U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19077 / February 14, 2005
Accounting and Auditing Enforcement
Release No. 2189 / February 14, 2005
SECURITIES AND EXCHANGE COMMISSION v. CRAIG SCOTT , Civil Action No. 3-05 CV 0302 P (USDC/NDTX/Dallas Division)
SEC SUES FORMER CFO AND GENERAL COUNSEL OF FORT WORTH, TEXAS-BASED CONVENIENCE STORE AND GAS STATION COMPANY
On February 14, 2005, the Securities and Exchange Commission filed a civil action in the United States District Court for the Northern District of Texas against Craig Scott, the former CFO and general counsel of FFP Marketing Company, Inc. ("FFP"), a Fort Worth, Texas-based owner and operator of convenience stores and gas stations whose stock was listed on the American Stock Exchange during the relevant period. The SEC alleged that Scott committed securities fraud, and that he aided and abetted FFP's violations of SEC reporting rules. Scott neither admitted nor denied the SEC's allegations, but he settled the case by agreeing to pay a civil money penalty of $25,000.
In June 2002, according to the SEC's complaint, FFP restated its net income for 1999, 2000 and the first three quarters of 2001, as a result of recurrent accounting lapses at the company. The SEC further alleges that, prior to the restatement, in April and May 2002, Scott prepared, and caused FFP to file with the Commission, notices of late filing (Forms 12b-25), when the company was unable to file periodic reports on time.
According to the SEC's complaint, the late-filing notices that Scott prepared were false and misleading. The SEC alleges that the notices fraudulently omitted to disclose that an internal investigation of the company's accounting lapses caused the company to delay filing its periodic reports. The SEC further alleges that the late-filing notices misrepresented the cause of certain losses that the company said it would report. According to the SEC, the late-filing notices falsely attributed losses that were actually related to the company's accounting lapses to other business conditions. The SEC alleges that Scott, by preparing the false and misleading notices of late filing, and causing FFP to file them, violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and aided and abetted FFP's violations of Rules 12b-20 and 12b-25 under the Exchange Act.
In addition to settling the SEC's civil action, Scott, who is a licensed attorney and CPA, simultaneously settled an SEC administrative proceeding under Rule 102(e)(1)(iii) of the SEC Rules of Practice, by agreeing to the entry of an SEC order denying him the privilege of appearing or practicing before the Commission as an attorney or as an accountant, with a right to apply for reinstatement after three years.
Scott also settled an SEC cease-and-desist proceeding, by consenting to the entry of an order that he cease and desist from committing or causing violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and from causing violations of Rules 12b-20 and 12b-25 under the Exchange Act. In the same cease-and-desist proceeding, FFP consented to the entry of an order that it cease and desist from committing or causing violations of reporting, record keeping, and internal controls provisions of the Exchange Act and rules promulgated thereunder, and the company's former controller, Warner Williams, consented to an order that he cease and desist from causing violations of those provisions and rules.
SEC Complaint in this matter