U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21625 / August 13, 2010
Securities and Exchange Commission v. Kevin J. Schott, Civil Action No. 4:10-cv-01500 in the United States District Court for the Eastern District of Missouri, Eastern Division.
SEC CHARGES FORMER CFO OF ZOLTEK COMPANIES, INC. WITH ACCOUNTING VIOLATIONS
On August 13, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Eastern District of Missouri in St. Louis against Kevin J. Schott, the former chief financial officer of Zoltek Companies, Inc., for violating the internal controls, books and records, lying to accountants and certification provisions of the Securities Exchange Act of 1934.
The Commission's complaint alleges that Schott circumvented Zoltek's internal accounting controls and caused Zoltek to make two payments totaling $250,000 to an outside financing consultant who had raised funds for Zoltek in the past, despite an instruction from Zoltek's CEO to not to make the payments. Instead of following Zoltek's internal controls which required the CEO to approve all wire transfers, the complaint alleges that Schott instructed the controller of Zoltek's foreign subsidiary in Hungary on two occasions and instructed him to wire the payments to the financing consultant from the subsidiary's account. According to the complaint, Schott told the Hungarian controller that the payments were for another purpose. Schott then further concealed the payments by creating a false document which he gave to Zoltek's CEO. By mischaracterizing the payments to the consultant, Schott caused Zoltek to make false entries into its books and records. The complaint further alleges that Schott made false and misleading representations in his certifications to the public and to Zoltek's external auditor for the fourth quarter of 2007 and the first quarter of 2008.
Schott has agreed to settle this matter without admitting or denying the allegations in the complaint. Schott has consented to an order permanently enjoining him from violating Section 13(b)(5) of the Exchange Act and Rules 13a-14, 13b2-1 and 13b2-2 thereunder and requiring him to pay a $20,000 civil penalty.
See Also: SEC Complaint