Ex-Critical Path Execs Face ChargesAug 27, 2002 | AP
Two former Critical Path Inc. executives on Tuesday faced criminal charges of bamboozling investors by fabricating sales and then selling their stock before the e-mail provider's shares collapsed in an accounting scandal.
The criminal complaint filed by the U.S. Attorney's Office in San Francisco against former Critical Path vice presidents Jonathan A. Beck and Kevin P. Clark raises familiar allegations of management greed amid Wall Street's quagmire of corporate corruption.
But federal authorities began digging into the alleged misconduct at San Francisco-based Critical Path in early 2001 — long before corporate heavyweights like Enron and WorldCom rattled the stock market with revelations of financial chicanery.
Two other former Critical Path executives, David A. Thatcher and Timothy Ganley, pleaded guilty to criminal charges of securities fraud earlier this year.
Both Beck, 33, and Clark, 37, are accused of pocketing windfalls from the illegal sale of Critical Path stock in January 2001 after helping the company book bogus sales in the quarter ending in December 2000.
The alleged stock sales took place about two weeks before Critical Path first hinted at an accounting scandal that nearly destroyed the company.
If found guilty, Beck and Clark each face up to 10 years in prison and fines of $1 million apiece. Critical Path fired Beck in February 2001 and Clark resigned around the same time, according to authorities.
Beck, formerly a vice president of sales at Critical Path, is charged with pocketing $600,000 from his stock sales — made during a time that the company's shares traded between $19.75 and $26.25.
Clark, formerly a regional vice president of sales at Critical Path, collected $350,000 from his stock sales, authorities said. On the days Clark cashed out, Critical Path's stock traded between $19.75 and $25.94.
Critical Path's shares sold for as little as 24 cents last year after the company wiped out $19 million in previously recorded sales. The shares dipped two cents to close at 86 cents Tuesday on the Nasdaq Stock Market.
The company is trying to rebound under an entirely new management team led by former venture capitalist William McGlashan Jr.
Clark's attorney, George O'Connell, declined to comment on the case Tuesday. In a separate civil case filed by the Securities and Exchange Commission, Clark agreed to repay $378,912, without admitting or denying the allegations.
Beck's attorney did not return calls by late Tuesday afternoon. The SEC also filed a civil complaint against Beck, mirroring the charges in the criminal case. Beck hasn't settled the SEC case.
The SEC on Tuesday also announced a settlement of a civil case against another former Critical Path executive, William H. Rinehart, who was formerly Clark's and Beck's boss.
The SEC alleges Rinehart, 38, helped orchestrate the financial shenanigans. He agreed to a $110,000 fine and a five-year ban from serving as an executive or director of a publicly held company to settle the SEC case.
Rinehart's attorney did not return messages by late Tuesday afternoon.
Thatcher, one of the former executives to plead guilty this year, has been helping authorities build cases against other former Critical Path insiders.
Without elaborating, the SEC said its Critical Path investigation is continuing. None of Critical Path's current executives are targets, according to the company.