A company that routinely engages in questionable behavior often has a problem from the top down. In general, a few bad apples lower down the ladder can only survive for so long before they are discovered and corrected or fired by senior staff. However, if a company has a proven track record of bad behavior that spans years and seems to be company policy, then the questionable ethics almost certainly stem from the top of that ladder. Avast Software s.r.o. doesn’t appear to be an exception to this rule.
Vincent Steckler, Avast Software’s CEO, seems to have a history of being “ethically challenged”, for those of you that are into political correctness. I prefer to call a spade a spade, however, and a fraudster a fraudster. Mr. Steckler, prior to taking over at Avast, served as the “” at a company called Logicon. While working at Logicon, Mr. Steckler was found to have engaged in fraudulent activities, which were investigated by the United States Securities and Exchange Commission. The SEC chose to bring a complaint against Mr. Steckler.
The SEC’s complaint alleged the following:
- “Beginning as early as May 1999 and continuing through January 2000, Legato Systems, Inc. (“Legato” or the “Company”), a Silicon Valley software company, recorded millions of dollars in revenue and income from phony transactions arranged by its senior sales executives. The fraud perpetrated by Legato’s senior sales executives was aided and abetted by Defendant Vince Steckler, while he was an executive of Legato’s customer, Logicon, Inc.”
- “Steckler also advised the Legato executives how to conceal the cancellation right from Legato’s finance department, by including it only in a hidden “side letter” instead of in the order or contract between Logicon and Legato. “
- “As a result of Steckler’s conduct, Legato filed a report on Form 10-Q containing materially inflated revenue and net income for the third quarter ending September 30, 1999.”
- “During the second half of 1999, Legato’s stock price rose from under $30 to nearly $80 per share on an historic (pre-split) basis. In April 2000, once the fraud was finally revealed to the public, the stock price plunged to under $20 per share on an historic (pre-split) basis.”
The SEC complaint admonished Steckler for the following:
- DUE TO FRAUDULENT CONDUCT BY STECKLER AND OTHERS LEGATO MATERIALLY MISSTATED ITS RESULTS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 1999. (Bold emphasis placed by the SEC)
- Steckler aided and abetted Legato’s sales executives’ fraudulent conduct, causing Legato fraudulently to recognize revenue on one transaction that accounted for a significant portion of the falsely reported revenue and income.
- Steckler aided and abetted, and unless enjoined will continue to violate Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5].
- Steckler aided and abetted, and unless enjoined will continue to violate Section 13(b)(5) of the Exchange Act [15 U.S.C. § 78m(b)(5)] and Rule 13b2-1 [17 C.F.R. § 240.13b2-1].
In other words, the SEC alleged that Vincent Steckler was engaged in accounting fraud, that cost shareholders lots of money. Of special note, is that the SEC also determined that “At Logicon, Steckler was eligible to receive a cash bonus if he met certain performance criteria.”
The SEC’s investigation culminated in the SEC imposing the following sanctions and penalties upon Mr. Steckler:
- The issuance of a cease-and-desist order against Steckler “from committing or causing future violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934, and Rules 10b-5, and 13b2-1, thereunder.
- The issuance of a cease-and-desist order against Steckler “from causing future violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder.”
- The imposing of a “$35,000 civil monetary penalty” against Mr. Steckler.
- The SEC ultimately finding that “Steckler caused Legato’s and other persons’ violations of the antifraud and related provisions.”
Steckler consented to these findings, sanctions, and penalties levied against him by the SEC, “without admitting or denying the findings”. I’ll leave it to the reader to determine what that says about Mr. Steckler.
Fast forward to present day and not much has changed. The company has changed from Logicon to Avast, the type of fraud has changed from accounting & financial fraud to tech support scams, and the people hurt have changed from Legato’s shareholders to Avast’s customers. However, one thing remains the same: Steckler unjustly enriching himself at other people’s expense.
It is no wonder that Avast Software, a seemingly reputable company established in 1991, has been twisted into a company that preys on its own customer-base under the helm of Vincent Steckler.
What is it that they say about the past? “Those who cannot remember the past are condemned to repeat it.”
For those of you that are into reading SEC cases and rulings (riveting reading for sure), you may find the sources that I researched from at:
Original SEC Complaint: http://www.sec.gov/litigation/complaints/comp18327.htm
Final Judgement of $35,000 Penalty: https://www.sec.gov/litigation/litreleases/lr19385.htm