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U.S. Securities and Exchange Commission

United States Securities and Exchange Commission

Litigation Release No. 18139 / May 15, 2003

Accounting and Auditing Enforcement Release No. 1783 / May 15, 2003

Securities and Exchange Commission v. Adam Gilburne, Civil Action Number CV-03-AR-1087-S (N.D. Ala.)

Commission Obtains Injunction, Civil Penalties and an Officer and Director Bar Against Former Just for Feet Officer

The Securities and Exchange Commission ("Commission") announced that on May 12, 2003, it filed a complaint in federal district court in the Northern District of Alabama against Adam Gilburne, former Executive Vice President and Superstore Division President of Just for Feet, Inc. ("Just for Feet"), a Delaware corporation based, during the relevant period, in Birmingham, Alabama. Just for Feet was a national retailer of athletic and outdoor footwear and apparel. The Company filed for bankruptcy protection in 1999. Gilburne consented to the entry of an injunction against him, civil penalties, and an officer and director bar.

The Commission's complaint alleges that from at least 1997 through its 1999 demise, Just for Feet substantially overstated its assets and income through the use of bogus receivables from the Company's outside advertising agency. One such receivable of $3 million comprised 8.7% of Just for Feet's $34.2 million in reported pre-tax income in its Form 10-K annual report for fiscal 1997. A second bogus receivable of $5.3 million comprised 12.3% of Just for Feet's $43.3 million in reported pre-tax income in its Form 10-K annual report for fiscal 1998.

According to the complaint, Gilburne made or directed fraudulent adjustments in Just for Feet's financial records necessary to artificially inflate Just for Feet's earnings. In or around January 1998, a senior management official, Gilburne and others caused a false credit memorandum for $3 million from the advertising agency to be entered into Just for Feet's books and records. On December 15, 1998, Gilburne agreed with the senior management official and the advertising agency president that the advertising agency would grant Just for Feet a rebate of $5.3 million for fiscal 1999. In or around May 1999, Gilburne spoke with the advertising agency's president about overbilling Just for Feet by $250,000 to give the advertising agency enough money to make a partial repayment on the balance of the $5.3 million receivable it purportedly owed Just for Feet.

The Commission alleges that Gilburne's actions violated and/or aided and abetted violations of the antifraud, reporting, books-and-records, and internal controls provisions of the federal securities laws. Specifically, the Commission has charged Gilburne with violating 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 aiding and abetting Just for Feet's violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. To settle the Commission's lawsuit, Gilburne agreed, without admitting or denying the Commission's allegations, to a permanent injunction, payment of $75,000 in civil penalties and the entry of an officer and director bar.

The Commission wishes to thank the staff of the Alabama Securities Commission for their cooperation and assistance in this matter. The Commission's investigation is continuing.

SEC Complaint in this matter



Modified: 05/16/2003