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U.S. Securities and Exchange Commission

U.S. SECURITIES & EXCHANGE COMMISSION

LITIGATION RELEASE NO. 17978 / February 10, 2003

ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 1715 / February 10, 2003

Securities and Exchange Commission v. Christopher F. Crawford and Todd F. Katz, Case No. C-03-561 JL (February 10, 2003)

In the Matter of Richard C. Tyrer, Admin. Proc. No. 3-11039 (February 10, 2003)

In the Matter of Donald F. Marcus, Admin. Proc. No. 3-11038 (February 10, 2003)

In the Matter of Harry P. Adler, Admin. Proc. No. 3-11040 (February 10, 2003)

SEC SUES THE NORTH FACE, INC. FORMER CHIEF FINANCIAL OFFICER AND FORMER VICE PRESIDENT OF SALES FOR FRAUD AND INSTITUTES RELATED ADMINISTRATIVE PROCEEDINGS AGAINST FORMER VP OF WESTERN REGION SALES AND TWO FORMER CUSTOMERS

The Securities and Exchange Commission today filed a civil enforcement action against Christopher F. Crawford ("Crawford"), the former CFO, and Todd F. Katz ("Katz"), the former VP of Sales of The North Face, Inc., alleging they violated, or aided and abetted violations of, the antifraud, reporting, record keeping, and lying-to-auditors provisions of the federal securities laws [Sections 10(b), 13(b)(5), 13(a), and 13(b)(2)(A) and (B) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rules 10b-5, 13b2-1, 13b2-2, 13a-1 and 13a-13]. In addition, the Commission instituted and settled administrative proceedings against (a) Richard C. Tyrer ("Tyrer"), former VP of Western Region Sales, finding that he violated, or caused violations of, the antifraud, reporting, record keeping, and lying-to-auditors provisions of the securities laws [Exchange Act Sections 10(b), 13(b)(5), 13(a), and 13(b)(2)(A) and (B), and Exchange Act Rules 10b-5, 13b2-1, 13b2-2, 13a-1, and 13a-13]; (b) Donald F. Marcus ("Marcus"), a former customer of the company, finding that he caused violations of the lying-to-auditors provision of the securities laws [Exchange Act Rule 13b2-2]; and (c) Harry P. Adler ("Adler"), another of the company's former customers, finding that he caused violations of the lying-to-auditors provision of the securities laws [Exchange Act Rule 13b2-2].

Without admitting or denying the allegations in the civil complaint, Crawford and Katz consented to the entry of final judgments against them that will (a) enjoin both from future violations of the antifraud, reporting, record keeping, and lying-to-auditors provisions of the securities laws; (b) bar both from serving as an officer or director of a public company for five years; (c) order Crawford to disgorge $28,981.77, plus interest; and (d) order Crawford to pay a civil penalty of $30,000 and Katz to pay a civil penalty of $40,000. Crawford also consented to the issuance of an administrative order suspending him from appearing or practicing before the Commission as an accountant and providing that he may request reinstatement after five years.

Without admitting or denying the findings in the administrative orders, Tyrer consented to the issuance of an order that he cease and desist from committing or causing any violation of the antifraud, reporting, record keeping provisions, and lying-to-auditors of the securities laws, and Marcus and Adler consented to the issuance of orders that they cease and desist from committing or causing any violation of the lying-to-auditors provision of the securities laws.

The Commission's complaint alleges, and the orders find, the following: During 1997 through 1998, Crawford and Katz, engaged in a series of schemes to artificially inflate The North Face's financial results. As a result, The North Face overstated its revenue and gross margin recognition by fraudulently recognizing revenue on barter transactions and by fraudulently recording consignment sales as completed, regular sales. Crawford, Katz, and Tyrer tried to conceal the true nature of the improperly reported transactions from The North Face's auditors and from a special audit committee investigation. Crawford made material misrepresentations and omissions to the auditors in an attempt to hide his misconduct. Katz and Tyrer also conspired to keep their fraud from being discovered. They persuaded a customer of the company, Marcus, to lie to the internal investigators and senior management, and to sign false documents, knowing that the information would be relied upon by the auditors. Tyrer and Katz persuaded a second customer, Adler, to sign a false confirmation letter, which also was relied upon by the auditors.

 

SEC Complaint in this matter


http://www.sec.gov/litigation/litreleases/lr17978.htm

Modified: 02/20/2003