COO Donald Fitzpatrick is on leave pending the conclusion of the investigation, the San Carlos, Calif.-based company said in a statement.
The company also withdrew its previous earnings and revenue projections. The company now states that pro forma revenue will be "materially" below its previous estimate of $15 million to $20 million and that its net loss per share will be "materially" greater than earlier estimates of 12 cents to 16 cents.
Liberate announced in October that it hada questionable licensing transaction worth around $1.84 million in revenue. At the time, the company said the transaction could affect results for all of its fiscal year 2001 and for the fourth quarter of fiscal 2002, which ended May 31.
Liberate said Thursday that further investigations by auditor PricewaterhouseCoopers and independent counsel Latham & Watkins had uncovered questionable transactions worth around $10 million in revenue during fiscal 2002 and the first quarter of fiscal 2003.
Liberate CEO Mitchell Kertzman is a member of the board of directors at CNET Networks, publisher of News.com.