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Nvidia's Former CFO to Pay Fine

Christine Hoberg settles a civil fraud charge without admitting or denying the allegation.

September 12, 2003|From Times Wire Services

A former Nvidia Corp. chief financial officer agreed Thursday to pay a fine of nearly $672,000 to settle a federal case charging her with accounting fraud.

In a civil complaint filed in federal court in San Jose, the Securities and Exchange Commission alleged that Christine Hoberg, 48, intentionally did not record $3.3 million in expenses, leading Nvidia to overstate its gross profit and income by 6.4%, and 15.3%, respectively, for the quarter ended April 30, 2000.

Hoberg, who left the company on July 31, 2002, consented to the payment without admitting or denying the allegations.

Santa Clara, Calif.-based Nvidia already restated its financial reports last year, prompted in part by an SEC probe into possible financial irregularities at the company. Without admitting any wrongdoing, the computer graphics chip maker agreed to comply with securities laws.

In a statement, Nvidia said Thursday's actions concluded the SEC probe of the company.

Nvidia revealed the SEC probe in February 2002, acknowledging that regulators were reviewing estimated expenses in the fourth quarter of fiscal 2000 and first quarter of 2001 and product costs in the second and third quarters of 2001.

The company then launched an internal investigation and later corrected its accounting for reserves, production expenses and inventory costs in the last three years.

According to the SEC complaint against Hoberg, Nvidia in early 2000 was lagging behind expectations for its financial performance. To meet those expectations, the company entered into an agreement with a supplier in which the supplier granted Nvidia $3.3 million in cost-reduction credits for the quarter.

In exchange, Nvidia agreed to repay the supplier the same amount by paying artificially higher prices on purchases later in the year, according to regulators.

Hoberg allegedly saw to it that Nvidia recorded only the cost-reduction portion of the transactions for the quarter. By failing to record the liability for the second portion of the deal, Hoberg led Nvidia to overstate gross profit and income.

Of Hoberg's total fine of $671,694.99, more than $596,000 was for the return of "ill-gotten gains and prejudgment interest," the SEC said.

Nvidia shares surged 18% on May 17, 2000, the day after the company reported earnings for the quarter in question.

Hoberg also agreed to a court order that prohibits her from serving as an officer or director of a public company for five years.

Shares of Nvidia fell 25 cents to $19.07 in Nasdaq trading.

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Associated Press and Bloomberg News were used in compiling this report.

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