U.S. Securities and Exchange Commission
Litigation Release No. 18851 / August 25, 2004
Accounting and Auditing Enforcement Release No. 2089 / August 25, 2004
FINAL JUDGMENT OF PERMANENT INJUNCTION AND OTHER RELIEF ENTERED AGAINST DEFENDANTS IAN R. WILSON, RAY CHUNG, M. LAURIE CUMMINGS, DIRK GRIZZLE AND TIMOTHY B. ANDERSEN, FORMER SENIOR OFFICERS AND EMPLOYEES OF AURORA FOODS INC.
SECURITIES AND EXCHANGE COMMISSION V. AURORA FOODS INC., ET AL., Case No. 01 CIV 0554 (AKH) S.D.N.Y.
The Securities and Exchange Commission announced that on August 3, 2004, the United States District Court for the Southern District of New York entered Final Judgments of Permanent Injunction and Other Relief against defendants Ian R. Wilson (Wilson), Ray Chung (Chung), M. Laurie Cummings (Cummings) and Timothy B. Andersen (Andersen), and on August 12, 2004, it entered a Final Judgment of Permanent Injunction and Other Relief against Dirk Grizzle (Grizzle). Wilson, the former Chief Executive Officer of Aurora Foods, Inc. (Aurora), Cummings, the former Chief Financial Officer, and Chung, the former Executive Vice-President, were each enjoined from future violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and from violations, as "control persons" pursuant to Section 20(a) of the Exchange Act, of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. Andersen and Grizzle, both former division vice-presidents, were enjoined from violating Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder. All of the defendants consented to the entry of the final judgments without admitting or denying the allegations in the Commission's Complaint.
In addition to the injunctive relief, Wilson, Chung, Cummings and Grizzle were permanently barred from serving as an officer or director of a public company. Wilson, Chung, Cummings and Grizzle were also ordered to pay disgorgement of their ill-gotten gains and prejudgment interest in the amounts of $420,000, $142,000, $75,000, $102,000, respectively. The final judgments impose civil penalties against Chung, Cummings, Andersen and Grizzle in the amounts of $125,000, $200,000, $125,000 and $75,000, respectively.
These civil penalties are in addition to criminal penalties assessed against Wilson, Cummings, Chung and Grizzle, each of whom pled guilty to various securities counts in a related criminal case. In the criminal case, Wilson received a sentence of 33 months incarceration and was fined $1 million. Cummings received a sentence of 41 months incarceration. Chung was fined $500,000. Grizzle received a sentence of six months incarceration and was fined $100,000. Andersen was not a defendant in the criminal case.
According to the Commission's Complaint, which was filed on January 23, 2001, Wilson, Chung, Cummings, Grizzle, Andersen, and other co-defendants perpetrated a brazen financial reporting fraud at Aurora in 1998 and 1999. The Complaint alleged that during the relevant period, Aurora under-reported its trade marketing expenses by more than $43 million which resulted in material misstatements of earnings in Aurora's financial statements. Aurora's senior management, consisting of Wilson, Chung, and Cummings, was aware that Aurora was not accurately reporting trade marketing expense. But instead of properly booking the expense, senior management tried to conceal it from the independent auditors by directing division level officers and employees, including Grizzle and Andersen, to make false entries in various accounts on Aurora's books. Grizzle and Andersen assisted in these efforts. As a result of the scheme, Aurora falsely and substantially inflated its financial results.
Previously, defendants Aurora, Tammy Fancelli and James Elliott consented to the entry of final judgments that permanently enjoined them from future violations of the federal securities laws. In addition, Fancelli and Elliott were ordered to pay civil penalties in the amounts of $20,000 and $10,000, respectively.
The litigation remains pending against defendant Keith Luechtefeld in the United States District Court for the Southern District of New York.
For further information, see Litigation Release No. 16866 (January 23, 2001).