U.S. Securities and Exchange Commission

Litigation Release No. 18327 / September 8, 2003
Accounting and Auditing Enforcement Release No. 1850 / September 8, 2003

, United States District Court for the Northern District of California,
Civil Action No. C-03-4067 RMW

   The Securities and Exchange Commission today filed suit in federal
   district court against Vincent Steckler, a former executive at
   Logicon, Inc., for his roles in a 1999 financial reporting fraud that
   caused Legato Systems, Inc. to overstate its third quarter operating
   income by more than 146%. The Commission's district court complaint
   alleges that Steckler assisted two former Legato sales executives in
   drafting a side letter in connection with an order by Logicon to
   purchase Legato software for resale to the U.S. Air Force. The side
   letter granted Logicon the right to cancel the transaction, and noted
   that the cancellation provision could not appear on the face of
   Logicon's purchase order "because of the impact on revenue
   recognition." Unaware of the side letter and the cancellation
   provision, Legato's finance department caused the company to recognize
   revenue on the order. As a result of this transaction, Legato's
   original Form 10-Q for the Sept 30, 1999, quarter improperly
   overstated the company's net income by approximately $2 million
   (146%). Legato later restated this income, and the transaction was
   ultimately cancelled following the discovery of the side letter.

   The complaint charges that Steckler aided and abetted Legato and
   certain of its former officers in violating the antifraud provisions
   of the securities laws, (Section 10(b) of the Securities Exchange Act
   of 1934 and Rule 10b-5 thereunder; provisions prohibiting the
   circumvention of Legato's internal accounting controls and
   falsification of its records, (Section 13(b)(5) of the Exchange Act
   and Rule 13b2-1; and provisions requiring the company to provide
   accurate periodic reports and make and keep accurate books and records
   (Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20
   and 13a-13 thereunder). The complaint seeks a permanent injunction
   against future violations by Steckler, as well as monetary penalties.

   In May 2002, the Commission sued Legato's former executive vice
   president of worldwide sales, David Malmstedt, and its former vice
   president of sales for North America, Mark Huetteman, for securities
   fraud for their roles in causing Legato to overstate its financial
   results for fiscal 1999. At the same time, Legato and its former chief
   financial officer, Steven Wise, consented to the issuance of a
   Commission order directing that they cease and desist from violations
   of the books and records, internal controls and periodic reporting
   provisions of the federal securities laws.