Lawrence B. Evans, David L. McQuillin, and Lisa W. Zappala
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19960 / January 8, 2007
Accounting and Auditing Enforcement Release No. 2532 / January 8, 2007
SEC v. Lawrence B. Evans, David L. McQuillin, and Lisa W. Zappala, Civil Action No. 07-CV-10027-JLT (D. Mass)
SEC Charges Former CEO, CFO and Chairman of Aspen Technology, Inc. With Accounting Fraud
The Commission today filed a civil injunctive action against three former officers of Aspen Technology, Inc., a Cambridge, Massachusetts software company. In the suit, filed in United States District Court for the District of Massachusetts, the Commission alleged that former CEO David L. McQuillin of Sudbury, Massachusetts, former CFO Lisa W. Zappala of Needham, Massachusetts, and Lawrence B. Evans of Cambridge, Massachusetts, Aspen's founder and former Chairman of the Board of Directors, engaged in a fraudulent revenue recognition scheme, causing Aspen to report inflated revenue on at least six software transactions during fiscal years 1999 through 2002.
According to the Commission's Complaint, the three defendants engaged in a scheme to inflate revenue reported in Aspen's publicly-filed financial statements and in press releases. The Complaint alleges that the three defendants caused Aspen to recognize revenue during the relevant period despite knowing that Aspen was prohibited from doing so under Generally Accepted Accounting Principles (also known as "GAAP") because contracts were not signed within the appropriate quarter and/or the earnings process was incomplete due to contingency arrangements which changed the terms of the customers' payment commitments under the contracts. On November 24, 2004, Aspen announced that it would file a restatement of its financial statements for the periods involved and that its board of directors had requested and obtained McQuillin's resignation. Thereafter, on March 15, 2005, Aspen filed with the Commission a restated Form 10-K for its fiscal years ended June 30, 2000 through June 30, 2004. The Complaint alleges that, as a result of the fraudulent scheme, Aspen overstated license revenue for its fiscal year ended June 30, 2000 by 5.5% and for the fiscal year ended June 30, 2001 by 9.3%. The Complaint further alleges that, as a result of prematurely recognized revenue from those earlier periods, license revenue for the fiscal years ended June 30, 2002, 2003, and 2004 was understated by 1.8%, 13.9%, and 4.0% respectively.
The Complaint alleges that the defendants violated Section 17(a) of the Securities Act of 1933 (Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The Complaint also alleges that the defendants violated Exchange Act Section 13(b)(5) and Exchange Act Rules 13b2-1 and 13b2-2. The Complaint further alleges that the defendants aided and abetted Aspen's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Complaint also alleges that the defendants aided and abetted Aspen's violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 13a-11 and 13a-13. In its Complaint, the Commission seeks injunctive relief, disgorgement, civil penalties and orders barring the defendants from serving as officers or directors of any public company.
In addition, today the United States Attorney's Office for the Southern District of New York filed related criminal charges against David McQuillin.
The Commission acknowledges the assistance and cooperation in this investigation of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation. The Commission's investigation is ongoing.
