29 January 2003 Supply chain management software company i2 Technologies is being investigated by the Securities and Exchange Commission (SEC) over a series of accounting allegations, the company said this week.
An ‘informal’ inquiry was opened after an internal investigation by i2 found evidence of improper revenue recognition and financial reporting practices. The SEC will now look at the evidence and decide whether to launch a full investigation.
The Dallas, Texas-based company, one of the heroes of the high-tech bubble, also said it had hired accountants Deloitte &Touche to re-audit its financial statements for 2000 and 2001. Its former auditor was Arthur Andersen, which wound down its operations as a result of its role in the Enron, WorldCom and other scandals.
“We take our fiduciary responsibility very seriously and believe under the circumstances a re-audit is the right thing to do,” said Sanjiv Sidhu, i2’s chairman and chief executive. “It does not dim my outlook for our performance in the future.”
The internal inquiry that discovered evidence of improper accounting was launched by i2 in November after allegations raised by two disgruntled former vice presidents, Reagan Lancaster and Claudio Osorio, now partners in a Dallas venture capital firm.
The initial review by i2 directors found no evidence to support their claims, but it is understood that the former executives recently provided fresh information to the board.
The company’s stock tumbled 27% at the end of trading yesterday following the news. In an attempt to avoid the humiliation of de-listing, i2 said it will move its shares from the Nasdaq National Market to the Nasdaq Small Cap Market on Thursday (30 January), where trading regulations are more lenient.
Meanwhile, i2 also reported preliminary fourth quarter figures, in which losses narrowed significantly as expense cuts offset another fall in sales. The company reported a net loss of $12.4 million (€11.4m), compared with a loss of $589.9 million (€544.4m) a year earlier. Revenue fell 38% to $119.9 million (€110.6m).