U.S. SECURITIES AND EXCHANGE COMMISSION.
LITIGATION RELEASE NO. 16302 / September 28, 1999
ACCOUNTING AND AUDITING ENFORCEMENT
RELEASE NO. 1172
Securities and Exchange Commission v. Bradley J. Buchanan, Case No. 1:99CV02567 (TPJ) (D.D.C.)
SEC CHARGES FORMER GENERAL MANAGER WITH FRAUD ARISING FROM THEFT OF OVER $400,000
The Securities and Exchange Commission today filed a Complaint in the United States District Court for the District of Columbia against Bradley J. Buchanan, of Sarnia, Ontario. The Complaint alleges that Buchanan, a former employee of a subsidiary of Thor Industries, Inc. (the "Issuer"), stole corporate funds totaling at least $415,000. According to the Complaint, to conceal his theft, give the appearance that the subsidiary was operating at a profit when it was not, and to earn performance bonuses, Buchanan made false entries to the subsidiary's books and records over a several year period.
According to the Complaint, in December 1993, Buchanan began stealing funds from General Coach of America, Inc. d/b/a ElDorado National (Michigan), Inc. (the "subsidiary"), and he continued to do so until March 1998. The Complaint also alleges that, beginning in November 1995, and continuing until March 1998, Buchanan made false entries on the books and records he maintained and controlled for the subsidiary. According to the Complaint, at month-end, Buchanan would create illusory profits by crediting or decreasing actual expenses incurred during the month and debiting or increasing asset accounts, including accounts receivable, inventory and cash. According to the Complaint, the Issuer used the accounts that Buchanan had falsified to generate a monthly income statement and balance sheet for the subsidiary, which were used to prepare the Issuers monthly consolidated financial statements. As a result, for the six month period ended January 31, 1998, the subsidiary's pre-tax income was overstated by $1.3 million, or 137%; for the year ended July 31, 1997, its pre-income was overstated by $2.4 million, or 121%; and for the year ended July 31, 1996, its pre-income was overstated by $2.5 million, or 144%. Accordingly, due to Buchanan's fraudulent scheme, the Issuer filed with the Commission annual and periodic reports for fiscal 1996, 1997, and the first two quarters of fiscal 1998, which materially overstated net income by between 4% to 19%, and a registration statement on Form S-8, which incorporated by reference the 1997 financial statements.
As a result, the Complaint alleges that Buchanan violated Section 17(a) of the Securities Act of 1933, Sections 10(b), and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5 and 13b2-1 thereunder, and aided and abetted violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. The Complaint seeks a permanent injunction and an officer and director bar against Buchanan.
On September 21, 1999, the United States Attorney's Office for the Eastern District of Michigan filed criminal charges against Buchanan arising from the same conduct. The fourteen-count indictment charges Buchanan with twelve counts of wire fraud and two counts of interstate transportation of money obtained by fraud.