3 Ex-Critical Path Execs Charged
Federal securities regulators Tuesday filed charges against three more former executives at Critical Path Inc., alleging that they helped in a scheme to inflate revenue at the once-highflying dot-com.
The Securities and Exchange Commission’s complaint, alleging financial fraud for fiscal year 2000, named Jonathan Beck and Kevin Clark, former sales vice presidents at Critical Path, as well as William Rinehart, former head of the San Francisco-based e-mail provider’s North American and Latin American sales forces.
The U.S. attorney’s office in Northern California also filed separate criminal charges of securities fraud against Beck and Clark. If found guilty, Beck and Clark each face up to 10 years in prison and fines of $1 million apiece.
Critical Path fired Beck in February 2001 and Clark resigned around the same time, according to authorities.
Rinehart and Clark have agreed to settle the SEC charges without admitting or denying them, but together will pay fines of almost $500,000, the agency said. Rinehart also agreed to a five-year ban on acting as an officer or director of a public company.
Lawyers for the defendants did not immediately return calls for comment.
The SEC alleged that Rinehart ordered his sales force to arrange transactions, some fake, that allowed the firm to book about $6.3 million of revenue for the fourth quarter of 2000.
Beck participated in one of the fake transactions, for which Critical Path improperly recorded revenue of $2.13 million, the SEC alleged.
Clark was alleged to have been involved in deals that resulted in improper records of another $2.15 million in revenue. Beck and Clark were also charged with insider trading of Critical Path stock during the financial fraud.
Critical Path, with its electronic messaging systems that allowed other companies to outsource their e-mail needs, was once a Wall Street darling. It went public in March 1999 and saw its shares trade as high as $150.25.
Under new management and recently unburdened of its large debt, the firm’s stock Tuesday fell 2 cents to 86 cents on Nasdaq.
Improper accounting practices were exposed in January 2001, when the company reduced 2000 revenue by about $19.3 million.
The company’s former president, David Thatcher, earlier this year pleaded guilty to securities fraud and admitted that he participated in a criminal conspiracy with other top officers to inflate company revenue to meet performance targets. Thatcher has been helping authorities build cases against other former Critical Path insiders.
Timothy Ganley, the company’s ex-vice president of strategic sales, pleaded guilty in April to insider trading.
Both men have also settled fraudulent accounting charges brought by the SEC.
The SEC said its investigation of the fraud continues. The company already has settled allegations of fraudulent accounting with the SEC, without admitting or denying the charges.
