Count ‘Em: 63 CFOs Convicted in Past Five Years

The DoJ, asked for names based on its earlier count, identified 53 former CFOs in all; CFO.com adds another 10 from its files.

The Department of Justice, which has said that at least 53 finance chiefs have been convicted in the five-year life of the President’s Corporate Fraud Task Force, has provided CFO.com with a list of 53 people who either pleaded guilty or were found guilty. After recalculating to include other cases, CFO.com has confirmed another 10, bringing the total to 63 ex-CFOs who either pleaded guilty or were convicted by juries since July 9, 2002.

The government’s list excludes the names of some well-known former finance chiefs who wound up in jail, including Enron’s Andrew Fastow, WorldCom’s Scott Sullivan, Tyco International’s Mark Swartz, and Rite-Aid’s Frank Bergonzi. Fastow’s and Sullivan’s cases, for example, were handled by the fraud team of the U.S. Attorney’s office, which is why they were not included on the list, according to the DoJ. Likewise, Swartz was prosecuted by Manhattan District Attorney Robert M. Morgenthau. The list provided by the DoJ was assembled by collecting cases from U.S. Attorneys’ offices around the country that had tried corporate fraud cases.

The DoJ list actually contains more than 70 names, although research by CFO.com shows that a number of those listed were not officially CFOs of their companies; some were company presidents, CEOs, or COOs. On its list, the government also included James Doyle, the former CFO of Mercury Finance, who died before being charged with a crime. Although prosecutors expected to convict Doyle, who was cooperating with them as part of a plea agreement, his appearance on the list is a reminder that the government lost one of its biggest convictions when the death of Enron’s Kenneth Lay caused his record to be posthumously cleared.

In its July 18 announcement, the DoJ said it counted 214 chief executives, 23 corporate counsels or attorneys, and 128 vice presidents as having been convicted since July 2002, in addition to “at least 53″ CFOs. The government list did include other ex-CFOs who were convicted or pleaded guilty in highly publicized trials, including Adelphia Communications’s Timothy Rigas and four of the five former HealthSouth CFOs: Aaron Beam, Michael Martin, William T. Owens, and Weston L. Smith (it did not include Malcolm McVay, who also was convicted).

Through news reports, court filings, press releases, and CFO.com’s own Website, 53 ex-CFOs on the DoJ list were confirmed as having been convicted of charges that included conspiracy; insider trading; money laundering; racketeering; embezzlement; accessory to fraud; and bank, mail, wire, and securities fraud. CFO.com also confirmed the charges of the 10 other ex-CFOs.

The Justice Department noted the role of the Sarbanes-Oxley Act of 2002 in leading to the five years of enforcement, citing it as one of the tools Congress has given prosecutors to target corporate fraud. However, only three ex-CFOs on its list, Steven Garfinkel of DVI, and Smith and Owens of HealthSouth, were convicted of direct violations of Sarbanes-Oxley. Most cases ended in a plea agreement, with more than 75 percent of defendants pleading guilty to charges brought against them.

The task force, created after a storm of corporate scandals, also gave itself unusual credit for the convictions in the July 18 press conference, saying that it “has compiled a strong record of combating corporate fraud and punishing those who violate the trust of employees and investors.” Actually, the task force’s main role has been to coordinate various federal enforcement efforts. Chaired by Deputy Attorney General Paul J. McNulty, the task force includes senior DoJ officials and seven U.S. Attorneys, along with the head of the Departments of Treasury and Labor, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Energy Regulatory Commission, the Federal Communications Commission, the U.S. Postal Inspection Service, and the Department of Housing and Urban Development’s Office of Federal Housing Enterprise Oversight.

63 CFOs Convicted of Corporate Fraud in Five Years
July 9, 2002, to July 9, 2007
Date CFO Company Charges Plea or Jury Trial
July 2002 to December 2002 Peter Bromberg Motorcar Parts and Accessories Making false statements Plea Agreement
Joseph Shew Homestore Conspiracy to commit securities fraud Plea Agreement
Steven Allan Media Vision Inc. Securities fraud Jury Trial
Gary Duane Schultz Lund Boats Mail fraud, money laundering Plea Agreement
2003 Thomas Lambach Quaker Alloy Inc. (Atchison Casting Corp.) Wire fraud, conspiracy Plea Agreement
Aaron Beam HealthSouth Bank fraud Plea Agreement
Michael Martin HealthSouth Conspiracy, filing false financial statements Plea Agreement
Weston Smith HealthSouth Conspiracy to commit wire fraud and securities fraud, filing false statements, violating the certification provision of Sarbanes-Oxley Plea Agreement
William Owens HealthSouth Conspiracy to commit wire and securities fraud, violating the certification provision of Sarbanes-Oxley Plea Agreement
Malcolm McVay* HealthSouth Conspiracy to commit wire and securities fraud, filing false financial reports Plea Agreement
Jay Gilbertson McKesson Corp.(HBO and Co.) Securities fraud Plea Agreement
Donna Richardson Craig Consumer Electronics Bank fraud Plea Agreement
Matthew Gless Peregrine Conspiracy, securities fraud Plea Agreement
Steven Lash FPA Medical Management Wire and mail fraud Jury Trial
Gary Atnip Franklin American Corp. Money laundering, racketeering Plea Agreement
Lawrence Simon Media-Hut Lying to investigators, conspiracy to inflate earnings and revenues Plea Agreement
Edward Stein American Tissue Securities and bank fraud Plea Agreement
Stephen Lowber Cutter & Buck Inc. Accessory after the fact to wire fraud Plea Agreement
Frank Bergonzi Rite Aid Making false statements to the SEC, obstructing justice, witness tampering Plea Agreement
2004 Thomas Sebastian L90 Conspiracy to commit securities fraud Plea Agreement
Kirk Dischino Measurement Specialties Inc. Insider trading Plea Agreement
Ira Zar Computer Associates Conspiracy, securities fraud, obstruction Plea Agreement
Timothy Rigas Adelphia Communications Conspiracy, bank fraud, securities fraud Jury Trial
Jon Clark Vari-L Company Inc. Fraudulently inflating earnings Plea Agreement
James Cutler Tollman-Hundley Hotels Conspiracy to commit bank fraud, bank fraud, making false statements to banks Jury Trial
Scott Sullivan* WorldCom Conspiracy, fraud, and making false statements Plea Agreement
John Howard Daws* Cylink Corp. Conspiracy to falsify accounting records, securities fraud
Plea Agreement
Thomas Bray* Network Technologies Group Wire fraud
Plea Agreement
2005 Lawrence Teodoro Timeless Toys Inc. Wire fraud Plea Agreement
John Garitta PinnFund, USA Conspiracy to commit wire fraud and money laundering, tax evasion, filing false statements Plea Agreement
Robin Szeliga Qwest Insider trading Plea Agreement
John Jacobs Hamilton Bank Securities and wire fraud, false filings with the SEC Plea Agreement
Steven Davis Berkeley Risk Administrators Co., LLC Mail fraud Plea Agreement
Kent Kalkwarf Charter Communications Wire fraud Plea Agreement
David Cammarata Impath Conspiracy, securities fraud, bank fraud, making false statements to the SEC, soliciting proxies with false proxy statements Plea Agreement
Wakon Redcorn Heritage National Insurance Co. Embezzlement, wire fraud, money laundering Jury Trial
Rondal Cavender Safescript Pharmacies Conspiracy to commit securities fraud, money laundering Plea Agreement
Mark Swartz*** Tyco International Grand larceny and conspiracy, securities fraud, falsifying business records, violating business law Jury Trial
2006 Rudolph Terry Terry Manufactoring Conspiracy Plea Agreement
Joseph Zumwalt Weida Mail fraud Plea Agreement
William Scott DeLoach PBSJ Corp. Conspiracy to commit wire fraud, the unlawful reimbursement of federal campaign contributions Plea Agreement
Donald Welchko Anicom Inc. Falsely inflating sales and profits Plea Agreement
William Rauwerdink Lason Conspiracy to commit mail, wire, and bank fraud; making false statements to the SEC Plea Agreement
Greg Gadel Buca Inc. Mail and wire fraud Plea Agreement
Marion Markle National School Fitness Foundation Misprison (failure to report) of a scheme to defraud Plea Agreement
Robert Gagalis Enterasys Conspiracy, wire, and securities fraud Jury Trial
Michael Resnick U.S. Foodservice Inc. Conspiracy Plea Agreement
Patrick Buttery Computer Personalities Systems Inc. Wire and mail fraud, money laundering Plea Agreement
John Monteclavo Hillside Health Center Embezzlement, money laundering, Medicare fraud Plea Agreement
Andrew Fastow* Enron Conspiracy to commit wire fraud, conspiracy to commit securities fraud Plea Agreement
Keith Howard* Enron Broadband Fraud, conspiracy, falsifying records Plea Agreement
David Kreinberg* Comverse Technology Conspiracy to commit securities, mail, and wire fraud; securities fraud Plea Agreement
2007 Steven Garfinkel DVI Mail fraud, violating the certification provision of Sarbanes-Oxley Plea Agreement
Robert Gordon TeleServices Internet Group Securities fraud, money laundering Jury Trial
Victor Suglia Friedman Jewelers Fraud Plea Agreement
Michael Suhadolnik HealthCare Financing Administration Wire fraud Jury Trial
Joseph Connors Kleinert’s Corp. Fraud, making false statements Jury Trial
Samuel Sacco Spectra Systems Inc. Mail and wire fraud Plea Agreement
Prahbat Goyal McAfee (Network Associates) Securities fraud, filing false reports with the SEC, making false statements to auditors Jury Trial
Jack Grace BestBank Conspiracy; bank and wire fraud; falsifying bank reports Jury Trial
Eric McCracken Aerosonic Corp. Conspiracy to commit wire fraud, wire fraud Plea Agreement
Steve Venechanos Supreme Specialties Inc. Conspiracy; mail, bank, and wire fraud; making false statements to the SEC Jury Trial
John Boultbee* Hollinger Mail fraud Jury Trial
Sources: Department of Justice press releases, various news reports, and court filings. *Name not provided in the list from the U.S. Department of Justice.**Case prosecuted in state court.

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