U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19065 / February 7, 2005
Accounting and Auditing Enforcement
Release No. 2180 / February 7, 2005
Securities and Exchange Commission v. Danny Forest Whitt and John Terry Shields, Civil Case No. 05-70440 (Roberts, J; Wahlen, M.J) (E.D. Michigan, filed February 4, 2005)
SEC Charges Two Employees of Handleman Subsidiary With Books and Records Violations
On February 4, 2005, the Securities and Exchange Commission filed civil charges against two former employees of Anchor Bay Entertainment, a former subsidiary of Handleman Company. The SEC's complaint, which was filed in the United States District Court for the Eastern District of Michigan, alleges that the two employees caused the company to enter into two million dollar sham transactions. Both transactions involved the purported sale of slow moving or obsolete inventory to business partners coupled with secret buy-back provisions. The inventory included worthless video boxes and sleeves and DVDs for films. Handleman subsequently restated its financial statements to correct these accounting errors.
The defendants are Danny Forest Whitt, former President of Anchor Bay Entertainment, and John Terry Shields, former Director of Finance at the company. Without admitting or denying the allegations of the complaint, Whitt and Shields consented to final judgments permanently enjoining them from violations of Section 13(b)(5) of the Securities Exchange Act of 1934 and Rule 13b2-1 thereunder and from aiding and abetting violations of Section 13(b)(2)(A) of the Exchange Act. Shields also agreed to pay a $25,000 civil penalty. Whitt was not ordered to pay a civil penalty based upon his sworn financial statements.
The Commission acknowledges the assistance of the U.S. Attorney's Offices for the Eastern District of Michigan and the Northern District of Ohio.
SEC Complaint in this matter