U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20891 / February 10, 2009
Accounting and Auditing Enforcement Release No. 2932 / February 10, 2009
Securities and Exchange Commission v. Thom A. Faria, Stephen J. McLaughlin and William M. Stickney, (United States District Court for the District of Massachusetts, Civil Action No. 06-10657-WJY)
Final Judgment Entered Against Former Officer of MetLife, Inc. Subsidiary New England Financal Charged in Fraudulent Scheme to Hide Expenses
The Securities and Exchange Commission ("Commission") announced today that on February 9, 2009, the United States District Court for the District of Massachusetts entered a final judgment by consent against Thom A. Faria, of Needham, Massachusetts, the last defendant in a financial fraud case filed in April 2006. Faria is a former officer of MetLife, Inc. and its insurance company subsidiary New England Financial (NEF). The Commission's action charged that Faria and two other defendants engaged in a scheme to improperly hide NEF expenses that led directly to the publication of materially false financial statements by MetLife and NEF. Faria, who was the former president of the NEF distribution channel and a senior vice president of MetLife, settled the matter without admitting or denying the Commission's allegations. He consented to the entry of a final judgment enjoining him from future violations of the federal securities laws, ordering him to pay a total of over $97,000 in disgorgement, prejudgment interest and civil penalties, and barring him from serving as an officer or director of a public company for five years.
The Commission's complaint, filed on April 13, 2006, alleges that over a period of years, Faria and two other defendants engaged in a scheme to hide certain NEF expenses in an effort to make NEF appear more efficient than it actually was. The complaint alleges that defendants hid certain non-commission expenses by reclassifying them as commission expenses in NEF's internal books and records. The complaint alleged that Faria was aware of and authorized the improper reclassifications. All told, the complaint alleges that the scheme resulted in the improper reclassification of over $100 million in NEF expenses, the direct result of which was the publication of materially false overstatements of MetLife and NEF net income in financial statements filed with the Commission from 2000 to 2003.
The complaint alleged that through his fraudulent conduct, Faria violated 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 and 13b2-1 thereunder, and Section 34(b) of the Investment Company Act of 1940 ("Investment Company Act"), as well as aided and abetted uncharged MetLife violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. The complaint also alleged that Faria aided and abetted uncharged MetLife/NEF violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
Without admitting or denying the allegations of the complaint, Faria consented to the entry of a final judgment that (1) permanently enjoins him from future violations of Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder, and Section 34(b) of the Investment Company Act, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder; (2) requires him to pay a civil penalty of $40,000; (3) requires him to disgorge $40,687, plus pre-judgment interest in the amount of $16,652.95; and (4) bars him from serving as an officer and director of a public company for five years.
Faria's two co-defendants, former NEF employees Stephen McLaughlin and William Stickney, previously agreed to settle the Commission's charges. Judgments by consented were entered against Stickney in July 2007 and McLaughlin in October 2007.
For further information, please see: Litigation Release No. 19656 (April 13, 2006); Securities Exchange Act Rel. No. 56168 (July 30, 2007); Securities Exchange Act Release No. 56668 (October 17, 2007).