Litigation News

Former Liberate Technologies Executive To Pay $222,499 To Settle Financial Reporting Fraud Charges With SEC

The Securities and Exchange Commission today announced that it has settled financial reporting fraud charges in a lawsuit it previously filed against Donald M. Fitzpatrick, the former Chief Operating Officer and head of sales of Liberate Technologies. The Commission's complaint charged Fitzpatrick with inflating Liberate's revenues through fraudulent sales transactions, and then misleading Liberate's finance department and outside auditors about the deals, in a scheme that ran from November 2001 to September 2002. Liberate is a San Mateo, California-based provider of software and services for interactive television. In the settlement announced today, Fitzpatrick consented to a court order that directs him to pay a total of $222,499, consisting of $97,499 in disgorgement of commissions and bonuses plus prejudgment interest, and a monetary penalty of $125,000. In addition, the order bars Fitzpatrick from serving as an officer or director of any publicly traded company, and enjoins him from future violations of Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13b2-2 thereunder. Fitzpatrick consented to the order without admitting or denying the allegations in the Commission's complaint. The Commission's complaint, which was filed in September 2004, alleged that Fitzpatrick used a variety of methods to fraudulently inflate Liberate's financial results. These included arranging a so-called "round-trip" transaction, in which Liberate provided all of the funds that a customer needed to purchase Liberate product; entering into a "side deal" that allowed a customer to return excess Liberate product; and granting undisclosed concessions to induce a customer to purchase Liberate products. In each instance, the complaint alleges, Fitzpatrick misrepresented or withheld key information about the transactions from Liberate's finance department and its outside auditors. In January 2005, the Commission settled charges against former Liberate sales executive Thomas R. Stitt for his role in the fraud described above. Without admitting or denying the allegations in the Commission's complaint, Stitt consented to a court order that imposed disgorgement and penalties totaling $78,000, as well as a ten-year officer and director bar and an injunction against future securities law violations.

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	Did You Know?
	Product liability litigation can arise when a consumer is injured or killed by a defective product. Under the Trade Practices Act, applicable after July 9 1992, the product liability provisions grant to take legal actions to those who suffer loss or injury due to a defective product or service and give grounds to take legal action against the manufacturer and/or supplier of that particular product.