U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission

UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION

Case No. 03-22191- CIV-KING



SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

v.

RICA FOODS, INC.,
CALIXTO CHAVES,
and GINA SEQUEIRA,

Defendants.


:
:
:
:
:
:
:
:
:
:
:

COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF

Plaintiff Securities and Exchange Commission ("Commission") alleges that:

INTRODUCTION

1. The Commission brings this action to restrain and permanently enjoin Defendants Rica Foods, Inc. ("Rica Foods" or "the Company"), Calixto Chaves ("Chaves"), and Gina Sequeira ("Sequeira") from violating the record-keeping and reporting provisions of the federal securities laws. As part of this action, the Commission seeks to enjoin Chaves and Sequeira from violating the certification requirements imposed on the principal executive and financial officers of public companies by the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley").

2. On January 13, 2003, Rica Foods filed a Form 10-K annual report with the Commission containing a purported unqualified independent auditor's report ("auditor's report") from Deloitte & Touche ("Deloitte") representing that Rica Foods' consolidated financial statements were presented fairly and in conformity with Generally Accepted Accounting Principles. At the time of the filing, however, Deloitte had not provided Rica Foods with a signed audit report, and Rica Foods' financial statements contained material classification errors. Despite the lack of a signed audit report and the existence of these material errors, Chaves, the Company's CEO and chairman, and Sequeira, the Company's Chief Financial Officer, certified, in the Form 10-K annual report, that the filing fairly and accurately presented Rica Foods' financial condition.

DEFENDANTS

3. Rica Foods is a Nevada corporation with executive offices in Miami, Florida and its corporate headquarters in Costa Rica. The common stock of Rica Foods has been registered with the Commission since 1999 pursuant to Section 12(b) of the Securities Exchange Act of 1934 ("Exchange Act") and is listed on the American Stock Exchange.

4. Chaves is 56 years old and resides in Costa Rica. He has been the Chairman of the Board, Chief Executive Officer, and President of Rica Foods since 1996.

5. Sequeira is 32 years old and resides in Costa Rica. She was appointed Rica Foods' Chief Financial Officer on November 8, 2002, and has been with the Company since 1996, serving in various financial and accounting positions. Sequeira is a licensed public accountant in Costa Rica.

JURISDICTION AND VENUE

6. The Commission brings this action pursuant to the authority conferred upon it by Section 21 of the Exchange Act [15 U.S.C. §78u] seeking to restrain and permanently enjoin the Defendants from engaging in the acts, practices, and courses of business alleged herein.

7. Defendants, directly and indirectly, have made use of the means or instruments of transportation or communication in, and the means or instrumentalities of interstate commerce, or of the mails, or of the facilities of a national securities exchange, in connection with the transactions, acts, practices, and courses of business alleged herein.

8. Certain of the acts constituting violations of the Exchange Act have occurred within the Southern District of Florida. Rica Foods conducts business and maintains offices in the Southern District of Florida.

9. Accordingly, this Court has jurisdiction over this action, and venue is proper pursuant to Sections 21 and 27 of the Exchange Act [15 U.S.C. §§78u and 78aa].

FACTUAL ALLEGATIONS

10. On the evening of January 13, 2003, Rica Foods filed with the Commission its annual report on Form 10-K for the fiscal year ended September 30, 2002. The Form 10-K annual report, due on January 14, 2003, included an audit report containing an unqualified opinion from Rica Foods' independent auditors, Deloitte, that the consolidated financial statements presented fairly, in all material respects, the financial position of Rica Foods and subsidiaries as of September 30, 2002, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.

11. The Form 10-K annual report also included the personal certifications of Chaves and Sequeira certifying that the filing conformed with the reporting and disclosure requirements of the securities laws and fairly presented Rica Foods' financial condition as required by Section 302 of Sarbanes-Oxley. Each certification stated, in relevant part that:

  1. I have reviewed this annual report on Form 10-K of Rica Foods, Inc.;

  2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and,

  3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

12. At the time of this filing, however, Rica Foods had not received an authorized and issued audit report from Deloitte. At least part of the reason for the absence of an audit report was that, as Deloitte had told the Company, the financial statements contained a number of material classification errors. Among other things, the Company's financial statements recorded $5 million in loans due from its shareholders as an asset (thereby increasing Rica Foods' assets from $91 million to $96 million on the Balance Sheet) instead of as a reduction of its shareholders' equity.

13. Chaves and Sequeira knew, or should have known, that Deloitte had not issued a signed audit report and that Rica Foods' Form 10-K included the material classification errors described above.

14. Deloitte resigned from the Rica Foods audit engagement on January 23, 2003. Also on January 23, 2003, AMEX halted trading in Rica Foods common stock for failure to file audited financial statements, and trading in its stock remains halted as of the date of this Complaint.

CAUSES OF ACTION

Violations by Rica Foods of Section 13(a) of the
Exchange Act and Rules 13a-1 and 12b-20 thereunder

15. Plaintiff realleges and incorporates by reference paragraphs 1 through 14 above.

16. Section 13(a) of the Exchange Act and Rule 13a-1 thereunder require issuers of registered securities to file with the Commission factually accurate annual reports. Rule 12b-20 of the Exchange Act provides that, in addition to the information expressly required to be included in a statement or report, there shall be added such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.

17. Rica Foods filed a Form 10-K on January 13, 2003 that included an audit report that was neither issued nor authorized by Deloitte and financial statements that contained material classification errors.

18. As a result of the conduct described above, Rica Foods violated Section 13(a) of the Exchange Act [15 U.S.C. §§78m(a)] and Rules 13a-1 and 12b-20 thereunder [17 C.F.R. §§240.13a-1 and 240.12b-20].

Violations by Rica Foods of Sections
13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act

19. Plaintiff realleges and incorporates by reference paragraphs 1 through 14 above.

20. Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, commonly referred to as the "books and records" and "internal controls" provisions, respectively, of the federal securities laws, require generally that issuers with a class of securities registered pursuant to Section 12 of the Exchange Act make and keep books, records and accounts, which, in reasonable detail, accurately and fairly reflect their transaction and disposition of assets, and devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that: transactions are executed in accordance with management's general or specific authorization; transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements and to maintain accountability for assets; access to assets is permitted only in accordance with management's general or specific authorization; and the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

21. Rica Foods' failed to accurately reflect certain account balances in the financial statements it filed with its most recent annual report on Form 10-K. Rica Foods also failed to devise and maintain a system of internal controls sufficient to provide reasonable assurances that certain transactions were recorded as necessary to permit the preparation of accurate financial statements for inclusion in its Form 10-K for the fiscal year ended September 30, 2002.

22. As a result of the conduct described above, Rica Foods violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C.§§78m(b)(2)(A) and (B)].

Chaves and Sequeira Aided and Abetted Rica Foods'
Violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B)
of the Exchange Act and Rules 13a-1 and 12b-20 thereunder
and Directly Violated Rule 13a-14 of the Exchange Act

23. Plaintiff realleges and incorporates by reference paragraphs 1 through 14 above.

24. Pursuant to Section 20(e) of the Exchange Act, the Commission may also impose secondary liability upon "any person that knowingly provides substantial assistance" to another violator of the Exchange Act.

25. Chaves and Sequeira aided and abetted Rica Foods' violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder, by knowingly providing substantial assistance in the commission of the Company's violations.

26. Rule 13a-14 of the Exchange Act requires that principal executive and financial officers certify that, based on their knowledge, the issuer's financial statements are accurate. Chaves and Sequeira, as the Company's principal executive and financial officers, signed personal certifications under Rule 13a-14 of the Exchange Act, indicating, in part, that they reviewed the Form 10-K annual report and that based on their knowledge, the report did not contain any untrue statement of a material fact or omit to state a material fact. Chaves and Sequeira signed these certifications in spite of the fact that at the time Rica Foods filed its Form 10-K annual report, Deloitte had not provided the Company with an issued and authorized audit report and the financials statements included in the filing contained material classification errors.

27. As a result of the conduct described above, Chaves and Sequeira aided and abetted Rica Foods' violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§78m(a), 78m(b)(2)(A) and 78m(b)(2)(A)] and Rules 13a-1 and 12b-20 thereunder [17 C.F.R. §§240.13a-1 and 240.12b-20] and directly violated Rule 13a-14 of the Exchange Act [17 C.F.R. §§240.13a-14].

Violations by Chaves and Sequeira
of Sections 13(b)(5) of the ExchangeAct

28. Plaintiff realleges and incorporates by reference paragraphs 1 through 14 above.

29. Section 13(b)(5) prohibits any person from, among other things, knowingly circumventing a system of internal accounting controls or failing to implement a system of internal accounting controls.

30. Chaves and Sequeira failed to implement a system of internal accounting controls by certifying the accuracy of the Form 10-K annual report which included an unissued and unauthorized audit report and financial statements containing material classification errors. 31. As a result of the conduct described above, Chaves and Sequeira violated Section 13(b)(5) of the Exchange Act [15 U.S.C. §78m(b)(5)].

RELIEF REQUESTED

WHEREFORE, the Commission respectfully requests that the Court enter Orders:

I.

Permanent Injunctive Relief
(All Defendants)

A. Permanently restraining and enjoining Rica Foods from violating Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act [15 U.S.C.§§78m(a), 78m(b)(2)(A) and (b)(2)(B)] and Rules 12b-20 and 13a-1 thereunder [17 C.F.R. §§240.12b-20 and 240.13a-1].

B. Permanently restraining and enjoining Chaves from violating Sections 13(b)(5) of the Exchange Act [15 U.S.C. §78m(b)(5)] and Rule 13a-14 thereunder [17 C.F.R. §§240.13a-14]; and, aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act [15 U.S.C.§§78m(a), 78m(b)(2)(A) and (b)(2)(B)] and Rules 12b-20 and 13a-1 thereunder [17 C.F.R. §§240.12b-20 and 13a-1];

C. Permanently restraining and enjoining Sequeira from violating Sections 13(b)(5) of the Exchange Act [15 U.S.C. §78m(b)(5)] and Rule 13a-14 thereunder [17 C.F.R. §§240.13a-14]; and, aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act [15 U.S.C.§§78m(a), 78m(b)(2)(A) and (b)(2)(B)] and Rules 12b-20 and 13a-1 thereunder [17 C.F.R. §§240.12b-20 and 13a-1].

II.

Civil Money Penalties
(Chaves and Sequeira)

Impose civil monetary penalties on Chaves and Sequeira pursuant to Section 21(d) of the Exchange Act [15 U.S.C. § 78u].

III.

Further Relief
(All Defendants)

Grant such other and further relief as may be necessary and appropriate.

IV.

Retention of Jurisdiction
(All Defendants)

Further, the Commission respectfully requests that the Court retain jurisdiction over this action in order to implement and carry out the terms of all orders and decrees that may hereby be entered, or to entertain any suitable application or motion by the Commission for additional relief within the jurisdiction of this Court.

 

August 15, 2003

Respectfully submitted,

_________/S/_____________
Kerry A. Zinn
Florida Bar No. 118559

Ivan P. Harris
Florida Bar No. 0085405

Yolanda Gonzalez
Florida Bar No. 107042

Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
801 Brickell Avenue, Suite 1800
Miami, Florida 33131
Telephone: (305) 982-6300
Facsimile: (305) 536-4154

 

http://www.sec.gov/litigation/complaints/comp18293.htm

Modified: 08/18/2003