THE former co-chairman of AremisSoft, an affiliate of Cyprus-based IT company GlobalSoft, is being forced to pay $200 million to the US Securities and Exchange Commission (SEC) to settle fraud charges brought against him four years ago.
The SEC complained that AremisSoft and two of its former chairmen, Rois Poyiadjis and GlobalSoft’s Lycourgos Kyprianou, overstated the company’s revenues in its annual report for 2000 and inflated the value of acquisitions made in 1999 and 2000, engaging in massive insider trading during that period. The SEC charged them with making more than $300 million in secret stock sales while AremisSoft was reporting inflated revenue.
Late last week, Poyiadjis agreed to pay $200 million to settle the charges by disgorging “unlawful profit from his trading in AremisSoft stock”. The papers were filed in the federal district court in New York, the SEC said in a statement.
The returned funds are to be distributed to investors under a plan for beneficiaries of the AremisSoft post-bankruptcy estate. AremisSoft filed for bankruptcy in 2002, reports from New York said.
Poyiadjis also agreed to be permanently enjoined from future fraud violations and is prohibited from ever acting as an officer or director of a public company. The SEC said Poyiadjis had consented to the settlement without admitting or denying the allegations.
In a civil complaint filed in a federal court in Manhattan, the SEC charged that the company’s co-CEOs, Poyiadjis and Kyprianou, made fraudulent statements by reporting sales to phony entities or businesses that did not buy its products.
In its 1999 and 2000 financial statements, the company reported that it paid $32.7 million to buy three software companies when the actual prices ranged from $100,000 to $300,000, the regulators said.
The co-CEOs, according to the SEC, also used offshore entities to sell millions of shares of stock in “massive” insider trading during the period of the alleged fraud.
According to reports from New York, Paul Berger, an SEC associate director of enforcement, said Kyprianou remained a fugitive in Cyprus, where he fled to avoid the US Attorney’s criminal indictment and the SEC’s charges.
“As this case demonstrates, the SEC will vigorously prosecute illegal conduct both home and abroad that affects US securities markets, will pursue the proceeds from such misconduct, and will enlist foreign authorities in its efforts to do so,” said Berger.
By the time it was collared by the SEC in 2001, AremisSoft had invested heavily in GlobalSoft, which was then the largest IT company in Cyprus. The Cyprus Stock Exchange (CSE) suspended GlobalSoft’s trading in late 2001 after the American SEC filed its complaint in New York.
In December 2001 the Cyprus SEC forwarded its file on GlobalSoft to the Attorney-general’s office to determine whether there was a case for criminal proceedings citing a possible violation of regulations with regard to the presentation of its financial statements in terms of a “correct and faithful picture of the company’s affairs”.
Among the allegations were possible violations of CSE law relating to the company’s alleged failure to adequately inform the investing public including an alleged omission relating to the activities and financial results of the company’ subsidiaries abroad.
The SEC said there was also a possible breach of regulations by the company’s alleged failure to inform via its prospectus of its real relationship with AremisSoft.
According to reports, the GlobalSoft case was due to be heard in court in Nicosia last Thursday but was postponed.
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