U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20477 / March 5, 2008
Securities and Exchange Commission v. Richard E. Fresia, Civil Action No. 07-CV-01549-JKL-BNB (D. Colo.)
SEC Settles With Former Chief Financial Officer of Expanets, Inc., a Former Subsidiary of NorthWestern Corporation
The Securities and Exchange Commission announced today that on February 22, 2008, the Honorable John L. Kane, United States District Judge for the District of Colorado, entered a permanent injunction against Richard E. Fresia, the former chief financial officer of Expanets, Inc. ("Expanets"), a former subsidiary of NorthWestern Corporation ("NorthWestern"). The judgment permanently enjoins Fresia from violating Section 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 13b2-1 thereunder, and from aiding and abetting 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 and requires him to pay a civil penalty of $20,000. Fresia, without admitting or denying the allegations in the Commission's complaint against him, consented to the entry of the final judgment.
The Commission's complaint alleged, among other things, that during the second and third quarters of 2002, Fresia participated in concealing from the public Expanets' ongoing operational problems and poor financial performance. The Complaint also alleged that Fresia knew that Expanets improperly accounted for accounts receivable and adjustments to customers' bills, causing overstatements of NorthWestern's reported income from continuing operations of 90% and 109% in the second and third quarters of 2002, respectively. The Commission's complaint further alleged that Fresia participated in NorthWestern's failure to disclose the nature of Expanets' reported income during the second and third quarters of 2002, including the magnitude of Expanets' reserve reductions and its receipt of unusual non-compete payments. The Commission's complaint alleged that Fresia's conduct helped facilitate more than $800 million in securities offerings by NorthWestern in September and October 2002, including raising approximately $87.5 million in an equity offering that provided NorthWestern with badly needed operating capital.