by T. GormanPosted on Posted in SECActions

This is the fifth in a series of articles examining the creation of the Financial Reporting and Audit Task Force along with a Center for Risk and Quantitative Analysis. Today’s article examines select cases brought in the wake of Chairman Levitt’s Numbers Game speech in which issuers and others utilized a variety of improper techniques to distort financial statement trends.

While some issuers utilized primarily one improper approach to ensure that the firm met its numbers, others utilized a variety of techniques. In those instances issuers frequently enhanced revenue, manipulated expenses and managed trends. Select examples of these cases include:

· SEC v. Buntrock, Civil Action No. 02C 2180 (N.D. Ill. Filed March 26, 2002) is an action against the founder and other former senior officers of Waste Management, Inc. The complaint alleges a massive accounting fraud beginning in 1992 and continuing through 1997 which involved, in part, improperly eliminating and deferring current period expenses to inflate earnings. A variety of other techniques were used including: avoiding depreciation expense on certain assets; assigning arbitrary salvage values to others; failing to record expenses for decreases in the value of landfills as they were filled in with waste; and improperly capitalizing a variety of expenses. When the financial statements were restated for the periods 1992 through 1997 the company acknowledged misstating its pre-tax earnings by about $1.7 billion. At the time the restatement was the largest in corporate history. The complaint alleged violations of Securities Act Section 17(a) and Exchange Act Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B). See Lit. Rel. No. 17435 (March 26, 2002).

· SEC v. Xerox Corporation Civil Action No. 02-CV-2780 (S.D.N.Y. Filed April 11, 2002) is an action against the office equipment manufacturer alleging an accounting fraud to manage earnings from 1997 through 2000. During that period Xerox employed seven different accounting actions to help it meet street expectations as to earnings. Those included in its leasing operations shifting revenue from servicing and financing which is recognized over the term of the lease to the equipment so that it could be immediately recognized; shifting revenue to equipment that the company had historically allocated to financing; and shifting revenue to equipment that historically had been allocated to servicing. These techniques, which departed from GAAP and the historical practices of the company, were combined with a series of other artful accounting conventions, the adoption of which added about $1 billion of revenue. All of these actions, in conjunction with the use of “cookie jar reserves,” helped the company meet street expectation. The Commission’s complaint alleged violations of Securities Act Section 17(a) and Exchange Act Sections 10(b), 13(a), 13(b)(2)(A) and13(b)(2)(B). See Lit. Rel. No. 17465 (April 11, 2002).

· SEC v. Safety-Kleen Corp., Civil Action No. 02 Civ. 9791 (S.D.N.Y. Filed December 12, 2002) is an action in which the Commission alleged a massive accounting fraud beginning in late 1998 and continued through the end of the first quarter of 2000. During that period two officers of the company implemented a scheme to inflate revenue primarily by improperly recognizing revenue, inappropriately capitalizing expenses, incorrectly recording derivative transactions, improperly deferring expenses and other fraudulent techniques. The company’s revenue was further distorted by fraudulently recording about $38 million of cash generated by speculative derivative transactions. The SEC’s complaint alleged violations of Securities Act Section 17(a) and Exchange Act Sections 10(b) and 13(b)(5). The two individual defendants were also criminally charged. See Lit. Rel. Nos. 17891 (Dec. 12, 2002) and 185555 (Jan. 28, 2004).

· SEC v. Symbol Technologies, Inc., Case No. CV 04 2276 (E.D.N.Y. Filed June 3, 2004) is an action against the company and eleven former officers alleging a massive accounting fraud scheme that took place from 1998 through early 2003. During that period the defendants utilized numerous fraudulent accounting practices which had a cumulative net impact of over $230 million on reported revenue and over $530 million on pretax earnings. To ensure that the company met its financial projections the defendants: a) made baseless accounting entries to conform quarterly results to management projections; b) fabricated and misused restructuring and other non-recurring charges to artificially reduce operating expenses, and create “cookie jar” reserves; c) engaged in channel stuffing and other revenue recognition schemes; and d) manipulated inventory levels and accounts receivable data to conceal the adverse side effects of the revenue recognition scheme. The company settled at the time of filing. See Lit Rel. No. 18734 (June 3, 2004).

· SEC v. Gemstar-TV Guide International, Inc., Case No. CV 04-04-4506 (C.D. Cal. Filed June 23, 2004) is an action in which the Commission alleged that the company fraudulently inflated its revenues from 1999 through 2002 using five improper practices: a) It recorded revenue under expired, disputed or non-existent agreements; b) revenue was reported under long-term agreements on an accelerated basis in contravention of GAAP and company policy; c) revenue was improperly recorded from multi-element transactions, some of which utilized round trip transactions; d) revenue was improperly recorded from non-monetary and barter transactions; and e) revenue was improperly classified. During the period the company overstated revenue by almost $250 million. The complaint alleged violations of Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B). The company settled on filing. The settlement was based in part on the cooperation and remedial efforts of the company. See also Lit. Rel. No. 2045 (June 23, 2004).

· The collapse of Enron Corporation was the result of perhaps the largest financial fraud to date. It spawned a number of cases. At the center of the improper practices was the manipulation of the financial statements of the company utilizing a variety of techniques. A key case regarding Enron is SEC v. Causey, Civil Action No. H-04-0284 (S.D. TX. Filed July 8, 2004; amended Feb. 19, 2004), an action against former Enron Corporation President and CEO Jeffrey Skilling and Richard Causey, the former Chief Accounting Officer of the company. The amended complaint details a massive accounting fraud scheme which centered on claims that the defendants: a) manufactured and manipulated reported earnings through the improper use of reserves; b) concealed huge losses in the retail energy business by manipulating Enron’s business segment reporting; c) fraudulently promoted another, Enron Broadband Service, using false statements and fraudulently inflated its value and manufactured earnings by recognizing millions of dollars as earnings from the increase in the stock price; and d) used special purpose entities to manipulate financial results. See Lit. Rel. No. 18582 (Feb. 19, 2004) (amended complaint) and No. 18776 (July 8, 2004) (adding former Chairman and CEO Kenneth Lay).

· SEC v. Collins & Akiman, Corp., Case No. 1:07-CV-2419 (S.D.N.Y. Filed March 26, 2007) is an action against the company, former OMB director David Stockman, and other officers at the company. The complaint, echoed in part by a parallel criminal case which was later dropped, alleged a multi-year earnings fraud beginning in 2001 and continuing through 2005. During that period the defendants engaged in a multifaceted financial fraud which included: a) Fictitious round trip transactions which supposedly gave the company increased revenue through the payments of rebates; b) improper accounting for certain rebates by, in some instances, recognizing the income prematurely while, in other instances, taking the sums into income when in fact they should not have been booked; and c) concealing a liquidity crisis at the firm. The complaint alleged violations of Securities Act Section 17(a) and Exchange Act Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B). See Lit. Rel. No. 20005 (March 26, 2007).

  • SEC v. Cardinal Health, Inc., Civil Action No. 07 CV 6709 (S.D.N.Y. Filed July 26, 2007) is a settled action against the pharmaceutical distribution company. The complaint alleged that from September 2000 through March 2004 the company managed its earnings to match guidance and analysts’ expectations using a variety of techniques. Those included: a) misclassifying over $5 billion of “bulk sales” – those that related to certain full case sales of product under firm policies – as operating revenue; b) selectively accelerating without disclosing the payment of vendor invoices to prematurely record about $133 million in cash discounts; c) improperly adjusting reserve accounts which misstated earnings by more than $65 million; and d) improperly classifying $22 million of expected litigation settlement proceeds to increase operating earnings. The SEC’s complaint alleged violations of Securities Act Section 17(a) and Exchange Act Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B). See Lit. rel. No. 20212 (July 26, 2007).
  • SEC v. Fisher, Civil Action No. 07C 4483 (N.D. Ill. Filed Aug. 9, 2007) is an action against three former senior executives of Nicor, Inc., a major Chicago-area natural gas distributor. From 1999 through 2002 the defendants devised a method by which the company could profit from accessing its low cost last-in, first-out layers of gas inventory through a series of misrepresentations and improper transactions. They also failed to disclose the impact of LIFO inventory liquidations on the reported income of the company, manipulated earnings and improperly caused losses on a supply agreement with an insurance provider to be charged to its utility customers. The complaint alleged violations of Securities Act Section 17(a) and Exchange Act Section 10(b). See Lit. Rel. No. 20233 (Aug. 9, 2007).
  • SEC v. General Electric Co., Civil Action No. 3:09 CV 1235 (D. Conn. Filed Aug. 4, 2009) is a financial fraud action which alleged that the company used four key fraudulent practices to artificially impact its financial results: a) Beginning in 2003 it applied an improper application of the accounting standards to GE’s commercial paper funding program to avoid unfavorable disclosures and about a $200 million pre-tax charge to earnings; b) in the same year the company failed to correct a misapplication of financial accounting standards to certain interest rate swaps; c) in 2002 it improperly accelerated $370 million in revenue by reporting as a year-end transaction the sale of locomotives that had not occurred; and d) in 2002 the company made an improper change in accounting for sales and commercial aircraft engines’ spare parts that increased earnings by $585 million. The complaint alleged violations of Securities Act Sections 17(a) and Exchange Act Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B). The company settled the action on filing. See Lit. Rel. No. 21166 (Aug. 4, 2009).
  • Other significant cases include: SEC v. Dunlap, Civil Action No. 01-8437 (S.D. Fla. Filed May 15, 2001) (action against the former CEO and Chairman of Sunbeam Corporation and others based on an accounting fraud that began in 1996 and continued through 1998 which used channel stuffing and cookie jar reserves); In the Matter of Sunbeam Corporation, Adm. Proc. File No. 3-10481 (Filed May 15, 2001)(proceeding against the company); In the Matter of David C. Fanning, Adm. Proc. File No. 3- 10482 (Filed May 15, 2001) (action against former E.V.P. and general counsel of Sunbeam for participating in drafting of false press releases); SEC v. Conaway, Case No. 05 Civ. 40263 (E.D. Mich. Filed Aug. 23, 2005) (action against two former officers of Kmart alleging that they failed to disclose in the MD&A the reasons for a massive inventory build-up which had a material impact on the liquidity of the company); SEC v. Federal National Mortgage Association, Case No. 06-00959 (D.D.C. Filed May 23, 2006) (action alleging that from 1998 through 2004 the company used a variety of devices to smooth earnings to establish a trend and obtain bonuses by, among other things, not properly applying FAS 91 which requires that loan fees, premiums and discounts be taken as adjustments over the life of the applicable loan; failing to comply with FAS 133 regarding accounting for derivative instruments and hedging activities; and improperly estimating and maintaining the loan loss reserve); SEC v. Fraser, Case No. 2:09-cv-00442 (D. Ariz. Filed March 6, 2006) (action against four executives of CSK Auto Corporation who manipulated earnings from 2002 to 2004 through the use of allowances with vendors); SEC v. BISYS Group, Inc., Case No. 07-Civ-4010 (S.D.N.Y. Filed May 23, 2007) (alleging earnings management through a series of accounting practice which included improperly recording as revenue commissions earned by entities acquired by BISYS before they were acquired and failing to properly adjust reserves. See Lit. Rel. No. 20125 May 23, 2007); SEC v. Italian Pasta Co., Civil Action No. 4:08-CV-00675 (W.D. Mo. Filed Sept. 15, 2008) (action against the company and its senior executives who engaged in a variety of fraudulent actions from 2002 to 2004 including inflating earnings, fraudulently capitalizing period costs, failing to write off obsolete or missing spare parts, engaging in round trip cash transactions and recording false receivables).

Next: The market crisis and a change of direction

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by T. GormanPosted on Posted in SECActions

This is the fourth in a series of articles examining the creation of the Financial Reporting and Audit Task Force along with a Center for Risk and Quantitative Analysis. Today’s article examines select cases brought in the wake of Chairman Levitt’s Numbers Game speech in which issuers and others utilized improper techniques to distort financial statement trends or distort balance sheet items.

In some instances issuers have distorted revenue trends by improperly combining income from one source with that from another. This was typically done to mask the fact that the primary business of the company was not meeting expectations in terms of revenue.

  • SEC v. Quest Communications International Inc., Civil Action No. 04-Z-2179 (D. Co. Filed October 21, 2004) is an action against the telecommunication company. The complaint alleged that Quest fraudulently recognized over $3.8 billion in revenue while excluding about $231 million in expenses to meet street expectations. When the revenue for the company from telecommunications services began to decline, it started selling indefeasible rights of use which are an irrevocable right to use a specific fiber strand or specific amount of fiber capacity for a period. Later the company sold capital equipment. While the investment community discounts such one-time transactions, Quest continually used these types of non-recurring transactions to bolster revenue. The company also engaged in a number of other fraudulent practices. The complaint alleged violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a). The company settled the case at the time of filing. See Lit. Rel. No. 2127 (Oct. 21, 2004); see also SEC v. Nacchio, Civil Action No. 05-MSK-480 (D. Co. Filed March 15, 2005) (action against former Chairman and others of company).
  • SEC v. Tenent Healthcare Corporation, Civil Action No. CV 07-2144 (C.D. Cal. Filed April 2, 2007) is a financial statement fraud action in which the company concealed the fact that a key source of income came not from the primary business of the company but by exploiting a loophole in a statute. Specifically, from 1999 through 2002 the revenue of the company was largely the result of exploiting a loophole in the Medicare reimbursement system, a fact not disclosed to the shareholders. See Lit. Rel. No. 2591 (April 2, 2007).
  • SEC v. Dell, Inc., Civil Action No. 10-cv-01245 (D.D.C. Filed July 22, 2010) is an action against the company, it found and other officers, alleging that they concealed a key source of the company’s revenues. Specifically, the complaint alleged that from 2003 through 2007 the company repeatedly touted its superior products and management as the source of its consistently increasing revenues. In fact, a significant and increasing portion of those revenues were from payments made by chip maker Intel Inc. so that Dell would not buy chips from a rival manufacturer. When the payments began to decrease in 2007, so did Dell’s revenues. The complaint alleges violations of Securities Act Sections 17(a)(2) and 17(a)(3). The action settled at the time of filing. See also SEC v. Davis, Case No. 1:10-cv-01464 (D.D.C. Filed Aug. 2, 2010); SEC v. Inhofe, Case No. 1:10-cv-01465 (D.D.C. Filed Aug. 27, 2010) (actions against Dell officers).
  • See also SEC v. Biovail Corporation, Civil Action No. 08 CV 02979 (S.D.N.Y. Filed March 24, 2009) (issuer falsely blamed failure to meet revenue goals on a truck accident while improperly moving certain expenses off-balance sheet, creating a fictitious bill and hold transaction to increase revenue and misstating foreign exchange losses).

Reserves: In a number of cases, issuers distorted trends by managing their earnings through the improper use of reserves. In some instances the company failed to release cash from the reserve as required by GAAP, holding it until needed to smooth an earnings trend. In other instances the company failed to add to the reserves as required by GAAP.

· Cendant Corporation. This company was at the center of what was at the time one of the largest financial frauds. The company was the product of a merger between CUC International Inc. and HFS Incorporated in 1997. The financial fraud began prior to the merger and traces to the 1980s. It continued until Cendant discovered and disclosed it in April 1998. At the core of the allegations was the manipulation of reserves. For example, in the complaint against Walter Forbes and E. Kirk Shelton, two former senior officers of CUC, the Commission alleged that the two men implemented a program of mergers and acquisition in an effort to generate inflated merger and purchase reserves. The transaction with HFS which created Cendant was sought out for this reason. SEC v. Forbes, Civil Action No. 01-987 (D.N.J. Filed Feb. 28, 2001); see also Lit. Rel. Nos. 16910 (Feb. 28, 2001) and 21356 (Dec. 30, 2009). Similarly, the complaint against Cosmo Corigliano, Anne Pember, Casper Sabatino and Kevin Kearney, also officers of CUC, alleged in part that the reserves of the company were manipulated to fraudulently inflate revenue. SEC v. Corigliano, Civil Action No. 00-2873 (D.N.J. Filed June 14, 2000); see also Lit. Rel. No. 16587 (June 14, 2000).

· SEC v. Integrated Electrical Services, Inc., Case No. 4:07-CV-2779 (S.D. Tex. Filed August 29, 2007) is an action against the company and its senior officers alleging that in 2003 and 2004 the company failed to disclose that about $3 million in unsigned change orders from two construction contacts were in dispute at one of its subsidiaries. To the contrary, the subsidiary president represented that the change orders were fully collectible. The parent failed to reserve for the change orders. Subsequently, about 70% of the change orders were written off. In addition, the company lowered its allowance for doubtful accounts by about $1.8 million without informing investors. The Commission’s complaint alleged violations of Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B). See Lit. Rel. No. 2673 (August 30, 2007); see also In the Matter of David A. Miller, CPA, Adm. Proc. File No. 3-12714 (August 29, 2013) (proceeding against the former Chief Accounting Officer of the company).

· SEC v. Dunn, Civil Action No. 07-CV 2058 (S.D.N.Y. Filed March 12, 2007) is an action initially brought against three senior officers of Nortel Networks Corporation. The amended complaint, filed on September 12, 2007, added four additional officers as defendants. That complaint alleged that in the second half of 2002 and early 2003 various business units of the company had millions of dollars in excess reserves. Those reserves were held and not immediately released as required by GAAP. Subsequently, in early January 2003, and during the year end closing, $44 million in additional excess reserves were established to lower Nortel’s consolidated earnings and bring it in line with internal management expectations. Then, in the first and second quarters of 2003, about $500 million of excess reserves were released to inflate earnings, changing a loss into a profit for the first quarter and largely eliminating a loss in the second. The release also permitted the payment of bonuses. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B). See Lit. Rel. Nos. 20036 (March 12, 2007) and 2676 (Sept. 12, 2007).

· See also, SEC v. Rand, Civil Action No. 1:09-CV-1780 (N.D. Ga. Filed July 1, 2009) (action against the former COO of Beazer Homes, USA, Inc. alleging that during some periods net income was decreased by improperly recording reserves between 2000 and 2005 to meet expectations and later reversing those entries to pay bonuses and mask declining financial performance. See Lit. Rel. No. 2114 (July 1, 2009).

Expenses: In some of the largest financial statement fraud cases the issuer’s earnings were distorted by minimizing the expenses which offset revenue.

  • SEC v. WorldCom, Inc., Civil Action 02 CV 4963 (S.D.N.Y. Filed June 27, 2002) is one of a series of actions arising out of the $3.8 billion financial fraud at the global communications provider. In 2001 and the first quarter of 2002, the company falsely portrayed itself as being profitable by capitalizing and thus deferring about $3.8 billion in costs. Those costs were transferred to capital accounts in violation of GAAP. The complaint alleged violations of Exchange Act Sections 10(b) and 13(a). See Lit. Rel. No. 1585 (June 27, 2002).
  • SEC v. Adelphia Communications Corporation, Case No. 02 Civ. 5776 (S.D.N.Y. Filed July 24, 2002) is an action against the cable company and six of its senior executives which the Commission called “one of the most extensive financial frauds ever to take place at a public company.” One key aspect of the fraud was the exclusion from mid-1999 through the end of 2001 of over $2.3 billion in bank debt by shifting the liability onto the books of Adelphia’s off-balance sheet, unconsolidated affiliates. This resulted in a series of misrepresentations about those liabilities including the creation of sham transactions backed by fictitious documents and misleading notes in the financial statements claiming that all the bank debt was included in the financial statements. The principals of the company also used a series of loans and other devices to essentially loot the company. See Lit. Rel. No. 1599 (July 24, 2002).
  • See also In the Matter of America Online Inc., Adm. Proc. File No. 3-10203 (May 15, 2000) (alleging violations of the books and records provisions by capitalizing most of the costs of acquiring new subscribers in violation of GAAP).

Balance sheet. While most financial fraud actions focus on improperly boosting earnings, in some instances issuers have sought to enhance select balance sheet entries through improper techniques. Examples of these cases include:

· Overstate assets: SEC v. Parmalat Finanziaria S.p.A., Case No. 03 CV 10266 (S.D.N.Y. Filed Dec. 30, 2003) is an action against an Italian seller of dairy products. The complaint alleged that from August through November of 2003 the company sold debt securities in the United States while engaging in what the complaint called “one of the largest and most brazen corporate financial frauds in history.” The assets of the company in its audited financial statements were overstated by at least €3.95 billion. In addition, during 2003 the company also told U.S. investors that it had used its “excess cash balances” which actually did not exist to repurchase corporate debt securities worth about €2.9 billion. In fact there had been no repurchase and the securities remained outstanding. Earlier the company had sold about $1.5 billion in bonds and notes to U.S. investors. The complaint alleged violations of Securities Act Section 17(a). See Lit. Rel. No. 18527 (Dec. 30, 2003).

· Overstated mineral reserves: In the Matter of Royal Dutch Petroleum Company, Adm. Proc. File No. 3-11595 (Aug. 24, 2004) is a settled proceeding against the company and its affiliates alleging that the issuer’s proved oil reserves were overstated. Specifically, in 2004 the company recategorized 4.47 billion barrels of oil equivalent, or about 23% of the proved reserves reported at the end of 2002, because they did not conform to the applicable rule. This action reduced the standardized measure of future cash flows reported by the company by about $6.6 billion. It also significantly reduced the reserves replacement ratio of the company from a previously reported 100% to 80%. That ratio is a standardized measure of future cash flows. The company had delayed the recategorization to avoid this impact, according to the Order. Previously, Shell had disregarded warnings about these errors. In early 2004 the boards of directors requested and received the resignations of the chairman of two companies in the group. The CFO of the group also stepped aside. Following the recategorization, Shell under implemented substantial remedial efforts and addressed its internal control deficiencies. The Order alleged violations of Exchange Act Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B). The action was resolved at the time of filing. The company also resolved market abuse charges in the U.K.

· Reduce liabilities: In the Matter of PNC Financial Services Group, Inc., Adm. Proc. File No. 3-10838 (July 18, 2002) is a settled action against the financial services company. The Order alleged that the company improperly removed about $762 million in loan and venture capital assets from its books through the use of a special purpose entity in a transaction with American International Group. The purpose was to eliminate the risk of the loans while having the opportunity to benefit from their possible appreciation. The Order alleged violations of Securities Act section 17(a)(2). See also SEC v. American International Group, Inc., No. 1:04CV02070 (D.D.C. Dec. 7, 2004) (companion action against AIG).

Self-dealing/looting: Perhaps the ultimate financial statement fraud case is one centered on what is essentially the looting of the corporation by certain executives for their personal benefit. While these cases can be viewed as financial fraud actions because the financial statements of the company are distorted, they differ significantly from those where the focus is to meet street expectations. Examples of these cases include:

· SEC v. Black, Civil Action No. 04C7377 (N.D. Ill. Filed March 16, 2007) is an action against Conrad Black, the former Chairman of Hollinger International, David Radler, the former Deputy Chairman of the company and Hollinger Inc., a Canadian holding company. The complaint alleged that over a period of four years beginning in 1999 the defendants engaged in a scheme to fraudulently divert cash and assets from Hollinger International and conceal their self-dealing schemes from the public. Specifically, the complaint alleged that through a series of related party transactions the individual defendants diverted to themselves and others about $85 million from the sale by the company newspaper publications. In addition, the two men are alleged to have orchestrated the sale of newspaper properties at below market prices to an entity controlled by them. The Commission’s complaint alleged violations of Exchange Act Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5) and 14(a). A parallel criminal case was also filed. See Lit. Rel. No. 2136 (Nov. 15, 2007).

· Other significant cases include: SEC v. Kozlowski, Civil Action No. 02 CV 7312 (S.D.N.Y. Filed Sept. 12, 2002) (action against three senior executives of Tyco International Ltd. alleging that from 1997 through 2002 they looted the company through a variety of techniques for their personal benefit. See Lit. Rel. No. 17722 Sept. 12, 2002); SEC v. Brooks, Civil Action No. 07-61526 (S.D. Fla. Filed Oct. 25, 2007); SEC v. Schlegel, Civil Action No. 06-61251 (S.D. Fla. Filed Aug. 17, 2006); SEC v. DBH industries, Inc., Civil Action No. 0:11-cv-60431 (S.D. Fla. Filed Feb. 28, 2011) (series of actions against senior officers of body armor manufacturer for looting the company; parallel criminal charges were also brought); SEC v. Rica Foods, Inc., Case No. 08-23546 (S.D. Fla. Filed Dec. 29, 2008) (action against the company and its former CEO based on related party transactions in which the former CEO utilized company assets to secure personal loans).

Next: Cases following the speech – multiple improper techniques

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