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Glenn E. Glasshagel


U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19309 / July 25, 2005

Accounting and Auditing Enforcement
Release No. 2280 / July 25, 2005

Securities and Exchange Commission v. Glenn E. Glasshagel, Civil Action No. 05-61159-CIV-COOKE (S. D. Fla., filed July 15, 2005)

The Securities and Exchange Commission (SEC) announced that on July 15, 2005, it filed civil fraud charges against Glenn E. Glasshagel, the former Chief Financial Officer of Roadhouse Grill, Inc., a Pompano Beach, Florida restaurant chain. The SEC's complaint, which alleges that Glasshagel orchestrated a scheme to manipulate Roadhouse Grill's earnings between 1999 and 2000, seeks injunctive relief, disgorgement plus prejudgment interest, civil money penalties, and an officer and director bar.

According to the SEC's Complaint, during Roadhouse Grill's 1999 and 2000 fiscal years, Glasshagel implemented various accounting schemes designed to artificially inflate Roadhouse Grill's reported pre-tax earnings in order to meet the expectations of the one Wall Street analyst that covered the company. The Complaint alleges, for example, that Glasshagel caused Roadhouse Grill to inflate its earnings by understating various accrual accounts. Accrual accounts contain provisions for anticipated expenses that companies expect to incur within a fiscal year. According to the Commission's Complaint, at the end of certain periods during the 1999 and 2000 fiscal years, Glasshagel made improper reductions in these accrual accounts in order to improve Roadhouse Grill's earnings.

The Complaint also alleges that Glasshagel caused Roadhouse Grill to overstate its fiscal 2000 net income by recording a non-existent rebate receivable from one of the company's suppliers. According to the Commission's Complaint, this rebate never existed and Roadhouse Grill never received it. Based on these various improper entries, the Commission's Complaint alleges that Glasshagel caused Roadhouse Grill to overstate its fiscal 1999 net income by 5% and its fiscal 2000 net income by 35%. In both of those fiscal years, Roadhouse Grill met the expectations set by the Wall Street analyst that covered the company.

After Glasshagel resigned from Roadhouse Grill in July 2000, the company's new management discovered his misconduct. On August 1, 2001, Roadhouse Grill issued a press release announcing that it had overstated its net income during its fiscal years ended 1999 and 2000 and the intervening quarterly periods, and that it would be restating its prior financial results.

The SEC's Complaint alleges that, as a result of Glasshagel's conduct, he violated 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 that he aided and abetted Roadhouse Grill's 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.

*SEC Complaint in this matter


Last Reviewed or Updated: June 27, 2023