Accounting & Tax

Charges for Ex-CEO of Aspen Technology

Prosecutors allege that he falsified revenues while competing to become the software company's chief executive.
Stephen TaubJanuary 8, 2007

David McQuillin, former chief executive officer and president of Aspen Technology, surrendered to authorities on Monday in connection with a scheme to falsify revenues at the software company, according to an announcement from the U.S. Attorney for the Southern District of New York.

McQuillin was charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison upon conviction, and one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years and $250,000.

Prosecutors alleged that McQuillin engaged in the scheme between January 2001 through September 2002, when he and another Aspen executive each held the title of co-chief operating officer and were competing to become the company’s CEO. McQuillin assumed that post in October 2002.

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According to prosecutors, McQuillin and others manipulated the company’s revenues by entering into side agreements with a customer that made certain Aspen revenues subject to cancellation and therefore not recognizable; backdating sales agreements into earlier financial quarters to give the false impression that Aspen had met the financial expectations of professional securities analysts; and providing false information to Arthur Andersen, which audited Aspen’s financial reports and investigated the company’s revenue recognition procedures.

The Securities and Exchange Commission also filed civil charges against McQuillin, Aspen Technology founder and former chairman Lawrence Evans, and former chief financial officer Lisa Zappala. The SEC accused them of engaging in a “fraudulent revenue recognition scheme, causing Aspen to report inflated revenue on at least six software transactions during fiscal years 1999 through 2002.”

The commission is seeking injunctive relief, disgorgement, civil penalties, and orders barring the three individuals from serving as officers or directors of a public company.

McQuillan’s lawyer, Paul Shechtman, did not immediately return CFO.com’s request for comment on the case; attorneys for Evans and Zappala could not be immediately identified for comment.