MicroStrategy executives fined by SEC over inquiry

MicroStrategy Inc. announced today that an inquiry into its accounting practices by the U.S. Securities and Exchange Commission (SEC) has been resolved without penalties being assessed against the software vendor. But MicroStrategy CEO Michael Saylor and two other top executives are being fined US$350,000 each.

Joining Saylor in paying the fines will be Sanju Bansal, MicroStrategy’s chief operating officer, and Mark Lynch, who resigned earlier this year as chief financial officer at the developer of data analysis software.

The three executives also will contribute a total of $10 million worth of MicroStrategy stock as part of a separate resolution of shareholder suits filed against the company – an action that was previously detailed by MicroStrategy.

Saylor, Bansal and Lynch “neither admitted nor denied the allegations” contained in a complaint filed by the SEC following its investigation, MicroStrategy said. Likewise, the Vienna, Va.-based company said it “concluded the SEC matter without admitting or denying wrongdoing,” although MicroStrategy added that it cooperated fully with the SEC.

The SEC launched its inquiry in the wake of a March revelation that MicroStrategy had overstated its revenue and earnings for the last two years and would need to restate the financial results. As part of the resolution, the company did enter into a remedial administrative order that commits it to rigorous contracting and accounting procedures.

“We have worked hard to put in place numerous organizational and business measures to safeguard the integrity of our finances, and now we can turn with renewed energy and dedication to the marketplace,” Saylor said in a statement.

Another step that will be taken is the addition of an independent director with finance expertise to the audit committee of MicroStrategy’s board. The company said resolution with the SEC, along with the October settlement of the shareholder suits, brings to a close all pending legal and regulatory matters related to the March restatement.

MicroStrategy last month announced several management changes, including the removal of functions such as internal controls and contract administration from Saylor’s responsibilities. That followed a summer layoff of about 10% of the workers at the once high-flying company.

But Peter Urban, an analyst at AMR Research Inc. in Boston, said MicroStrategy should be able to weather the financial storm. “I don’t think this is a company that’s going to be ruined by this,” Urban said.

He added that MicroStrategy has changed its pricing to go after mid-sized companies and small businesses and plans to expand into the market for customer relationship management software.

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