Ex-Media Vision Executives Accused of Securities Fraud
Four former Media Vision Technology Inc. executives were accused of causing the company to inflate its 1993 financial results in what regulators described as the biggest securities fraud case in the history of California’s high-tech Silicon Valley.
The U.S. Securities and Exchange Commission, in a lawsuit filed in a federal court in San Francisco, also alleged that three of the executives netted a total of $2.3 million from inside trading.
Named in the suit are Paul C. Jain, the former chief executive of the company, which made personal computer accessories; Steven J. Allan, its former chief financial officer; Robert S. Williams, the former controller; and Wayne Nakamura, the former manufacturing director.
Lawyers for Jain, 51, and Allan, 46, whom the SEC accused of orchestrating the scheme, denied allegations in the suit.
The SEC charged all four with filing fraudulent reports for the company that inflated revenue and understated expenses in the third and fourth fiscal quarters of 1993. They helped hide the fraud by lying to auditors and creating false accounting entries on company documents, the suit alleged.
Media Vision, which changed its name to Aureal Semiconductor Inc. in May 1996, overstated its fiscal 1993 revenue by $91.4 million and its income by $119.1 million, the complaint alleged. The Fremont, Calif.-based company, which reported $241.1 million in revenue, actually had revenue of only $149.7 million, the agency said. It reported $19.9 million in income while actually incurring a $99.2-million loss, the SEC said.
The complaint also charged Jain, Allan and Nakamura with inside trading. Jain made $1.5 million, Allan $825,000, and Nakamura $21,000 from the illegal trades, the suit contended.
“He denies any liability,” said Jain’s attorney, Paul Dawes, a partner with the Latham & Watkins law firm in Menlo Park. Jain was chief executive from August 1990 until his May 1994 dismissal, the suit said.
Allan’s lawyer, Darryl Rains, said his client “is not the person responsible for the problems that occurred at Media Vision.” Allan, now a consultant, didn’t engage in any insider trading, said Rains, a partner with Morrison & Foerster in San Francisco. Allan, a certified public accountant, was CFO from May 1992 to May 1994, according to the suit.
Attorneys for Williams and Nakamura couldn’t be reached. The SEC is seeking fines and restitution, as well as prohibitions to keep Jain and Allan from ever working as executives at a public company.
The company’s stock plunged from $46.50 in January 1994 to $4.875 four months later, before Media Vision filed for bankruptcy protection in July 1994.
