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Former Critical Path Exec Sentenced

September 12, 2002|KAREN GULLO | BLOOMBERG NEWS

SAN FRANCISCO — Critical Path Inc.'s former vice president, Timothy Ganley, was sentenced Wednesday to six months in federal prison in connection with insider trades he made related to a plan to inflate the e-mail software company's revenue.

Ganley, who faced a maximum of 10 years in prison and a $1-million fine, is the first former Critical Path executive to be sentenced after a criminal investigation of the scheme. Three other former managers at the company, which saw its shares trade as high as $116.75 in March 1999, also face criminal charges.

Insider trading cases have attracted additional attention from prosecutors in recent months as a congressional committee studied Martha Stewart's sale of ImClone Systems Inc. shares.

Ganley, 46, sold shares "at a time when he was aware the software company was recording false revenues," federal prosecutors said.

U.S. District Judge William Alsup sentenced Ganley to six months in prison plus two years of supervised release, the U.S. attorney's office in San Francisco said. Ganley pleaded guilty in April to participating in a plan to improperly book sales.

In a civil case brought by the Securities and Exchange Commission, Ganley was ordered to pay $107,908.

William Keane, an attorney for Ganley, didn't respond to a voicemail message. Ganley will begin serving his sentence Jan. 13.

Ganley sold 1,300 shares of Critical Path stock in January 2001 knowing that the company wouldn't meet sales predictions.

The shares, worth $24 each when Ganley sold them, were worth less than $4 each a month later, after the company publicly disclosed the problem.

Critical Path shares rose 8 cents to 73 cents in Nasdaq trading Wednesday.

In February, Critical Path's former president, David Thatcher, pleaded guilty to conspiracy to commit securities fraud for directing the company to overstate revenue in 2000.

Jonathan A. Beck and Kevin P. Clark, former sales executives, were charged last month with insider trading.

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