U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19543 / January 26, 2006
Securities and Exchange Commission v. Allan Boren, et al., Case No. CV-01-04377-PA (Ex) (C.D. Cal.)
Final Judgment Entered Against Eric S. Cano, Former President of Manhattan Bagel Subsidiary, and Phillip M. Borini
The Securities and Exchange Commission announced that on January 11 and 14, 2003, the United States District Court for the Central District of California entered Final Consent Judgments of Permanent Injunction and Other Relief against defendants Eric S. Cano and Phillip M. Borini, respectively. The final judgments permanently enjoin each defendant from future violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 12b-20, 13a-1, 13a-13 and 13b2-1 thereunder. Cano was additionally enjoined from future violations of Section 13(b)(2)(B) of the Exchange Act. Furthermore, Borini has been ordered to pay a civil penalty in the amount of $50,000 and Cano has been barred from serving as an officer or director of a public company. Both defendants consented to the entry of the final judgments without admitting or denying the allegations in the Commission's Complaint.
The Commission filed this action on May 15, 2001, alleging a financial reporting fraud perpetrated by the senior officers of I. & J. Bagel, Inc. (I&J), a California-based entity that in June 1995 became a wholly-owned subsidiary of Manhattan Bagel Inc. (Manhattan Bagel). The Complaint alleges that, in 1995 and 1996, I&J's Chairman of the Board, defendant Alan Boren, orchestrated a scheme to inflate Manhattan Bagel's net income by recording fictitious sales, overstating franchise fee and other revenues, and understating certain expenses on I&J's books. The Complaint further alleges that defendant Cano, the president of I&J, was Boren's primary accomplice in implementing much of the scheme and deceiving Manhattan Bagel's auditors about the fictitious sales. Cano and Boren's brother, defendant Borini, implemented the fraud by, among other things, (i) procuring false confirmations for the auditors with respect to the fictitious sales, and (ii) making payments against the fictitious bagel sales using money provided by Boren.
In parallel criminal proceedings, Cano and Borini each pled guilty to criminal charges predicated on the facts underlying the Commission's action. As a result, Cano was placed on five years probation and ordered to pay restitution in the amount of $514,000. Borini was placed on two years probation and ordered to pay a $3,000 fine.
For further information, see Litigation Release No. 17002 (May 15, 2001).