• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Former Symbol Technologies Executives Charged With Conspiracy, Fraud

Posted on: Wednesday, 4 January 2006, 21:00 CST

By Robert E. Kessler, Newsday, Melville, N.Y.

Jan. 4--To the outside world, Symbol Technologies was an icon of high-tech innovation on Long Island, a pioneer in producing cutting-edge bar-code readers that helped speed shoppers through supermarket checkouts and helped industry quickly monitor and control inventory.

To federal prosecutors, however, the Holtsville company was more fittingly viewed as a classic study in corporate corruption.

They say Symbol, one of the Island's 10 biggest companies, with almost $2 billion a year in sales, had a culture in which many executives vied to cook the company's books in order to meet Wall Street profit targets and garner hefty bonuses.

With that backdrop, three of the 10 former key executives allegedly at the heart of Symbol's corporate crimes are scheduled to go on trial on conspiracy and stock fraud charges today in U.S. District Court in Central Islip, following completion of jury selection.

The fraud was "breathtaking in its scope," U.S. Attorney Roslynn Mauskopf said when the executives were indicted a year and a half ago.

An official of the U.S. Postal Inspection Service added that the Symbol case "was a textbook example of a company cooking the books. ... What was unusual was the number of cooks in the kitchen."

The three execs facing trial today -- former chief financial officer Kenneth Jaeggi, former senior vice president of finance Michael DeGennaro and former senior vice president and general manager Frank Borghese -- have said they are innocent.

Sources familiar with the case say the executives are expected to blame the misdeeds at Symbol in part on other former executives who already have pleaded guilty and are expected to be key government witnesses.

They may also point the finger at the firm's former chairman, Tomo Razmilovic, who fled to Sweden two years ago rather than face trial.

Jaeggi's attorney Steven Malo said yesterday as the jury was being selected that after hearing the evidence, the jurors will find his client innocent and "they will put an end to this injustice."

Borghese's attorney Brad Simon declined to comment, as did DeGennaro's attorney Michael Sommer.

Federal prosecutors and investigators also declined to comment.

Another former Symbol executive, James Heuschneider, who was director of customer service finance, awaits trial on similar charges. Razmilovic, who left Symbol with a $5 million severance package before his indictment, has denied any wrongdoing.

Six former Symbol executives have already pleaded guilty in the case.

Most recently, Christopher DeSantis, the former vice president of worldwide sales and finance, pleaded guilty two weeks ago to intentionally concealing knowledge of a felony. DeSantis admitted he knew about fraudulent accounting practices but ordered those records removed from the company's headquarters.

Jerome Swartz, a professor of electrical engineering at Stony Brook University who developed the original Symbol bar-code scanner in his garage and founded the company in 1973, has not been charged. A former head of the company, Swartz did pay $14 million to settle civil litigation.

In total, the alleged fraud so inflated Symbol's supposed finances from 1999 to 2002 that the firm later restated its previously reported revenue by $234 million and its net income by $325 million.

The trial before U.S. District Judge Leonard Wexler is expected to last six weeks because of the complicated nature of the frauds allegedly involved.

Prosecutors say the accounting techniques used to inflate Symbol's books, and consequently defraud investors with falsely inflated stock value, were known to executives by a number of colorful names, including channel stuffing, candy deals, tango sheets and cookie jar reserves.

Channel stuffing, prosecutors said, consisted of sales to wholesalers and distributors that were recorded as final profitable sales to customers.

In candy deals, distributors bought goods ostensibly for customers, prosecutors said. But they did not have actual customers, and Symbol executives agreed to buy back the products at cost plus 1 percent.

Tango sheets were allegedly internal reports indicating how much sales had to be falsely inflated to hit earnings and sales targets.

Cookie jar reserves were purportedly created by vastly inflating likely expenses and then using the supposed money set aside for the expenses to boost profits.

-----

To see more of Newsday, or to subscribe to the newspaper, go to http://www.newsday.com

Copyright (c) 2006, Newsday, Melville, N.Y.

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

SBL,

Source: Newsday, Melville, N.Y.

More News in this Category