UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18037 / March 17, 2003
Six Indicted For Perpetrating Massive Financial Fraud at Anicom, Inc.
United States v. Carl E. Putnam, et al., No. 03CR 268 (N.D. Ill.) (Hon. Robert W. Gettleman).
Securities and Exchange Commission v. Carl E. Putnam, et al., No. 02C 3235 (N.D. Ill.) (Hon. George M. Marovich).
On March 13, 2003, the Securities and Exchange Commission announced that the United States Attorney for the Northern District of Illinois indicted six former executives and other employees of Anicom, Inc. for thirty counts of securities fraud, books and records violations, and bank fraud in connection with a massive financial fraud at the now-bankrupt company. The indictment charges that from at least January 1, 1998 through at least May 31, 2000, the six defendants caused Anicom to falsely report millions of dollars of non-existent sales, including sales to a fictitious customer, and used other fraudulent techniques that overstated Anicom's reported revenues and net income. The indictment also charges that Anicom's former Chief Financial Officer, Donald C. Welchko, age 48, of Willow Springs, Illinois, obstructed justice by providing the Commission with false documents during its investigation of Anicom. The United States Attorney filed the indictment in federal district court in the Northern District of Illinois.
The fraud had two distinct aspects. First, the indictment charges that the defendants, President and Chief Executive Officer Carl E. Putnam, age 54, of Naperville, Illinois, Welchko, Chief Operating Officer John P. Figurelli, age 56, of Libertyville, Illinois, Vice President of Sales Daryl T. Spinell, age 38, of Naperville, Illinois, Vice President of Accounting Ronald M. Bandyk, age 37, of LaGrange, Illinois, and Billing Manager Renee L. LeVault, age 34, of Huntley, Illinois, improperly recognized numerous fictitious sales that overstated reported revenues and net profits. Additionally, the defendants caused Anicom in 1999 to improperly recognize more than $10.454 million in sales to a fictitious customer called SCL Integration. The defendants used SCL Integration to minimize the effect on income of writing off earlier improper sales. Second, the indictment charges that the defendants entered journal entries that improperly reduced expenses and accelerated the recognition of sales between reporting periods. The indictment also charges that Putnam and Welchko defrauded Anicom's lenders by falsely representing that Anicom's financial statements accurately represented the company's financial position.
Just ten months ago, on May 6, 2002, the Commission filed a civil lawsuit in United States District Court in the Northern District of Illinois against the same six defendants. Grounded in the same financial fraud as charged in the indictment, the Commission's lawsuit alleges that all six defendants engaged in multiple violations of the antifraud and books and records provisions of the federal securities laws.
Additional information regarding the Commission's lawsuit can be found in Litigation Release No. 17504, May 6, 2002.
Accounting and Auditing Enforcement Release No. 1741 / March 17, 2003