SEC fines Symantec’s Veritas $30M in accounting case

The U.S. Securities and Exchange Commission has fined Symantec Corp.’s Veritas Software subsidiary $30 million for accounting fraud, ending a case that divided Republicans and Democrats at the agency.
Veritas, which was acquired by Cupertino, Calif.-based Symantec in 2005, inflated revenue and used accounting tricks to smooth earnings from 2000 through 2003, the SEC said in a statement last Wednesday.
The agency also accused Veritas of entering into a fraudulent transaction in 2000 with Time Warner Inc.’s America Online unit. Time Warner paid $300 million to settle an SEC accounting probe in 2005.
The Veritas case has been pending at the SEC for almost two years, subject to an internal agency dispute over fining public companies.
The SEC deadlocked on Veritas’ proposed $30 million fine in June 2005, with the two Democratic commissioners voting to approve it and two Republicans opposing it as too severe. Then-SEC Chairman William Donaldson, a Republican, didn’t participate in the case.
The accord has been in limbo ever since, along with other enforcement cases in which the agency’s investigators had negotiated stiff company fines. Republicans on the commission, including Paul Atkins, argue the penalties hurt shareholders. Democrats, including Roel Campos, contend that fines are needed to deter wrongdoing.
The disagreement devolved into partisan rancor during the months leading up to Donaldson’s departure from the agency in 2005.
Christopher Cox, the Republican who succeeded Donaldson, has sought to forge consensus on the commission. In January 2006, Cox persuaded Democrats and Republicans on the panel to agree on a set of guidelines for fining companies.
While Cox, 54, and the other commissioners are now approving some long-delayed penalties, including the Veritas fine, they are doing so without applying the criteria they laid out last year. The guidelines, embodied in a Jan. 4, 2006, “Statement Concerning Financial Penalties,” focus on whether companies profited from their misconduct.
“The corporate penalty in this case was negotiated before the commission issued its statement,” the SEC said in a news release announcing the Veritas settlement. “The commission therefore elected not to apply that statement.”
John Nester, an SEC spokesman in Washington, declined to comment beyond the agency’s written statement.
America Online in 2000 agreed to pay an extra $20 million for software from Veritas, which in exchange promised to pay the same amount for online advertising, helping both companies inflate earnings, the SEC said. Regulatory probes into the deal later prompted Veritas to restate earnings for that and other transactions and a variety of accounting problems.
Symantec, the world’s biggest maker of computer anti-virus products, said Wednesday that it had already set aside money to pay the SEC fine. A lawyer for Veritas, William Baker of Latham & Watkins in Washington, declined to comment. Veritas neither admitted nor denied wrongdoing in the case, the SEC said.
The $30 million penalty will be distributed to harmed investors, the agency said.