The Green Sheet Online Edition
March 25, 2013 • Issue 13:03:02
Bergeron steps down at VeriFone
Douglas G. Bergeron, long-time Chief Executive Officer of payment terminal manufacturer VeriFone Inc., resigned March 12, 2013, after 12 years at the helm. Board Chairman Richard McGinn is stepping in as interim CEO, VeriFone said in a release issued March 11. McGinn is also assuming the board seat Bergeron vacated. And Leslie Denend is the new interim Chairman of the Board.
Bergeron helped grow VeriFone from a $50 million business to the largest credit card terminal manufacturer in the world with revenues of nearly $3 billion. In a farewell e-mail to employees, Bergeron said, "In 2001, we purchased the company from Hewlett Packard for $50 million dollars (which we mostly had to borrow) and today VeriFone's enterprise value is about $3 billion dollars.
"We had 800 employees and under $300 million in revenue in the first year. Today, our revenues are six times larger and we employ almost 5,000 people around the world."
An embroiled legacy
Founded in 1981, acquired by Hewlett Packard Co. in 1997 and sold to Gores Technology Group in 2001 - at which time Bergeron took the helm - the company now faces multiple challenges. Among them are declining income; a failure to meet earnings projections, several pending lawsuits, and fallout from the company's disclosure in a March 11 filing with the Securities and Exchange Commission that VeriFone may have illegally done business with Iran.
In 2009, the SEC sued VeriFone, alleging the company had juggled its books to inflate its 2007 income. When news of the alleged trickery surfaced, stock prices dropped 46 percent (about $1.8 billion) in a single day. In May 2011, the federal government filed an anti-trust action against VeriFone that forced the company to divide Hypercom Corp., which it had just acquired for $485 million, and sell off Hypercom's U.S. equipment division. In addition, the government dropped an insider trading probe of Bergeron in February 2013.
In December 2012, the U.S. 9th Circuit Court reinstated a consolidated shareholder lawsuit against VeriFone that had been dismissed by the U.S. District Court for the Northern District of California. The suit alleges Bergeron and another VeriFone executive deliberately overstated earnings in three consecutive quarters in 2007 (also alleged by the SEC) to disguise that a merger with an Israeli firm, Lipman Electronic Engineering Ltd., did not realize the earnings VeriFone projected. After an independent audit discovered the irregularities, VeriFone admitted to accounting errors.
On March 7, 2013, a group of VeriFone investors filed a lawsuit in the Northern District of California alleging VeriFone and its officers made "materially false and misleading statements regarding the company's revenues and operations" between Dec. 14, 2011, and Feb. 19, 2013.
In addition, VeriFone launched mobile card terminals for taxicabs but was sued for $250 million by Creative Mobile Technologies LLC in December 2012 over VeriFone's alleged failure to live up to an agreement to place advertisements on the taxi terminal screens.
And recently, in a filing with the SEC, VeriFone stated "unauthorized activities" in its technical support services and its European merchant processor subsidiary, Point, may have resulted in illegal sales of terminal equipment to businesses in Iran. VeriFone said it is cooperating with authorities investigating these incidents.
On a positive note, VeriFone reported it made $430 million in the first quarter of 2013, compared with $425 million in the same time period in 2012.
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