David A. Thatcher

SECURITIES EXCHANGE ACT OF 1934
Release No. 45683 / April 2, 2002

ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1539 / April 2, 2002

ADMINISTRATIVE PROCEEDING
File No. 3-10747

I.

The Securities and Exchange Commission deems it appropriate and in the public interest that a public administrative proceeding be, and hereby is, instituted against Respondent David A. Thatcher (Thatcher) pursuant to Rule 102(e) of the Commission's Rules of Practice.¹

II.

In anticipation of the institution of this proceeding, Thatcher has submitted an Offer of Settlement (Offer), which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, Thatcher consents to the issuance of this Order, the entry of the findings, and the imposition of the sanction set forth below without admitting or denying the findings or conclusions contained herein except that he admits: (1) the Commission's jurisdiction over him and the subject matter of this proceeding; and (2) the entry of the permanent injunction against him described in Section III.C. below.

III.

The Commission makes the following findings:²

A. Respondent

David A. Thatcher, age 46, resides in Rancho Santa Fe, California. He was president of Critical Path, Inc. from January 31, 2000, until he left the company in February 2001. For part of that period, from approximately December 6, 2000, until approximately January 3, 2001, Thatcher was also Critical Path's acting chief financial officer. He was a member of Critical Path's board of directors from May 1997 until March 1998, and again from May 1998 through November 1998. From December 1998 until January 2000, Thatcher was Critical Path's executive vice-president, secretary, and chief financial officer. As chief financial officer, he signed Critical Path's Forms 10-Q for the first three fiscal quarters of 1999. Throughout his employment at Critical Path he was licensed as a CPA (inactive) in California.

B. Critical Path

Critical Path, Inc., a California corporation with principal offices in San Francisco, is a provider of Internet messaging infrastructure products and services. The company was formed in February 1997 and conducted its initial public offering in March 1999. Its common stock trades on the Nasdaq Stock Market and is registered with the Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 (Exchange Act).

C. Facts

By judgment of the United States District Court for the Northern District of California, Thatcher has been permanently enjoined from violating Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rule 13a-13 thereunder. The Court also barred Thatcher for five years from serving as an officer or director of any issuer that has a class of securities registered with the Commission or that is required to file reports with the Commission and ordered him to pay a civil penalty in the amount of $110,000. SEC v. David A. Thatcher and Timothy J. Ganley, Civil Action No. C-02-0621 (SBA) (N.D. Cal. March 28, 2002).

The Commission's complaint, filed on February 5, 2002, alleged, among other things, the following:

For two successive fiscal quarters in late 2000, Thatcher and other Critical Path employees caused Critical Path to materially overstate its revenue, and materially understate its loss, in contravention of Generally Accepted Accounting Principles. Thatcher, along with others, negotiated a barter agreement that he knew should not have been, but was, recorded as revenue, and concealed a side letter to another agreement to avoid Critical Path's internal accounting controls. Along with other Critical Path officers, he directed Critical Path personnel to enter into sales agreements that he knew, or was reckless in not knowing, were either contingent or spurious, and that he knew should not have been, but were, recorded as revenue. In addition, he and other Critical Path officers directed Critical Path personnel to backdate agreements that as a result were prematurely recognized as revenue. On April 5, 2001, Critical Path restated its financial results for the third quarter and revised its results for the fourth quarter and full year 2000. By engaging in this conduct, Thatcher violated the antifraud provisions of the federal securities laws and the books and records and internal accounting control provisions of the Exchange Act. Thatcher also aided and abetted Critical Path's violations of the periodic reporting, books and records, and internal accounting control provisions of the federal securities laws.

IV.

Based on the foregoing, the Commission deems it appropriate and in the public interest to impose the following sanction agreed to in Thatcher's Offer.

Accordingly, IT IS HEREBY ORDERED that, effective immediately, Thatcher is suspended from appearing or practicing before the Commission as an accountant.

By the Commission.

Jonathan G. Katz
Secretary

Footnotes