Ixia said it has completed a review of its finances after the resignation of former CEO Victor Alston due to falsified credentials. The company said it found that despite the controversy on his resume, there was no evidence of “intentional misconduct” in regards to the company’s financials.
However, the company’s CFO, Tom Miller, resigned this week due to accounting errors that were discovered in the course of the investigation. Miller was cleared of intentional misconduct, but Ixia found mistakes that encompass six previous quarters in 2012 and 2013.
Brent Novak, Ixia’s VP of finance since 2006, is stepping in as acting CFO while Ixia conducts a CFO search. Miller will remain a company employee for a three-month transition period.
The investigation concluded that the tone set by Alston impacted the sloppy financials, along with “insufficient resources, controls, and training of relevant personnel with respect to revenue recognition.”
The internal investigation included the audit committee of Ixia’s board of directors retaining its own legal counsel and an advisory firm in forensic accounting. Victor Alston resigned in late October after years of claiming to have computer science degrees from Stanford University (he attended Stanford, but did not have degrees in those areas) and lying about his age and early work history, according to the company. The delays in Ixia’s quarterly filings as it went through the investigation process have put it out of compliance with the Nasdaq’s listing requirements.
According to an Ixia company statement, “the committee found that, although the company’s former president and chief executive officer … had misstated his academic credentials, age, and early employment history, the investigation did not establish that he engaged in intentional misconduct with respect to the company’s financial results or financial statements.” Miller was similarly cleared of deliberate misconduct.
The company went on to say: “The investigation found, however, an aggressive tone at the top set by the former CEO, a lack of leadership in terms of tone at the top with respect to the company’s recently resigned chief financial officer [Miller], and insufficient resources, controls and training of relevant personnel with respect to revenue recognition, all of which collectively resulted in certain identified errors in the company’s revenue recognition.”
Ixia found flaws in its recognition of revenue for some prior periods, involving “inappropriate assessment of certain multiple-element arrangement sales transactions,” as well as “an arrangement involving the extension of payment terms beyond the company’s customary terms.” Both of those resulted in early recognition of revenue for all quarters in Ixia’s fiscal year that ended Dec. 31, 2012 and the quarters that ended March 31 and June 30 of last year. The figures were small – between zero to 3% of the company’s reported amounts, and according to Ixia, involve revenue that would at most, be shifted between accounting periods. The investigation concluded that the underlying transactions were valid and there will be no impact on the total amount of revenue that Ixia ultimately recognized.
Ixia said it is working to finish evaluating the errors to confirm whether or not it needs to make any re-statements of its finances, as well as looking at its own financial procedures and controls. It has been given until March 18 by Nasdaq to file its quarterly report for the period ended Sept. 30, 2013; Ixia said it is trying to complete that form on or around March 18, but it will request a hearing with Nasdaq to remain listed if it doesn’t make that deadline.
