U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19165 / April 4, 2005
Accounting and Auditing Enforcement
Release No. 2222 / April 4, 2005
SECURITIES AND EXCHANGE COMMISSION V. AURORA FOODS INC., ET AL., Case No. 01 CIV 0554 (AKH) S.D.N.Y.
FINAL JUDGMENT OF PERMANENT INJUNCTION AND OTHER RELIEF ENTERED AGAINST DEFENDANT KEITH LUECHTEFELD, FORMER EMPLOYEE OF AURORA FOODS INC.
The Securities and Exchange Commission announced that on December 1, 2004, the United States District Court for the Southern District of New York entered a Final Judgment of Permanent Injunction and Other Relief against defendant Keith Luechtefeld (Luechtefeld). Luechtefeld, a former division controller of Aurora Foods, Inc. (Aurora) was enjoined from future violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5 and 13b2-1 thereunder. Luechtefeld consented to the entry of the final judgment without admitting or denying the allegations in the Commission's Complaint. In addition to the injunctive relief, Luechtefeld was ordered to pay disgorgement of his ill-gotten gains and prejudgment interest in the amount of $62,500.
According to the Commission's Complaint, which was filed on January 23, 2001, Luechtefeld assisted other co-defendants, including former members of Aurora's senior management, in a financial reporting fraud at Aurora in 1998 and 1999. The Complaint alleged that during the relevant period, Aurora under-reported its trade marketing expenses by more than $43 million which resulted in material misstatements of earnings in Aurora's financial statements. The Complaint alleged that Aurora's senior management was aware that Aurora was not accurately reporting trade marketing expense. Instead of properly booking the expense, the Complaint alleged that senior management tried to conceal it from the independent auditors by directing division level officers and employees, including Luechtefeld, to make false entries in various accounts on Aurora's books. The Complaint alleged that Luechtefeld assisted in these efforts. As a result of the scheme, the Complaint alleged that Aurora falsely and substantially inflated its financial results.
Previously, defendants Aurora, Ian R. Wilson, Ray Chung, M. Laurie Cummings, Timothy B. Andersen, Dirk Grizzle, Tammy Fancelli and James Elliott each consented to the entry of final judgments that permanently enjoined them from future violations of the federal securities laws. In addition to the injunctive relief, Wilson, Chung, Cummings and Grizzle were permanently barred from serving as officers or directors of a public company. Wilson, Chung, Cummings and Grizzle were also ordered to pay disgorgement of their ill-gotten gains and prejudgment interest in the amounts of $420,000, $142,000, $75,000, $102,000, respectively. In addition, Chung, Cummings, Andersen, Grizzle, Fancelli and Elliott were ordered to pay civil penalties in the amounts of $125,000, $200,000, $125,000, $75,000, $20,000 and $10,000, respectively.
In a related criminal case, Wilson, Cummings, Chung and Grizzle each pled guilty to various securities counts. As a result, Wilson received a sentence of 33 months incarceration and was fined $1 million. Cummings received a sentence of 41 months incarceration. Chung was fined $500,000. Grizzle received a sentence of six months incarceration and was fined $100,000.
For further information, see Litigation Release Nos. 16866 (January 23, 2001) and 18851 (August 25, 2004).