U.S. Securities and Exchange Commission
Litigation Release No. 18691 / May 4, 2004
Accounting and Auditing Enforcement Release No. 2000 / May 4, 2004
Securities and Exchange Commission v. Michael W. Gullion, Civil Action No. 04-CV-2190-KHV (D.Kan.)
In the Matter of Gold Banc Corporation, Inc., Exchange Act Rel. No. (May 4, 2004).
SEC BRINGS ACTIONS INVOLVING MISAPPROPRIATIONS BY FORMER GOLD BANC CEO
On May 4, 2004, the Securities and Exchange Commission filed a complaint in the United States District Court for the District of Kansas, against Michael W. Gullion, the former board chairman and chief executive officer of Gold Banc Corporation, Inc. Gold Banc is a Kansas-based bank holding company listed on the NASDAQ. The complaint alleges Gullion, 49, of Leawood, Kansas, misapplied $4.4 million in Gold Banc funds to his personal benefit by circumventing Gold Banc's internal controls and falsifying its books and records, with the result that Gold Banc materially misstated its operating results. Gullion, who has since reimbursed Gold Banc, has offered to settle the SEC's claims against him by consenting to pay a $100,000 civil penalty, and also to the entry of district court orders permanently enjoining him from future violations of the securities laws and barring him from serving as an officer or director of a publicly-held company.
According to the SEC's complaint, Gullion's misappropriations involved two separate schemes. Most egregiously, in connection with the purchase of land for a suburban bank location, Gullion diverted two checks, in November 2000 and April 2001, respectively representing $1 million and $900,000 in Gold Banc funds, into his personal brokerage and banking accounts. Second, from January 1998 to December 2002, Gullion received an approximate $2.5 million in unauthorized extensions of credit by Gold Banc.
The $1.9 million Gullion misappropriated in connection with the real estate purchase was not booked as an expense during the fiscal years ended December 31, 2000 and 2001, or during the quarter ended June 30, 2001. Consequently, Gold Banc overstated its income and earnings in the Forms 10-K that it filed with the SEC for 2000 and 2001, and also overstated its income in the Forms 10-Q that it filed for the second and third quarters of 2001. Gullion signed those periodic filings. Gullion also signed the October 2002 registration statement for a $49.3 million offering of Gold Banc's common stock, and a December 2001 registration statement for an offering of common stock to company employees in connection with Gold Banc's 401(k) plan, both of which incorporated the misstated financials.
The SEC's complaint alleges that Gullion violated Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and that he aided and abetted violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder. Without admitting or denying the allegations in the complaint, Gullion made an offer of settlement in which he consented to the entry of an order of permanent injunction against violations of the above-specified provisions of the federal securities laws, the payment of a $100,000 civil money penalty, and a bar against serving as an officer or director of a publicly held company.
Additionally, the SEC instituted settled cease-and-desist proceedings against Gold Banc, based on its violations of the recordkeeping, reporting and internal control provisions of the federal securities laws, which Gullion caused. The SEC found that Gullion's misappropriations in connection with the land purchase caused Gold Banc to make material financial misstatements, and that internal control deficiencies caused Gold Banc to fail to prevent, detect or correctly account for Gullion's misapplication of corporate funds.
Without admitting or denying the findings made by the SEC, Gold Banc consented to the entry of an order which requires the company to cease and desist from violating Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder. The SEC agreed to settle with Gold Banc on the above terms based on the remedial acts promptly undertaken by Gold Banc, and the cooperation afforded the SEC's staff. Immediately after discovering Gullion's misconduct, Gold Banc initiated an internal inquiry, alerted shareholders to its inquiry, terminated Gullion, obtained re-payment from Gullion for his misappropriations, implemented or strengthened various internal controls, and issued financial restatements.