Liberate Financial Probe Widens

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Liberate Technologies' accounting problems may be more serious than
previously reported, and that has prompted the interactive-TV provider to bench
its chief operating officer.

The San Carlos, Calif.-based company acknowledged that it has placed COO
Donald Fitzpatrick on leave pending completion of an investigation into
reporting of $10 million in revenue during fiscal-year 2002 and the first fiscal
quarter of 2003.

It is also withdrawing its financial guidance for the coming quarters.

The probe started in October, when Liberate's audit committee discovered
questions related to $1.84 million in license revenue from a transaction
recorded in the fourth quarter of 2002.

The investigation, aided by independent auditor PricewaterhouseCoopers and
legal firm Lantham & Watkins, widened the scope of the inquiry to include
about $10 million in revenue recorded during 2002 and the first quarter of 2003,
and further transactions are now being looked into, according to a company
statement.

Liberate is also adjusting its economic outlook southward.

The company expects pro forma revenues for the current quarter to be
"materially below" its original guidance of $15 million to $20 million, and its
pro forma basic net loss will be "materially greater" than the original forecast
of 12 cents to 16 cents per share.

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