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The Securities and Exchange Commission (SEC) revealed today (Jan. 31) that two former executives of one-time San Diego computer giant Gateway have been enjoined from future violations of securities laws. Former chief executive Jeffrey Weitzen and former controller Robert Manza were charged with falsely representing the company's financial position in the year 2000 by, among other things, chalking up revenue on an incomplete sale of computers. As is typical in these SEC settlements, Weitzen and Manza neither admitted nor denied the SEC's fraud allegations. Both are to pay penalties.

On March 7, 2007, a federal jury had found Manza and former chief financial officer John Todd liable for fraud and making false representations to auditors. But two months later, federal Judge Roger T. Benitez overturned the jury verdict on fraud and other claims. (Benitez is notoriously easy in white collar wrongdoing cases.) The SEC appealed that ruling and one other, and the Ninth Circuit Court of Appeals reversed the rulings and remanded the matter to district court.

Gateway's co-founder, Ted Waitt, was a San Diego icon of sorts, having moved the company from Sioux City, Iowa. But on Sept. 2 of 2002, Fortune magazine had a cover story on "The Greedy Bunch," five executives who had massively bailed out of their stocks as outside shareholders got crushed in a downswoop. Two of the five were San Diegans: Waitt and John Moores, who had dumped $646 million of his Peregrine Systems shares, almost all he controlled. After Gateway's business and stock price collapsed, the company was bought in 2007 by Taiwan-based Acer. The operations, once based in La Jolla and later Poway, are now mainly in Irvine.

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Comments

Visduh Jan. 31, 2012 @ 8:17 p.m.

Oh yeah, I remember when Gateway decided to come here. It was touted as something akin to the Second Coming. All sorts of otherwise-intelligent local people were falling all over themselves to welcome Waitt, and then sit back and ride the Gateway "gravy train." But the train never came, so it could never leave, and it had few if any riders.

Yet the company looked so good for a while! What are you supposed to do, examine its financials in detail? Actually, that would be a good place to start. That way some of these arrivals on the local scene, those that seem to be unbeatable, could be spotted for what they are ahead of time.

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Don Bauder Feb. 1, 2012 @ 8:17 a.m.

Gateway stock was trading in the $80s, and pretty soon was down to $3. The company's employees were freezing their toes off in Iowa and South Dakota while top management luxuriated in San Diego. The crash hurt a lot of people. There have been other such cases: Wickes top management came to San Diego more than 40 years ago, leaving employees freezing to death in Michigan. The company made a disastrous acquisition, taking on excessive debt, then plunged and disappeared into the hands of Los Angeles sharks who piled on more debt. One of the top officials later admitted to me that top management couldn't manage the company from San Diego. I suspect the same was true with Gateway. Best, Don Bauder

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Ponzi Feb. 1, 2012 @ 9:12 a.m.

In my opinion, Gateway’s success was founded on their flexibility in building custom made computers for customers and selling direct. Through catalogs and phone sales and later the internet. When Gateway entered retail distribution, they were not prepared. They were not a savvy and organized as Dell.

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Don Bauder Feb. 1, 2012 @ 9:59 a.m.

And now investors wonder just how savvy Dell is. Best, Don Bauder

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