SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO.16433 / February 11, 2000
ACCOUNTING AND AUDITING ENFORCEMENT
RELEASE NO. 1227 / February 11, 2000
SECURITIES AND EXCHANGE COMMISSION v. FABRI-CENTERS OF AMERICA, INC., ROBERT L. NORTON and JOSEPH E. WILLIAMS, Civil Action No. 5:97CV1216 (N.D. Ohio) (filed February 18, 1997)
On February 7, 2000, the Commission issued an Order pursuant to Sections 8A of the Securities Act of 1933 (Securities Act) and 21C of the Securities Exchange Act of 1934 (Exchange Act) against Robert L. Norton, requiring him to cease-and-desist from committing or causing violations of, or future violations of Sections 17(a)(2) and (3) of the Securities Act, Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, 13b2-1 and 13b2-2 thereunder. Norton is the former executive vice president and Chief Financial Officer of Fabri-Centers of America, Inc. (Fabri-Centers), now known as Jo-Ann Stores, Inc. He left Fabri-Centers in June 1996.
This matter stems from Fabri-Centers' application of the "gross profit method" of accounting during periods immediately before and after a $74.75 million debt offering in March 1992. Norton, without admitting or denying the allegations in the Commission's Order, consented to the entry of the Order finding that he: (1) violated Sections 17(a)(2) and 17(a)(3) of the Securities Act in connection with Fabri-Centers' 1992 year-end Form 10-K and the S-3 Registration Statement for the debt offering; (2) violated Rule 13b2-1 of the Exchange Act by permitting the company's gross profit reserve and earnings to be recorded without properly increasing the gross profit reserve in the first and second quarters of Fiscal 1993; (3) violated Rule 13b2-2 of the Exchange Act by signing representation letters to the company's auditors without making adequate inquiry into the adverse results of the recent store inventories in connection with the registration statement for the March 1992 debt offering; and (4) caused the company to violate Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 12b-20 thereunder by signing and approving the company's Form 10-K for the year-end Fiscal 1992, and Forms 10-Q for the first and second quarters of Fiscal 1993.
As part of the settlement, the district court will enter an order requiring Norton to pay a $50,000 civil penalty, $46,916.68 in disgorgement and $41,630.29 in prejudgment interest thereon.