The U.S. Securities and Exchange Commission has filed a civil action against a Canadian businessman, James Reid, on financial fraud allegations.

The SEC alleges that Reid caused Firepond Inc., a software development company formerly based in Massachusetts, to materially misstate its financial results for two quarters in 2002. Reid was acting vice president of North American sales at Firepond at the time.

The SEC’s move follows the arrest today of Reid on federal criminal charges involving the same conduct. He made an initial appearance in federal court in Buffalo on the criminal charges. Prior to his appearance, an indictment presented by the U.S. Attorney’s Office for the District of Massachusetts and returned by a federal grand jury sitting in Boston was unsealed.

The SEC’s complaint alleges that in January and April 2002, Reid caused Firepond to make these material misstatements by fabricating license agreements with three purported customers, forging signatures and correspondence, and engaging in an elaborate scheme with confederates and impersonators to prevent Firepond from discovering his wrongdoing.

According to the SEC’s complaint, Reid conducted several sales meetings on behalf of Firepond with Bombardier Inc. Although the sales meetings stalled and Bombardier never purchased Firepond software, on Dec. 19, 2001, Reid provided Firepond management with a purported executed license agreement between Firepond and Bombardier worth about US$3.5 million in revenue. It alleges that Reid had forged the name of a high-level Bombardier executive to the agreement.

Reid was paid over US$156,000 in commissions for the forged Bombardier deal. The SEC also alleges that Reid used similar methods to create forged contracts with two other Firepond customers.