The former chief financial officer of Network Associates Inc. was convicted Thursday of securities fraud in a scheme to overstate revenue and earnings at the Santa Clara software company by hundreds of millions of dollars between 1998 and 2000.
A federal court jury found Prabhat Goyal of Los Altos guilty of one count of fraud and seven counts each of filing false reports to the Securities and Exchange Commission and making false statements to auditors.
Goyal was the company's CFO at its founding in 1997 but was forced out along with other top managers in December 2000 after the company reported a loss and changed its accounting methods.
The company, acquired by McAfee Inc., paid $50 million last year to settle civil charges by the SEC of inflating revenue by $622 million.
Goyal was accused of taking advantage of the former accounting method, which recorded revenue based on sales to distributors rather than customers, through a variety of schemes to oversell products to distributors. Prosecutors said those methods included secret payments to distributors to keep excess inventory and buy more products.
Goyal's lawyers argued that recording revenue based on sales to distributors, sometimes called sell-in accounting, is not illegal. Defense attorney Stephen Jonas said Thursday that he would ask U.S. District Judge Martin Jenkins to acquit Goyal or grant a new trial at a hearing in July and, if unsuccessful, would appeal the convictions.
"It is our view that sell-in accounting is a matter of accounting judgment, and that the judgments made by Mr. Goyal and others, all of whom agreed that sell-in accounting was appropriate at the time, were not criminal,'' Jonas said.
Two former controllers of the company, Evan Collins and Terry W. Davis, have pleaded guilty to charges related to the former accounting practices. Both men are scheduled to be sentenced by Jenkins in September. Collins testified against Goyal.
