Financial Fraud:Walter Konigseder Arrested On Investment Fraud Charges
Former Informix Executive Hauled Into Court On 19-Year-Old Indictment Regarding Alleged Investment Fraud Scheme
Walter Konigseder arrested on investment fraud charges
SAN FRANCISCO – This morning, former Informix executive Walter Konigseder appeared in federal court to face investment fraud charges laid out in an 11-count indictment filed in October of 2000, announced United States Attorney David L. Anderson and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.
A federal grand jury indicted Konigseder, 67, a German national, on October 5, 2000. According to the indictment, in the early 1990s, Konigseder was the Sales Director and Country Manager for Germany of Menlo Park-based Informix, a multinational, publicly held computer software developer, support, training, and consulting company. From 1992 through 1996, Konigseder had authority over Informix’s sales force, finance, and legal staff within all of Central and Eastern Europe. The indictment alleges that Konigseder caused Informix to record false and illusory sales, to make false statement to Informix’s auditors and management, and to book license revenue in advance, rather than over the period of maintenance contracts.
The indictment describes how Konigseder engaged in numerous acts of alleged wrongdoing in connection with Informix’s restatement in 1997 of its 1996 earnings. The indictment alleges that Konigseder’s fraud contributed to the need for Informix to restate its 1996 earnings. Between April and September of 1997, Informix therefore restated its previous year’s growth. The result was a 60% drop in its stock value—a change to the company’s value from approximately $2.5 billion to as low as $975 million. For example, the indictment describes six illusionary sales between June of 1996 and January of 1997 in which Konigseder, contrary to Generally Accepted Accounting Principles, directed Informix to recognize more than $25 million in revenue on contracts that contained contingencies. Further, the indictment describes how Konigseder allegedly concealed material facts from Informix’s auditors. In July of 1997, for example, Konigseder allegedly reported to Informix’s auditors that a client did not make a multi-million dollar payment because the client was hoping to expand on the existing contract with Informix. In truth, Konigseder was aware that the client had exercised a side agreement canceling the contract with Informix altogether. The indictment also alleges Konigseder caused Informix to make false statements to the Securities and Exchange Commission overstating the company’s earnings in the second, third, and fourth quarters of 1996.
In sum, Konigseder was charged with three counts of wire fraud, in violation of 18 U.S.C. §§ 1343 and 2; four counts of accounting fraud, in violation of 15 U.S.C. §§ 78m(b) and 78ff(a), 17 C.F.R. 240.13b2-1, and 18 U.S.C. § 2; and three counts of false statements to accountants, in violation of 15 U.S.C. §§ 78m(b)(2) and 78ff(a), 17 C.F.R. 240.13b2-2, and 18 U.S.C. § 2.
A bench warrant was issued for Konigseder’s arrest on October 5, 2000. At that time he was residing in Germany and remained there for almost 19 years after being indicted. Konigseder was arrested by Mauritius authorities in August while on a trip to that country. He was handed over to United States authorities on October 9 and arrived in the United States on Friday, October 11. He made his initial federal court appearance at 10:30 this morning before U.S. Magistrate Judge Jacqueline Scott Corley.
An indictment merely alleges that crimes have been committed and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendant faces a maximum sentence of 5 years’ imprisonment and a $250,000 fine for each count of wire fraud, 10 years’ imprisonment and up to $1 million for each count of falsification of accounting records and false statements to accountants. In addition, the court may order additional periods of supervised release, fines, and restitution, if appropriate. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorney William Frentzen is prosecuting the case. The prosecution is the result of an investigation by the Federal Bureau of Investigation with assistance from the Department of Justice Office of International Affairs, Mauritius, and the United States Marshal Service.