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Dogged by seemingly unrelenting bad news that now includes possible violations of U.S. sanctions against Iran, leading point-of-sale terminal maker VeriFone Systems Inc. late Monday said its long-time chief executive officer Douglas G. Bergeron “is stepping down,” effective today. The company named its chairman, Richard McGinn, as interim chief executive and board member Leslie Denend as interim chairman while it hunts for a permanent CEO.
VeriFone did not say if Bergeron’s departure after 12 years leading the company was voluntary or forced, but it came it came just a week after VeriFone reported weak financial results for its first quarter of fiscal 2013 ended Jan. 31.
What appear to be the last straws can be found in the quarterly report VeriFone filed Monday with the Securities and Exchange Commission. In it, VeriFone disclosed that it may have run afoul of new export controls that limit business dealings by American companies with Iran. The report also notes that attorneys filed a federal class-action shareholder lawsuit against VeriFone last week in California. The suit alleges the company and certain officers and former officers made false statements or misleading statements between December 2011 and last month.
A VeriFone spokesperson said the company would not comment beyond a news release and its SEC filings. In the release, Bergeron said, “It has been an honor to lead VeriFone through such an exciting period in its history. I am very proud of our progress and accomplishments during the past 12 years. Now is the right time for new leadership to take the baton and continue to drive the company forward.”
McGinn praised Bergeron but gave no specifics about his departure. “Doug Bergeron has led VeriFone since 2001 and overseen its transformation into an industry leader,” he said in the release. “On behalf of the entire board, I want to thank Doug for his dedication and his many contributions.”
VeriFone’s board formed a search committee headed by former MasterCard president Alex W. “Pete” Hart, a company director since 2006, to lead the hunt for a new CEO, assisted by an executive search firm. (Hart serves on Digital Transactions magazine’s board of advisors.)
The SEC filing says VeriFone recently “discovered certain unauthorized activities” that might violate U.S. export controls Congress passed last year as part of tougher sanctions against Iran, as well as company policy. Employees of non-U.S. VeriFone subsidiaries during fiscal 2012 provided “technical support services” to a Dubai-based third-party distributor when they “had reason to know” that their services would assist the distributor in reselling VeriFone POS terminals to two Iranian banks, VeriFone’s filing says.
The distributor is not listed on any U.S. sanctions lists, but dealings with the banks must be disclosed, VeriFone says. The company has ended its business with the unnamed distributor.
VeriFone’s filing also says that subsidiaries of Point, a European merchant processor that VeriFone acquired in December 2011, leased a total of eight POS terminals to the Iranian embassies in Sweden and Norway. Those leases, which were in place before VeriFone bought Point, have been ended.
It was not immediately clear what, if any, penalties VeriFone might face as a result of its Iranian dealings, but the company said it voluntarily disclosed them to the U.S. Treasury Department’s Office of Foreign Assets Control and is cooperating with authorities.
The lawsuit mentioned in the quarterly report represents the latest in a series of challenges to the company’s financial reports or executive stock trades that go back years. When VeriFone disclosed on Feb. 20 that its first-quarter results would fall well short of expectations, its stock plunged 43%. In February, the company dodged a legal bullet when the U.S. Attorney’s Office in Manhattan and the SEC ended an investigation into possible insider trading by Bergeron without taking action.
VeriFone recently sold its unprofitable Sail portfolio of small merchants to an undisclosed buyer; Sail was VeriFone’s entry in the fast-growing niche of booking tiny merchants who use mobile devices to accept card payments.
At a conference call with analysts March 5 just after VeriFone released its latest financials, Bergeron said external factors contributed to the lower-than-expected revenues, but he also said poor execution and planning caused “self-inflicted” wounds. He promised improvements, including “changes to senior management.” But Bergeron gave no indication that he had just a week left as CEO.
“It’s a strange turn of events,” says merchant-acquiring industry consultant and researcher Paul R. Martaus of Mountain Home, Ark.-based Martaus & Associates. “I wish him all the luck in the world.”
