The Securities and Exchange Commission Filed A complaint against the former President, Chairman, and CEO of HPL Technologies, Inc.
  • The Commission's complaint Alleges Yervant David Lepejian, a 41-year-old Palo Alto resident, repeatedly created fake customer purchase orders
  • The Commission's complaint Alleges Lepejian covered up his fraud by doctoring financial records and forging letters to HPL's auditors verifying the sales
  • According to the Commission States Lepejian ultimately created over $28 million in non-existent sales
  • According to the Commission States Lepejian caused the Company to overstate its revenue for fiscal 2002 by 328%
  • Lepejian Agreed to The entry of an order enjoining him from future violations of these provisions
  • Lepejian Agreed to Permanently barring him from acting as an officer or director of a publicly-held company
  • Lepejian Agreed to Paying disgorgement and monetary penalties in an amount to be set by the court
  • The Commission's complaint Alleges Lepejian began his fraud in anticipation of HPL's July 2001 initial public offering
  • Lepejian Forged Purchase orders from HPL customers
  • Lepejian Generated Phony shipping documents showing that the software had been delivered to the customers
  • HPL Raised Over $75 million from investors in its IPO based on financial results fraudulently inflated by Lepejian
  • The Commission's complaint Further alleges Lepejian's fraud escalated over the next year
  • Lepejian Created Fake purchase orders at the end of each quarter in order to boost the Company's revenue
  • In one quarter Reported Over 90% of HPL's reported revenue was wholly fictitious
  • The complaint Charges Lepejian engaged in a massive cover-up to conceal his fraud
  • According to the complaint States Lepejian doctored bank records to create the appearance of millions of dollars in non-existent customer payments
  • Lepejian Borrowed Millions of dollars from his brokerage accounts secured by his personal HPL stock holdings
  • Lepejian Funneled The money into the Company in the guise of customer payments
  • The Commission Further alleges Lepejian repeatedly forged letters from HPL customers confirming the purchases
  • Lepejian Arranged A conference call between the Company's auditors and a friend posing as an HPL customer
  • The complaint Charges Lepejian with securities fraud (Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder)
  • The complaint Charges Lepejian with lying to accountants (Rule 13b2-2 under the Exchange Act)
  • The complaint Charges Lepejian with falsifying the company's books and records (Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder)
  • The complaint Charges Lepejian with causing HPL to report false financial information to the Commission (Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder)
  • The complaint Charges Lepejian with causing HPL's failure to maintain accurate books and records and internal controls (Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act)
View original SEC litigation releasesec.gov
Extracted body text (3,080c) 
The Securities and Exchange Commission today filed a complaint against the former President, Chairman, and CEO of HPL Technologies, Inc., charging him with fabricating over 80% of the San Jose software company's reported sales for fiscal 2002. The Commission's complaint alleges that Yervant David Lepejian, a 41-year-old Palo Alto resident, repeatedly created fake customer purchase orders, and then covered up his fraud by doctoring financial records and forging letters to HPL's auditors verifying the sales. According to the Commission, Lepejian ultimately created over $28 million in non-existent sales, causing the Company to overstate its revenue for fiscal 2002 by 328%. Without admitting or denying the allegations, Lepejian has agreed to the entry of an order enjoining him from future violations of these provisions, permanently barring him from acting as an officer or director of a publicly-held company, and requiring him to pay disgorgement and monetary penalties in an amount to be set by the court. The Commission's complaint alleges that Lepejian began his fraud in anticipation of HPL's July 2001 initial public offering. Lepejian forged purchase orders from HPL customers and generated phony shipping documents showing that the software had been delivered to the customers. HPL raised over $75 million from investors in its IPO based, according to the Commission, on financial results fraudulently inflated by Lepejian. The Commission's complaint further alleges that Lepejian's fraud escalated over the next year, with Lepejian repeatedly creating fake purchase orders at the end of each quarter in order to boost the Company's revenue; in one quarter, over 90% of HPL's reported revenue was wholly fictitious. The complaint also charges that Lepejian engaged in a massive cover-up to conceal his fraud. According to the complaint, Lepejian doctored bank records to create the appearance of millions of dollars in non-existent customer payments. Lepejian also borrowed millions of dollars from his brokerage accounts - secured by his personal HPL stock holdings - and funneled the money into the Company in the guise of customer payments. The Commission further alleges that Lepejian repeatedly forged letters from HPL customers confirming the purchases, at one point arranging a conference call between the Company's auditors and a friend posing as an HPL customer. The complaint charges Lepejian with securities fraud (Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder), lying to accountants (Rule 13b2-2 under the Exchange Act), falsifying the company's books and records (Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder), causing HPL to report false financial information to the Commission (Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder), and causing HPL's failure to maintain accurate books and records and internal controls (Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act). SEC Complaint in this matter
OCR text (3,080c · plain-text · 99% conf) 
The Securities and Exchange Commission today filed a complaint against the former President, Chairman, and CEO of HPL Technologies, Inc., charging him with fabricating over 80% of the San Jose software company's reported sales for fiscal 2002. The Commission's complaint alleges that Yervant David Lepejian, a 41-year-old Palo Alto resident, repeatedly created fake customer purchase orders, and then covered up his fraud by doctoring financial records and forging letters to HPL's auditors verifying the sales. According to the Commission, Lepejian ultimately created over $28 million in non-existent sales, causing the Company to overstate its revenue for fiscal 2002 by 328%. Without admitting or denying the allegations, Lepejian has agreed to the entry of an order enjoining him from future violations of these provisions, permanently barring him from acting as an officer or director of a publicly-held company, and requiring him to pay disgorgement and monetary penalties in an amount to be set by the court. The Commission's complaint alleges that Lepejian began his fraud in anticipation of HPL's July 2001 initial public offering. Lepejian forged purchase orders from HPL customers and generated phony shipping documents showing that the software had been delivered to the customers. HPL raised over $75 million from investors in its IPO based, according to the Commission, on financial results fraudulently inflated by Lepejian. The Commission's complaint further alleges that Lepejian's fraud escalated over the next year, with Lepejian repeatedly creating fake purchase orders at the end of each quarter in order to boost the Company's revenue; in one quarter, over 90% of HPL's reported revenue was wholly fictitious. The complaint also charges that Lepejian engaged in a massive cover-up to conceal his fraud. According to the complaint, Lepejian doctored bank records to create the appearance of millions of dollars in non-existent customer payments. Lepejian also borrowed millions of dollars from his brokerage accounts - secured by his personal HPL stock holdings - and funneled the money into the Company in the guise of customer payments. The Commission further alleges that Lepejian repeatedly forged letters from HPL customers confirming the purchases, at one point arranging a conference call between the Company's auditors and a friend posing as an HPL customer. The complaint charges Lepejian with securities fraud (Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder), lying to accountants (Rule 13b2-2 under the Exchange Act), falsifying the company's books and records (Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder), causing HPL to report false financial information to the Commission (Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder), and causing HPL's failure to maintain accurate books and records and internal controls (Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act). SEC Complaint in this matter