Wednesday, January 10, 2007
Federal prosecutors charged former Aspen Technology, Inc. CEO David L. McQuillin with securities fraud in a criminal information alleging various accounting violations. The violations occurred in 2001 and 2002, when McQuillin, then Aspen's co-chief operating officer, was involved in a "bake-off" with the other COO competing to succeed Lawrence Evans as CEO of the company. While McQuillin won, he used methods that have led him into the criminal case, according to a press release (here) issued by the U.S. Attorney's Office for the Southern District of New York:
From January 2001 through September 2002, MCQUILLIN was the Co-Chief Operating Officer (“COO”) of Aspen, which was in the business of developing and selling computer software to oil refineries and other process industries. During the time that MCQUILLAN was co-COO of Aspen, he was in a competition – or so-called “bake-off” – with his co-COO to become the next CEO of Aspen. In the course of this “bake-off,” during which MCQUILLIN’s performance was evaluated largely on Aspen’s software revenues, MCQUILLIN engaged in a scheme to inflate the software revenues Aspen reported to the investing public. MCQUILLIN became the CEO of Aspen in October of 2002.
The SEC filed civil securities fraud charges (complaint here) against McQuillin, Evans, and Lisa Zappala, Aspen's former CFO. Two outside companies are described as assisting in the revenue recognition scheme by providing assurances to auditors about the timing and legitimacy of software contracts. McQuillin was also charged with conspiracy, although his alleged co-conspirators have not yet been identified. The government usually proceeds with a grand jury indictment in these types of cases, so look for a wider range of charges to be brought in the near future, perhaps with other defendants included. It will be interesting to see if anyone outside the company is charged with aiding the revenue recognition scheme. (ph)