PWC Resigns as STEC AuditorWednesday, September 12, 2012
Shares of Santa Ana-based disk drive maker STEC Inc. fell in early trading today after PricewaterhouseCoopers LLP resigned as the company’s independent auditor.
STEC shares were down more than 5% in early afternoon trading to a market value of $331 million.
The London-based accounting firm had been STEC’s auditor for more than two years.
A regulatory filing on Tuesday indicated there were no disagreements between the two companies that led to move, but the resignation comes at a significant juncture for STEC.
Its Chairman and Chief Executive Manouchehr Moshayedi is currently fighting insider trading charges levied by the Securities and Exchange Commission.
Moshayedi denied those charges in a recent filing in U.S. District Court for the Central District of California.
Moshayedi contends he was “unaware of any material information that had not been publicly disclosed at the time of the public offering,” according to the filing.
The SEC has charged Moshayedi with violating anti-fraud provisions of U.S. securities laws, and seeks a final judgment ordering him to relinquish any trading profits, pay prejudgment interest and financial penalties, and be permanently barred from serving as an officer and director of any registered public company.
The civil charges, filed in mid July, allege he withheld “critical nonpublic information” that was likely to negatively affect the company’s stock price and a secondary offering that was set to coincide with its second quarter financial results and its third-quarter revenue guidance in 2009.
The SEC alleges he did not call off the offering or abstain from selling his shares once he had the information. He instead engaged in a fraudulent scheme to hide the “truth” through a secret side deal, the SEC said, selling 9 million shares.
Moshayedi and his brother Mehrdad Mark Moshayedi, STEC’s president, chief operating officer and chief technology officer, made $267 million from the sale before expenses.
In late July the SEC cleared STEC and Mehrdad Mark Moshayedi of any wrongdoing related to the insider trading investigation.
The SEC contends that Manouchehr Moshayedi entered into a secret deal with its largest customer Hopkinton, Mass.-based EMC Corp., to meet third quarter revenue expectations, and failed to disclose that EMC would not make any other additional purchases with STEC after that order.
STEC makes flash memory drives for corporate data networks. The products, known as solid state drives, use chips to store data.
The Business Journal first reported the SEC was considering a civil injunction action against the company and its CEO in August 2011.
Regulators began looking at the company in 2009 to determine if it violated federal securities laws by making false and misleading statements.
STEC is in discussions with another independent accounting firm to succeed PwC, a spokesman said.