SEC Dismisses Financial Fraud Charges After Years of Investigation and Litigation
In Litigation Release No.19504, December 20, 2005 (www.sec.gov/litigation/litreleases/lr19504.htm) the SEC announced that it was voluntarily dismissing with prejudice all claims against the former officers of TenFold Corporation that it had named along with the company in a fraud complaint. The SEC did not offer any explanation for the unusual action. New accounts suggest that there may have been new materials produced which prompted the dismissal. See, e.g, New York Times, at C4 (December 20, 2005). The company previously settled with the SEC. The announcement did not state that the SEC planned to request that the settlement be vacated.
In 2002, the SEC in SEC v. TenFold Corp., et al, (www.sec.gov/litigation.complaints/comp17852.htm) charged the defendant company and several of its officers with financial fraud. Specifically, the complaint alleged that in its initial registration statement the company failed to disclose two unusual transactions that had a significant impact on its financial statements. In one, the terms of a contract were manipulated so that revenue could be recognized at an earlier date. In another, an unusually large allotment of shares from the IPO was granted to a customer in return for the deletion of a contract term that permitted earlier recognition of revenue. The company also failed to disclose pervasive operating problems according to the complaint. The company had previously settled.