U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19279 / June 22, 2005
SEC v. Schick Technologies, Inc., David B. Schick and Fred Levine, Civil Action No. CV-03-5766-CBA (CBA) (E.D.N.Y.)
Accounting and Auditing Enforcement
Release No. 2265
FINAL JUDGMENTS ENTERED IMPOSING PERMANENT INJUNCTIONS AGAINST SCHICK TECHNOLOGIES, INC., DAVID B. SCHICK AND FRED LEVINE, AND ALSO IMPOSING CIVIL PENALTIES AND OTHER RELIEF AGAINST THE INDIVIDUAL DEFENDANTS
The Securities and Exchange Commission announced that on June 21, 2005, the United States District Court for the Eastern District of New York entered final judgments against defendants Schick Technologies, Inc. ("STI"), David B. Schick and Fred Levine, fully resolving the litigation against all three defendants. Schick and Levine, without admitting or denying the allegations of the Commission's complaint, consented to final judgments that permanently enjoined them from violating, or aiding and abetting violations of, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and against aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. Schick and Levine further consented to permanent bars from serving as officers or directors of any issuer of public securities. The final judgment against Schick requires that he pay a civil penalty of $330,000 and the final judgment against Levine requires that he pay a total monetary award of $250,000, comprised of disgorgement and interest totaling $71,000 and a civil penalty of $179,000. STI, without admitting or denying the allegations of the complaint, consented to a final judgment permanently enjoining it from violating Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder.
The Commission's complaint, filed on November 14, 2003, alleged that STI improperly booked and reported revenue from sales practices including end of quarter shipments to warehouses, consignment sales and merchandise shipped to customers pursuant to two loaner programs where the customers accepted the product on a trial basis with no obligation to purchase the product. The Commission further alleged that the defendants failed to account properly for massive product returns and to establish sufficient sales return reserves. The fraud, which led to two restatements, caused STI to overstate materially its reported revenue for the June, September and December quarters of 1998. At the time of the fraud, Schick was STI's CEO, President and Chairman, and made or controlled STI's accounting decisions and practices. Levine, STI's Vice President of Sales and Director, was in charge of all product sales. The complaint alleges that Schick and Levine knew of or recklessly disregarded the fraudulent practices and deception of Schick's independent auditors, and were responsible for STI's improper recording and reporting of the inflated revenue. Schick and Levine are no longer employees, officers or directors of STI.
For further information see Litigation Release No. 18464 (November 17, 2003).