NAI offers $70m to settle class action suit
Shadow of SEC probe lingers
Network Associates (NAI) yesterday announced an offer to pay $70 million to settle a class action brought by shareholders who allege the company used improperly booked revenues to ramp up its share price.
According to the lawsuit the IT security firm misled investors during the late 1990s by recording software sales when technology was shipped to distributors instead of when users actually bought product, a practice known as channel stuffing.
The action was brought to light by a PwC audit in late 2000, after which NAI was forced to restate its results. This triggered the class action lawsuit and coincided with the departure from NAI of flamboyant former chairman and CEO Bill 'Liberace' Larson, former president Peter Watkins and former CFO Prabhat Goyal, each of whom was named in the class action suit.
NAI's current management is keen to draw a line under the affair, hence the proposed $70 million settlement.
"This settlement represents a significant milestone in Network Associates' move from past issues to future opportunities," said NAI's current chairman and CEO, George Samenuk.
NAI's proposed settlement is subject to agreement by the parties to the lawsuit and court approval.
Aside from the class action lawsuit, NAI is still under investigation by the Justice Department and the Securities and Exchange Commission regarding the way it historically booked revenue from its distribution partners.
The Company announced in March last year that it would restate its 1998, 1999 and 2000 financial statements to reflect revenue on sales to distributors on a sell-through basis, which is how the company has reported sales to distributors since January of 2001. At the time it also announced a decision to delay filling its financial results for 2002.
NAI yesterday said it expects to be able to file its results for 2002 and the first half of 2003 with the SEC by the end of October this year. ®