The Enron scandal is sending ripples across Silicon Valley, where fast moving companies and once-burgeoning dotcom companies worked the edges of lawful accounting practices.
Computer graphics chipmaker Nvidia was the the latest victim of the so-called "Enron-itis" Friday. Its stock price tumbled after an announcement the company was conducting an internal accounting practice probe.
Nvidia said Thursday that a January inquiry from the US Securities and Exchange Commission prompted an "internal review of the recording of certain reserves and the timing of recording certain expenses."
In November, the SEC announced it had charged 11 Nvidia employees with using inside information regarding an upcoming announcement of a lucrative contract with Microsoft's Xbox division. That insider information, the SEC alleged, resulted in windfall profits on Nvidia stock for the employees. The SEC said that probe is still ongoing.
Several days earlier, David Thatcher, president of Internet services company Critical Path, pleaded guilty to charges of securities fraud for manipulating his company books to pump up revenue figures. Thatcher's lawyer said the executive is cooperating with authorities in further dotcom probes.
The Thatcher affair is especially troubling for the legions of former dot-com executives here who have long faced accusations of creative accounting as their firms burned up cash.
As far back as December 1999, the SEC was calling for new accounting guidelines. The new guidelines were needed to guarantee that the growing number of dotcoms were reporting their revenues accurately, said Chartered Accountants magazine.
Thatcher now faces a possible five-year prison sentence and a US$250,000 fine. The San Francisco SEC office has been especially enthusiastic in getting the word out on Thatcher's cooperation in the hope of flushing out other wrong-doers. "We want to see what else we can shake loose," said one SEC investigator.
The growing financial scandals are fast becoming the most-talked about subject here, where some are still living off stock earnings from before the Internet bubble burst.
"It has certainly brought a whole new dimension to the post-bubble landscape," said Michael Perkins, author of The Internet Bubble.
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