A nationwide sweep by federal regulators targeting alleged accounting fraud has snared former NFL quarterback Fran Tarkenton, executives of a bankrupt San Juan Capistrano software firm and 64 others involved in 15 publicly held companies, officials said Tuesday.
In the Securities and Exchange Commission's first "coordinated assault on financial reporting misdeeds," regulators said defendants have agreed to pay $630,000 in fines as part of their settlements with the agency.
The SEC also is seeking a total of about $9 million in restitution and wants to bar 10 of the individuals involved from serving as officers or directors of publicly traded companies.
Arthur Levitt, chairman of the market watchdog agency, has been pushing publicly traded companies to improve their financial reporting and avoid manipulating earnings to meet Wall Street analysts' projections.
The SEC said the cases involved a "cookbook of recipes" for fraudulent accounting, including reporting income from shipments never made, sending products unwanted by customers, creating phony invoices and inflating the value of inventories.
In Tarkenton's case, the Hall of Fame quarterback and 10 other former executives of his computer software and consulting firm, KnowledgeWare Inc., were accused of fraudulently inflating by millions of dollars the company's earnings in reports for its fiscal year ended June 30, 1994.
The former Minnesota Vikings quarterback agreed to pay a $100,000 fine and $54,187 in restitution. He did not admit or deny any wrongdoing.
Executives of the San Juan Capistrano software firm Wiz Technology Inc. allegedly misled investors with false financial statements that inflated the company's stock price, then sold their shares for a profit, according to a lawsuit filed in federal district court in San Francisco.
"It was a small company and the chief executive and the president and the chief financial officer ran it as though it belonged to them instead of the shareholders," said Helane Morrison, district administrator for the SEC in San Francisco.
The suit names Mar-Jeanne Tendler, the chief executive; her husband, Arthur Tendler, president; and Billie Jolson, chief financial officer. The SEC said the executives made at least $282,000 in profits from the stock trades. The lawsuit seeks to recover that amount plus treble damages, for a total of $1.1 million, and seeks to bar the executives from serving as officers or directors of publicly traded companies.
The Tendlers' attorney, Dennis Stubblefield, declined to comment on the suit. Neither Jolson nor her attorney could be reached.
Wiz, which was founded by the Tendlers in 1990, filed for bankruptcy protection in February 1998 and is currently in a Chapter 7 liquidation proceeding, Stubblefield said.
The Tendlers live in Dana Point and Jolson is an Orange County resident, the SEC said.
SEC officials were alerted to the alleged scheme in December 1996, when the accounting firm Grant Thornton LLP became the third auditor in 17 months to resign from the company. Grant Thornton said it was concerned that Wiz had overstated its projected fiscal 1996 performance by saying it anticipated a profit. Later, Wiz corrected those statements, saying it would actually lose $2.5 million for that fiscal year.
At the time, Grant Thornton also said Wiz officials did not adequately oversee the company's financial practices and policies.
"We looked at that and then saw the history of resignations, and that's always a red flag to us," Morrison said.
Before Grant Thornton, Coopers & Lybrand had been the company's accountants for just more than a year, taking over after Wiz's original accounting firm, Corbin & Wertz, resigned. Wiz, which repackaged and resold software generally distributed for free, traded on the American Stock Exchange in 1994 until it was delisted in 1997, and has been trading over the counter since.
During the time the alleged fraud took place, Wiz's stock price rose from $3 per share in August 1995 to as high as $9.38 in May 1996, the SEC said.
Wiz shares last traded Friday for less than a penny.
Associated Press contributed to this report.