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IN THE UNITED STATES DISTRICT COURT
COMPLAINT Plaintiff, Securities and Exchange Commission ("Commission"), alleges the following: NATURE OF THE ACTION 1. This enforcement action involves a massive financial fraud carried out between January 1, 1998 and March 31, 2000 by top executives and other employees ("Defendants") of Anicom, Inc. ("Anicom" or the "Company"). During this period, the Defendants falsely reported millions of dollars of non-existent sales, including sales to a fictitious customer, and used other fraudulent techniques to inflate Anicom's net income by more than $20 million. To conceal the fraud, certain of the Defendants lied to Anicom's outside auditors, lied to the Audit Committee of Anicom's Board of Directors in an internal investigation, and withheld information from the Commission's staff. When aspects of the fraud were eventually revealed to the public, Anicom's shareholders lost more than $80 million. 2. The fraud had two distinct aspects. First, President and Chief Executive Officer Carl E. Putnam ("Putnam"), along with Vice President of Sales Daryl T. Spinell ("Spinell"), Chief Operating Officer John P. Figurelli ("Figurelli"), and Billing Manager Renee L. LeVault ("LeVault") improperly recognized numerous sales that inflated reported revenues and net profits. Additionally, Chief Financial Officer Donald C. Welchko ("Welchko"), with assistance from Figurelli, LeVault, and Vice President of Accounting Ronald M. Bandyk, C.P.A. ("Bandyk"), and with at least Putnam's knowledge, caused Anicom in 1999 to, among other things, improperly recognize over $11.7 million in sales to a fictitious customer called SCL Integration in order to minimize the effect on income of writing off earlier improper sales. Second, Welchko and Bandyk engaged in fraud by entering journal entries that improperly charged certain expenses to an inadvertently created reserve account and a Restructuring Charge, unjustifiably inflated purchase rebates accrued, and accelerated the recognition of sales between reporting periods. As a result of the Defendants' misconduct, Anicom filed with the Commission at least nine false 10-Q and 10-K reports between January 1, 1998 and March 30, 2000 that, among other things, overstated the Company's revenues by over $38 million. 3. On July 18, 2000, Anicom announced that it was conducting an investigation into accounting irregularities, that investors should not rely on its 1998, 1999, and first quarter 2000 financial statements, and that the Board of Directors ("Board") had placed Putnam and Welchko on administrative leave. Nasdaq immediately halted trading in the Company's stock. When Anicom's stock finally resumed trading on November 17, 2000, the price fell from $4.00 to $0.75, reflecting a market loss of over $80 million. Anicom ultimately declared bankruptcy in January 2001. As a result, Anicom had to discontinue operations, fire its nearly 1,200 employees, and liquidate its assets to pay creditors. 4. Through the activities alleged in this Complaint, the Defendants violated numerous provisions of the federal securities laws. All six Defendants engaged in fraud in the offer and sale of securities in violation of Sections 17(a)(1) and (3) of the Securities Act of 1933 ("Securities Act"), and in the purchase and sale of securities in violation of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated thereunder. All six Defendants also engaged in conduct that circumvented Anicom's system of internal controls and falsified Anicom's books and records in violation of Section 13(b)(5) of the Exchange Act. Five Defendants (Putnam, Welchko, Figurelli, Spinell, and Bandyk) aided and abetted Anicom's failure to file accurate annual and quarterly reports with the Commission that contained all information necessary to ensure that the statements contained in the reports were not materially misleading in violation of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. LeVault also aided and abetted Anicom's violation of Exchange Act Rule 12b-20. All six Defendants aided and abetted Anicom's failure to keep books and records, which accurately and fairly reflected Anicom's assets and recorded transactions in order to permit the financial statements to conform with Generally Accepted Accounting Procedures ("GAAP"), in violation of Section 13(b)(2)(A) of the Exchange Act. Four Defendants (Putnam, Welchko, Figurelli, and Bandyk) similarly aided and abetted Anicom's violation of Section 13(b)(2)(B)(ii) of the Exchange Act. All six Defendants violated Exchange Act Rule 13b2-1. Finally, Welchko and Bandyk made material misrepresentations to Anicom's external auditors, PricewaterhouseCoopers, in violation of Exchange Act Rule 13b2-2. 5. Accordingly, the Commission seeks: (i) entry of a permanent injunction prohibiting the Defendants from further violations of the relevant provisions of the federal securities laws; (ii) the imposition of a civil monetary penalty against each of the Defendants due to the egregious nature of the violations; (iii) entry of an order barring Putnam, Welchko, Figurelli, Spinell, and Bandyk from serving as an officer or director of a public company; (iv) disgorgement, with prejudgment interest, of the losses avoided from sales of Anicom stock by Spinell and Bandyk; (v) disgorgement, with prejudgment interest, of Putnam, Welchko, and Figurelli's 1999 performance-based bonuses; and (vi) disgorgement, with prejudgment interest, of Putnam, Welchko, and Spinell's salaries unjustly earned after they interfered with an Anicom internal investigation. JURISDICTION 6. This Court has jurisdiction over this action pursuant to Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. § 78aa], and 28 U.S.C. § 1331. 7. The Commission brings this action pursuant to the authority conferred on it by Section 20(b) of the Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)] and Sections 21(d) and (e) of the Exchange Act [15 U.S.C. §§ 78u(d) and 78u(e)]. 8. Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault, directly and indirectly, made use of the mails and means of instrumentalities of interstate commerce in connection with the transactions, acts, practices, and courses of business alleged herein. DEFENDANTS 9. Putnam, age 52, resides in Naperville, Illinois. At all time relevant to this Complaint, Putnam was Anicom's President, a Director, and was responsible for the Company's sales. In September 1999, he also became Chief Executive Officer. At all relevant times, Putnam signed Anicom's annual reports on Form 10-K as a Director, President, and in 1999 as CEO. Putnam also participated in making public statements concerning the annual, quarterly, and other periodic reports filed with the Commission. On July 18, 2000, Anicom's Board of Directors placed him on administrative leave. On September 11, 2000, Putnam resigned all positions. 10. Welchko, age 47, resides in Willow Springs, Illinois. At all relevant times, Welchko was Anicom's Chief Financial Officer and responsible for its accounting and finance functions. In 1998, he became a Director and was a member of the Audit Committee. At all relevant times, Welchko participated in preparing Anicom's annual, quarterly, and other periodic reports filed with the Commission. He signed Anicom's annual reports on Form 10-K as a Director and CFO, and its quarterly reports on Form 10-Q as CFO. Welchko also participated in making public statements concerning the annual, quarterly, and other periodic reports filed with the Commission. On July 18, 2000, the Board placed him on administrative leave. On September 11, 2000, Welchko resigned all positions. 11. Figurelli, 54, resides in Libertyville, Illinois. In August 1997, Figurelli joined Anicom as Vice President of Credit Services and an officer. In July 1998, he was promoted to Vice President of Operations and Credit Services. In March 1999, Figurelli became Executive Vice President of Operations and Logistics. On September 10, 2000, he resigned from Anicom. 12. Spinell, 38, resides in Naperville, Illinois. In 1995, he became Anicom's Vice President of Sales and an officer. In this position, Spinell reported directly to Putnam and managed Anicom's sales force. In January 2000, Spinell stepped down to become the General Manager of Anicom's Elk Grove Village, Illinois location. On September 21, 2000, Spinell resigned from Anicom. 13. Bandyk, 37, resides in LaGrange, Illinois. He is a certified public accountant in Illinois. In March 1998, Bandyk became Anicom's Vice President - Accounting and an officer. In January 1999, he was made Vice President - Controller. At all relevant times, Bandyk reported to Welchko, managed the accounting department, and participated in preparing Anicom's annual, quarterly, and other periodic reports filed with the Commission. On April 6, 2000, Bandyk resigned from Anicom. 14. LeVault, 33, resides in Huntley, Illinois. At all relevant times, LeVault managed Anicom's Drop Ship Billing Department. LeVault reported to Bandyk, and had a close working relationship with Putnam. On July 15, 2000, LeVault resigned from Anicom. ANICOM, INC. 15. Prior to filing for bankruptcy in January 2001, Anicom was a national distributor of wire and cable products based in Rosemont, Illinois. Anicom's business involved buying wire and cable products from vendors or manufacturers and selling those products to customers with a price mark up. 16. Anicom's Board planned to sell the Company to a larger concern within five years of its February 1995 initial public offering. To accomplish that objective, senior management set out to grow Anicom into a Company with $1 billion in annual revenues. Between 1995 and 1998 Anicom grew, in large part, by purchasing sixteen wire and cable companies through cash and stock transactions. By 1999, Anicom had more than sixty-one locations, and employed nearly 1,200 people. 17. Beginning in January 1998 and continuing through March 2000, Anicom materially overstated its earnings in filings with the Commission. In 1998, Anicom's revenues were overstated by at least $13.6 million and net income was overstated by at least $9.3 million. In 1999, Anicom's revenues were overstated by at least $15.2 million and net income was overstated by at least $7.3 million. In first quarter 2000, Anicom's revenues were overstated by at least $9.8 million and net income was overstated by at least $3.8 million. 18. At all relevant times, Anicom was required to file periodic and other informational reports, including Forms 10-K (annual reports) and 10-Q (quarterly reports), with the Commission pursuant to Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and the rules and regulations promulgated thereunder. These periodic reports contained, among other things, Anicom's financial statements. 19. Management represented that the financial information contained in Anicom's Form 10-Q reports filed with the Commission in 1998, 1999, and for first quarter 2000 reflected all normal recurring adjustments necessary for a fair presentation of the results for that interim period. Management further represented that Anicom's Form 10-Q reports should be read in conjunction with the Company's audited financial statements filed with the Commission on Form 10-K. Anicom's Form 10-K reports filed with the Commission as of December 31, 1998 and December 31, 1999 included the Report of the Company's Independent Accountants, PricewaterhouseCoopers, which stated that management represented that the financial information contained in those reports were prepared in conformity with GAAP and fairly presented Anicom's financial position in all material respects. 20. At all relevant times, Anicom's common stock was registered with the Commission under Section 12(g) of the Exchange Act. Prior to its delisting in November 2000, Anicom's common stock was traded on the Nasdaq National Market. SALES FRAUD 21. Defendants Putnam, Welchko, Figurelli, Spinell, and LeVault caused Anicom to improperly recognize revenue from sales involving drop shipments. In a drop shipment, Anicom arranged for a vendor or manufacturer to ship the product directly to the customer. Anicom billed customers for the cost of the product and a mark up in price after receiving notification from the vendor or manufacturer that product had been shipped to the customer. 22. To recognize revenue from a drop shipment, Anicom's employees entered incoming customer orders into the Company's billing system, which designated the orders as "booked." Pursuant to Anicom's revenue recognition policy, which was based on Statement of Financial Concepts No. 5, Anicom recognized (or "billed") revenue and the associated cost of sales when product for a "booked" order was shipped to the customer. Anicom disclosed its revenue recognition policy to the public in its Form 10-K reports filed with the Commission. 23. Near the end of quarters in 1998, 1999, and first quarter 2000, Putnam, and, in 1998 and 1999, Spinell, knew or recklessly disregarded that they instructed Anicom's employees to book orders which customers had not yet placed with Anicom. Putnam and Spinell knew or recklessly disregarded that these booked orders were billed and, accordingly, improperly recognized as revenue on Anicom's financial statements filed with the Commission. 24. In at least one instance, Putnam and Spinell requested that a customer, Checkpoint Systems, Inc., submit an order which Putnam and Spinell knew that the customer did not intend to honor. Putnam and Spinell knew or recklessly disregarded that this order would be billed to the customer and improperly recognized as revenue on Anicom's financial statements filed with the Commission. 25. Where a booked order exceeded the customer's existing credit line, customer accounts needed credit approval in order to process the order any further. Figurelli provided the required credit approval even though he knew or recklessly disregarded that the customer had not placed an order with Anicom. Figurelli also provided the required credit approval even though he knew or recklessly disregarded that Anicom improperly billed customers for those orders, which Anicom reported as revenue on its financial statements filed with the Commission. 26. Because customers did not place these orders, Anicom did not order the necessary product from vendors or manufacturers to send to the customers. In order to bill these orders, and improperly recognize the order as revenue, LeVault knowingly or recklessly disregarded that she entered false data into Anicom's billing system to show that the vendor or manufacturer had shipped the product to the customer. Putnam, Welchko, Figurelli, and Spinell knew or recklessly disregarded that LeVault entered false data into Anicom's billing system in order to show that product was shipped to customers. Furthermore, Putnam, Welchko, Figurelli, Spinell, and LeVault knew or recklessly disregarded that the sales billed as a result of LeVault entering the false data would be included in Anicom's financial statements filed with the Commission. 27. In later quarters, LeVault knew or was reckless in not knowing that she entered customer credits into Anicom's billing system to eliminate the receivables previously generated by improper sales. Putnam, Welchko, Figurelli, and Spinell knew or recklessly disregarded that LeVault entered customer credits in the billing system to eliminate the receivables previously generated by the improper sales. Putnam, Welchko, Figurelli, and Spinell knew or recklessly disregarded that these credits caused Anicom to file materially misstated financial statements with the Commission. 28. The improper sales entered into Anicom's billing system were reflected on the Flash Report. The Flash Report was an online report available through Anicom's billing system that tracked sales activity, including the sales and gross profit numbers for every sales person and sales totals by branch, region, and for the Company. Data appearing on the Flash Report updated about every fifteen minutes. Each of the Defendants had access to the Flash Report. Putnam watched the Flash Report particularly assiduously. 29. Throughout 1998, 1999, and first quarter 2000, the average customer order posted to the Flash Report was about one thousand dollars. The dollar amounts of the improper sales ranged from $11,500 to $5 million. Improper sales ranging from $11,500 to $5 million appeared as billed on the Flash Report. In light of their access to the Flash Report, all the Defendants knew or recklessly disregarded that Anicom billed improper sales, which were included in Anicom's financial statements filed with the Commission. 30. Three examples of improperly recognized sales involved Spanpro, Inc., GTT Electronics, Inc., and SCL Integration Corp. Spanpro, Inc. 31. In its Form 10-Q filed with the Commission for the quarter ended September 30, 1998, Anicom improperly recognized nearly $5.5 million in revenue from an improper sale to Spanpro, Inc. During the summer of 1998, Spanpro had discussed with an Anicom sales representative the possibility that it might purchase a large quantity of fiber optic cable for use in building a fiber optic loop in Kentucky. Putnam and Spinell knew of this potential order, and that Spanpro was experiencing difficulties in securing a needed right-of-way permit for a segment of the loop. During a conference call in mid-September 1998, Putnam and Spinell instructed the Anicom sales representative to book the order in the billing system. Putnam and Spinell knew or recklessly disregarded that Spanpro had not placed the order with Anicom and that Anicom would recognize revenue from this order on its financial statements filed with the Commission. 32. On September 30, 1998, Figurelli approved credit for the order when he knew, or recklessly disregarded, that (1) Spanpro had not placed an order with Anicom, and (2) that Anicom would not ship any product to Spanpro for the order. LeVault knew or recklessly disregarded that she entered false data into the billing system to show that product had been shipped to Spanpro. Putnam, Figurelli, Spinell, and LeVault knew or recklessly disregarded that LeVault entered false data into Anicom's billing system to show that product was shipped to Spanpro to improperly recognize the order as revenue on Anicom's financial statements filed with the Commission. GTT Electronics, Inc. 33. In its Form 10-K report for the year ended December 31, 1998, Anicom improperly recognized revenue from a sale to GTT Electronics, Inc. In December 1998, Spinell ordered a sales person in Anicom's Dallas, Texas branch office to book a sale to GTT Electronics for $2.1 million because Spinell "needed the numbers." The sales person informed Spinell that Anicom did not have an order from GTT Electronic. Spinell knew or was recklessly disregarded that GTT Electronics had not placed the order with Anicom. Spinell also knew or recklessly disregarded that Anicom would recognize the order from GTT Electronics as revenue on its financial statements filed with the Commission. 34. On December 30, 1998, Figurelli approved credit for the order when he knew, or recklessly disregarded, that (1) GTT Electronics had not placed an order with Anicom, and (2) that Anicom would not ship any product to GTT Electronics for the order. LeVault knew or recklessly disregarded that she entered false data into the billing system to show that product had been shipped to GTT Electronics. Putnam, Figurelli, Spinell, and LeVault knew or recklessly disregarded that LeVault entered false data into Anicom's billing system to show that product was shipped to GTT Electronics to improperly recognize the order as revenue on Anicom's financial statements filed with the Commission. SCL Integration Corp. 35. By early 1999, improper and otherwise uncollectible sales made up approximately $10 million, or nearly 20 percent, of Anicom's accounts receivable. Pursuant to Statement of Financial Concepts No. 6, these receivables should have been written off Anicom's books and records at the time they became uncollectible. 36. In first quarter 1999, Welchko informed Bandyk of a plan that would gradually eliminate the improper and otherwise uncollectible accounts receivable. Welchko's plan was two-part: (1) to remove certain improper and otherwise uncollectible sales through sales credits; and (2) to offset the credits by recording additional improper sales, which would later be written off on a monthly basis over the latter half of 1999. Welchko and Bandyk knew or recklessly disregarded that this plan was contrary to GAAP, which called for Anicom to write off the receivables all at once and would have required the Company to take a significant charge to income. Welchko and Bandyk knew or recklessly disregarded that implementing this plan would cause Anicom to file materially misstated financial statements with the Commission in 1999. 37. Welchko and Figurelli compiled a list of improper sales and uncollectible amounts that needed to be removed from Anicom's accounts receivable. At Welchko's direction, LeVault researched each item on the list to determine whether it was a real sale that was deemed uncollectible or an improper sale that was to be removed from Anicom's accounts receivable through a sales credit. LeVault's work resulted in two lists: one that totaled $4,466,337 and another that totaled $2,117,454. The first number represented the amount of improper sales in Anicom's accounts receivable, and the second number represented arguably legitimate amounts due to Anicom but which Anicom's customers disputed and, therefore, might not be collectible. 38. The two amounts calculated by LeVault and a third amount called "Credit Reserve" were reflected on a document prepared by Welchko entitled "Credit Disbute (sic)." Credit Reserve totaled $3,870,554. The "Credit Reserve" was in anticipation of future improper or uncollectible sales. The two numbers from LeVault plus the Credit Reserve totaled $10.454 million. 39. In March 1999, Figurelli instructed a Credit Department employee to set up a new customer account in Anicom's billing system for a fictional company called SCL Integration Corp. Figurelli provided the employee with all the necessary information to add SCL Integration to the billing system, including customer name, address, telephone number, and credit limit. Curiously, the address provided by Figurelli for SCL Integration was identical with the exception of one digit to the address of Figurelli and Putnam's former employer. Welchko and LeVault instructed another employee to arrange the Flash Report to allow only Putnam, Welchko, Figurelli, and LeVault to view transactions involving SCL Integration. 40. Putnam, Welchko, Figurelli, Bandyk, and LeVault knew about SCL Integration, and knew that SCL Integration did not, and does not, exist. In addition, Putnam, Welchko, Figurelli, Bandyk, and LeVault knew that it was a wholly fictitious company that was created solely for the purpose of obscuring the write off of uncollectible accounts receivable on Anicom's books and records. Putnam, Welchko, Figurelli, Bandyk, and LeVault knew or recklessly disregarded that using SCL Integration to obscure the write off of uncollectible accounts receivable was improper and would result in Anicom filing materially misstated financial statements with the Commission. 41. On April 6, 1999, LeVault booked and billed nine sales for fiber optic cable to SCL Integration that totaled $10.454 million. She billed the sales to SCL Integration at the same time, but backdated the invoices so that two of the sales were in January 1999, four were in February 1999, and three were in March 1999. No product for these sales ever shipped to SCL Integration. On October 12, 1999, LeVault backdated to September 30, 1999 another sales invoice to SCL Integration for $1.3 million. LeVault, along with Putnam, Welchko, Figurelli, and Bandyk knew that she had billed over $11.7 million in sales to a fictitious customer account. 42. LeVault noted on each sales order the month in which that particular sale should be reversed by sales credit. Her information came from Welchko's "Credit Disbute" document, which showed when and how much of SCL Integration's sales should be removed by sales credit. In each month from March 1999 through October 1999, LeVault issued a sales credit to SCL Integration. Putnam, Welchko, Figurelli, and Bandyk knew or recklessly disregarded that LeVault issued these credits to SCL Integration. Putnam, Welchko, Figurelli, Bandyk, and LeVault knew or recklessly disregarded that the credits issued to SCL Integration were improperly issued for the purpose of eliminating from accounts receivable improper sales made to a fictitious customer or to otherwise obscure the write off of improper sales. In addition, Putnam, Welchko, Figurelli, Bandyk, and LeVault knew or recklessly disregarded that the credits issued to SCL Integration would cause Anicom to file with the Commission materially misstated financial statements. 43. In July 1999, after the end of the second quarter, Welchko directed Bandyk to enter a journal entry that moved $3.3 million in credits issued by LeVault in April, May, and June 1999 into third quarter 1999. In July, August, and September 1999, Bandyk knowingly wrote those credits off by journal entry against sales and allowance for doubtful accounts. Welchko and Bandyk knew or recklessly disregarded that moving the credits from second quarter 1999 into third quarter 1999 was improper and would cause Anicom to file materially misstated financial statements with the Commission. 44. In December 1999, the Commission sent Anicom a letter requesting that Anicom voluntarily produce information relating to sales credits over $1,000 issued during 1999. Welchko instructed an Anicom employee to compile the responsive information but remove all sales credits relating to SCL Integration. As a result of Welchko's instructions, in March 2000, Anicom produced the requested information to the Commission having improperly excluded the credits issued to SCL Integration. Anicom's Credit Managers Complained To Putnam, Welchko,
45. Putnam, Welchko, Figurelli, and Spinell knew, or recklessly disregarded, that Anicom's financial statements included improper sales based on their interactions with the Company's Credit Department. Anicom's Credit Managers were responsible for collecting the accounts receivable owed to the Company, and identifying uncollectible accounts receivable that needed to be written off the books and records. The job performance of the Credit Managers was evaluated, among other things, on their ability to collect outstanding accounts receivable. The Credit Managers knew that Anicom's accounts receivable and, accordingly, its financial statements included improper sales because they encountered these sales in performing their duties. 46. The Credit Managers complained about the improper sales to Putnam at a Credit Manager's meeting in March 1998, and to Spinell at a Credit Manager's meeting in March 1999. Putnam and Spinell knew or recklessly disregarded the Credit Manager's warnings that Anicom recognized improper sales and that its accounts receivable contained improper sales. 47. At the Credit Manager's meeting in March 1999, Figurelli, then Director of Credit Services, admitted to the Credit Managers that improper and otherwise uncollectible sales made up approximately 20 percent, or $10 million, of Anicom's accounts receivable. Following that meeting, Figurelli allowed the Credit Managers to identify to him those sales which the Credit Managers had determined were improper. Where Figurelli agreed that a particular sale was improper, he permitted the Credit Manager(s) to disregard that sale in computing the amounts on which they were responsible for collecting. 48. In August 1999, Welchko took over management of Anicom's Credit Department from Figurelli. At that time, at least one Credit Manager informed Welchko that Anicom recognized improper sales as revenue and that its accounts receivable contained these improper sales. In September 1999, Welchko met with several Credit Department employees to identify the existing improper and other uncollectible sales in accounts receivable. 49. Putnam required that the Credit Department employees responsible for processing customer credits advise him of any customer credit that decreased gross profit by an amount exceeding $1,000. Putnam knowingly refused to issue credits in a timely manner due to customers for legitimate reasons, such as incorrectly shipped products. On one occasion, a Credit Department employee complained to Figurelli that Putnam had refused to issue a credit due to a customer. Figurelli and the Credit Department employee went to speak with Putnam about the matter. Before discussing the proposed customer credit, Figurelli pretended to measure Putnam with his hands, telling Putnam that he was measuring him for prison garb. 50. Putnam knew or recklessly disregarded that delaying the issuance of credits misstated sales, cost of sales, and accounts receivable for that period and future periods. Furthermore, Putnam knew or recklessly disregarded that this practice caused Anicom to file materially misstated financial statements with the Commission. 51. In addition, Putnam knowingly refused to process certain credits, either through the Credit Department or material returned to Anicom's warehouses, at month or quarter end. In those situations, warehouse personnel put aside customer returned material until they were authorized to process the returned merchandise again. Putnam knew or recklessly disregarded that this practice overstated accounts receivable, as well as misstated inventory, sales, and cost of sales for that period and the period when the material was ultimately recorded as returned into inventory. Furthermore, Putnam knew or recklessly disregarded that this practice caused Anicom to file materially misstated financial statements with the Commission. The Impact Of The Sales Fraud On Anicom's Financial Statements
52. In total, the improper sales and credit practices described above caused Anicom to overstate its sales, as reported in its financials statements filed with the Commission on Forms 10-Q and 10-K, by at least $13.6 million in 1998, at least $15.2 million in 1999, and at least $9.8 million in 2000. All of the Defendants knew or recklessly disregarded that these improper practices caused Anicom to file materially misstated financial statements with the Commission. FRAUD IN THE ACCOUNTING DEPARTMENT Welchko And Bandyk Improperly Charged Expenses
53. In December 1997, Anicom purchased and installed a new billing system. As a result of the conversion to the new billing system, an $8 million out-of-balance condition appeared in a balance sheet liability account called the inventory clearing account. 54. The inventory clearing account represented inventory that had been received by Anicom, but not yet billed to Anicom by the vendor. As a result of Anicom's December 1997 billing system conversion, the inventory clearing account became out-of-balance with the subsidiary perpetual inventory record when the balance from the inventory clearing account on the old billing system's general ledger was transferred to the new billing system's general ledger but not to the new subsidiary perpetual inventory records. This resulted in the inventory clearing account carrying a credit balance that exceeded the subsidiary perpetual inventory records by over $6 million. This credit balance represented inventory for which Anicom had not been billed at the date of the transfer. In the months following the transfer, unit of measure errors in the new billing system's inventory module and operator keypunch errors further increased the out-of-balance condition and misstated the carrying value of inventory and cost of sales. 55. In June 1998, Bandyk directed an accounting department employee to isolate the out-of-balance amount, by then exceeding $8 million, by transferring the full amount to another balance sheet liability account, referred to as the inventory clearing account. 56. Between June and November 1998, Welchko directed Bandyk to make approximately $6 million in improper cost of sales reductions against the inventory clearing account. 57. In August 1998, Bandyk authorized an Anicom employee to improperly write off against the inventory clearing account over $106,000 in liabilities assumed by Anicom as a result of acquiring another wire and cable company. 58. In November 1998, Bandyk improperly wrote off against the inventory clearing account $935,254 in unreconciled differences from Anicom's cash checking account. 59. Under Statement of Accounting Standards No. 5, financial statement accruals shall be made when (a) information available prior to issuance of the financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statement, and (b) the amount of loss can be reasonably estimated. 60. Welchko and Bandyk knew or recklessly disregarded that using the inventory clearing account to reduce cost of sales by approximately $6 million, write off acquisition liabilities of $108,000, and adjust the cash checking account by $935,254 violated GAAP and caused Anicom to file with the Commission materially misstated financial statements in 1998. Welchko And Bandyk Improperly Charged Expenses To A
61. Anicom incurred expenses in third quarter 1999 that Welchko and Bandyk improperly allocated to a Restructuring Reserve. Anicom reported this Restructuring Reserve in the income statement filed with the Commission as part of its Form 10-Q for the period ending September 30, 1999. The Restructuring Reserve was represented in the 10-Q as a one-time exiting charge to close out and downsize several warehouse locations. 62. Welchko directed Bandyk to charge items unrelated to discontinuing the warehouses to the Restructuring Reserve. These items totaled over $7.65 million, including a bank fee incurred when Anicom violated its working capital loan covenants, a note receivable with accrued interest, charges incurred for enhancement to a computerized inventory control system, and over $2.3 million in accounts receivable. 63. Under FASB EITF 94-3, a company is permitted to recognize a one time charge related to exiting an activity that has no future economic benefit and meets all the following conditions: (1) the cost is not associated with or does not benefit activities that will be continued; (2) the cost is not associated with or is not incurred to generate revenues after the exit plan's commitment date; and, (3) the cost meets one of the following criteria: (a) the cost is incremental to other costs incurred by the enterprise in the conduct of its activities prior to the commitment date and will be incurred as a direct result of the exit plan; and, (b) the cost represents amounts to be incurred by the enterprise under a contractual obligation that existed prior to the commitment date and will either continue after the exit plan is completed with no economic benefit to the enterprise or be a penalty to cancel the contractual obligation. 64. Welchko and Bandyk knew or recklessly disregarded that charging the items described above to the Restructuring Charge caused Anicom to file with the Commission false and misleading financial statements for the third quarter of 1999 that materially underreported Anicom's expenses related to continuing business activities. Welchko and Bandyk Unjustifiably Inflated Purchase Rebates Accrued 65. Anicom received either cash or credit rebates from certain vendors if the Company met certain annual purchasing goals. Each month, Bandyk accrued one-twelfth of Anicom's budgeted amount for rebates based on Welchko's projections. On numerous occasions, Welchko knowingly instructed Bandyk to make additional entries that accrued more in purchase rebates than Anicom expected to receive based on its purchasing levels. 66. In 1998, Bandyk, at Welchko's direction, knowingly entered journal entries recognizing rebates that understated cost of sales and overstated net income, as reported in financial statements filed with the Commission, by approximately $1,652,163. 67. In 1999, Bandyk, at Welchko's direction, knowingly entered journal entries recognizing rebates that understated cost of sales and overstated net income, as reported in financial statement filed with the Commission, by approximately $929,000. 68. Under Statement of Financial Concepts No. 5, purchase rebates should be recognized when (1) realized, and (2) earned. Welchko and Bandyk knowingly or recklessly disregarded that they improperly recorded journal entries that accrued more in purchase rebates than was justified by Anicom's purchasing volume. Accordingly, Welchko and Bandyk knew or recklessly disregarded that their treatment of purchase rebates accrued caused Anicom to file materially misstated financial statements with the Commission in 1998 and 1999. Welchko And Bandyk Improperly Accelerated The
69. From fourth quarter 1998 through fourth quarter 1999, Welchko directed Bandyk to accelerate the recognition of revenue by recording in the just-completed quarter sales that occurred, and were recorded in the billing system, in the first few days of the new quarter. On at least one occasion, Bandyk investigated sales that were moved into the just-completed quarter and found that the product did not ship until the new period. 70. Nonetheless, Bandyk, at Welchko's direction, knowingly recorded in the prior quarter sales occurring in the first few days of the new quarter. 71. In each successive quarter, Bandyk knowingly reversed the prior quarter journal entry, and repeated the process to avoid a major revenue and earnings shortfall. 72. Under Statement of Financial Concepts No. 6, revenue is recognized when earned. As discussed above, Anicom's revenue recognition policy called for recognizing revenue when product was shipped to the customer. Welchko and Bandyk knew or recklessly disregarded that recording sales prior to shipping the product to customers violated GAAP and caused Anicom to file materially misstated financial statements with the Commission from fourth quarter 1998 through fourth quarter 1999. Welchko And Bandyk Lied To Anicom's External Auditors 73. The public accounting firm of PricewaterhouseCoopers conducted Anicom's annual external audits. In March 2000, Welchko and Bandyk signed a management representation letter in connection with PricewaterhouseCooper's audits of Anicom's consolidated financial statements as of 1998 and 1999 and for each of the three years for the period ended December 31, 1999. By signing that letter, Welchko and Bandyk falsely represented that, among other things, during those periods no fraud had occurred involving management or employees who had significant roles in Anicom's internal controls. 74. At the time that they signed the management representation letter, Welchko and Bandyk knew that they had recorded in those periods numerous improper journal entries that overstated Anicom's earnings and caused Anicom to file materially misstated financial statements with the Commission. OTHER FALSE STATEMENTS MADE TO THE PUBLIC 75. As a result of the activities discussed above, in each of the nine quarters between January 1, 1998 and March 31, 2000, Anicom filed periodic reports with the Commission that contained materially false and inaccurate financial statements. As part of the periodic reports filed with the Commission, Anicom made material misrepresentations and omissions in the Management's Discussion and Analysis ("MD&A") section. The general purpose of the MD&A disclosure is to give investors an opportunity to look at a company's business through the eyes of management by providing a historical and prospective analysis of the company's financial condition and results of operations, with a particular emphasis on the company's prospects for the future. 76. On February 17, 1999, for example, Anicom issued a press release announcing "record financial results for the fourth quarter and year ended December 31, 1998." The press release announced that, among other things, Anicom's net sales increased 93 percent to $470 million in 1998, from $244 million in 1997. The press release stated that "[t]hese record sales reflect strong progress in the continuing implementation of Anicom's integrated growth strategy." 77. On March 31, 1999, Anicom filed with the Commission its Form 10-K report for the fiscal year ended December 31, 1998. The report included the financial information that was disclosed in its February 17, 1999 press release. Anicom's financial statements for the quarter contained material misstatements resulting from the non-GAAP accounting practices discussed above, including improper sales to Spanpro, misuse of the inventory clearing account, overstated purchase rebates accrued, and improperly accelerated sales. 78. The MD&A section in Anicom's December 31, 1998 Form 10-K report furthered the misrepresentations in the financial statements. In discussing net sales, the MD&A stated that "[t]he significant increase is primarily attributable to acquisitions coupled with internal growth, which has led to new customers, new products, increased market share, expanded market penetration and increased volume with existing customers." This statement was false because, among other things, it failed to disclose that Anicom's financial results for fourth quarter 1998 and year ended December 31, 1998 included improper sales activity that exceeded $13.6 million. 79. As a further example, on February 23, 2000, Anicom issued a press release announcing, among other things, a "[s]ixth consecutive record year in sales" for the fourth quarter and year ended December 31, 1999. The press release announced that net sales increased 14 percent to $537 million in fiscal 1999, from $470 million in 1998. With respect to Anicom's 1999 sales results, Putnam stated that "[d]uring 1999 we . . . created new sales programs to target our resources on higher margin products." 80. On March 30, 2000, Anicom filed with the Commission its Form 10-K report for the year ended December 31, 1999. The report included the financial information that was disclosed in its February 23, 2000 press release. Anicom's financial statements for the quarter contained material misstatements resulting from the non-GAAP accounting practices discussed above, including improper sales to SCL Integration and GTT Electronics, overstated purchase rebates accrued, and improperly accelerated sales. 81. The MD&A section in Anicom's December 31, 1999 Form 10-K report furthered the misrepresentations in the financial statements. In discussing net sales, the MD&A stated that "[t]hese increases are primarily attributable to acquisitions, which have led to new customers, new products, and expanded market penetration. These results were adversely impacted by declining sales at certain of the locations acquired from TW Communications ("TW") in December 1997." This statement was false because, among other things, it failed to disclose that Anicom's financial results for fourth quarter 1999 and year ended December 31, 1999 included non-existent sales to a fictitious customer. 82. From January 1, 1998 through March 31, 2000, Putnam knew or recklessly disregarded that his actions caused Anicom's publicly disseminated financial information contained in periodic reports on Forms 10-K and 10-Q and press releases of annual and quarterly earnings to misstate and omit material facts about Anicom's financial condition. As a Director and President, Putnam signed Anicom's Form 10-K reports. As the senior Anicom manager in charge of sales, Putnam, among other things, directed lower level employees to book improper sales, which he knew or recklessly disregarded would be recognized as revenue on Anicom's financial statements filed with the Commission. 83. From January 1, 1998 through March 31, 2000, Welchko knew or recklessly disregarded that his actions caused Anicom's publicly disseminated financial information contained in periodic reports on Forms 10-K and 10-Q and press releases of annual and quarterly earnings to misstate and omit material facts about Anicom's financial condition. In 1998, Welchko directed Bandyk to prepared journal entries that, among other things, improperly reduced cost of sales by over $6 million. In 1999, he planned and executed a scheme to recognize over $11.7 million in improper sales to SCL Integration. Furthermore, Welchko participated in the preparation of the financial statements filed with the Commission, and signed Anicom's Form 10-K reports as a Director and CFO and Form 10-Q reports as CFO. 84. From January 1, 1998 through March 31, 2000, Figurelli knew or recklessly disregarded that his actions caused Anicom's publicly disseminated financial information contained in periodic reports on Forms 10-K and 10-Q and press releases of annual and quarterly earnings to misstate and omit material facts about Anicom's financial condition. He provided credit approval for numerous improper sales. In February 1999, he admitted to Anicom's Credit Managers that nearly 20 percent of the Company's accounts receivable was composed of improper and otherwise uncollectible sales. In March 1999, he directed a lower level employee to add SCL Integration to the billing system to conceal these problems, which were known to him at the time. 85. From January 1, 1998 through December 31, 1999, Spinell knew or recklessly disregarded that his actions caused Anicom's publicly disseminated financial information contained in periodic reports on Forms 10-K and 10-Q and press releases of annual and quarterly earnings to misstate and omit material facts about Anicom's financial condition. Spinell directed lower level employees to book improper sales, which he knew or recklessly disregarded would be recognized as revenue on Anicom's financial statements filed with the Commission. 86. From January 1, 1998 through March 30, 2000, Bandyk knew or recklessly disregarded that his actions caused Anicom's publicly disseminated financial information contained in periodic reports on Forms 10-K and 10-Q and press releases of annual and quarterly earnings to misstate and omit material facts about Anicom's financial condition. Bandyk knew or recklessly disregarded that he recorded improper journal entries to Anicom's books and records, and knew or recklessly disregarded that Anicom had improperly recognized revenue to a fictitious customer, SCL Integration. Bandyk also participated in the preparation of Anicom's financial statements, knowing or recklessly disregarding that the improper entries would be included in Anicom's financial statements filed with the Commission. 87. From January 1, 1998 through March 31, 2000, LeVault knew or recklessly disregarded that her actions caused Anicom's publicly disseminated financial information contained in periodic reports on Forms 10-K and 10-Q and press releases of annual and quarterly earnings to misstate and omit material facts about Anicom's financial condition. LeVault knew or recklessly disregarded that she entered false data into the billing system to show that product had been shipped to customers when, in fact, no product had been shipped. She also knew or recklessly disregarded that she recorded improper sales to a fictitious customer, SCL Integration. DEFENDANTS' UNJUST ENRICHMENT Putnam, Welchko, And Figurelli's 1999 Performance-Based Bonuses 88. For 1999, the Board awarded Putnam, Welchko, and Figurelli performance-based bonuses of $40,000 each, based on Anicom's 1999 pro forma results without giving effect to the charges and costs associated with the Company's restructuring. As described above, in 1999 Putnam, Welchko, and Figurelli knew or recklessly disregarded that their actions caused Anicom to file materially misstated financial statements with the Commission. Spinell And Bandyk's March 2000 Anicom Stock Sales 89. On March 14, 2000, Spinell exercised options to purchase Anicom stock and sold 16,000 shares, realizing a net profit of $63,000. At the time he sold, Spinell knew or recklessly disregarded that Anicom had recognized improper sales in the past and filed materially misstated financial statements with the Commission. 90. On March 23 - 24, 2000, Bandyk exercised options to purchase Anicom stock and sold 4,300 shares, realizing a net profit of $7,804. At the time he sold, Bandyk knew or recklessly disregarded that Anicom's financial statement filed with the Commission were materially misstated by improper sales and improper journal entries. Putnam, Welchko, And Spinell Interfered With
91. In October 1999, the Board of Directors retained the law firm of Winston & Strawn to conduct an internal investigation into allegations made by a former employee about improper sales. 92. Putnam told Spinell that Anicom was doing the internal investigation just in case the SEC came calling. Putnam also told Spinell that he and Welchko wanted to make sure that everyone interviewed by Winston & Strawn told the same story. Putnam then discussed with Spinell what they should tell Winston & Strawn's lawyers about certain improper sales which Anicom had recognized as revenue on its financial statements filed with the Commission. 93. At Putnam's request, Spinell then went to see Welchko. Spinell told Welchko that Putnam had approved Spinell's story about certain sales. Welchko and Spinell then discussed those sales in more detail. Afterward, Spinell went to Putnam's office and told Putnam that he had spoken to Welchko and was ready to meet with Winston & Strawn's lawyers. 94. When Winston & Strawn interviewed Spinell, he repeated Putnam and Welchko's version of the story about the sales. 95. In January 2000, Spinell took a demotion to General Manager at Anicom's Elk Grove Village, Illinois office. In June 2000, Spinell truthfully described his actions when interviewed during a second internal investigation into allegations of accounting fraud. 96. On or about July 18, 2000, the Board of Directors placed Putnam and Welchko on administrative leave. The Board allowed Spinell to remain in his position. On September 11, 2000, Putnam and Welchko resigned rather than face termination. On September 21, 2000, Spinell resigned under similar circumstances. 97. Had Putnam, Welchko, and Spinell told Winston & Strawn the truth in October 1999, Anicom's Board would have fired them. As a result, Putnam and Welchko were unjustly enriched by the salaries that they received after October 1999, $322,000 and $215,000, respectively. Spinell was unjustly enriched by $30,000 in salary that he received in November and December 1999 when he was Vice President of Sales. COUNT I Violations of Section 17(a)(1) of the Securities Act [15 U.S.C. § 77q(a)(1)]
98. Paragraphs 1 through 97 are realleged and incorporated by reference. 99. As set forth more fully above in paragraphs 1 through 97, from January 1, 1998 through December 31, 1998, Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault, in the offer and sale of securities, by use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, employed devices, schemes and artifices to defraud. 100. Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault knew or recklessly disregarded the facts described in paragraph 98 through 99. 101. By reason of the activities described in paragraphs 98 through 100, Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault violated Section 17(a)(1) of the Securities Act [15 U.S.C. §§ 77q(a)(1)]. COUNT II Violations of Section 17(a)(3) of the Securities Act [15 U.S.C. § 77q(a)(3)]
102. Paragraphs 1 through 97 are realleged and incorporated by reference. 103. As set forth more fully above in paragraphs 1 through 97, from January 1, 1998 through December 31, 1998, Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault, in the offer and sale of securities, by use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, engaged in transactions, practices, and courses of business which operated or would have operated as a fraud and deceit upon purchasers. 104. By reason of the activities described in paragraphs 102 through 103, Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault violated Section 17(a)(3) of the Securities Act [15 U.S.C. §§ 77q(a)(1)]. COUNT III Violations of Section 10(b) of the Exchange Act
105. Paragraphs 1 through 97 are realleged and incorporated by reference. 106. As forth more fully above in paragraphs 1 through 97, from January 1, 1998 through March 31, 2000, Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault, in connection with the purchase and sale of securities, by the use of the means and instrumentalities of interstate commerce and by the use of the mails, directly and indirectly: used and employed devices, schemes and artifices to defraud; made untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and engaged in acts, practices and course of business which operated or would have operated as a fraud and deceit upon purchasers and sellers and prospective purchase and sellers of securities. 107. Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault knew or were reckless in not knowing of the facts and circumstances described in paragraph 105 through 106. 108. By reason of the activities described in paragraphs 105 through 107, Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault violated Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. COUNT IV Violations of Section 13(b)(5) of the Exchange Act [15 U.S.C. § 78m(b)(5)]
109. Paragraphs 1 through 97 are realleged and incorporated by reference. 110. As set forth more fully above in paragraphs 1 through 97, from January 1, 1998 through March 31, 2000, Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault knowingly circumvented a system of internal accounting controls at Anicom and knowingly falsified Anicom's books and records. 111. By reason of the activities described in paragraph 109 through 110, Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault violated Section 13(b)(5) of the Exchange Act [15 U.S.C. § 78m(b)(5)]. COUNT V Aiding and Abetting Violations of Section 13(a) of the Exchange Act
112. Paragraphs 1 through 97 are realleged and incorporated by reference. 113. As set forth more fully above in paragraphs 1 through 97, from January 1, 1998 through March 31, 2000, Anicom violated Section 13(a) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, and 13a-13 by filing materially false and misleading annual reports on Form 10-K and materially false and misleading quarterly reports on Form 10-Q with the Commission. 114. By engaging in the conduct described in paragraph 112 through 113, Putnam, Welchko, Figurelli, Spinell, and Bandyk knowingly and substantially aided and abetted Anicom's violations of Section 13(a) of the Exchange Act [15 U.S.C. § 78t(a)] and Rules 13a-1 and 13a-13 thereunder [17 C.F.R. §§ 240.13a-1, and 240.13a-13]. 115. By engaging in the conduct described in paragraphs 112 through 113, Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault knowingly and substantially aided and abetted Anicom's violation of Exchange Act Rule 12b-20 [17 C.F.R. § 240.12b-20]. COUNT VI Aiding and Abetting Violations of Sections 13(b)(2)(A) and 13(b)(2)(B)(ii) of the
116. Paragraphs 1 through 97 are realleged and incorporated by reference. 117. As set forth more fully above in paragraphs 1 through 97, from January 1, 1998 through March 30, 2000, Anicom violated Section 13(b)(2)(A) by failing to make and keep books, records, and accounts that accurately and fairly reflected Anicom's transactions and the disposition of its assets. 118. As set forth more fully above in paragraphs 1 through 97, from January 1, 1998 through March 30, 2000, Anicom violated Section 13(b)(2)(B)(ii) by failing to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that Anicom's transactions were recorded as necessary to permit preparation of its financial statements in conformity with GAAP and to maintain accountability for assets. 119. By engaging in the conduct described in paragraphs 116 through 117, Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault knowingly and substantially aided and abetted Anicom's violations of Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)]. 120. By engaging in the conduct described in paragraphs 116 and 118, Putnam, Welchko, Figurelli, and Bandyk knowing and substantially aided and abetted Anicom's violations of Section 13(b)(2)(B)(ii) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)(ii)]. 121. By engaging in the conduct in paragraphs 116 through 117, Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault violated Exchange Act Rule 13b2-1 [17 C.F.R. § 240.13b2-1] by falsifying and causing to be falsified Anicom's books, records, and accounts subject to Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. § 78m(b)(2)]. COUNT VII Violations of Exchange Act Rule 13b2-2 [17 C.F.R. § 240.13b2-2]
122. Paragraphs 1 through 97 are realleged and incorporated by reference. 123. By engaging in the conduct described above in paragraphs 1 through 97, Welchko and Bandyk directly and indirectly made or caused to be made materially false and misleading statements or omitted or caused others to omit material facts necessary in order to make statements made, in light of the circumstances under which they were made, not misleading to Anicom's independent auditors in connection with an audit of Anicom's required financial statements and in the preparation and filing of documents or reports required to be filed with the Commission. 124. By engaging in the conduct described in paragraphs 122 through 123, Welchko and Bandyk violated Rule 13b2-2 [17 C.F.R. § 240.13b2-2] promulgated under Section 13(b)(2) of the Exchange Act [15 U.S.C. § 78m(b)(2)]. RELIEF REQUESTED WHEREFORE, the Commission requests that this Court enter a judgment: A. permanently enjoining Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault from future violations, and aiding and abetting future violations, of Sections 17(a)(1) and 17(a)(3) of the Securities Act and Sections 10(b) and 13(b)(5) of the Exchange Act and Rule 10b-5 thereunder; B. permanently enjoining Putnam, Welchko, Figurelli, Spinell, and Bandyk from aiding and abetting future violations of Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder; C. permanently enjoining Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault from aiding and abetting future violations of Exchange Act Rule 12b-20; D. permanently enjoining Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault from aiding and abetting future violations of Section 13(b)(2)(A) of the Exchange Act; E. permanently enjoining Putnam, Welchko, Figurelli, and Bandyk from aiding and abetting future violations of Section 13(b)(2)(B)(ii) of the Exchange Act; F. permanently enjoining Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault from future violations of Exchange Act Rule 13b2-1; G. permanently enjoining Welchko and Bandyk from future violations of Exchange Act Rule 13b2-2; H. barring, pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)], Putnam, Welchko, Figurelli, Spinell, and Bandyk from serving as an officer or director of any issuer required to filed reports with the Commission under Sections 12(b), 12(g), or 15(d) of the Exchange Act [15 U.S.C. §§ 78l(b), 78l(g), and 78o(d)]; I. ordering Putnam, Welchko, Figurelli, Spinell, Bandyk, and LeVault each to pay an appropriate civil monetary penalty pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]; J. ordering Spinell to pay disgorgement of $63,000, plus prejudgment interest, related to the losses that he avoided by selling Anicom stock in March 2000; K. ordering Bandyk to pay disgorgement of $7,804, plus prejudgment interest, related to the losses that he avoided by selling Anicom stock in March 2000; L. ordering Putnam, Welchko, and Figurelli to each pay disgorgement of $40,000, plus prejudgment interest, related to their 1999 performance-based bonuses; M. ordering Putnam, Welchko, and Spinell to pay disgorgement of $322,000, $215,000, and $30,000, respectively, plus prejudgment interest, related to the salaries that each unjustly earned after they interfered with Anicom's October 1999 internal investigation; N. retaining jurisdiction over this action to implement and carry out the terms of all orders and decrees that may be entered; and O. granting such other and additional relief as this Court deems just and proper. Respectfully submitted, s/ Kenneth E. Yeadon Kenneth E. Yeadon
DATED: May 6, 2002 http://www.sec.gov/litigation/complaints/complr17504.htm
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