Litigation Release No. 18293 / August 18, 2003
Accounting and Auditing Enforcement Release No. 1844 / August 18, 2003
SEC SETTLES SARBANES-OXLEY CERTIFICATION CASE
SEC v. Rica Foods et. al., Civil Action No. 03-22191-Civ-King (S. D. Fla) (filed August 15, 2003)
The Securities and Exchange Commission (Commission) announced today that it filed settled civil injunctive actions against Rica Foods, Inc. (Rica Foods), its Chief Executive Officer, Calixto Chaves (Chaves) and its Chief Financial Officer, Gina Sequeira (Sequeira) for violations of the CEO and CFO certification requirements of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley). Rica Foods, with executive offices in Miami, Florida and its corporate headquarters in Costa Rica, and Chaves and Sequeira, who reside in Costa Rica, consented, without admitting or denying the allegations in the Commission's Complaint, to the entry of a Final Judgment of Permanent Injunction and Other Relief (Final Judgment).
According to the Commission's Complaint, on January 13, 2003, Rica Foods filed a Form 10-K annual report with the Commission containing a purported unqualified independent auditor's report from Deloitte & Touche (Deloitte). The audit report represented that Rica Foods' consolidated financial statements were presented fairly and in conformity with Generally Accepted Accounting Principles. At the time of the filing, however, Deloitte had not provided Rica Foods with a signed audit report, and Rica Foods' financial statements contained material classification errors.
Despite the lack of a signed audit report and the existence of these material errors, Chaves and Sequeira, personally certified in the annual report that the Form 10-K filing fairly and accurately presented Rica Foods' financial condition. Chaves and Sequeira signed these certifications pursuant to Section 302 of Sarbanes-Oxley, which required the Commission to adopt rules requiring an issuer's principal executive and financial officer each to certify the financial and other information contained in the issuer's quarterly and annual reports.
The Final Judgment will permanently enjoin Rica Foods from violating Sections 13(a),13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 12b-20 and 13a-1 thereunder, which governs the accuracy of issuer books and records and financial disclosures. The Final Judgment will also permanently enjoin Chaves and Sequeira from violating Section 13(b)(5) of the Exchange Act and Rule 13a-14 thereunder 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 and 13a-1 thereunder. The Final Judgment will further order Chaves to pay $25,000 in civil penalties, but does not impose a penalty against Sequeira based on the sworn financial statements and other financial information she provided to the Commission.
