Mr. Goyal, 49 years old, lives in Los Altos, California.  The Indictment alleges that between 1998 to 2000, Mr. Goyal, while he was CFO of Network Associates, conspired with others to commit securities fraud by, among other things, causing Network Associates to make millions of dollars in payments to its distributors falsely disguised as discounts, rebates and marketing fees in order to convince the distributors to hold excess inventory; not return unsold products; and purchase more products than the distributors could actually sell to customers during a given quarter. 

The Indictment alleges that Mr. Goyal concealed from Network Associates' outside auditors and its Board of Directors the true nature, extent, and source of the improper payments to its distributors as well as other special terms and conditions reflected in oral and written side agreements.  If these and other matters had been disclosed, Network Associates would not have been permitted to recognize revenue on these software sales at the time that it did.  The Indictment alleges that revenue was overstated by over $470 million, and losses were understated by approximately $330 million during 1998 to 2000.

The Indictment also charges the defendant with filing false and misleading Form 10-Qs, Form 10-Ks, and other documents with the SEC.  It further alleges that Mr. Goyal made fraudulent entries in Network Associates' financial books and records, false statements and material omissions to outside auditors, and materially false and misleading public statements about Network Associates' financial performance.

The Indictment alleges violations of Title 18, United States Code, Section 371; Title 15, United States Code, Sections 78j(b) and 78ff; Title 15, United States Code, Sections 78m(b)(2) and 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5; Title 17, Code of Federal Regulations, Section 240.13b2-2; and Title 18, United States Code, Section 2 – aiding and abetting. 

United States Attorney Kevin Ryan said, "The U.S. Attorney's Office and the FBI have made clear that we will prosecute those high level officials who illegally conceal truthful information from investors about the state of their companies.  Investors need to be able to rely

on the financial statements made by public companies, and these efforts to defraud the markets undermine the integrity of our financial institutions."

FBI Special Agent in Charge Mark Mershon said, "The FBI is committed to devoting the resources needed to investigate and bring to justice white collar criminals, especially executives at publicly traded companies who violate their fiduciary obligations to shareholders and the investing public."

If convicted, Mr. Goyal faces maximum statutory penalties for each count of the nineteen counts of securities fraud of 10 years in prison, a fine of up to $1 million, three years supervised release, and restitution.  On the conspiracy charge, Mr. Goyal faces a maximum statutory sentence of five years imprisonment, a $250,000 fine, and three years of supervised release plus restitution.  However, any sentence following conviction would be dictated by the Federal Sentencing Guidelines which take into account a number of factors, and would be imposed in the discretion of the court.  As with all defendants, Mr. Goyal must be presumed not guilty unless and until convicted.

The Securities and Exchange Commission in Washington also filed a civil suit against Mr. Goyal today.

The Indictment against Mr. Goyal is part of a two-year investigation by the Federal Bureau of Investigation, the United States Attorney's Office in San Francisco, and the Securities and Exchange Commission in Washington.  Network Associates' current management team has been cooperating with the investigation.  The case is being prosecuted by Assistant United States Attorney Jeffrey L. Bornstein and First Assistant U.S. Attorney Eumi Choi, with the assistance of Linda Woo, paralegal and Lori Lucchetti, legal assistant.

All press inquiries to the U.S. Attorney's Office should be directed to Assistant U.S. Attorney Matthew J. Jacobs at (415) 436-7181.