Ex-gateway execs found liable

San Diego Business Journal, March 12, 2007 by Mike Allen

Ex-Gateway Execs Found Liable: Two former Gateway Inc. executives were found liable of multiple counts of fraud in a scheme to manipulate the former Poway computer manufacturing company's revenues in 2000.

A San Diego jury found John J. Todd, Gateway's former chief financial officer, and Robert Manza, its former controller, liable for violating anti-fraud, false statements to accountants, and record-keeping provisions of securities laws following a three-week civil trial before federal Judge Roger Benitez.

The two executives were charged with fraudulently reporting revenue and earnings to meet Wall Street analysts' expectations in an indictment filed by the Securities and Exchange Commission in 2003.

Gateway settled with the SEC in 2003, neither admitting nor denying any wrongdoing, and wasn't assessed any penalties.

In an announcement following the verdicts, the SEC said Todd was the architect of a plan to "close the gap" between stock analysts' expectations and Gateway's anticipated revenues through a variety of improper and extraordinary transactions.

Manza initiated one of the transactions and helped prepare financial statements knowing the transactions failed to comply with generally accepted accounting principles, the SEC said.

A hearing to determine sanctions is scheduled for April 26.

Gateway, once based in San Diego County, acquired eMachines in 2004 and moved its offices to Irvine.