Error Forces Ariba to Restate Fiscal 2001 Loss

Ariba Inc., a software maker that never has made money as a public company, will restate its fiscal 2001 loss after it failed to book a $10-million payment from Chairman Keith Krach to an executive as a cost.

Krach, Ariba’s top shareholder, made the payment to Larry Mueller in the fiscal second quarter of 2001, when Mueller was chief operating officer, Chief Financial Officer James Frankola said Tuesday. Securities and Exchange Commission rules say payments by a principal holder to executives must be treated as expenses paid on behalf of the company and recorded.

“They were concerned it was a form of unreported compensation,” said Charles Elson, director of the Center for Corporate Governance at the University of Delaware.

The restatement is unusual because the chairman, not the company, covered the expense. Payments such as Krach’s raise the concerns of investors and regulators because the lower costs may improve the company’s results and bolster its share price.

Ariba shares fell 12 cents Tuesday to $2.48 on Nasdaq.