U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19720 / June 7, 2006
Accounting and Auditing Enforcement Release No. 2439 / June 7, 2006
SEC v. Greg A. Gadel and Daniel J. Skrypek, (U.S.D.C. Minnesota, Civil Action Number 06-CV-2320, filed June 7, 2006)
The Securities and Exchange Commission today announced that it filed an enforcement action against two former officers of Buca, Inc. (Buca), the corporate parent of the Buca di Beppo and Vinny T's of Boston national restaurant chains. The Commission's complaint, filed today in federal court in Minneapolis, alleges that Greg A. Gadel (Gadel), Buca's former Chief Financial Officer, and Daniel J. Skrypek (Skrypek), Buca's former Controller, caused various misstatements and omissions in Buca's public filings. As a result of Gadel and Skrypek's conduct, Buca's public filings understated the compensation paid to Gadel and Buca's former CEO and failed to disclose related party transactions. In addition, Gadel and Skrypek engaged in a financial statement fraud that resulted in the material overstatement of Buca's income in its financial statements.
According to the Commission's complaint, due to Gadel and Skrypek's conduct, Buca's public filings materially understated the executive compensation received by Gadel and Joseph Micatrotto, Sr. (Micatrotto), Buca's former CEO. The Commission's complaint alleges that from 2000 to 2003, Gadel received approximately $96,630 in undisclosed compensation from Buca, including reimbursements for family vacations and visits to strip clubs. The complaint also alleges that from 2000 to 2003, Gadel and Skrypek routinely approved Micatrotto's inappropriate requests for reimbursement of a wide variety of personal and non-business expenses resulting in undisclosed compensation to Micatrotto of $849,100. The complaint further alleges that Gadel and Skrypek knew about and failed to ensure disclosure of a series of related party transactions totaling more than $1 million between Buca and an information technology company of which Gadel was a director and shareholder. Gadel and Skrypek also failed to ensure disclosure of a related party transaction in which Micatrotto used Buca's funds to purchase an Italian villa titled in Micatrotto's and his wife's names. Finally, the Commission's complaint alleges that Gadel and Skrypek directed a scheme to meet Buca's earnings targets by improperly inflating Buca's income by nearly $12 million from 2000 to 2004 through the improper capitalization of numerous expenses. This fraudulent scheme caused Buca to overstate its annual income in amounts ranging from 18.8% to 36.9%.
The Commission's complaint charges Gadel and Skrypek with violating Section 17(a) of the Securities Act of 1933 (Securities Act), Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1, and 13b2-2 thereunder and aiding and abetting Buca's violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, 14a-3, and 14a-9 thereunder. The complaint also alleges that Gadel violated Rule 13a-14 under the Exchange Act. In its complaint, the Commission seeks permanent injunctions, disgorgement, civil penalties, and officer and director bars against Gadel and Skrypek.
The Commission and the United States Attorney's Office for the District of Minnesota conducted parallel investigations of this matter. Simultaneous with the Commission's announcement of this action, the United States Attorney's Office announced the filing of mail and wire fraud charges against Gadel.