U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19532 / January 19, 2006
Accounting and Auditing Enforcement Release No. 2364 / January 19, 2006
SEC v. Sport-Haley, Inc., Steve S. Auger, Kenneth R. LeCrone, Civ. Action No. 03-N-1917 (CBS) (District of Colorado)
The Securities and Exchange Commission ("Commission") announced that on January 17, 2006, Judge Edward W. Nottingham of the United States District Court for the District of Colorado entered final judgments by consent against defendants Sport-Haley, Inc. and Steve S. Auger in the above-referenced matter. Sport-Haley, located in Denver, Colorado, designs, markets, and contracts for the manufacture of golf apparel and outerwear under the Haley-Registered Trademark label. Steve S. Auger, of Morrison, Colorado, was formerly the controller of Sport-Haley. The Commission's complaint alleged that Sport-Haley materially overstated work-in-process ("WIP") inventory, improperly capitalize period costs and materially misstated losses on the sale of headwear equipment during its 1998 and 1999 fiscal years. According to the Complaint, as a result of these and other accounting errors, Sport-Haley filed with the Commission materially incorrect financial statements that overstated the company's 1998 fiscal year income by $1.5 million or 41 percent and its 1999 fiscal year income by $311,000 or 22 percent. The Complaint alleged that Auger reviewed and signed filings with the Commission that he knew or was reckless in not knowing contained false financial statements.
Without admitting or denying the allegations of the Commission's complaint, Sport-Haley consented to the issuance of a final judgment which enjoins it from further violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act, Sections 13(b)(2) and 15(d) of the Exchange Act and Rules 12b-20, 15d-1, and 15d-13 thereunder. Without admitting or denying the allegations of the Commission's complaint,, Auger consented to the issuance of a final judgment which enjoins him from further violations of Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder, and from aiding and abetting violations of Sections 13(b)(2) and 15(d) of the Exchange Act and Rules 12b-20, 15d-1, and 15d-13 thereunder. Auger was further barred from acting as an officer or director of any public company for a period of five years.
On December 21, 2005, the complaint was dismissed by stipulation as to defendant Kenneth R. LeCrone, formerly an independent auditor for the company. On December 22, 2005, the Commission issued an order against LeCrone which ordered him to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder; and from causing any violations and any future violations of Section 15(d) of the Exchange Act, and Rules 12b-20, 15d-1 and 15d-13 promulgated thereunder. LeCrone consented to the order without admitting or denying the factual allegations contained in the order. [Securities Act Rel. No. 8647/December 22, 2005]