VeriFone Settles Accounting Irregularities Charges

SAN JOSE, Calif. (AP) — VeriFone Holdings Inc. on Tuesday agreed to settle regulators' charges that it falsified accounting records by pledging to never violate federal securities laws. A VeriFone employee implicated in the accounting debacle will pay a $25,000 fine.

The Securities and Exchange Commission charged VeriFone, a provider of electronic pay services, and a former supply chain controller, with overstating operating income by 129 percent by improperly accounting for its inventory.

In February 2007, VeriFone discovered that in the fiscal first quarter ended Jan. 31 its gross margin fell unexpectedly to 42.8 percent, or about 4 percentage points lower than the forecast provided to Wall Street analysts.

The SEC said senior management were convinced prior forecasts were correct. The agency claimed the company then directed employees to search for and fix the problem to avoid what an executive called an "unmitigated disaster."

The SEC said 38-year-old Paul Periolat of Rocklin, Calif., manipulated inventory levels to boost margins — and thereby income as well — so VeriFone wouldn't miss expectations. The company said Periolat acted without scrutiny or authorization from more senior management.