U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19349 / August 26, 2005
Accounting and Auditing Enforcement Release No. 2297 / August 26, 2005
SEC V. LEONARD M. SNYDER, H. DANE REYNOLDS, C. BURT DUREN, AND R. CAREY JOHNSON, Civil Action No. 7-05-2471-RBH (D.S.C.)
The Securities and Exchange Commission announced that on August 25, 2005, it filed a complaint in the United States District Court for the District of South Carolina against four former officers and employees of One Price Clothing Stores, Inc. ("One Price"), a national clothing retailer that is currently in bankruptcy. The individuals named in the Commission's complaint include One Price's former Chief Executive Officer, Leonard M. Snyder ("Snyder"), Chief Financial Officer, H. Dane Reynolds ("Reynolds"), Treasurer (and successor Chief Financial Officer), C. Burt Duren ("Duren"), and Controller, R. Carey Johnson ("Johnson").
The Commission's complaint alleges that, during the period from late 2002 through December 2003, Snyder, Reynolds, Duren, and Johnson caused One Price to misrepresent in its Commission filings that it was in compliance with its credit facility, on which the company relied to provide cash for its operations. The complaint further alleges that One Price was actually in default because the defendants caused the company to artificially inflate its inventory levels, which collateralized its debt, in weekly reports to its lender. The complaint also alleges that One Price filed false and misleading periodic reports with the Commission because the inflated inventory levels were included in the financial statements that were filed with those reports.
The Commission's complaint charges Snyder, Reynolds, and Duren with violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 13(b)(5) of the Securities and Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13a-14, 13b2-1, and 13b2-2 thereunder, and with aiding and abetting One Price's 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. The Commission's complaint seeks permanent injunctions, disgorgement with prejudgment interest, civil penalties, and officer and director bars.
The Commission's complaint also charges Johnson with violations of Section 17(a) of the Securities Act and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder, and with aiding and abetting One Price's 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. Johnson, without admitting or denying the allegations in the Commission's complaint, consented to a entry of a final judgment: (1) permanently enjoining him from violating and aiding and abetting violations of these provisions of the federal securities laws; (2) permanently barring him from serving as an officer or director of a public company; and (3) ordering him to pay a civil monetary penalty of $25,000.