United States of America
In the Matter of
|ORDER INSTITUTING PUBLIC|
PURSUANT TO SECTION 21C OF THE
SECURITIES EXCHANGE ACT OF 1934,
MAKING FINDINGS, AND IMPOSING
A CEASE-AND-DESIST ORDER
The Securities and Exchange Commission ("Commission") deems it appropriate that public administrative proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Daniel Parker ("Parker" or "Respondent").
In anticipation of the institution of these administrative proceedings, Parker has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings, and any other proceedings brought by or on behalf of the Commission, or in which the Commission is a party, without admitting or denying the findings set forth below, except as to jurisdiction of the Commission over him and over the subject matter of these proceedings, which Respondent admits, Respondent consents to the entry of this Order Instituting Public Administrative Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order ("Order") set forth below.
Accordingly, it is ordered that proceedings pursuant to Section 21C of the Exchange Act be, and hereby are, instituted.
The Commission makes the following findings:1
Daniel Parker, age 44, was the Director of Purchasing of USA Detergents from May 1995 to August 1996, and Vice President for Materials Management of USA Detergents from August 1996 to November 1997. He resides in Ringwood, New Jersey.
USA Detergents, at all times relevant, was a Delaware corporation with its principal executive offices in North Brunswick, New Jersey. The company was a manufacturer and marketer of laundry and household cleaning products. Its common stock was registered with the Commission pursuant to Section 12(g) of the Exchange Act and traded on the NASDAQ National Market System. On May 21, 2001, Church & Dwight Co., Inc. announced that its wholly owned subsidiary, US Acquisition Corp., had completed a $7.00 per share cash tender offer for the outstanding shares of USA Detergents common stock. As a result of that acquisition, USA Detergents is no longer a Section 12 registrant.
During the last half of 1996, in anticipation that the company could not otherwise achieve its budget or meet analysts' expectations for the company's financial results, certain officers and managers at USA Detergents resorted to improper methods to increase the company's net income and earnings, including recording a number of bogus vendor rebates or credits on the company's books. During late 1996 and early 1997, Parker, the company's Vice President for Materials Management, solicited from vendors certain letters and other documentation ostensibly supporting vendor rebates or credits that did not accurately reflect USA Detergents' commercial relationships with those vendors. Parker submitted the documentation to the company's Chief Financial Officer, who then recorded bogus rebates or credits on the company's books and selected as support some of the documentation supplied by Parker. As a result, the company understated its cost of goods sold and overstated its income for 1996. The understated cost of goods sold and overstated income were subsequently reflected in the company's financial statements for 1996, as Parker knew or should have known would be the case.
In March of 1997, USA Detergents filed with the Commission its annual report on Form 10-K for 1996. The filing was false and misleading because, as a result of the practices described herein, it included financial statements that misrepresented the company's financial condition and results of operations, understating its cost of goods sold and overstating its income.
Section 13(a) of the Exchange Act and Rule 13a-1 thereunder require issuers with securities registered under Section 12 of the Exchange Act to file annual reports with the Commission and to keep this information current. The obligation to file such reports embodies the requirement that they be true and correct. See, e.g., SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1165 (D.C. Cir. 1978), cert. denied, 440 U.S. 913 (1979). Exchange Act Rule 12b-20 further requires the inclusion of any additional material information that is necessary to make required statements, in light of the circumstances under which they were made, not misleading. Information regarding the financial condition of a company is presumptively material. SEC v. Blavin, 760 F.2d 706, 711 (6th Cir. 1985).
USA Detergents' 1996 annual report on Form 10-K was false and misleading inasmuch as it included financial statements that misrepresented the company's financial condition and results of operations. Based on the conduct described above, Parker was a cause of the company's violation of Section 13(a) of the Exchange Act and Exchange Act Rules 13a-1 and 12b-20.
Based on the foregoing, the Commission finds that Parker was a cause of USA Detergents' violation of Section 13(a) of the Exchange Act and Exchange Act Rules 13a-1 and 12b-20.
In view of the foregoing, the Commission deems it appropriate to accept Parker's Offer.
Accordingly, IT IS HEREBY ORDERED that
Pursuant to Section 21C of the Exchange Act, Parker cease and desist from causing any violation and any future violation of Section 13(a) and Rules 13a-1 and 12b-20.
By the Commission.
Jonathan G. Katz
1 The findings herein are made pursuant to Parker's Offer and are not binding on any other person or entity in these or any other proceedings.
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