The Securities and Exchange Commission charged a former sales executive at a Herndon-based Northrop Grumman Corp. information technology unit yesterday with aiding and abetting securities fraud at supplier Legato Systems Inc.
Vincent Steckler, a 43-year-old resident of Great Falls and Singapore, allegedly helped two salesmen at Legato boost the company's net income by $ 2 million -- or 146 percent -- in the third quarter of 1999 by entering into a secret agreement that improperly allowed Steckler to back out of a software-purchasing deal. Accounting rules bar companies from recognizing revenue from deals that may later be canceled. Legato, of Mountain View, Calif., later restated its financial results for that period and settled its own civil charges with the SEC last year.
Steckler left his job as head of sales to government buyers at the Northrop Grumman subsidiary, which was formerly known as Logicon Inc., in September 2000, according to a spokeswoman there. He is currently president of the Asia-Pacific operations of software company Symantec Corp. If convicted, Steckler faces unspecified monetary penalties and an injunction barring him from breaking securities laws in the future.
"Legato apparently had a practice of entering into side agreements with its customers. Vincent Steckler did not knowingly assist in any fraud," said Daniel H. Bookin, a San Francisco-based lawyer for Steckler.
Chris Paden, a spokesman for Symantec, declined to comment. He said Steckler was in Singapore and could not be reached.
SEC lawyers said it is unusual, though not unprecedented, to bring charges against customers who knowingly help a company commit fraud. "These frauds don't exist on their own," Kevin M. Gross, a lawyer in the San Francisco office of the SEC, said in an interview. "There are plenty of people inside a company and out who let them take place."
Steckler began talks with a pair of Legato sales officials during the summer of 1999, according to court papers. They agreed that Legato would sell $ 7 million worth of software to Steckler's company, which would then pass along the products to its own client, the Air Force. Legato wanted to sign the deal by Sept. 30 in order to include the revenue in its third-quarter financial reports. But the deal -- then the biggest in Legato's history -- ran into a "stumbling block" when a Logicon staffer demanded that the company be able to back out of the deal if it could not offload the products, according to the SEC complaint.
Steckler and Legato officials Mark Huetteman and David Malmstedt drafted a secret letter spelling out the real terms of the deal, a document they hid from the company's finance and legal departments, court papers said. Steckler actively took part in the creation of the letter, dictating language to the Legato salesmen in a telephone call, according to the SEC. The fraud was uncovered in 2000, when Legato began an internal investigation after getting into a disagreement with its auditors.
Huetteman settled SEC charges earlier this year, and Malmstedt, who is fighting the charges, is scheduled for a civil trial in San Jose in November. The charges against Steckler bring to a close the agency's investigation, said Christopher C. Cooke, a supervisor in the SEC's San Francisco office.
This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.