U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19931 / December 4, 2006
Accounting And Auditing Enforcement Release No. 2519 / December 4, 2006
Securities and Exchange Commission v. Andrew J. Zahn, Philip J. Sexauer, and Cynthia K. Berryman, Case No. 04C4948 (N.D. Ill.)
The Commission announced that on November 27, 2006 the United States District Court for the Northern District of Illinois entered a Final Judgment as to Defendant Andrew J. Zahn, based on his Consent. In SEC v. Andrew J. Zahn, Philip J. Sexauer, and Cynthia K. Berryman, each of the defendants is a former officer of DFG, L.L.C. ("DFG"), a Chicago-based company that was a subsidiary of a subsidiary of IBP, Inc. ("IBP").
The Commission alleged in the complaint that Zahn, among other defendants, engaged in an array of accounting improprieties to inflate DFG's earnings. These misstatements caused IBP to materially misstate its own financial results for the fourth quarter of 1999 and the first three quarters of 2000. Specifically, the Commission alleged that Zahn and others directed that DFG not charge certain expense items in the period they were incurred, but instead improperly included these amounts in inventory, prepaid expense, and accounts receivable asset accounts to overstate DFG's earnings. The Commission alleged that Zahn was motivated by personal compensation tied to DFG's financial performance.
In its complaint, the Commission claims that, through these actions, each of the defendants violated Section 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 13b2-1 thereunder, and aided and abetted IBP's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder. It further claims that Zahn violated Section 10(b) of the Exchange Act and Rules 10b-5 and 13a-13 thereunder.
The Final Judgment enjoins Zahn from future violations of the federal securities laws and imposes a five year officer and director bar. Zahn was also ordered to pay a civil penalty of $50,000.00 and post judgment interest on any delinquent amounts pursuant to 28 USC § 1961.