Volt Information Sciences Inc. was sued by the U.S. Securities and Exchange Commission and settled with the regulator over claims it misstated $7.55 million in software revenue and income.
Volt, a provider of staffing, call-center and technology services, asserted that it had a $10 million contract with a customer to justify the revenue recognition and incorporated the improper revenue in regulatory filings with the SEC, according to a complaint filed today in federal court in Manhattan.
“The company is pleased to resolve the matter and move forward,” Joan McKown, a partner at Jones Day who is representing New York-based Volt, said in a phone interview. “They cooperated with the SEC and they have taken extensive remedial steps. The SEC is not seeking a penalty against the company.”
The SEC also settled its claims against Debra Hobbs, the former chief financial officer for the company’s computer-segment unit, Volt Delta Resources, said John Nester, a spokesman for the SEC. Hobbs was accused of overstating revenue and consolidated net income for its 2007 fourth-quarter and year-end financial statements issued in January 2008 and February 2008.
The SEC filed a separate complaint in federal court in Manhattan against Volt’s former chief financial officer, Jack Egan Jr., alleging he “provided substantial assistance” and allowed misleading omissions in Volt’s fraudulent recognition of revenue.
The SEC alleges that Egan, a certified public accountant, knew that Volt’s representations were false and didn’t comply with generally accepted accounting practices. Egan hasn’t settled the SEC’s claims, Nester said.
Paul Schoeman, a lawyer for Egan, didn’t immediately return a voice-mail message left at his office seeking comment on the complaint.
Volt announced the SEC investigation in November 2008. The company conducted an internal review of its accounting for review and related costs and is in the process of preparing a restated financial statement, Chief Executive Officer Ron Kochman said in a statement.
“We are committed to adhering to the highest standards of accounting and corporate governance,” Kochman said in the statement. “We have cooperated with the SEC throughout this investigation and we have made a significant investment in reviewing and improving our accounting processes and internal controls.”
The accord is subject to approval by a federal judge in New York who is presiding over the case.
The cases are Securities and Exchange Commission v. Volt Information Sciences Inc., 13-cv-00237, and Securities and Exchange Commission v. Egan, 13-cv-00236, U.S. District Court, Southern District of New York (Manhattan).