Aspen Technology settles SEC fraud case

Aspen Technology Inc. has settled allegations by federal regulators who found the software maker fraudulently inflated revenue over three years to meet Wall Street's financial expectations, the Securities and Exchange Commission said today.

The settlement does not require Aspen Technologies to pay a financial penalty, in part because the Cambridge-based company cooperated with investigators and took steps to correct the problems, the SEC said.

However, Aspen must retain an independent consultant to review its finances.

A related civil action that the SEC filed in January against three former Aspen executives is pending in U.S. District Court in Boston. One of the three, former Chief Executive David McQuillin, pleaded guilty in U.S. District Court in Manhattan in March to criminal conspiracy and securities fraud.

Aspen, a provider of software and services to help oil companies and other customers run industrial plants efficiently, improperly recorded revenue on at least 19 different software license transactions from 1999 to 2002, the SEC said.

The alleged scheme involved violating standard accounting rules by prematurely recognizing revenue from contracts during certain financial quarters, even though the contracts had not been signed during that quarter, the SEC said. In other cases, Aspen counted revenue from certain contracts in quarterly financial statements, even though the revenue shouldn't have been recorded then because of contingency agreements in the contracts.

Aspen was "motivated by a desire to boost revenues and meet securities analyst earnings expectations," the SEC said in a news release. Former Aspen managers, the SEC said, were "directly involved in negotiating and improperly recognizing revenue on transactions."

Aspen agreed to settle the case without admitting or denying the SEC's findings.

Phone calls seeking comment from Aspen and an attorney for the company were not immediately returned today.

In the pending civil case against former Aspen executives, the SEC is seeking unspecified fines and restitution as well as an order barring the three from serving as officers or directors of any public company. In addition to McQuillin, the case names former Chief Financial Officer Lisa Zappala and former Chairman Lawrence Evans.

The criminal case against McQuillin alleged he inflated the company's revenues when he successfully competed in 2002 with another company executive for the CEO post.

In June, Aspen said it would restate some of its earlier financial results due to accounting errors. (AP)