U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 18370 / September 29, 2003
ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 1876/ September 29, 2003
SEC SETTLES ACCOUNTING FRAUD CASE AGAINST FORMER PRESIDENT OF OAKGRIGSBY, INC.
Securities and Exchange Commission v. James C. Horne (United States District Court for the Northern District of Illinois, Civ. No. 00-C-5935)
The Securities and Exchange Commission announced today that, on September 12, 2003, an Illinois federal court entered, by consent, an order permanently enjoining defendant James C. Horne, of Lake Bluff, Illinois, from future violations of the antifraud, periodic reporting, books and records and internal accounting controls provisions of the federal securities laws. The order also holds Horne liable for disgorgement and interest totaling almost $100,000, but waives payment of all but $20,000, and does not impose a penalty, based on Horne's sworn representations and other documents submitted concerning his financial condition. At the time of the conduct at issue, Horne was the president of OakGrigsby, Inc., a Sugar Grove, Illinois company that was a division of Oak Industries, Inc., headquartered in Waltham, Massachusetts.
The Commission's complaint, filed on September 27, 2000, alleged that, between July 1995 and January 1997, defendants Horne and Matthew R. Welch, the former controller of OakGrigsby, conspired to fraudulently conceal OakGrigsby's operating expenses such as salaries, shipping and travel. OakGrigsby's results were consolidated with those of other Oak divisions and incorporated into Oak's periodic Commission filings and press releases. As a result of Horne and Welch's actions, Oak's income per share for the fourth quarter of 1995 and for the first three quarters of 1996 were materially overstated. According to the Complaint, the defendants were, at least in part, motivated to undertake the scheme in order to ensure that OakGrigsby met specified earnings targets, which allowed Horne to earn a bonus of $55,000 for 1995. The disgorgement ordered by the Court was of Horne's 1995 bonus. Welch has previously settled the Commission's action.
The Commission's complaint charged Horne with, and the Court permanently enjoined Horne from, violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder (antifraud provisions), Exchange Act Rule 13b2-1 (prohibiting falsification of issuer books and records), and 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 and 13a-13 thereunder (issuer reporting, books and records and internal accounting controls provisions). The order, entered by the Honorable Ronald A. Guzmàn, held Horne liable for disgorgement of $55,000, plus prejudgment interest of $39,574, or a total of $94,574, but waived payment of all but $20,000 based on Horne's financial condition. For further information, see Litigation Release Nos. 16734 and 17165.