Accounting & Tax

Nu Horizons Subpoenaed in “Vitesse Mess”

Vitesse Semiconductor previously disclosed that former senior managers had used improper accounting practices, primarily related to revenue recogni...
Stephen TaubApril 17, 2007

Nu Horizons Electronics disclosed that the company and its wholly owned subsidiary Titan Logistics received subpoenas from the Securities and Exchange Commission regarding their business relationship with Vitesse Semiconductor.

Both the parent company and the subsidiary distribute electronic components, including products manufactured by Vitesse.

Nu Horizons did not provide further details, other than to state that it and Titan are cooperating fully with the SEC.

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Last December, Vitesse disclosed that former senior managers had used improper accounting practices, primarily related to revenue recognition and inventory, and prepared or altered financial records to conceal the questionable practices.

A special committee also found that Vitesse failed to record credits for merchandise returns and other customer credits in the appropriate accounting periods, did not write off related accounts receivable, and failed to record inventory for returned merchandise in the appropriate accounting periods.

The company also recorded false sales invoices that increased revenue, permitted customers to return significantly more merchandise than contractually permitted, and booked sales that did not meet the requirements for revenue recognition, including consignment sales, shipments prior to customers’ requested shipment dates, and shipments to warehouses.

Vitesse also previously disclosed that former members of its senior management team “backdated and manipulated” the grant dates of stock options issued over several years. Chief executive officer Louis R. Tomasetta, chief financial officer Yatin Mody, and executive vice president Eugene F. Hovanec were eventually terminated as officers and employees of the company.