U.S. Securities and Exchange Commission
SEC Files Financial Fraud Action in Coordination with Australian Authorities
Litigation Release No. 18382 / October 1, 2003
Accounting and Auditing Enforcement Release No. 1883 / October 1, 2003
Securities and Exchange Commission v. Greg Waring and Craig Treloar, United States District Court for the Northern District of Ohio, Civil Action No. 1:03 CV 2030
The Securities and Exchange Commission announced the filing of a civil complaint against two Australian citizens who were senior officers of the Australian subsidiary of CorrPro Companies, Inc. (CorrPro), a U.S. public corporation based in Medina, Ohio. The Commission's complaint alleges that from at least October 2000 through February 2002, Greg Waring, the former managing director and Craig Treloar, the former financial accountant of the subsidiary, CorrPro Companies Australia Pty., Ltd. (CorrPro Australia), falsified the accounting records of the subsidiary, CorrPro Australia, in order to inflate its net income and its net assets. The complaint seeks injunctive relief against Waring and Treloar as well as the imposition of an officer and director bar.
The complaint alleges that Waring and Treloar falsified CorrPro Australia's financial records so that CorrPro Australia would meet financial performance targets set by managers at the parent company. The complaint alleges that as a result, CorrPro misstated its financial statements after incorporating the false numbers from CorrPro Australia.
The complaint alleges that beginning in at least October 2000, Waring, and Treloar at Waring's direction, began entering journal entries to CorrPro Australia's general ledger that increased profit and net assets. The complaint also alleges that Waring and Treloar falsified invoices and credit notes, and made false entries to subledgers including accounts payable, accounts receivable, costs of goods sold and inventory, and falsified reporting packages sent to CorrPro. The complaint further alleges that Treloar and Waring recorded fictitious invoices in CorrPro's computerized accounting records and later printed physical copies of the false invoices. In addition, the complaint alleges that they falsified credit notes from suppliers, and accordingly, the accounts payable ledger, to make it look like CorrPro Australia owed less money than it did.
The complaint goes on to allege that Waring and Treloar took steps to fabricate documents to be reviewed by the company's independent auditors. The complaint further alleges that in November 2001 before an expected audit, Treloar e-mailed Waring two versions of a spreadsheet summarizing monthly results from April 2001 through September 2001. The complaint alleges that in order to ensure that the auditors would review general ledger balances that matched those previously sent to CorrPro, Waring recorded false entries to the general ledger to increase profit in each month.
The Commission's complaint alleges that Waring and Treloar committed fraud in connection with the purchase and sale of securities, in violation of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint also alleges that Waring and Treloar violated Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-13 and 13b2-1 thereunder.
The Australian Commonwealth Director of Public Prosecution in Melbourne in the State of Victoria, Australia, has issued summons to Craig Treloar for criminal violations of various sections of the Australian Corporations Act, and of the Crimes Act of the State of Victoria, in connection with the same conduct described in the Commission's complaint. Treloar must appear in Magistrate's Court in Melbourne, Australia on October 2, 2003 for the first hearing of the case.
The Commission acknowledges the assistance of the Australian Securities and Investments Commission in this investigation.