LITIGATION RELEASE NO. 18283 / August 12, 2003
ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 1836 / August 12, 2003
U.S. v. MORRIS WEISSMAN, Criminal Action No. 01 CR 529 (BSJ) (S.D.N.Y.)
MORRIS WEISSMAN, FORMER CEO AND CHAIRMAN OF THE BOARD OF AMERICAN BANKNOTE CORPORATION AND AMERICAN BANK NOTE HOLOGRAPHICS, INC., CONVICTED OF CONSPIRACY, SECURITIES FRAUD, FALSIFYING BOOKS AND RECORDS, AND MAKING FALSE STATEMENTS TO AUDITORS
On August 6, 2003, following a jury trial before the U.S. District Court for the Southern District of New York, a verdict was returned finding Morris Weissman guilty of fraud in the offer and sale of securities in violation of Sections 17(a) of the Securities Act of 1933 ("Securities Act"), falsifying books and records in violation of Sections 13(b)(2)(A), and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), and Exchange Act Rule 13b2-1, and making false statements to auditors in violation of Section 13(b)(1) of the Exchange Act, and Exchange Act Rule 13b2-2. The jury also found Weissman guilty of conspiracy with respect to each of the above counts.
The evidence at trial established that Weissman, the former chief executive officer and chairman of the board of American Bank Note Holographics, Inc. ("ABNH") and American Banknote Corporation ("ABN"), ABNH's former publicly-held parent, and two subordinate ABNH executives fraudulently inflated ABNH's reported revenue and earnings for fiscal years 1996 and 1997 and for the first three fiscal quarters of 1998. Weissman and his co-conspirators engaged in sham transactions, recognized revenue from sales of holograms before the manufacturing process was even complete, and lied to the company's independent auditors in an effort to conceal the scheme. The evidence at trial established that in July 1998, Weissman and his co-conspirators, on the basis of this fraudulent financial information, caused ABN to sell the common stock of ABNH to members of the investing public for $115 million. The evidence established that on January 19, 1999, six months after the ABNH IPO, ABNH announced that it would restate some of its previous financial statements. Over the following few days, the price of ABNH stock plummeted from approximately $16 a share to approximately $1.80, resulting in a decline of more than $190 million in ABNH's market capitalization. Restated financial statements issued by ABNH in December 1999 revealed that ABNH had overstated its actual net income for 1996 by 11%, and overstated its actual revenue and net income for 1997 by 34% and 169% respectively.
Weissman, who was convicted on each of the charges above, faces a maximum sentence of 30 years in prison, a fine of $1 million or twice the gross loss or gain resulting from the offense, and mandatory restitution. The District Court scheduled sentencing for November 13, 2003.
For additional information, see Litigation Releases 17068A and 18081.