Former AspenTech CEO Faces Fraud Charges

 
 
By Renee Boucher Ferguson  |  Posted 2007-01-10 Print this article Print
 
 
 
 
 
 
 

David McQuillin, former AspenTech CEO, will face criminal and civil securities fraud charges. The civil case, filed by the SEC, accuses IBM of being a co-conspirator.

Criminal and civil charges were filed in early January against David McQuillin, the former CEO of Aspen Technology, alleging securities fraud violations. The charges filed separately Jan. 8 by the United States Attorney for the Southern District of New York and the Securities and Exchange Commission accuse McQuillin of plotting to exaggerate the companys software revenues between January 2001 and September 2002. AspenTech, as its known in company parlance, develops manufacturing and supply chain optimization software for the chemicals and oil and gas industries.
Prosecutors in the criminal case against McQuillin allege that in the heat of competition—as then chief operating officer McQuillin was vying for the CEO spot with another AspenTech COO—McQuillin tried to inflate revenues to meet the companys quarterly projections, according to the Associated Press.
McQuillin became CEO of AspenTech in 2002. Two years later he was reportedly ousted by the board over accounting issues. According to a news release from AspenTech, based in Cambridge, Mass., the transactions in question were originally reflected in the companys financial statements. Following a "self-initiated investigation by AspenTechs audit committee" the transactions were restated in March 2005. The SEC also maintains securities fraud in its case, alleging McQuillin and two other former AspenTech officers were engaged in a fraudulent revenue recognition scheme that caused AspenTech to report inflated revenue on at least six software transactions with five global customers during the fiscal years between 1999 and 2002. Also named in the case is Lawrence Evans, the companys founder and former chairman; and Lisa Zappala, the companys former CFO. Read more here about AspenTechs OEM partnership with Informatica. Of the five customers named in the SECs case, IBM stands as the most prominent. The SEC in court documents alleges that AspenTech, acting through McQuillin, Evans and Zappala, improperly recognized $2.8 million in revenues in its fiscal quarter ending Dec. 31, 2000, and $1.7 million in its fiscal quarter that ended March 30, 2002. The SEC essentially alleges that an unnamed IBM employee backdated software license agreements with AspenTech; that anticipated payments from IBM to AspenTech were contingent on AspenTech finding end-users that IBM would resell AspenTechs software to; and that an IBM employee signed a false audit confirmation that was eventually sent to AspenTechs outside auditors. An IBM spokesperson was not immediately available for comment. The SEC also named Logica UK Ltd., Yukos, Petroleum Services and Lyondell-Equister in the case against McQuillin, Evans and Zappala. McQuillins attorney, Paul Shechtman, a partner with Stillman, Friedman & Shechtman in New York, was also not available for comment. The SEC is seeking fines and restitution from the group, as well as an order barring all three from serving as officers or directors of any public company. If found guilty of the criminal charges against him, McQuillin could face up to 25 years in prison and at least $5 million in fines. Check out eWEEK.coms for the latest news, reviews and analysis about productivity and business solutions.
 
 
 
 
 
 
 
 
 
 
 

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