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SEC charges Gateway executives in fraud case

By J. Kyle Foster
Bloomberg News

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The Poway, Calif.-based company wasn't charged, and it neither admitted nor denied wrongdoing, it said in a statement. The Securities and Exchange Commission didn't assess any penalties or fines against Gateway, run by founder Ted Waitt.

The SEC filed fraud charges in San Diego against former Chief Executive Jeffrey Weitzen, 47; former finance chief John Todd, 43; and former Controller Robert Manza, 42. They are accused of making false statements and hiding information that Gateway's personal-computer sales were falling in the second and third quarters of 2000.

On May 14, the Justice Department opened a criminal fraud investigation of the company's accounting in 2000. Those results were restated in 2001 to lower sales and profit and to correct how Gateway had booked investment losses, sales and bad loans. The SEC also began its investigation in 2000.

Waitt, Gateway's chairman and biggest shareholder, named a slate of new senior managers in January 2001 after Weitzen and Todd quit. Gateway's shares dropped 70 percent under Weitzen, who was CEO for 13 months.

The SEC said Todd was the principal architect and Manza helped by initiating certain one-time transactions and preparing financial statements that he knew didn't comply with generally accepted accounting principles.

Richard Marmaro, an attorney for Weitzen, in a statement called the charges "baseless." Robert Rose, Todd's attorney, said in another statement that the accusations against his client are "outrageous." He said that no one who worked with Todd accused him of doing anything wrong.

The SEC is seeking anti-fraud injunctions, civil money penalties and the return of illegally received gains from Weitzen, Todd and Manza. The agency also wants the men banned from serving as officers or directors of public companies.

Disclosure over dinner means trouble for Siebel Systems

PRINCETON, N.J. — Siebel Systems, the first company to pay a fine to settle accusations it selectively disclosed market-moving information, said it may face a second charge by the Securities and Exchange Commission.

SEC staff recommended the commission take enforcement action against Siebel and two officers for giving some analysts and investors information at a private dinner on April 30, Siebel said in an SEC filing. The shares rose 7.9 percent on May 1.

The SEC's Regulation Fair Disclosure rule went into effect in October 2000 to give investors equal access to news. Siebel, Raytheon and Secure Computing last year became the first companies charged with violations.

"There could be harsher penalties" for a repeat offender, said Ed Smith, a corporate-governance expert and partner at New York law firm Chadbourne & Parke.

Burghardt Tenderich, a Siebel spokesman, said the company won't comment beyond yesterday's SEC filing.

Chief Financial Officer Ken Goldman told analysts at the April dinner that seasonal demand made the company more confident about results in the second quarter than the first.

At a closed-door investor conference in November 2001, Chief Executive Tom Siebel said business was picking up, sending the shares up 20 percent that day.

— Bloomberg News

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