Video Jitters.

Michael Keough is in the hot seat. His ClearOne Communications, a $55 million (sales) maker of audio-video conferencing equipment, faces the wrath of shareholders and federal securities cops. The Securities & Exchange Commission (SEC) filed suit against ClearOne, Frances Flood and her chief financial officer, alleging that for most of 2001 and 2002 they overstated sales and earnings and thereby defrauded investors. The pair did it, according to the SEC, by dumping unwanted inventory on distributors on a pay-as-you-sell basis, despite contract terms that ostensibly called for payment within 90 days. Those transactions, the agency alleges, were improperly booked as revenues. The whistle-blower who tipped off the SEC has an ax to grind: He is a former manager who is considering a suit against Flood for wrongful termination and sexual harassment (a separate complaint alleges Flood routinely hugged and kissed men in the office), charges she denies. As for the law, there is dispute about whether flooding distribution channels amounts to accounting fraud.