Risk Management

One Way to Meet Targets: Invent Revenues

Ex-finance chief at OCA consents to SEC charges that he used that approach to the tune of $71 million over three years.
Stephen TaubFebruary 12, 2008

The former CFO of a Louisiana medical services firm agreed to pay more than $100,000 in settling Securities and Exchange Commission civil fraud charges that he had created about $71 million of fictitious revenue between 1998 and 2001.

Bartholomew F. Palmisano Jr., former chief financial officer of Metairie, La.-based OCA Inc. — a provider of back-office business services to orthodontic and dental practices, which is now known as OrthoSynetics — was accused of creating the false revenue over a period of 12 quarters. Palmisano, without admitting or denying the allegations of the Commission’s Complaint, consented to the entry of a proposed final judgment.

The SEC said in its complaint that the fictitious revenue was always at least the amount OCA needed to meet that quarter’s consensus earnings per-share expectations among Wall Street analysts.

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In May 2005, Palmisano tried to cover-up his fraud and provided false information and documents in response to an inquiry by OCA’s independent auditors concerning a fixed asset balance related to one of the fraudulent journal entries, the SEC also charged.

Palmisano served as OCA’s finance chief from September 1998 until October 2001, and, at other times, as the company’s chief information officer and chief operating officer.

OCA went public in 1994, and its shares were listed on the New York Stock Exchange. The shares were delisted in February 2006, however, due to OCA’s failure to file any quarterly or annual financial statements after the quarter ended Sept. 30, 2004. In March 2006, OCA and certain subsidiaries filed for Chapter 11 bankruptcy protection.

The proposed final judgment, ordering the $100,000 civil penalty and post-judgment interest, also will bar him from acting as an officer or director of a public company for 10 years.