Local software firm charged with faking sale
A La Jolla-based software firm and three former officers charged with faking the sale of the company to falsely inflate its revenue reached a settlement with the Securities and Exchange Commission, the SEC announced Sept. 4.
Barry M. Schechter of La Jolla, the former CEO and de facto officer of Retail Pro Inc., formerly known as Island Pacific; Ram H. Furman of San Diego, the then-CFO of the company; and Harvey Braun of Livingston, N.J., the then-CEO, caused Island Pacific to improperly claim $3.9 million in revenue from a sham sale to an Australian software company, although the sale had no economic substance or business purpose aside from artificially inflating Island Pacific’s revenues, according to the SEC.
Island Pacific overstated its revenue by 140 percent and reported a small profit instead of a massive loss for the second quarter of 2004, and overstated its revenue by 22 percent for the 2004 fiscal year, according to the SEC.
The executives concealed the sham nature of the transactions from Island Pacific’s outside auditors and the public by creating forged and/or fabricated documents in an attempt to show that recognizing revenue from the transaction was proper.
Furman also fired a company whistle-blower who discovered the fraud, while Schechter sold 637,750 shares of Island Pacific stock, receiving $488,410 in ill-gotten gains, the SEC reported.
Island Pacific, Schechter and Braun agreed to settle the charges without admitting or denying the SEC’s allegations or findings, according to the SEC.
Schechter cannot serve as an officer or director of a public company for 10 years and must return $488,410 from his stock sales plus interest of $27,437 and a civil penalty of $120,000.
Braun cannot be an officer or director of a public company for five years and must pay a civil penalty of $75,000.
The SEC did not immediately provide any further information on Braun.
The case was settled in San Diego federal court.