Skip Links

Network World

  • Social Web 
  • Email 
  • Close

Former networking execs indicted for securities fraud

Former CEO and vice president of Clarent indicted on securities fraud charges.
By Grant Gross , IDG News Service , 03/27/2006

Two former executives at networking equipment provider Clarent have been indicted on securities fraud charges, the Department of Justice (DOJ) announced.

Jerry Shaw-Yau Chang, 48, of Los Altos, Calif., and Matthew Ming Chang Chiang, 36, of Taiwan were charged with filing fraudulent financial statements with the Securities and Exchange Commission (SEC) in the last quarter of 2000 and the first and second quarters of 2001, the DOJ said. Chiang was additionally charged with one count of witness tampering in the indictment, unsealed late Friday.

Chang, former president and CEO at Clarent, surrendered into custody Friday and was released on $1 million bond in the U.S. District Court for the Northern District of California, the DOJ said. An arrest warrant was issued for Chiang.

The defendants were top executives at Clarent, based in Redwood City, Calif. They are accused of conspiring to improperly recognize millions of dollars in revenue for Clarent.

Chang served as president and CEO of Clarent between July 1996 and about July 2001, and Chiang was president of Clarent Asia/Pacific between September 2000 and September 2001, the indictment said.

The two are alleged to have negotiated high-value deals on behalf of Clarent with various overseas distributors. The defendants carried out the improper revenue recognition scheme by immediately recognizing revenue from transactions in which customers had been given the right to return products, the right to cancel orders, or a guarantee that Clarent would find a purchaser for any product customers were unable to sell on their own, the DOJ said.

The defendants are charged with entering into undisclosed side agreements establishing the contingencies to the sales. The defendants allegedly made these agreements without disclosing this information to the SEC and Clarent's independent auditor, Ernst & Young.

The purpose of the scheme to defraud was to falsely inflate Clarent's revenue and profits, to exceed projected quarterly financial results, and to artificially sustain Clarent's stock price, the indictment said.

Trading on Clarent stock was halted on Sept. 4, 2001. The stock price on the previous day was at $5.37, and the company was valued at approximately $216 million, the DOJ said. On May 8, 2002, Clarent restated its financial statements for 2000 and 2001, at that time the stock price closed at 27 cents per share, and the company was valued at about $10.9 million.

Partner Content
Foundry Networks

The Foundry Enterprise Advantage

Foundry Networks, Inc. (NASDAQ: FDRY) is a leading provider of high-performance enterprise and service provider switching, routing, security and Web traffic management solutions. Foundry's customers include the world's premier ISPs, metro service providers, and enterprises.

For further information on Foundry Networks please click here.

Leveraging the Advantages
of a Multi-vendor Network Strategy

Today's enterprise network provides more than simply a technology infrastructure. It's an enabler for the enterprise, supporting mission critical applications, creating operational efficiencies and increasing productivity gains. Foundry Networks provides the ideal foundation for a multi-vendor network.

Click here to view whitepaper!

Comment
Login
Forgot your account info?
Add comment
Anonymous comments subject to moderator approval. Register here for member benefits.
Have a NetworkWorld account? Log in here. Register now for a free account.

Videos

rssRss Feed
Save The Date!
What They Are Saying

If the IT manager is knowledgeable regarding Cisco technology, he would have 2 options. Option 1 - Consult...- Anonymous

Join the Discussion