U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19319 / August 1, 2005
Accounting and Auditing Enforcement
Release No. 2287 / August 1, 2005
SEC v. Robert Korkuc, 03 CV 3017 (LDW)(EDNY)
FORMER CHIEF ACCOUNTING OFFICER OF SYMBOL TECHNOLOGIES, INC. CONSENTS TO PERMANENT INJUNCTIVE RELIEF, OFFICER-AND-DIRECTOR BAR AND ADMINISTRATIVE ORDER UNDER RULE 102(e)
On May 11, 2005, the Honorable Leonard D. Wexler, United States District Judge for the Eastern District of New York entered a partial final judgment against Robert Korkuc ("Korkuc"), the former Chief Accounting Officer of Symbol Technologies, Inc. ("Symbol"). Korkuc consented to entry of an order that prohibits him from acting as an officer or director of a public company and imposes permanent injunctive relief for violations of the relevant antifraud, corporate reporting, books and records and internal control provisions of the federal securities laws. Specifically, Korkuc, without admitting or denying the allegations in the Commission's complaint, is permanently enjoined from violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2), 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), and Exchange Act Rules 10b-5, 13b2-1 and 13b2-2, 12b-20, 13a-1 and 13a-13. The Commission's claims for disgorgement and civil penalties against Korkuc remain pending.
The Commission today also instituted and simultaneously settled an administrative proceeding pursuant to Rule 102(e) of the Commission's Rules of Practice against Korkuc, a certified public accountant licensed to practice in the state of New York. The administrative proceeding was based on the entry of the partial final judgment against Korkuc. Korkuc consented, without admitting or denying the Commission's findings, to an order suspending him from appearing or practicing before the Commission as an accountant.
The Commission's complaint against Korkuc filed on June 19, 2003 alleges that from 1998 until early 2003, Korkuc and others engaged in a fraudulent scheme to inflate revenue, earnings and other measures of financial performance in order to create the false appearance that Symbol had met or exceeded its financial projections. The complaint further alleges that, with no regard for generally accepted accounting principles or his financial reporting obligations, Korkuc and others used the following schemes to align Symbol's reported financial results with market expectations:
- a "Tango sheet" process through which baseless accounting entries were made to conform the raw quarterly results to management's projections;
- the creation of "cookie jar" reserves to further manage earnings; and
- channel stuffing and other revenue recognition schemes.
On June 19, 2003, Korkuc pled guilty to criminal charges brought by the United States Attorney's Office for the Eastern District of New York ("USAO") based on the same conduct alleged in the Commission's complaint against Korkuc.
A separate complaint filed by the Commission on June 3, 2004 named Symbol and eleven other former Symbol executives as defendants for their role in the fraudulent scheme. Symbol consented to entry of a final judgment imposing, among other relief, a permanent injunction and a civil penalty in the amount of $37 million, and James Dean, one of the individual defendants, consented to a partial final judgment imposing permanent injunctive relief. On February 17, 2005, Brian Burke, a former senior vice-president of Symbol consented to a partial final judgment imposing permanent injunctive relief and a bar prohibiting him from acting as an officer or director of a public company.
The Commission acknowledges the assistance and cooperation of the USAO and the U.S. Postal Inspection Service in this matter.
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