David McQuillin, former chief executive officer and president of Aspen Technology, pleaded guilty Monday to securities fraud charges, according to the U.S. Attorney for the Southern District of New York.
U.S. Attorney Michael Garcia stated that from January 2001 through September 2002, McQuillin was co-chief operating officer of Aspen, which provides computer software to oil refineries and other process industries. In Garcia’s words, McQuillin was in a “bake-off” with his co-COO to become the company’s next CEO.
McQuillin, whose performance was burnished by inflated software revenues, assumed that post in October 2002.
Before landing the top job, said 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.
In one instance at the end of 2000, according to prosecutors, McQuillin realized that Aspen would fall short of internal and analyst projections for software revenues for the second fiscal quarter. McQuillin allegedly “engaged in a scheme” to complete a $2.75 million sale of software to an unnamed computer company in mid-January 2001, then backdated the sale to December 29.
McQuillin also backdated a software license agreement with a Russian oil company at the end of June 2001, the close of Aspen’s fourth quarter and fiscal year, said prosecutors.
McQuillin pleaded guilty to one count of conspiracy to commit securities fraud and one count of securities fraud.
On the conspiracy count, he faces up to five years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the offense, and on the securities fraud count, a maximum of 20 years in prison and a fine of the greater of $5 million or twice the gross gain or loss from the offense.
Sentencing is scheduled for July 11.