SEC Calls on Riverstone

Router maker Riverstone Networks Inc. (Nasdaq: RSTN) said today that it is cooperating with requests that the Securities and Exchange Commission (SEC) has made regarding its accounting practices (see Riverstone Opens Books to SEC). The SEC may yet decide to open a formal investigation, the company said.

Meanwhile, shares of Riverstone sank like a millstone in afternoon trading Friday. The company's shares fell $0.49 (33%) to $0.99 as investors distanced themselves from the already struggling equipment maker. This latest announcement likely comes as a punch in the gut to investors, who have yet to see the company report a profitable year and cringe at the thought of watching a management team wrangle with softening sales and a federal probe (see Riverstone Disappoints the Street and Riverstone Slapped in Face of Good News).

News of the SEC inquiry comes just a few days after the company announced it has begun to hunt for a new CEO. Its only CEO to date, Romulus Pereira, has taken the chairman's chair from Piyush Patel, who is staying on the board of directors (see Riverstone Names Chairman, Acting CEO). Indeed, Riverstone's executive staff has had several roster changes since the beginning of the year, including changes to the board, the top sales boss, and other senior managers (see Riverstone Names Euro GM, Riverstone Appoints Sales VP, and Riverstone Demos MPLS Interop).

Riverstone didn't return calls related the SEC inquiry. The SEC itself wouldn't acknowledge the inquiry, but a spokesman there says that any decision to announce any information request from a federal agency is up to the company. Whether to acknowledge one, he says, largely depends on whether the company believes the matter to be substantial to its business.

Riverstone is one of four companies that were formed when Cabletron Systems restructured and split up back in 2000 (see Cabletron Restructures). Coincidentally, Enterasys Networks Inc. (NYSE: ETS), one of the other Cabletron spinoffs, just settled with the SEC after a year-long investigation into its business (see What's Up With Enterasys?). That company admitted no wrongdoing as part of its settlement, but since the investigation started it went through the kind of makeover more often associated with Michael Jackson.

During the Enterasys debacle, Riverstone took care to issue a press release letting everyone know that the SEC had not contacted it in relation to the Enterasys investigation. Since Riverstone's announcement, there's been no word from Enterasys distancing itself from its gear maker brethren.

— Phil Harvey, Senior Editor, Light Reading

BobbyMax 12/5/2012 | 12:09:59 AM
re: SEC Calls on Riverstone Riverstone must have done something very terrible to warrant an investigation by SEC. In spite of sluggish markets, Riverstone has acquired another company. It is not clear as to how much the new company, Peepal, would be able to contribute to the bottom line. Riverstone does not have much of a market except in South Korea. I do not think swapping jobs would do any good to the company.
gea 12/5/2012 | 12:09:58 AM
re: SEC Calls on Riverstone Bobby:

All of your base are belong to us.
BobbyMax 12/5/2012 | 12:09:52 AM
re: SEC Calls on Riverstone Both Riverstone and its sister company Enterasys are under investigation by the SEC for accounting malpractices and for misreporting income. In order to avoid detection of wrongdoings, Riverstone has rearranged its management positions. In fact, Riverstone has two seats on the Board in order to avoid any serious actions by the Riverstone Board.

It is very depressing to note that Riverstone and Enterasys would engage in blatant illegal practices. The business community has to develop some data base where the crooked activities of the US corporations are documented. Both these companies were presented to the US public as IPOs, although there were at leasr 10-12 years old and carved out of Cabletron Systems. These two companies are creations of one "Dr." Patel.
gea 12/5/2012 | 12:09:49 AM
re: SEC Calls on Riverstone BobbyMax:

All your base are belong to us.
dwdm2 12/5/2012 | 12:09:48 AM
re: SEC Calls on Riverstone gea: if you start writing in BM style, would you please let us know where we can get a copy of English to BM to English dictionary/thesaurus? Otherwise write in English, please.
299792458 12/5/2012 | 12:09:47 AM
re: SEC Calls on Riverstone Actually, the SEC recently completed the Enterasys investigation....

manoflalambda 12/5/2012 | 12:09:42 AM
re: SEC Calls on Riverstone dwdm2 see --


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