U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20342 / October 19, 2007
Accounting and Auditing Enforcement Release No. 2745 / October 19, 2007
SEC v. Fred Gold, et al, Civil Action No. 05 CV 4713 (JS) (E.D.N.Y.)
Former Arthur Andersen Audit Partner Fred Gold Agrees to Permanent Anti-Fraud Injunction, $100,000 Civil Penalty, and SEC Practice Suspension in Settlement of SEC Litigation Relating to American Tissue Audit
The Securities and Exchange Commission (Commission) announced today that Fred Gold, a former partner at Arthur Andersen, LLP., has agreed to settle the Commission's civil injunctive action pending against him in the U.S. District Court for the Eastern District of New York. Without admitting or denying the allegations in the complaint, Gold consented to entry of a final judgment entered by the Court on October 16, 2007, that permanently enjoins him from violating Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and from aiding and abetting violations of Section 15(d) of the Exchange Act and Exchange Act Rules 12b-20 and 15d-1, and orders him to pay a civil money penalty of $100,000. As part of the settlement, Gold has consented, without admitting or denying the Commission's findings, to the issuance of an administrative order suspending him from appearing or practicing before the Commission as an accountant pursuant to Rule 102(e)(3) of the Commission's Rules of Practice.
The Commission's complaint alleged that:
- During its fiscal year 2000, American Tissue fraudulently and materially inflated reported assets and earnings by improperly capitalizing $15.6 million of previously expensed supplies and overvaluing its finished goods inventory by at least $12.5 million;
- Gold supervised, reviewed and approved Andersen's audit of American Tissue's fiscal year 2000 financial statements;
- Gold knew or was reckless in not knowing that American Tissue's finished goods inventory was overstated and that supplies American Tissue used in its manufacturing processes had been improperly classified as inventory instead of as expenses;
- In July 2001, when he learned the fiscal 2000 American Tissue audit had been selected for a peer review by another accounting firm, Gold directed others to alter audit work papers in an attempt to conceal audit work failures; and
- In September 2001, when he learned that another accounting firm had discovered that American Tissue had overvalued inventory and would have to restate financial results for fiscal 2000, Gold destroyed documents and e-mails in a further attempt to conceal the audit failures.
For additional information, see Litigation Release No. 19417 / October 6, 2005