Risk & Compliance

Wells Notice for Ingram Micro on McAfee Deals

The SEC alleges that the company failed to maintain adequate books and records, helping to cause securities-law violations by antivirus software ma...
Stephen TaubMay 21, 2007

Ingram Micro has received a Wells notice from the Securities and Exchange Commission regarding transactions between the computer products distributor and McAfee.

According to Ingram, the SEC alleged that the company failed to maintain adequate books and records, which the company believes are concerned with certain transactions with McAfee from 1998 through 2000. At the time, McAfee, which is best-known for its anti-virus software programs, was known as Network Associates.

The SEC has further alleged that Ingram Micro’s failure to maintain adequate books and records was a cause of McAfee’s securities-law violations, which concerned the filing of reports and maintenance of its own books and records, according to Ingram Micro.

In January 2006, the SEC and McAfee announced a settlement in which the company would pay a $50 million fine. McAfee also agreed to appoint an independent consultant to recommend improvements to the company’s internal accounting controls as well as its revenue recognition and reserves practices.

Ingram Micro first disclosed an informal inquiry by the commission regarding McAfee during the third quarter of 2004.

Under SEC procedures, a Wells notice indicates that the staff has made a preliminary decision to recommend that the commission bring a civil action. Recipients have the chance to respond to the SEC staff before a formal recommendation is finalized.

Ingram Micro stated that it continues to cooperate fully with the SEC, intends to “respond thoroughly” to the Wells notice, and is currently discussing a possible resolution of the issues with the commission.

The company added that resolution will not have a material adverse impact on its financial condition but may have a material effect on the results of operations or cash flows for the quarter in which the matter is resolved.

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