MANHASSET, N.Y. Mobile and wearable computer hardware vendor Xybernaut Corp. said Wednesday (April 20) it had fired several top-level officers and announced the resignation of its accounting firm after an independent audit revealed widespread management corruption, including the use of company funds for personal expenses and nepotism by the company's CEO.
Upon recommendation of an independent audit committee, the Board of Directors for Xybernaut (Fairfax, Va.) fired chairman and chief executive Edward Newman and president and chief operating officer Steven Newman, and requested both resign from the Board. Retired General William Tuttle was appointed interim chairman and chief executive while a search is conducted for new management.
According to a company statement, neither ousted officer has agreed to resign from the Board, and both have been accused of impeding the audit committee investigation.
The committee accused Edward Newman of improperly using substantial company funds for personal expenses and failing to properly to substantiate expenses charged to the company. In addition, the investigation said that members of the CEO's family employed by Xybernaut were given preferential treatment, directly violating of the company's anti-nepotism policy by constituting a "protected class" of employees.
The investigation also found that senior management conducted major transactions in violation of Xybernaut's internal controls by failing to properly to advise the Board of material financial conditions.
In a related move, Xybernaut announced that Grant Thornton LLP has resigned as the company's independent auditors. On April 8, Xybernaut advised investors that, based on a letter from Grant Thornton dated April 6, 2005, no reliance should be placed on the company's financial statements.
The company has put its Form 10K filing on hold as a result.