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Ex-Chief of HPL Charged With Fraud

Courts: He allegedly faked purchases. A civil suit over nonexistent sales has been settled.

September 11, 2002|MICHAEL KAHN | REUTERS

Federal authorities Tuesday charged the former chief of HPL Technologies Inc. with wire fraud for allegedly fabricating customer orders that represented most of the software maker's sales in the last fiscal year.

The U.S. attorney's office for the northern district of California alleged in a criminal complaint that Yervant David Lepejian, 41, repeatedly created fake customer purchase orders then covered up the fraud by doctoring financial records and forging letters to auditors verifying the sales.

In addition, the Securities and Exchange Commission announced the former chairman and chief executive settled civil fraud charges for allegedly creating more than $28 million in nonexistent sales that resulted in the San Jose-based company overstating its revenue for fiscal 2002 by 328%.

Lepejian, who settled the civil charges without admitting or denying the allegations, could not be reached for comment.

But his lawyer said the former CEO regretted his actions and has cooperated with the company, the SEC and the U.S. Justice Department.

"Mr. Lepejian founded HPL in 1987 and spent 15 years building the company," said attorney Michael Tubach. "His actions were the result of a terribly misguided effort to make HPL succeed rather than a desire for personal profit."

As part of the settlement with the SEC, Lepejian agreed to an order permanently barring him from serving as an officer or director of a public company and requiring him to pay an undetermined amount in fines and penalties.

"This case goes far beyond the sort of 'cooking the books' that has become all too familiar to today's investors," said Helane Morrison, the chief of the SEC's San Francisco office.

A representative from HPL could not be reached for comment.

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