The U.S. Securities and Exchange Commission has settled charges that the BISYS Group, Inc., a leading provider of financial products and support services, violated the financial reporting, books-and-records, and internal control provisions of securities laws.

BISYS has agreed to settle the case, without admitting or denying the commission’s allegations. The company will consent to the entry of a judgment upon charges of violating the reporting, books-and-records and internal controls provisions of the securities laws. It has agreed pay approximately US$25 million in disgorgement and prejudgment interest.

The commission’s complaint, filed today in federal court in Manhattan, alleges that from July 2000 through December 2003, former BISYS officers and employees engaged in a variety of improper accounting practices that resulted in an overstatement of the company’s reported financial results for the fiscal years ended June 30, 2001, 2002, and 2003 by roughly US$180 million. The improper accounting practices were primarily based in the company’s Insurance Services division, but also occurred in other divisions of the company.

The complaint alleges that the improper accounting practices were a product of a corporate focus by former management on meeting aggressive, short-term earnings targets and a lax internal control environment. It also claims that the improper accounting practices within the Insurance Services division resulted in an overstatement of BISYS’s reported pre-tax earnings by roughly US$118 million for the fiscal years ended June 30, 2001, 2002, and 2003, and by 34.3%, 38.9%, and 20.6%, respectively, in each of those fiscal years. The improper accounting practices in BISYS’s other divisions overstated the company’s pre-tax earnings by an additional US$60.9 million for the same period.

The SEC alleges that as a result of these and other improper accounting practices, BISYS filed annual and quarterly reports with the commission that included financial statements that were inaccurate and misleading. In addition, the company’s overstated financial results were incorporated in annual reports to shareholders, press releases, and offering documents including registration statements. The complaint further alleges that BISYS received approximately US$20 million in ill-gotten gains as a result of its issuance of convertible debt, stock, and options at prices that were inflated as a result of its violations.

The SEC acknowledged BISYS’s extensive cooperation during the investigation, and it added that its investigation continues as to others.

Mark Schonfeld, director of the commission’s New York Regional Office, said, “This is a case study in internal control failures under earnings pressure. The settlement delivers meaningful relief to investors harmed by BISYS’s misconduct.”

Andrew Calamari, associate director of the New York Regional Office, added, “The commission continues to focus on accounting improprieties such as these at public companies, and the resulting harm to investors. We aim to deter such conduct before it occurs and, if it does, to compensate investors and prevent recidivism.”