Supply Chain

Ex-Logitech CFO Accused of Accounting Fraud

The executive and a former Logitech controller are accused of inflating the company's operating income in fiscal 2011.
Matthew HellerApril 19, 2016

The former CFO of Logitech International has been charged with inflating the computer accessories company’s operating income to conceal the poor sales of a television set-top device.

The U.S. Securities and Exchange Commission alleged Monday that Erik Bardman and Logitech’s former acting controller, Jennifer Wolf, failed to accurately account for the problems with Revue, a device to allow internet browsing and video streaming, causing a $30.7 million, or more than 27%, overstatement of operating income in fiscal 2011.

By the time of Logitech’s April 2011 earnings release, the SEC said in a civil complaint, Revue’s sales were 70% lower than internal projections and the company had lowered its forecast of operating income.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

“Given the shortfall, senior management, including Bardman and Wolf, were under substantial pressure to meet the lowered guidance,” the complaint says.

On Tuesday, the SEC announced that Logitech had agreed to pay a $7.5 million fine to settle allegations of improper accounting involving the Revue product and two other areas during a five-year period. Two other executives — former controller Michael Doktorczyk and former director of accounting Sherralyn Bolles — agreed to pay penalties of $50,000 and $25,000, respectively.

Logitech failed “to write down the value of its inventory to avoid the financial consequences of disappointing sales,” Andrew Ceresney, director of the SEC’s Division of Enforcement, said in a news release.

Bardman, 49, served as Logitech’s CFO from October 2009 to April 2013. The Revue product was launched in the third quarter of fiscal 2011 and, according to the SEC, Logitech had sold only about 165,000 units by the end of the fourth quarter, far short of its projection of 350,000 units.

Bardman and Wolf allegedly concealed the extent of the problems by improperly calculating Revue’s inventory valuation, misrepresenting to Logitech’s independent auditor that the company’s excess component parts would be used in production, and misrepresenting to the independent auditor the proper amount of Logitech’s writedown of finished goods inventory.

“For Logitech’s financial statements, the two executives falsely assumed the company would build all of the components into finished products despite their knowledge of contrary facts and events,” the SEC said.