SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16689 / September 6, 2000
SEC SETTLES FRAUD CASE AGAINST JAN R. KIRK, FORMER FERROFLUIDICS CFO
SEC v. Ferrofluidics Corp., Ronald Moskowitz, Jerome R. Allen, Jan R. Kirk, Stephen P. Morin, Bruce S. Moody, and the 1991 RPM Irrevocable Trust (97 Civ. 7174 (RMB), S.D.N.Y.)
On September 1, 2000, the U.S. District Court for the Southern District of New York entered a final judgment against Jan R. Kirk, the former chief financial officer of Ferrofluidics Corporation (SEC v. Ferrofluidics Corp. et al.). The judgment enjoins him from violating the antifraud provisions and certain reporting, internal controls, and record-keeping provisions of the federal securities laws. Without admitting or denying the Commission's allegations, Kirk consented to the entry of the judgment, which bars him from acting as an officer or director of a public company.
In its complaint, filed on September 25, 1997, the Commission alleged that from early 1991 through June 1993, former Ferrofluidics CEO and chairman Ronald Moskowitz devised and, with the assistance of members of the company's senior management and others, including Kirk, implemented a broad-ranging scheme to defraud the investing public and enrich himself by materially inflating the company's revenues and earnings and by making numerous other materially false and misleading disclosures about the company's business. As part of the scheme, Kirk recruited three private purchasers and orchestrated their phony stock purchases for a sham private placement. Kirk ultimately received $23,000 in kickbacks for his efforts. Kirk also helped prepare and disseminate a series of materially false and misleading public statements concerning sales of the company's products to domestic and foreign companies. Based on the falsely reported profitability of the company, Kirk received a year-end bonus of $27,500. He also failed to file a Schedule 13D with respect to Ferrofluidics shares that he and Moskowitz controlled as a voting group, after he agreed with Moskowitz to exercise warrants and vote against a shareholder's proposal regarding executive compensation.
The judgment enjoins Kirk from violating Sections 17(a) of the Securities Act, Sections 10(b), Section 13(d) of the Exchange Act, and Rules 10b-5, 13b2-1, 13b2-2, 13d-1 thereunder. The judgment also bars him from acting as an officer or director of any public company and orders him to disgorge $50,500 plus prejudgment interest. Based on Kirk's financial condition, disgorgement was waived and no penalty was assessed. Proceedings continue against the remaining defendants, Bruce S. Moody and the 1991 RPM Irrevocable Trust.
In a related criminal proceeding (U.S. v. Jan R. Kirk, 97 Cr. 1032 (MBM) (S.D.N.Y. 1999)), Kirk was sentenced to five years in prison on two counts, conspiracy to violate the securities laws and conspiracy to obstruct justice. On May 25, 2000, the U.S. Court of Appeals for the Second Circuit affirmed the criminal judgment and sentence as to Kirk (U.S. v. Ronald Moskowitz and Jan R. Kirk, Nos. 99-1745 (L), 99-1769 (CON) (MBM), 2000 U.S. App. LEXIS 11733).
The Commission previously instituted five related administrative proceedings: In the Matter of Paul Y. Okuda, Stephen A. Thorpe, and David J. Chester, Admin. Proc. File No. 3-9345 (July 1, 1997), In the Matter of Helen Chalut and Saleem Noorani, Admin. Proc. File No. 3-9344 (July 1, 1997); In the Matter of Sheldon S. Traube and George F. Sweeney, Admin. Proc. File No. 3-9283 (March 27, 1997); In the Matter of Kedar Gupta, Alvan Chorney, and Herbert Moskowitz, Admin. Proc. File No. 3-9435 (September 26, 1997); In the Matter of Dickinson & Co. and T. Marshall Swartwood, Admin. Proc. File No. 3-9321 (May 28, 1997). All of these matters have been settled. In related criminal proceedings, former Ferrofluidics CEO and chairman Ronald Moskowitz was sentenced to eight years in prison (U.S. v. Ronald Moskowitz, 97 Cr. 1122 (MBM) (S.D.N.Y. 1999)), and former Ferrofluidics consultant Jerome Allen was sentenced to six months in prison (U.S. v. Robert Jerome Allen, 97 Cr. 979 & 98 Cr. 884 (MBM) (S.D.N.Y. 2000)).