SEC Sues Former CEO, CFO, Other Top Former Officers of Sunbeam Corporation in Massive Financial Fraud
FOR IMMEDIATE RELEASE
Complaint Also Charges Former Arthur Andersen Engagement Partner With Fraud; Company and Its Former General Counsel Settle Related Administrative Proceedings
Washington, D.C., May 15, 2001 The Securities and Exchange Commission today filed a civil injunctive action in U.S. District Court in Miami, Florida charging 5 former officers of Sunbeam Corporation and the former engagement partner on the Arthur Andersen LLP audits of Sunbeam's financial statements with fraud, resulting in billions of dollars of investor losses. The defendants are: Sunbeam's former CEO and chairman Albert J. Dunlap; former principal financial officer Russell A. Kersh; former controller Robert J. Gluck; former vice-presidents Donald R. Uzzi; and Lee B. Griffith; and Arthur Andersen LLP partner Phillip Harlow. In related matters, the Commission instituted settled administrative proceedings against Sunbeam and its former General Counsel, David Fannin.
The Commission's complaint in the injunctive action alleges that senior management of Sunbeam, led by Dunlap and Kersh, engaged in a fraudulent scheme to create the illusion of a successful restructuring of Sunbeam and thus facilitate a sale of the Company at an inflated price. According to the complaint, the defendants employed a laundry list of fraudulent techniques, including creating "cookie jar" revenues, recording revenue on contingent sales, accelerating sales from later periods into the present quarter, and using improper bill and hold transactions.
Richard H. Walker, the SEC's Director of Enforcement, stated: "Accurate and reliable financial reporting is the bedrock of our capital markets. This case is the latest in our ongoing fight against fraudulent earnings management practices that have caused investors billions of dollars in losses and threaten to undermine the integrity of our markets. As the case makes clear, we will attack such conduct aggressively in whatever guise it may appear (in this case, practices ranging from "cookie jar" reserves to channel stuffing) and against whomever may be involved (here, senior company management and the outside auditor)."
According to the Commission's Complaint:
According to the Commission's Complaint, through this conduct, Dunlap, Kersh, Gluck, Uzzi, and Griffith violated the anti-fraud, reporting and other provisions of the federal securities laws. The Commission seeks, as to all defendants, perma-nent injunctions against future violations and civil penalties and, in the case of Dunlap, Kersh, Gluck, and Uzzi, permanent bars from acting as an officer or director of any public company.
In a related matter, the Commission filed an administrative proceeding against Sunbeam Corporation, based in part on allegations that Sunbeam's filings with the Com-mission were materially false and misleading from the fourth quarter of 1996 through the first quarter of 1998. Without admitting or denying the allegations in the Order Instituting Proceedings, Sunbeam consented to the entry of a cease-and-desist order prohib-iting future violations of the anti-fraud, reporting, books and records, and internal controls provisions of the securities laws.
In another related matter, the Commission filed a settled administrative action against David C. Fannin, former Executive Vice President, General Counsel and Secre-tary of Sunbeam, based on allegations that Fannin participated in the drafting of certain Sunbeam press releases in early 1998 that presented a misleading picture of the Company's results of operations. Without admitting or denying the Commission's allegations, Fannin consented to the entry of a cease-and-desist order prohibiting future violations of Section 17(a)(3) of the Securities Act.
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