246. 1. Hughes stated that Kennedy had "covered all the points [he] would have," such that he had nothing to add. 118. What We Do Our clients are specialists—scientists, engineers, technologists, researchers, government officials—narrowly focused. Gary D. Kennedy, a resident of Sandy, Utah, became president, chief executive officer ("CEO"), and a member of TenFold's board of directors in September 1996. 124. TenFold had never returned a customer's money. The Commission seeks an order requiring all defendants to pay civil penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. As discussed in more detail below, Kennedy, Hughes, Hanks and Clayton knew at the time the fourth quarter and year-end 1999 results were released that completion dates that were no longer correct or feasible had been used to calculate revenue. For the financial results TenFold reported in its 10-Q for the first quarter of 2000, TenFold used a completion date of June 1, 2000 to calculate revenue on the Unitrin project. 50. 184. 1801 California Street, Suite 1500 208. TenFold's failure to disclose the facts surrounding its business operations, coupled with positive statements that risks were potential rather than actual, rendered the 10-K materially false and misleading. Business people understand business needs. 241. 4. §§ 240.10b-5, 240.12b-20, 240.13a-1, 240.13a-13, and 240.13b2-1] thereunder. By way of example, TenFold's president, Gary D. Kennedy, and its chief financial officer ("CFO"), Robert P. Hughes, held a conference call with analysts on February 1, 2000, providing information and answering questions in a way that fraudulently masked the difficulties the company was experiencing in timely completing contracts. At the time the 10-K was filed, TenFold was aware that the project had not been completed by February 18, 2000 and would not be completed by April 3, 2000. For the financial results TenFold reported in its 10-Q for the first quarter of 2000, TenFold used completion dates of March 25, 2000 and April 3, 2000 to calculate revenue on the Trumbull project. During KPMG's audit of TenFold's 1999 financial statements, TenFold supplied KPMG with the various project end dates it used when it calculated the amount of revenue to recognize on a percentage of completion basis. IT administrators and users must only set the desired level of authorization (read, modify) and tenfold will take care of the rest. Plaintiff repeats and realleges paragraphs 1 through 261 above. 95. The confirm request sent to Utica specified a completion date for the project of February 29, 2000. Hughes also provided materially inaccurate and misleading information during the call. § 78m(a), 17 C.F.R. Using March 25, 2000 and April 3, 2000 as the completion dates was improper. 193. Those contracts were with Utica, Unitrin, and Trumbull Services LLC ("Trumbull"). 210. Since TenFold's fundamental assumption in estimating labor was inaccurate, and it did not track actual costs on its projects, TenFold was unable to determine if and when it was in a loss position. Ensure high quality applications by automating tedious, repetitive and error-prone coding tasks. 240. (801) 495-1010, Gary D. Kennedy For the results TenFold reported in its 10-K for 1999, TenFold utilized end dates of February 29, 2000 and March 15, 2000 to calculate the revenue it would recognize on the Utica project. any delays or changes in customer requirements incurred in connection with new or existing projects [or] the accuracy of our estimates of the resources required to complete any current or new projects. License revenues consist of fees for licensing the Universal Application as a tool, and license fees for the applications that the Company owns and resells. TenFold's accounting or finance department or division, of which Hughes, Hanks and Clayton were a part, received copies of all contract amendments. 122. Sandy, Utah 84093 144. This could result in a fixed price that turns out to be too low, which would cause us to suffer a loss on the project and would negatively impact our operating results. In 1999 and the first part of 2000, TenFold engaged in a pattern of announcing positive news and withholding negative news. Kennedy was very involved in certain projects during January 2000, including Nielsen and Untitrin, as he actively worked to manage those customer accounts. TenFold knew at the time the first quarter 2000 10-Q was filed that the completion date had been extended to September 30, 2000. 5. § 78m(b)(2)(B)], and unless restrained and enjoined will continue to do so. 160. F. False Financial Reporting in the 1999 10-K and the First Quarter 10-Q. ", "An unanticipated termination of a major contract [or] the delay of a project . See the platforms that Tenfold currently supports. Integrate with your existing architecture & technology, global architectural standards (SOA) and messaging & data standards (FIXML, HL7, AL3, ACORD etc.) During the first quarter of 1999, TenFold entered into a contract with Ohio Farmers whereby TenFold would develop a software program to manage commercial policies for Ohio Farmers. In late 1998, Utica hired TenFold to develop a software application that would process insurance premiums for Utica's commercial customers. Order Kennedy, Hughes, Hanks, and Clayton to disgorge and pay over, as the Court may direct, all ill-gotten gains received or benefits in any form derived from the illegal conduct alleged in this Complaint, together with pre-judgment interest as provided by law. Under generally accepted accounting principles, in order to use the percentage of completion method of revenue recognition an entity must be able to make estimates that are reasonably dependable. 153. TenFold, Kennedy and Hughes, directly or indirectly, in the offer or sale of securities, by the use of means or instruments of transportation or communication in interstate commerce, or by the use of the mails, obtained money or property by means of untrue statements of material facts or omissions to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, in violation of Section 17(a)(2) of the Securities Act [15 U.S.C. 108. It boasted that "[w]e deliver [software] applications on time, for a fixed price, and on target - or we refund our customer's money." But instead of providing truthful information to the investing public, TenFold's officers disseminated inaccurate, incomplete, positive and "upbeat" disclosures designed to mislead analysts and investors so that the officers could reap thousands and even millions in personal profits - at the expense of other investors -- by selling their TenFold stock at inflated prices. Summary of Alleged Violations and Remedies Sought. DISSEMINATION OF FALSE AND MISLEADING INFORMATION REGARDING TENFOLD'S BUSINESS OPERATIONS AND STOCK SALES BY DEFENDANTS, A. 2926 East 3835 South 60. He said that Kennedy should have disclosed the status of certain problem projects, pointing out that TenFold booked a loss of $1.7 million on one project and $1 million on another during the fourth quarter.