The US Securities and Exchange Commission (SEC) has clawed back almost $500,000 (£327,000) in bonuses and stock options paid to two former CFOs while their Silicon Valley software company was involved in an accounting fraud, even though neither was found guilty of any misconduct during the investigation
The regulator said William Slater and Peter Williams III received $337,375 (£220,824) and $141,992 (£92,938) respectively at a time when the company they worked for, Saba Software, presented materially false and misleading financial statements.
Saba Software overstated its pre-tax earnings and made material misstatements about its revenue recognition practices while Slater served as CFO from December 2008 to October 2011 and while Williams served as CFO from October 2011 to January 2012.
Neither man was personally charged with the company’s misconduct, but the SEC said Slater and Williams are still required under Section 304 of the Sarbanes-Oxley Act to reimburse the company for bonuses and stock sale profits received while the fraud occurred.
Jina Choi, director of the SEC’s San Francisco regional office, said: ‘During any period when a company materially misrepresents its financial results, even executives who were not complicit in the fraud have an obligation to return their bonuses and stock sale profits to the company for the benefit of the shareholders who were misled.’
Last year the SEC brought charges against Saba Software and two former executives, company vice presidents Patrick Farrell and Sajeev Menon.
The two were responsible for a scheme in which managers based in the US directed consultants in India to either falsely record time that they had not yet worked, or purposely fail to record hours worked during certain pay periods to conceal budget overruns from management and finance divisions.
These time-reporting practices enabled Saba Software to achieve its quarterly revenue and margin targets by improperly accelerating and misstating virtually all of its professional services revenue during a four-year period as well as a substantial portion of its license revenue.
Saba Software agreed to pay $1.75m (£1.15m) to settle the SEC’s charges, and Farrell and Menon agreed to settle the case as well.
As part of that settlement, the SEC also required former CEO, Babak Yazdani, to reimburse the company $2.5m (£1.64m) in bonuses and stock profits that he received while the accounting fraud was occurring, even though he was not charged with misconduct.
