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SEC Files Insider Trading, Fraud Charges In Cascade Case

March 17, 1995

WASHINGTON (AP) _ Regulators filed federal civil charges against six people arising from the case of Cascade International Inc., the Florida clothing and cosmetics company that collapsed after its top executive disappeared in 1991.

The Securities and Exchange Commission announced Thursday it filed insider trading charges in U.S. District Court in Southern Florida against Victor G. Incendy _ Cascade’s missing chairman and chief executive officer.

Also charged with insider trading were a former Cascade director, Lawrence D. Moses of Boca Raton, Fla., and former vice president John T. Sirmans, who currently is serving a 1- to 3-year prison term following his 1993 guilty plea to larceny charges arising from the case.

Cascade’s accountant, Bernard H. Levy of New York, was charged with preparing improper audits of Cascade. The broker who allegedly handled the disputed trades, Rodney B. Hedges of Santa Rosa, Calif., was charged with failing to disclose how Incendy conducted his trades.

Incendy’s ex-wife, J.B. Van Zanten, was an officer in Cascade who faces record-keeping charges.

Cascade was charged with inflating its balance sheet and deliberately filing exaggerated claims in SEC filings about the company’s worth and the size of its operations in order to obtain millions of dollars of loans and investments. The alleged fraud surfaced after Incendy disappeared on Nov. 20, 1991.

The SEC said that from 1988 to 1991, Incendy, his ex-wife and Sirmans filed false quarterly and annual financial reports with the SEC that exaggerated the number of cosmetic counters and fashion boutiques, as well as Cascade’s assets and revenues.

According to the documents, Cascade ran 270 cosmetics counters and 11 cosmetics retail outlets in five states in 1988, the SEC said. Actually, there were ``very few, if any cosmetic counters and only 1 cosmetic retail outlet,″ the SEC said.

The SEC said the accountant, Levy, gave Cascade unqualified audit opinions for Cascade from 1988 through 1991.

The false reports sent Cascade’s stock from $1.75 a share in 1988 to a high of $11.75 a share in 1991, prior to its collapse, the SEC said.

Incendy and Sirmans, armed with secret corporate information, traded Cascade stock and reaped $6.6 million, the SEC charged. Moses took in $4.8 million from such trades, the agency charged.

The SEC charged Hedges, the broker, opened ``numerous nominee accounts″ in the name of corporate shells that Incendy used to conduct ``illegal trading″ in Cascade stock. Hedges failed to disclose that he helped create these accounts and he was paid more than $200,000 by Cascade and Incendy for working on the accounts, the SEC said.

Hedges’ attorney, Peter Robinson of Santa Rosa, Calif., said his client ``was a victim and was duped by Victor Incendy to trade unregistered securities.″ Hedges contends he checked to see if the shares were properly registered and that he dealt with ``real people″ and not nominee investors as alleged by the SEC, Robinson said.

Attempts to reach attorneys for the remaining defendants early Thursday evening were not successful.

The SEC’s complaint seeks civil fines, a court order forbidding the defendants from violating securities laws, as well as return of illegally gained profits.

Cascade International filed for bankruptcy in December 1991 and has since been liquidated. The bankruptcy court found $30 million missing and it has been estimated that before the company collapsed investors and creditors may have lost as much as $100 million.

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