Application development tools vendor Unify has suspended its two top executives while auditors investigate "improper accounting and financial practices".
President and chief executive Reza Mikailli, who had been on medical leave following a heart attack in early June, and chief financial officer Gary Pado, who had been acting chief executive in Mikailli's absence, have both been placed on administrative leave during the investigation.
The move has prompted a number of class action lawsuits from investors, claiming that Unify violated US securities law by "issuing false and misleading statements" and that company insiders "artificially" inflated the stock price.
Trading of Unify's shares on Nasdaq have been suspended at $3.15. Unify's stock climbed as high as $37 at the end of last year, which the lawsuits allege followed the issuing of "false" financial statements.
In a statement this week, the company said that portions of its reported revenue for the financial year ending 30 April 2000 "were improperly recognised", and said figures for the same period last year are also under investigation. It also warned that first quarter earnings will fall short of expectations.
Auditors Gray Cary Ware and Fredenrich are working together with PricewaterhouseCoopers on the investigation, and Unify said amended reports would be filed with the Securities and Exchange Commission (SEC) once the investigation is completed.
Unify has also requested an extension from the SEC for the filing of its financial statements for its current financial year. An SEC spokesman was unable to confirm whether it had launched its own investigation into the company's trading practices.
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