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HPL Revenue Based on Fake Deals, CEO Says

July 23, 2002|From Bloomberg News

HPL Technologies Inc., which last week warned investors not to trust its past financial statements, said Monday that most of its fiscal fourth-quarter revenue was based on "fictitious transactions" through falsified documents made by the software maker's former chief executive.

At least $11 million of the $13.7 million in revenue reported in the three months ended March 31 was based on fake deals with the company's Japanese distributor, Canon Sales Co., said HPL interim CEO and Chairman Elias Antoun. Canon Sales, a unit of Canon Inc., never agreed to the purchases, he said.

San Jose-based HPL, whose software helps companies make semiconductors more efficiently, fired former CEO and Chairman David Lepejian last week after a preliminary investigation by its board's audit committee turned up "financial and accounting irregularities."

Antoun said Monday that HPL would restate its results for fiscal 2002 and possibly restate results for 2001 as well. The company also will restate its cash position, because the $60.1 million in cash and short-term investments reported on its fourth-quarter balance sheet "is not now and may not have ever been in the company's possession," he said. As of Friday, the company had $35.7 million in cash and short-term investments, he said.

Shares of HPL, the first Silicon Valley company to be swept up in the nationwide wave of accounting scandals, plunged as much as 71% to $4 on Nasdaq before trading was halted Friday.

Lepejian is the "central player" in the company's accounting problems, and the company is investigating whether any other HPL employees were involved, Antoun said in a conference call.

Lepejian left HPL's office Tuesday, and company officials don't know where he is and have been unable to contact him, Antoun said. Lepejian owned 10.3 million HPL shares as of June 26.

Outside attorneys began investigating HPL on Thursday, after the company's management and board became aware of the accounting regularities.

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