Calling Off the Dogs

Recent signals from the SEC raise the question: Is Harvey Pitt taking a softer line on financial fraud?

Alix Nyberg is a staff writer at CFO.

September Rush

For the SEC’s fraud cops, the fiscal year-end is crunch time. Financial-statement fraud charges filed by the Securities and Exchange Commission, September 2001.

Source: SEC, December 2001

Filed Company Financial Officers Charged Allegations When Consequences
9/28/01 TransEnergy CFO/VP William Woodburn Failed to disclose over $1 million in material lawsuits in filings, overvalued oil reserves in press release,misled investors with information on Web site 1998-
2000
No resolution yet
9/28/01 TELnetgo2000 CEO Wayne E. Mullins Made unreasonable revenue projections in filings, failed to disclose lack of necessary business licenses 2000 No resolution yet
9/27/01 Sabratek CFO Stephen Holden; VP Fin/CAO Scott Skooglund; former CFO Paul Jurewicz Created fictitious sales, parked inventory at third-party warehouses, recognized revenue on sales with right-of-return provisions, filed an incomplete MD&A 1998-
Q1 1999
Jurewicz ordered to pay $17,556;
no resolution yet for others
9/27/01 Vari-L CFO Jon Clark, controller Sarah Hume Improperly recognized bill-and-hold sales; held books open at end of quarter; improperly capitalized labor and overhead costs as assets; overstated inventory 1996-
Q1 2000
Clark ordered to pay $216,632
9/19/01 Madera Int’l CFO Daniel Lezak Recorded and overvalued assets the company didn’t own; created fictitious sales; made false or incomplete disclosures in filings, press release, and to auditors 1994-
2000
No resolution yet
9/12/01 Baker Hughes CFO Eric Mattson Authorized bribes to Indonesian tax officials, violating Foreign Corrupt Practices Act; created false invoices so that bribes could be recorded as consulting services 1995, 1998, 1999 Mattson agreed to settle without admitting or denying guilt; no
monetary penalties mentioned
9/10/01 Swisher Int’l Founder/CEO Patrick Swisher Several cases of fraud related to 1996 sale of franchise to another entity owned by Swisher Q2 1996 Swisher ordered to pay $391,627
in fines and restitution
9/6/01 M&A West Int’l CFO Salvatore Censoprano Helped set up publicly traded shell companies with sham revenues, created fictitious sales to cover up “revenues” from unregistered stock sales 1999-
5/31/00
Criminal charges against CEO;
civil case ongoing
9/5/01 Indus Int’l CAO Robert Pocsik Lied about contingencies on certain sales to CFO, accountants, and auditors, leading to premature revenue recognition. Q3 1999 Pocsik pled guilty to one count of securities fraud; faces up to five years in prison and $250,000 fine

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