UNITED STATES OF AMERICA
|In the Matter of
ROBERT G. HERNDON,
|ORDER INSTITUTING A PUBLIC PROCEEDING AND OPINION AND ORDER PURSUANT TO RULE 102(e) OF THE COMMISSION'S RULES OF PRACTICERespondent.|
The Securities and Exchange Commission (Commission) deems it appropriate and in the public interest that a public administrative proceeding be, and hereby is, instituted against Robert G. Herndon ("Herndon") pursuant to Rule 102(e) of the Commission's Rules of Practice.1
In anticipation of the institution of this proceeding, Herndon has submitted an Offer of Settlement (Offer), which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, Herndon consents to the issuance of this Order, the entry of the findings, and the imposition of the sanction set forth below without admitting or denying the findings or conclusions contained herein except that he admits: (1) the Commission's jurisdiction over him and the subject matter of this proceeding; and (2) the entry of the permanent injunction against him described in Section III. C. below.
The Commission makes the following findings:
Robert G. Herndon, age 66, resides in Fort Worth, Texas. Herndon was an audit partner with Arthur Andersen from about 1969 to 1980. He was an executive vice-president and Chief Operating Officer with two other public companies and the Chief Financial Officer ("CFO") of a third public company before he became Pier 1's CFO in August 1985. Herndon was a licensed Certified Public Accountant throughout his career until he allowed his license to lapse in April 1995. On February 9, 1996 Pier 1 terminated Herndon for fraudulently concealing an investment loss of $20 million and various other facts about the company's investments.
B. Pier 1 Imports, Inc.
Pier 1 Imports, Inc. is a Delaware corporation with headquarters in Fort Worth, Texas. It is a retailer of home furnishings. Pier 1's common stock is registered with the Commission pursuant to Section 12(b) of the Securities Exchange Act of 1934 ("Exchange Act") and trades on the New York Stock Exchange. Its fiscal year ends annually on the Saturday closest to the last day of February.
By judgment of the United States District Court for the Northern District of Texas, Herndon has been permanently enjoined from violating Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1, and 13b2-2 thereunder and from aiding and abetting or causing violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. The Court also permanently barred Herndon from serving as an officer or director of any issuer that has a class of securities registered with the Commission or that is required to file reports with the Commission and ordered him to pay a civil penalty in the amount of $75,000. SEC v. Robert G. Herndon, Civil Action No. 4:00-CV-1564-A (N.D. Tex. Oct. 3, 2000).
The Commission's complaint, filed on September 19, 2000, alleged, among other things, the following:
Herndon, Pier 1's former CFO, fraudulently concealed a $20 million loss and various other material facts about the company's investments from Pier 1's senior management, its outside auditors, and the public. Pier 1's loss involved two interrelated frauds, one by Pier 1's outside money manager, and the other by Herndon. First, from at least 1986 through most of 1995, S. Jay Goldinger ("Goldinger"), a Beverly Hills-based bond specialist, engaged in fraudulent trading that eventually left his clients with losses totaling $100 million. One of his clients was Pier 1, which lost nearly $20 million. Second, Herndon concealed Pier 1's $20 million loss and various other facts about the company's investments with Goldinger. Herndon's and Goldinger's conduct caused material misrepresentations and omissions in Pier 1's financial statements and other disclosures in its 1993, 1994, 1995, and 1996 Forms 10-Q, and its 1995 Form 10-K.
Herndon's concealment began in 1986 with the first trade Goldinger placed for Pier 1, and ended in 1995 when Goldinger and his clients suffered catastrophic losses after interest rates rose dramatically. By engaging in this conduct, Herndon violated the antifraud provisions of the federal securities laws and the books and records and internal accounting control provisions of the Exchange Act. Herndon also aided and abetted Pier 1's violations of the periodic reporting, books and records, and internal accounting controls provisions of the federal securities laws.
Based on the foregoing, the Commission deems it appropriate and in the public interest to impose the sanction specified in Herndon's Offer.
Accordingly, it is ordered that, effective immediately, Herndon is suspended from appearing or practicing before the Commission as an accountant.By the Commission.
Jonathan G. Katz
1 Rule 102(e)(3)(i), in relevant part, provides that the Commission may suspend from appearing or practicing before it any accountant who by name has been permanently enjoined, by a court of competent jurisdiction in an action brought by the Commission, from violating any provision of the federal securities laws or the rules and regulations thereunder. 17 C.F.R. §201.102(e)(3)(i).
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