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VeriFone's Darkest Moment

Douglas Bergeron has been a hugely successful chief executive at VeriFone — but with plenty of rough patches along the way.

The biggest concerns a financial restatement for the first three quarters of fiscal 2007, which, when announced in December of that year, sent VeriFone's stock and market value tumbling.

"That was the darkest moment in VeriFone's history," Bergeron tells American Banker. "I'm searching for words to describe the combination of anger, disappointment and embarrassment."

Dark may only tell part of the story. By the looks of a deposition Bergeron voluntarily gave to the SEC, and which American Banker acquired, the episode put his VeriFone career in serious peril.

The 152-page document indicates that SEC attorneys confronted Bergeron with a cache of emails relating to his involvement in discussions about the company's financial reporting prior to the erroneous statements.

At the time, VeriFone expected to earn 36.5 cents a share for a period that was not specified in the transcript. In a separate and unrelated email, Bergeron told colleagues that if the company didn't hit a certain number, "the party would be over big time for us," according to messages cited in the deposition.

"Now, assuming Paul" — Paul Periolat, then the company's supply chain controller — "delivers, we're at 219 million, 47 percent, 51 million, but only 35.6 cents. … How did we lose three cents?" Bergeron wrote a colleague at the time. Responded the colleague: "Paul will not stop looking."

Said Bergeron in another email cited in the deposition: "We need to get to 36.5 cents, figure it out."

The recipient's response: "Can I speak with you?" Bergeron: "You should wait until I cool down, use the time to figure out how we get to 36.5 cents."

Bergeron insisted during his deposition that he was using brash language because he was frustrated by his accounting team's inability to conclusively pin down earnings or explain why the company's profits weren't meeting expectations.

"You're seeing some frustration in the … — from me — in what happens after the operating numbers come in and how do you get to EPS," he told the SEC. "My sense was this was their first quarter closing this complicated dual thing and they had a lot of errors in their calculation. I was doing what good CEOs do, maybe with a little more expletive, regrettable expletive than necessary. I'm pushing him to go on and, you know, recalculate, recalculate, make sure we get it right."

Ultimately, the SEC came to a settlement with VeriFone. Periolat agreed to a $25,000 SEC settlement and was fired. VeriFone's chief financial officer, Barry Zwarenstein, resigned. Bergeron relinquished the chairmanship shortly after the episode. He remains VeriFone's chief executive.




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