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Former Gateway Execs Found Liable In SEC Case

3/09/2007 09:45:00 AM Eastern

San Diego — A federal jury this week found two former Gateway executives liable for violating fraud and record-keeping regulations and making false statements.

Former Gateway chief financial officer John Todd and former controller Robert Manza were accused in 2000 by the Securities and Exchange Commission (SEC) of manipulating revenue and earnings to meet Wall Street expectations, the SEC said in a written statement.

The three-week civil trial took place in the Southern District of California. The jury found Todd and Manza liable for violating antifraud, false statements to accountants and record-keeping provisions of the federal securities laws. Punishment will be handed out by the court at a later date.

The SEC’s specific complaint against Todd was that he was the architect of a plan to “close the gap” between analyst’s expectations and the company’s anticipated revenues through a variety of improper and extraordinary transactions. The SEC had alleged that Manza assisted the actions by initiating one of the unusual transactions and by preparing financial statements that did not meet generally accepted accounting principles.

The government also charged the men with failing to disclose what it described as significant trends in Gateway’s business, such as the company propping up sales by offering pre-approved financing to consumers whose credit applications had previously been denied by Gateway. This boosted Gateway’s sales figures, but without disclosing the fact that the money was generated by loaning money to credit risks.

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