Press Release: SEC Announces Settlement With Aspen Technology
summary
Aspen Technology, Inc. fraudulently inflated revenue over three years through premature recognition of at least 19 software license deals with 15 customers, orchestrated by former CEO, CFO, and COO to meet earnings targets, resulting in a cease-and-desist order without penalty due to self-reporting and cooperation, while one former executive pleaded guilty to criminal securities fraud.
paragraph
The SEC charged Aspen Technology with fraudulently inflating revenue over a three-year period by prematurely recognizing income on at least 19 software license transactions involving 15 customers, often due to unsigned contracts or undisclosed side letters that violated GAAP. Former senior executives, including the CEO, CFO, and COO, were directly involved in the scheme to meet Wall Street earnings expectations. Aspen consented to a cease-and-desist order without admitting or denying wrongdoing, agreed to retain an independent consultant to review its accounting practices, and avoided a monetary penalty due to its self-reporting, extensive cooperation, and remedial actions.
narrative
Aspen Technology, Inc. engaged in a multi-year fraud by prematurely recognizing revenue on at least 19 software license transactions with 15 customers worldwide, often because contracts were not signed within the reporting quarter or because side letters created undisclosed contingencies that rendered revenue recognition improper under GAAP. The scheme was orchestrated by former senior management, including the CEO, CFO, and COO, who sought to meet securities analysts' earnings expectations and avoid missing financial targets. The SEC issued a cease-and-desist order against the company, which consented without admitting or denying the findings, and required Aspen to retain an independent consultant to overhaul its financial controls. Notably, the SEC declined to impose a monetary penalty due to Aspen’s prompt self-reporting, thorough internal investigation, and full cooperation with the Commission’s inquiry. The SEC had previously filed a civil injunctive action against three former executives, one of whom pleaded guilty in March 2007 to criminal charges of conspiracy and securities fraud brought by the U.S. Attorney’s Office for the Southern District of New York. The FBI and U.S. Attorney’s Office provided critical assistance in uncovering the misconduct. This case underscored the SEC’s commitment to holding companies accountable for earnings manipulation while recognizing the value of corporate self-policing and remediation.
Classified financial-fraud(confidence 100%). EDGAR detection: forms 10-K/10-Q/8-K/NT 10-K· recall 67% / precision 23%. detection rule →
Statutes
15 U.S.C. § 77q(a)
Parties
aspen technologyaspen technology, inc.david p. bergerslinda chatman thomsensec's orderSecurities and Exchange Commissionwithout admitting or denying any of the sec's findings
Keywords
aspenaspen technologysec's ordersec'srevenueorderannounces settlementsettlement aspenboston regionalregionalsectechnologysecuritiescommissionformer
Exhibits & Attached Documents (1)
Extracted insights
Entities 7
- company aspen technology
- company aspen technology, inc.
- person david p. bergers
- person linda chatman thomsen
- agency sec's order
- agency Securities and Exchange Commission
- agency without admitting or denying any of the sec's findings
Triples 16
- SEC Announces Settlement Aspen Technology
- SEC charged Aspen Technology, Inc.
- Aspen's former senior management was directly involved in negotiating and improperly recognizing revenue on transactions
- SEC's order directs Aspen to cease and desist from violating various provisions of federal securities laws
- SEC's order requires Aspen to retain an independent consultant to review the company's financial and accounting policies and procedures
- Aspen consented to the issuance of the order without admitting or denying any of the SEC's findings
- Linda Chatman Thomsen said Companies must take seriously their obligations to accurately report their financial results to their shareholders who depend on that information to make investment decisions
- David P. Bergers added Aspen took significant remedial steps and cooperated extensively with the Commission's investigation
- Aspen promptly self-reported the misconduct and conducted a thorough internal investigation
- Aspen shared the findings of that investigation with the staff
- SEC's order finds Aspen improperly recognized revenue on at least 19 different software license transactions involving at least 15 different customers worldwide
- The scheme involved premature recognition of revenue not recognizable under generally accepted accounting principles in the quarterly reporting periods claimed by Aspen either because contracts were not signed within the appropriate quarter or because the earnings process was incomplete due to side letters or other contingency arrangements
- SEC's order finds In several reporting periods, Aspen would not have met analysts' earnings expectations without the improperly recognized revenue
- The Commission filed a civil injunctive action against three former executives of Aspen in United States District Court for the District of Massachusetts
- One of the former executives pleaded guilty to one count of conspiracy and one count of securities fraud in connection with related charges brought by the United States Attorney's Office for the Southern District of New York
- The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation
PDF (from attached: pdf)
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Extracted body text (3,614c)
SEC Announces Settlement With Aspen Technology FOR IMMEDIATE RELEASE 2007-152 Washington, D.C., July 31, 2007 - The Securities and Exchange Commission today charged Aspen Technology, Inc., with fraudulently inflating revenue over a three-year period. The SEC's order finds that Aspen's former senior management, motivated by a desire to boost revenues and meet securities analyst earnings expectations, was directly involved in negotiating and improperly recognizing revenue on transactions. The SEC's order directs Aspen, a software company based in Cambridge, Mass., to cease and desist from violating various provisions of federal securities laws, and requires Aspen to retain an independent consultant to review the company's financial and accounting policies and procedures. Aspen consented to the issuance of the order without admitting or denying any of the SEC's findings. "Companies must take seriously their obligations to accurately report their financial results to their shareholders who depend on that information to make investment decisions," said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement. "The management of reported earnings through premature revenue recognition will not be tolerated." David P. Bergers, Director of the SEC's Boston Regional Office, added, "Aspen took significant remedial steps and cooperated extensively with the Commission's investigation. Aspen promptly self-reported the misconduct, conducted a thorough internal investigation, and shared the findings of that investigation with the staff. Consistent with the principles announced in the Commission's January 2006 Statement Concerning Financial Penalties, the Commission considered Aspen's remediation and cooperation, among other things, in deciding not to impose a penalty." According to the SEC's order, Aspen - often acting through its former Chief Executive Officer, Chief Financial Officer and Chief Operating Officer - improperly recognized revenue on at least 19 different software license transactions involving at least 15 different customers worldwide. According to the order, the scheme involved premature recognition of revenue not recognizable under generally accepted accounting principles in the quarterly reporting periods claimed by Aspen either because contracts were not signed within the appropriate quarter or because the earnings process was incomplete due to side letters or other contingency arrangements. The SEC's order finds that, in several reporting periods, Aspen would not have met analysts' earnings expectations without the improperly recognized revenue. The Commission previously filed a civil injunctive action on Jan. 8, 2007, against three former executives of Aspen in United States District Court for the District of Massachusetts. That case is still pending. (See LR-19960) In addition, on March 26, 2007, one of the former executives pleaded guilty to one count of conspiracy and one count of securities fraud in connection with related charges brought by the United States Attorney's Office for the Southern District of New York. (See LR-20059) The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation. # # # For more information, contact: David P. Bergers Regional Director Boston Regional Office (617) 573-8927 John T. Dugan Associate Regional Director Boston Regional Office (617) 573-8936 Additional materials: Administrative Proceeding No. 33-8827 http://www.sec.gov/news/press/2007/2007-152.htm Home | Previous Page Modified: 07/31/2007
OCR text (3,614c · plain-text · 99% conf)
SEC Announces Settlement With Aspen Technology FOR IMMEDIATE RELEASE 2007-152 Washington, D.C., July 31, 2007 - The Securities and Exchange Commission today charged Aspen Technology, Inc., with fraudulently inflating revenue over a three-year period. The SEC's order finds that Aspen's former senior management, motivated by a desire to boost revenues and meet securities analyst earnings expectations, was directly involved in negotiating and improperly recognizing revenue on transactions. The SEC's order directs Aspen, a software company based in Cambridge, Mass., to cease and desist from violating various provisions of federal securities laws, and requires Aspen to retain an independent consultant to review the company's financial and accounting policies and procedures. Aspen consented to the issuance of the order without admitting or denying any of the SEC's findings. "Companies must take seriously their obligations to accurately report their financial results to their shareholders who depend on that information to make investment decisions," said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement. "The management of reported earnings through premature revenue recognition will not be tolerated." David P. Bergers, Director of the SEC's Boston Regional Office, added, "Aspen took significant remedial steps and cooperated extensively with the Commission's investigation. Aspen promptly self-reported the misconduct, conducted a thorough internal investigation, and shared the findings of that investigation with the staff. Consistent with the principles announced in the Commission's January 2006 Statement Concerning Financial Penalties, the Commission considered Aspen's remediation and cooperation, among other things, in deciding not to impose a penalty." According to the SEC's order, Aspen - often acting through its former Chief Executive Officer, Chief Financial Officer and Chief Operating Officer - improperly recognized revenue on at least 19 different software license transactions involving at least 15 different customers worldwide. According to the order, the scheme involved premature recognition of revenue not recognizable under generally accepted accounting principles in the quarterly reporting periods claimed by Aspen either because contracts were not signed within the appropriate quarter or because the earnings process was incomplete due to side letters or other contingency arrangements. The SEC's order finds that, in several reporting periods, Aspen would not have met analysts' earnings expectations without the improperly recognized revenue. The Commission previously filed a civil injunctive action on Jan. 8, 2007, against three former executives of Aspen in United States District Court for the District of Massachusetts. That case is still pending. (See LR-19960) In addition, on March 26, 2007, one of the former executives pleaded guilty to one count of conspiracy and one count of securities fraud in connection with related charges brought by the United States Attorney's Office for the Southern District of New York. (See LR-20059) The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation. # # # For more information, contact: David P. Bergers Regional Director Boston Regional Office (617) 573-8927 John T. Dugan Associate Regional Director Boston Regional Office (617) 573-8936 Additional materials: Administrative Proceeding No. 33-8827 http://www.sec.gov/news/press/2007/2007-152.htm Home | Previous Page Modified: 07/31/2007