CFOs Ordered to Return Bonus and Profits Due to False Financial Statements
The Securities and Exchange Commission recently ordered two former CFOs of Saba Software, Inc. to reimburse the company for stock-sale profits and bonuses accrued during the 12-month periods following its materially false and misleading financial statements. Saba, a Silicon Valley-based software company, misstated revenues in SEC filings from October 2007 to January 2012. The misstatements stemmed from professional service employees’ false time-keeping practices, including recording hours in advance to accelerate revenue recognition, and failing to report non-billable time to conceal budget overruns. As a result of the inaccurate time records, Saba failed to recognize revenue in accordance with generally accepted accounting principles and was required to restate its financial statements for the years 2008–2011, as well as the first two quarters of 2012. Although the company’s CFOs were not accused of misconduct, Section 304 of the Sarbanes Oxley Act of 2002 requires the CFO of any issuer required to prepare an accounting restatement due to material noncompliance with securities laws as a result of misconduct to reimburse the issuer for (1) any bonus or incentive-based or equity-based compensation received during the 12 months following the filings; and (2) any profits realized from the sale of securities of the issuer during those 12 months. Without admitting or denying the SEC’s findings, the current and former CFOs of the company consented to the SEC’s order. The prior CFO, who served from December 2008 to October 2011, was required to reimburse $337,375, while his successor was ordered to pay $141,992.
Securities and Exchange Commission v. William Slater, CPA and Peter E. Williams, III, File No. 3-16381.