Software Firm Loses Top Execs Amid Scandal Over Revenue : Computers: Platinum admits that it has overstated figures for the past 15 months. Its stock drops 64%.
Irvine-based Platinum Software Corp. was plunged into turmoil Monday after four top executives quit and the company said it has overstated revenue for the past 15 months. The news sent the company’s stock plummeting by 64% in furious trading.
Platinum, a fast-growing maker of custom accounting software for large and medium-sized companies, also said it will lay off an unspecified number of its 820 employees, restate revenue for the past four quarters and report a “substantial” loss for its third quarter, ended March 31.
“It appears to be a massive accounting fraud,” said Alan Schulman, a San Diego attorney representing some shareholders who are suing Platinum for alleged securities violations.
Bruce C. Edwards, Platinum’s chief financial officer, declined to comment except to say, “You would expect an attorney to say that.”
Platinum announced the executive departures and other changes in a news release that said it discovered its accounting problems as a result of its own investigation stemming from the shareholder suit.
Leading the departures was Platinum founder, Chairman and Chief Executive Gerald R. Blackie. His temporary replacement is Carmelo J. Santoro, a Platinum director and former chairman of AST Research Inc., a large Irvine-based personal computer maker.
Santoro said a number of transactions at Platinum appear to have been recorded as revenue for quarters before the deals were completed.
“On a strict interpretation, we were putting revenues in the wrong place,” he said. “It’s almost impossible to conceive that, with a restatement of this nature, the SEC will not get involved.”
Officials of the Securities and Exchange Commission were unavailable for comment.
Platinum announced its news before the stock market opened Monday. By the end of the day, Platinum shares had fallen $6.44 to close at $3.56. Nearly 4 million shares changed hands, making the stock one of the most actively traded Nasdaq issues.
“Obviously, this is a very large negative surprise,” said Frank Michnoff, analyst at Prudential Securities Research in New York. “This restatement of revenue casts a shadow on the (company’s) whole future.”
Santoro and Edwards, who has been on the board since October, will now be the company’s sole directors. Edwards, acting chief financial officer, is also chief financial officer for AST. But Santoro said Monday that he will move fast to form a new management team.
Monday’s announcement by Platinum’s new management culminated an investigation that Santoro and Edwards began in January after the shareholder lawsuit pointed out irregularities in the timing of reporting some sales.
Shareholder Ezriel Tauber filed the suit Jan. 19, a day after the company announced cancellation of a major order and Platinum’s stock fell 24%. In the suit, Tauber accused the company of withholding vital information from investors before the price tumbled.
