This section contains the nature of the case and procedural background.

D is a multinational database software company. Its common stock is registered pursuant to section 12(g) of the Exchange Act and is traded on NASDAQ. In November 1997, D restated its financial statements for fiscal years 1994 through 1996 and the fiscal quarter ended March 30, 1997. Former employees including salespersons, members of management, and others engaged in a variety of fraudulent practices that inflated annual and quarterly revenues and earnings in violation of generally accepted accounting principles (GAAP). They (1) back dated license sale agreements; (2) entered into side agreements granting rights to refunds and other concessions to customers; (3) recognized revenue on transactions with reseller customers that were not creditworthy; (4) recognized amounts due under software maintenance agreements as software license revenues; and (5) recognized revenue on disputed claims against customers. The filings also omitted or misrepresented information concerning the extent to which revenues were derived from nonmonetary exchanges and the extent to which revenues were derived from transactions with resellers that had not yet resold software licenses to end-users. D and its auditors identified $114 million of accounting irregularities in 1995 and 1996 involving more than a hundred transactions, mostly with resellers. D filed restated annual financial statements for fiscal years 1994, 1995, and 1996 and restated quarterly financial statements for each interim quarter of 1996 and the first quarter of 1997. D's financial statements for 1995 and 1996 and the interim periods were misstated. On March 31, 1997, D filed its Form 10-K for 1996, which, for the first time, included disclosures concerning the nonmonetary exchanges and the amount of license purchases by resellers that had not been resold to end-users. The next day, D unexpectedly announced that revenues for the first quarter of 1997 would be $59 million to $74 million below revenues for the first quarter of 1996. The revenue shortfall resulted largely from a significant decline in license purchase commitments from resellers during the first quarter. D's stock price and market capitalization decreased 34.5%. The stock price decreased from 15 1/8 to 9 29/32, and the market capitalization dropped from $2.3 billion to $1.5 billion.

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