By Debbie Strickland

The U.S. Attorney's Office in Boston Wednesday filed a one-count securities fraud charge against Peter Hartman, a former chief financial officer of Cambridge Biotech Corp. (CBC).

If convicted, Hartman faces up to five years' imprisonment and a fine of $250,000.

The charge stems from "his role in a scheme to grossly exaggerate the sales revenue figures contained in the company's public filings and press releases," federal prosecutors said.

Hartman retired from CBC in 1993 -- a year before the company filed for federal Chapter 11 bankruptcy protection. He now resides in Suwanee, Ga.

As for CBC, the Worcester, Mass., company was reorganized in 1996. Its diagnostics units were sold and its therapeutic programs became part of a new company, called Aquila Biopharmaceuticals Inc., which also is headquartered in Worcester.

Documents filed by the federal prosecutors alleged Hartman and others at CBC overstated the company's revenue by improperly recognizing revenue from sales that were not, in fact, legitimate. The company was not supposed to recognize revenue from a sale until it had a firm, unconditional contract and had shipped the goods to the customer.

"For all of their perceived complexity, [revenue recognition] schemes are nothing more than an attempt to rip off the investing public by misleading them about a company's financial performance," First Assistant U.S. Attorney Mark Pearlstein said in a prepared statement. "This case illustrates that 'cooking the books' is a recipe for prosecution."

Jonathan Kotlier, assistant U.S. attorney and chief of the office's economic crimes unit, is the prosecutor on the case.

CBC, according to the attorney's office, routinely included in its revenue figures sales in which the customer had not agreed to buy the product. By including such revenue in publicly filed financial statements, the company made it appear that its financial performance was better than it actually was.

According to court documents, Hartman, as chief financial officer, participated in efforts to make these sales look legitimate so they wouldn't be noticed by the company's auditors. Many of the transactions were effected through Cambridge Biotech's Irish subsidiary, Cambridge Biotech Ltd., of Galway.

For example, Hartman is accused of causing an Irish company to order products with the understanding that it would not have to pay for them.

"Hartman caused the CBC to fraudulently recognize $612,000 as revenue from this transaction for the quarter ending Dec. 31, 1992, even though he knew it was not a real sale," the U.S. attorney's statement says.

Shortly thereafter, according to the statement, when company auditors sought to obtain a confirmation of the sale, Hartman arranged to pay the principals of the Irish company $42,000 to sign a sale confirmation.

Investigated by the Federal Bureau of Investigation with help from the Securities and Exchange Commission, the case will move forward once a judge is assigned, said Amy Rindskopf, of the attorney's office. *