Symbol Technologies Inc., the world’s largest seller of barcode scanners, agreed to pay $175 million to settle three-year-old criminal and civil investigations, as well as investor suits alleging accounting fraud at the company.
The Holtsville, New York-based company inflated revenue by $230 million between 1998 and 2003 to meet analyst expectations over 32 consecutive quarters, prosecutors said. Eight former Symbol executives were also indicted today, including former chief executive officer Tomo Razmilovic, U.S. Attorney Roslynn Mauskopf said at a press conference in Brooklyn, New York.
“The securities fraud here was breathtaking in its scope. These defendants used a veritable playbook of corporate fraud,” Mauskopf said.
To avoid a criminal prosecution of the company, Symbol accepted responsibility for the conduct of former executives, adopted corporate reforms and agreed to pay $138 million to compensate investors and fund a U.S. Postal Service consumer fraud unit. It also agreed to pay $37 million to settle a U.S. Securities and Exchange Commission suit.
The indictments included ex-Chief Financial Officer Kenneth Jaeggi, ex-Vice Presidents Brian Burke, Michael DeGennaro, Frank Borghese, Christopher DeSantis, ex-general counsel Leonard Goldner and ex-finance director James Heuschneider.
Mauskopf said the company used a “veritable playbook of corporate fraud.” She identified seven methods, including systematic “channel stuffing” transactions entered at the end of fiscal quarters in which Symbol purported to sell goods to vendors and distributors who had no obligation to pay.
Symbol employed what its officers called “candy deals” in which it pushed resellers and distributors to buy products while promising to buy back the products and pay them an additional one percent of the purchase price, prosecutors said.
“We have now succeeded in putting the vast majority of our problems behind us and have taken this opportunity to put in place a dramatically improved corporate governance infrastructure,” Symbol Chief Executive Officer William Nuti, 40, said in a statement. The company agreed to hire a government- approved examiner to monitor its compliance with the settlements for three years.
Symbol will pay $37 million to investors injured by the fraud as part of its settlement.