SEC Announces Settlement With Aspen Technology

The Securities and Exchange Commission today charged Aspen Technology, Inc., with fraudulently inflating revenue over a three-year period. The SEC's order finds that Aspen's former senior management, motivated by a desire to boost revenues and meet securities analyst earnings expectations, was directly involved in negotiating and improperly recognizing revenue on transactions.

The SEC's order directs Aspen, a software company based in Cambridge, Mass., to cease and desist from violating various provisions of federal securities laws, and requires Aspen to retain an independent consultant to review the company's financial and accounting policies and procedures. Aspen consented to the issuance of the order without admitting or denying any of the SEC's findings.

"Companies must take seriously their obligations to accurately report their financial results to their shareholders who depend on that information to make investment decisions," said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement. "The management of reported earnings through premature revenue recognition will not be tolerated."

David P. Bergers, Director of the SEC's Boston Regional Office, added, "Aspen took significant remedial steps and cooperated extensively with the Commission's investigation. Aspen promptly self-reported the misconduct, conducted a thorough internal investigation, and shared the findings of that investigation with the staff. Consistent with the principles announced in the Commission's January 2006 Statement Concerning Financial Penalties, the Commission considered Aspen's remediation and cooperation, among other things, in deciding not to impose a penalty."

According to the SEC's order, Aspen - often acting through its former Chief Executive Officer, Chief Financial Officer and Chief Operating Officer - improperly recognized revenue on at least 19 different software license transactions involving at least 15 different customers worldwide. According to the order, the scheme involved premature recognition of revenue not recognizable under generally accepted accounting principles in the quarterly reporting periods claimed by Aspen either because contracts were not signed within the appropriate quarter or because the earnings process was incomplete due to side letters or other contingency arrangements. The SEC's order finds that, in several reporting periods, Aspen would not have met analysts' earnings expectations without the improperly recognized revenue.


The Commission previously filed a civil injunctive action on Jan. 8, 2007, against three former executives of Aspen in United States District Court for the District of Massachusetts. That case is still pending. (See LR-19960) In addition, on March 26, 2007, one of the former executives pleaded guilty to one count of conspiracy and one count of securities fraud in connection with related charges brought by the United States Attorney's Office for the Southern District of New York. (See LR-20059)

The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation.

GE Capital Solutions, Franchise Finance Purchases Portfolio from Citicorp Leasing Inc.

As part of its business growth strategy, GE Capital Solutions, Franchise Finance has purchased $13.3 million in restaurant loans from Citicorp Leasing Inc. The portfolio represents three borrower groups and 24 loans.

Through its strong and established relationship, GE Capital Solutions, Franchise Finance and Citicorp Leasing Inc. worked closely together to quickly assess the value of this portfolio and close this deal.

“This is an attractive portfolio purchase due to stable asset protection, improving cash flow, increasing same store sales trends, and the breadth and experience of these restaurant operators,” says Barry Perhac, vice president, business development, GE Capital Solutions, Franchise Finance. “This purchase provides new clients to grow our existing asset base.”

GE Capital Solutions, Franchise Finance is a leading lender serving customers in the restaurant, hospitality, branded beverage, automotive after-market, and power sports industries. It provides financing to help franchisees and franchisors grow, compete, and prosper. It offers access to capital with a diverse array of flexible financing options, including funds for purchasing real estate or equipment, new construction or remodels, acquisitions, or refinancing.

About GE Capital Solutions, Franchise Finance

GE Capital Solutions, Franchise Finance is a leading lender for the franchise finance market via direct sales and portfolio acquisition. With more than 30 years of experience and $14 billion in served assets, we serve more than 6,000 customers and more than 20,000 property locations, primarily in the restaurant, hospitality, branded beverage, power sports, and automotive after-market industries. We offer customers access to capital with a menu of products featuring flexible structuring, including financing for acquisitions, refinancing, construction of new units, and remodels for single- and multi-unit operators/chains. More information is available at www.gefranchisefinance.com or by calling toll-free 866-GET-GEFF (438-4333).

GE Capital Solutions provides leasing, lending, and capital investment products and services to help business customers grow. It has more than $90 billion in assets, serves more than a million clients around the world, and is headquartered in Danbury, Connecticut, USA. For more on GE Capital Solutions, go to www.ge.com/capitalsolutions.

GE (NYSE: GE) is Imagination at Work — a diversified technology, media and financial services company focused on solving some of the world's toughest problems. With products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, media content and advanced materials, GE serves customers in more than 100 countries and employs more than 300,000 people worldwide. For more information, visit the company's Web site at www.ge.com.

SEC Sues Cardinal Health, Inc. For Fraudulent Earnings and Revenue Management Scheme

The Securities and Exchange Commission today announced that Cardinal Health, Inc., a pharmaceutical distribution company based in Dublin, Ohio, has agreed to pay $35 million to settle charges that it engaged in a nearly four-year long fraudulent revenue and earnings management scheme, as well as other improper accounting and disclosure practices.

The Commission's complaint alleges that, from September 2000 through March 2004, Cardinal engaged in this conduct in order to present a false picture of its operating results to the financial community and the investing public - one that matched Cardinal's publicly disseminated earnings guidance and analysts' expectations, rather than its true economic performance. Through these practices, Cardinal materially overstated its operating revenue, earnings and growth trends in certain earnings releases and filings with the Commission.

Linda Thomsen, Director of the Commission's Division of Enforcement, said, "Cardinal's scheme deceived investors by presenting a string of revenue and earnings reports and other disclosures that reflected a false picture of Cardinal's financial performance. As this case demonstrates, issuers cannot resort to accounting ploys and misleading disclosures to make their numbers."

Antonia Chion, an Associate Director of the Commission's Division of Enforcement, said, "Sound financial reporting - the foundation of our capital markets - includes not only compliance with GAAP, but transparent disclosure of information that investors need to understand a company's performance. Cardinal's fraudulent mischaracterization of its operating revenues, as alleged, deprived investors of material information."

According to the complaint, Cardinal managed its reported revenue and earnings through a variety of undisclosed and improper actions. Cardinal inflated reported operating revenue by misclassifying more than $5 billion of bulk sales as operating revenue. Cardinal classified its revenue from drug distribution as either "bulk" revenue, which consisted of certain full case quantities of pharmaceutical products delivered to customer warehouses, or operating revenue, which consisted of all other sales. The complaint alleges that Cardinal implemented an undisclosed internal practice under which it reclassified any revenue from the sale of bulk product held on its premises for 24 hours or longer as operating revenue. As the complaint describes, Cardinal, among other improper practices, began intentionally holding certain bulk shipments for longer than 24 hours, in order to shift revenue from the bulk revenue line to the operating revenue line. The complaint alleges that Cardinal decided when to start and stop this practice based on the strength or weakness of quarterly sales and earnings.

According to the complaint, Cardinal also managed its reported earnings by:

selectively accelerating, without disclosure, the payment of vendor invoices in order to prematurely record a cumulative total of $133 million in cash discount income;
improperly adjusting reserve accounts, which misstated earnings by more than $65 million; and
improperly classifying $22 million of expected litigation settlement proceeds to increase operating earnings.
In addition, the complaint alleges that Cardinal failed timely to disclose the impact of a change in the method of applying its last-in-first-out (LIFO) inventory valuation accounting principle and, on one occasion, intentionally transferred inventory within business units in order to avoid a negative LIFO impact on year-end reported earnings. Furthermore, the complaint alleges that Cardinal prematurely recognized millions of dollars in revenue from Pyxis, a wholly-owned subsidiary it featured as an important growth driver.

The terms of the settlement reflect, and the Commission acknowledges, the cooperation provided by Cardinal during the course of the SEC investigation. Without admitting or denying the allegations of the Commission's complaint, Cardinal agreed to be permanently enjoined from violating the antifraud, reporting, record-keeping and internal controls provisions of the federal securities laws. Cardinal also agreed to pay $1 in disgorgement and a $35 million penalty, which the Commission will seek to place in a Fair Fund for distribution to affected shareholders. Cardinal also will engage an independent consultant to conduct a review of its disclosure processes, practices and controls, as well as those policies and procedures that relate to allegations in the Commission's complaint. The settlement is subject to court approval.

The Commission also acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of New York. The Commission's investigation is continuing.

SEC Charges Former Chairman and CEO of Brooks Automation in Stock Option Fraud

The Securities and Exchange Commission has filed a civil fraud action against Robert J. Therrien, former President and CEO of Brooks Automation, Inc., a Massachusetts software company, alleging that he received millions of dollars in undisclosed compensation by fraudulently backdating his exercise of an option to purchase company stock.

Therrien also is alleged to have engaged in a broader fraudulent scheme to grant himself and other Brooks employees and executives undisclosed, in-the-money stock options. The complaint alleges that Therrien personally benefited by more than $10 million from his fraudulent conduct.

"All companies must play by the same rules when it comes to accounting for employee compensation and reporting its impact on the company's bottom line," said Linda Chatman Thomsen, Director of the SEC's Enforcement Division. "Executives who violate these rules for their own personal benefit will be held accountable for their actions."

David Bergers, Director of the SEC's Boston Regional Office, added, "Investors have the right to complete and accurate information about the financial condition of public companies and the compensation their executives receive. The Commission will continue to aggressively pursue actions against individuals who engage in fraudulent options practices that mislead investors."

The Commission's civil complaint alleges that Therrien received approximately $5.8 million in undisclosed compensation in November 1999, when he fraudulently backdated his exercise of an option to purchase 225,000 shares of Brooks stock. According to the complaint, after learning that his option had expired unexercised in August 1999, Therrien signed false documents indicating that he had actually exercised his option before its expiration. As a result, the company issued Therrien a new in-the-money option at the original price, which he immediately exercised to purchase company stock at a fraction of the market price when the option was re-issued.

The Commission's civil complaint further alleges that, on at least four occasions from 1999 through 2001, Therrien approved the issuance to company executives and employees of stock options that were backdated to earlier dates on which the stock's market price was lower. Through backdating, options that were in-the-money (with exercise prices below the market price) on the date they were actually granted were disguised as at-the-money options (with exercise prices at the market prices) purportedly granted on an earlier date. As a result of these instances of option backdating, the complaint alleges, Therrien received another $4.6 million in undisclosed benefits. The complaint alleges that as a result of Therrien's misconduct, he benefited by a total of at least $10.4 million and Brooks overstated income and understated employee compensation expenses by at least $54 million in its financial statements during the period from 1999 through 2005.

The complaint alleges that by his conduct Therrien violated the general antifraud provisions of the federal securities laws and provisions that prohibit misrepresentations to auditors and falsification of records, and that he aided and abetted Brooks in its violations of financial reporting, recordkeeping and internal controls requirements. The Commission's action seeks injunctive relief, a civil penalty, disgorgement and an officer and director bar against Therrien.

In a separate matter, the United States Attorney's Office for the District of Massachusetts today announced a criminal indictment charging Therrien with tax evasion for his conduct in connection with the November 1999 option transaction.

NASDAQ is Recognized as the World's Best Exchange for Data Feeds for the Second Year

The Nasdaq Stock Market, Inc. (Nasdaq:NDAQ) has been recognized as the world's premier stock exchange for data feeds for the second consecutive year. In the fifth annual Waters Rankings, readers of Waters magazine voted NASDAQ the winner of the "Best Exchange Data Feeds" award.

NASDAQ's acknowledgement of this distinguished award was determined by nearly 600 sell and buyside end users of data who subscribe to Waters magazine -- the leading publication for financial technology professionals worldwide.

The results show that readers of Waters magazine prefer NASDAQ for speed, price, reliability and overall service even more than they did last year. NASDAQ's margin of victory this year increased to 12% versus last year's 2% margin.

"Receiving this endorsement from hundreds of industry experts is an especially rewarding achievement," said Adena Friedman, NASDAQ Executive Vice President, Corporate Strategy and Data Products. "Such recognition validates our ability to provide an array of innovative tools that help investors and traders achieve their trading strategies."

NASDAQ was also the recipient recently of another prestigious award for the second consecutive year. In May 2007, NASDAQ was recognized by the readership of Inside Market Data as the best data provider among the world's securities exchanges. Inside Market Data is the publication of choice for senior level data and technology executives within the financial services and securities industry throughout the world.

NASDAQ has delivered another innovative data solution with the recent introduction of The NASDAQ DataStore, an online collection of innovative data tools for institutional and individual investors. NASDAQ's offering of these unique data products on the Web marks the first time a U.S. stock exchange has provided an opportunity for direct purchase of this breadth of data directly via the Web.

As part of this initiative, NASDAQ will also be supporting full "plug-and-play" access to its premium market data products. This distribution allows market data vendors and market data distributors more efficient, easier, and less expensive deployments of new data products.

For more information about The NASDAQ DataStore and NASDAQ Data Products, visit http://www.nasdaqtrader.com/trader/mds/mdsoverview/mdsoverview.stm.

About NASDAQ

NASDAQ is the largest U.S. equities exchange. With approximately 3,200 companies, it lists more companies and, on average, trades more shares per day than any other U.S. market. It is home to companies that are leaders across all areas of business including technology, retail, communications, financial services, transportation, media and biotechnology. NASDAQ is the primary market for trading NASDAQ-listed stocks as well as a leading liquidity pool for trading NYSE-listed stocks. For more information about NASDAQ, visit the NASDAQ Web site at www.nasdaq.com or the NASDAQ Newsroom at www.nasdaq.com/newsroom/.

GE Reports Second-Quarter EPS up 13% to $.52 per Share;2007 Share Repurchase Program Increased to $14 billion;Record Orders of $25 billion, up 32%

GE announced today record second-quarter 2007 earnings from continuing operations of $5.4 billion or $.52 per share, up 12% and 13%, respectively, from second quarter 2006. Revenues from continuing operations were $42.3 billion, up 12%, increasing 8% organically.

“Infrastructure and Commercial Finance, which account for 56% of segment profit, led our strong performance this quarter with profit growth of 23% and 18%, respectively,” GE Chairman and CEO Jeff Immelt said. “Global demand for our Infrastructure products and services is unprecedented with double-digit revenue and earnings growth in Oil & Gas, Aviation, Energy, and Transportation. Strong global origination at Commercial Finance contributed to double-digit growth in assets, revenues, and earnings.

“We are building a highly visible and sustainable growth pipeline around the world,” Immelt said. “We are winning with technology and deepening customer relationships through services. Our total orders were up 32% to a record $25 billion, and total backlog grew $18 billion year-over-year, an increase of 42%. Major equipment orders were $13.1 billion, up 54%, and major equipment backlog grew to $44 billion, up 53%. Services orders were up 11%, and our Customer Service Agreement (CSA) backlog stands at $96 billion, up 10%.

“With our strong orders and momentum, we are forecasting third quarter EPS from continuing operations of $.54-.56, up 15-19% over comparable 2006 earnings. We are reaffirming guidance for the full year and are on track to deliver a solid, low-risk performance in 2007 with high visibility to organic growth. We are increasing our 2007 share repurchase program to $14 billion, with the remaining $12 billion to be allocated over the second half of the year. The Board of Directors increased the program, announced in 2004, to $27 billion and accelerated it by a year to be completed by the end of 2007,” Immelt said.

GE delivered its tenth straight quarter of organic revenue growth of 2-3 times global GDP generated by broad-based services and global market demand. Services revenues were up 12% and global revenues grew 21%, with $8.3 billion from developing markets, up 29%.

GE’s segment profit grew 11% and industrial segment operating profit margin increased 70 basis points to 17%. With year-to-date segment operating profit growth of 120 basis points, the company is on track to meet its goal of 100 basis points of margin expansion for the year.

“For the quarter, GE Money had strong global growth in revenues and assets, and increased segment profit 8% despite a loss at its U.S. mortgage business, WMC,” Immelt said. “We have made the decision to exit this business and substantially reduced our exposure by selling $3.7 billion of WMC loans in the quarter.

“NBC Universal grew segment profit 2% with a strong cable, film, and digital performance. Its current operating improvements coupled with a successful upfront provides a solid foundation for future performance,” Immelt said.

“At Healthcare, the impact from the Deficit Reduction Act (DRA) and the continued regulatory suspension on shipments of surgical supplies by our OEC business was greater than expected,” Immelt said. “In the short term, these challenges more than offset strong performances in our other Healthcare businesses. However, the future of this business remains solid.”

In the second quarter, GE realized a $0.5 billion after-tax gain from its nuclear joint venture with Hitachi. At the same time, GE recorded $0.6 billion of restructuring and other charges, including $0.2 billion that was recorded in the GE Money segment. The company’s consolidated tax rate was 17%, consistent with the first quarter of 2007 and in line with expectations.

Second-Quarter 2007 Financial Highlights:

Earnings from continuing operations were a record $5.4 billion, up 12% from $4.8 billion in second quarter 2006. EPS from continuing operations were $.52, up 13% from last year’s $.46. GE’s Infrastructure and Commercial Finance businesses contributed strong double-digit earnings growth for the quarter.

Continuing revenues grew 12% to a record $42.3 billion. GE industrial sales were $24.3 billion, an increase of 10% from second quarter 2006, reflecting core growth and the net effects of acquisitions. Financial services revenues grew 11% over last year to $17.1 billion, primarily reflecting core growth.

Cash generated from GE’s continuing operating activities (CFOA) in the first six months of 2007 totaled $11.6 billion, down 16% from $13.8 billion last year. The decrease was the result of $3.0 billion of lower special dividends from GE Capital Services related to prior year proceeds from sales of insurance holdings, which more than offset an 11% increase from the industrial businesses’ continuing operations.

Discontinued Operations for the second quarter reflected a $21 million profit, down from last year’s $0.1 billion. Effective in second quarter 2007, discontinued operations for all periods presented include the results of our Plastics business, expected to be sold in third quarter 2007, and the results of our former Advanced Materials business for periods prior to its sale in fourth quarter 2006. Accordingly, second quarter net earnings were $5.4 billion ($.53 per share) in 2007 and $4.9 billion ($.48 per share) in 2006.

“We have made significant changes to drive growth across the company and around the world. We have created a faster growing, higher returning set of businesses through smart acquisitions and dispositions. We have diligently executed on our ‘growth as a process’ initiative. We have invested in technology and services to better serve our customers,” Immelt said. "Our financial goals have been clear: consistent, double-digit earnings growth with expanding margins and increasing returns. We have delivered another quarter that meets our goals and reflects the power of our portfolio of leading businesses. We are investing and delivering.”

GE will discuss preliminary second-quarter results on a conference call and Webcast at 8:30 a.m. ET today. Call information is available at www.ge.com/investor, and related charts will be posted there prior to the call.

GE (NYSE: GE) is Imagination at Work -- a diversified technology, media and financial services company focused on solving some of the world’s toughest problems. With products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, media content and advanced materials, GE serves customers in more than 100 countries and employs more than 300,000 people worldwide. For more information, visit the company's Web site at www.ge.com

VeriSign Files Restatement of Financial Statements

VeriSign, Inc. (Nasdaq: VRSN) announced today that it has filed with the SEC its Annual Report on Form 10-K for the year ended December 31, 2006 as well as its previously delayed Quarterly Reports on Form 10-Q for the second and third quarters of 2006. These reports contain financial statements that were restated as a result of an independent review by an ad hoc group of independent Directors of VeriSign’s Board of Directors into VeriSign’s historical stock option grant practices and include adjustments to consolidated financial statements for the years ended December 31, 2005, 2004, 2003 and 2002.

In November 2006, the Company announced that its Board of Directors had determined the need to restate historical financial statements to record additional non-cash, stock-based compensation expense related to past stock option grants with incorrect measurement dates, without required documentation, or with initial grant dates and prices that were subsequently modified. At that time, the company estimated that the non-cash stock-based compensation charge for the years 2002 - 2005 would not exceed $250 million.

The total non-cash, stock-based compensation expense related to past stock option grants for the years 2002 -2005 was $160.3 million, after tax.

The Company also announced today that Chief Financial Officer, Dana Evan, resigned on July 10, 2007, and Bert Clement, former Senior Vice President, Finance and Controller, has been elected Chief Financial Officer.

On January 31, 2007, the Company announced that the independent review was substantially completed, and did not find intentional wrong doing by any current member of VeriSign’s senior management, including former CEO, Stratton Sclavos, and former CFO, Dana Evan.

Additional financial information for the full year 2006 periods is available on the Company’s investor relations website at http://investor.verisign.com

VeriSign intends to file its quarterly report on Form 10-Q for the first quarter of 2007 as soon as practicable.

About VeriSign
VeriSign, Inc. (NASDAQ: VRSN), operates digital infrastructure services that enable and protect billions of interactions every day across the world’s voice, video and data networks. Additional news and information about the company is available at www.verisign.com