Vari-L, SEC settle fraud case

WASHINGTON—The Securities and Exchange Commission on Thursday settled a fraud case against a wireless equipment manufacturer, former officials of the company and its auditors. Litigation against Vari-L Co. Inc.’s former chief executive officer and former controller is still pending.
While Vari-L did not admit to any wrongdoing and no fines were imposed, the settlement would require a waiver before it can tap capital markets. The SEC’s allegations stem from Vari-L’s reported earnings of $17 million from 1996 to March 2000 when it actually lost $14 million. The company used a variety of tactics to reach such misstatements. The tactics included using improper “bill-and-hold” sales to jack up reported earnings, recorded revenue on products shipped after the close of each quarter, improperly capitalized labor and overhead costs and overstated inventory.
Vari-L reported its quarterly earnings on Thursday. It expects to file its 2001 financial report, audited by KPMG, shortly but is uncertain when it will file the audited reports for 1999 and 2000, said Lee Terry, Vari-L corporate counsel.
Jon Clark, Vari-L’s former chief financial officer, agreed to pay $216,631 of allegedly ill-gotten gains, interest and penalties. Clark is also barred from acting as an officer or director of a public company.
Vari-L’s former president and chief executive officer, David Sherman, and former controller, Sarah Hume, are pressing forward with litigation.
Additionally, the SEC settled administrative proceedings against Vari-L’s former chairman, Joseph Kiser and Vari-L’s former auditors, Charles Springer and Robert Haugen of Haugen, Springer & Co.
Kiser agreed to a cease-and-desist order and to return $58,000 of compensation he allegedly failed to disclose. Haugen and the firm were barred from auditing records of public companies for a minimum of three years. Springer was barred from public-company audits for at least 10 years.