The U.S. Securities and Exchange Commission filed a complaint against the former president, chairman and CEO of HPL Technologies, charging him with fabricating over 80% of the company's reported revenues for fiscal 2002.

According to the complaint, the CEO began his fraud in anticipation of HPL's initial public offering in July 2001. At that time, he forged purchase orders from HPL customers and generated phony shipping documents showing that software products had been delivered to the customers. The Commission's complaint further alleges that the CEO's fraud escalated over the next year through repeated creation of fake purchase orders at the end of each quarter in order to boost the company's revenue. In one quarter, the SEC says, over 90% of the company's reported revenue was wholly fictitious.

The SEC explains that the CEO covered up his fraud by doctoring bank records to create the appearance of millions of dollars in non-existent customer payments. He also borrowed millions of dollars from his brokerage accounts - secured by his personal HPL stock holdings - and funneled the money into the company in the guise of customer payments.

He fooled the auditors by forging letters from HPL customers confirming the purchases. At one point, says the SEC, he arranged a conference call between the company's auditors and a friend posing as an HPL customer.

Without admitting or denying the allegations, the CEO has agreed to the entry of an order enjoining him from future violations of these provisions, permanently barring him from acting as an officer or director of a publicly-held company, and requiring him to pay disgorgement and monetary penalties in an amount to be set by the court.

-Rosemary Schlank