Centennial Technologies details extent of fake profits
BOSTON (AP) _ Centennial Technologies Inc.’s former managers inflated profits by $40 million over 3 1/2 years, far more than previously disclosed, by billing for nonexistent products and shipping empty boxes.
The figures, released Thursday, came from an audit initiated the day after former Chief Executive Officer Emanuel Pinez was arrested on fraud charges in February. They dwarfed numbers contained in his federal indictment.
Before word of the scandal got out, Centennial was one of the hottest performers on Wall Street. The company went public in 1994 and its stock soared 450 percent on the New York Stock Exchange last year.
The company, which makes computer cards, has since been kicked off the NYSE. Pinez, who pleaded innocent in March, was fired, along with former Chief Financial Officer James Murphy.
Centennial already had admitted it had cumulative losses going back to fiscal 1994. Thursday’s statement outlined the extent of the deception and acknowledged the methods used to pull it off.
The period covered by the audit covered nearly four fiscal years.
From July 1993 through December 1996, sales were inflated by $22.6 million, while inventory was understated by $7.7 million, the company said.
All told, Centennial claimed profits of nearly $12.2 million during that period. In fact, the figures released Thursday showed it had lost more than $28 million.
In a March indictment, federal prosecutors charged Pinez with booking $2.4 million in phony sales over the course of a year.
Centennial said it has been cooperating with federal authorities since Pinez was arrested. He was fired Feb. 11 and arrested Feb. 14. Pinez maintains his innocence.
The audit was compiled with the help of the employees who carried out Pinez’ orders, said Donald Peck, the company’s treasurer and general counsel. Pinez and Murphy were the only people fired in connection with the scandal.
Echoing charges by federal prosecutors, the auditors said Centennial shipped empty PC card housings and created bills for a nonexistent product named ``Flash 98.″ Empty boxes were delivered to create fictitious shipping labels and invoices, and the invoices were paid by Pinez himself, the company said.
Pinez is also charged with investing in such a way that he would profit from the company’s collapse.
Although both the U.S. attorney and the Securities and Exchange Commission investigations are continuing, Peck said the company was ready to move on under interim chief Lawrence Ramaekers, a turnaround specialist.