SEC Sues Ex-Signal Executives
SEC Sues Ex-Signal Executives
Mar. 27, 2002
BOSTON (AP) _ Federal financial regulators have sued seven former executives of defense contractor Signal Technology Corp. for fraud, but settled the case with the company over accounting irregularities.
The Danvers-based company was not fined and neither admitted nor denied wrongdoing, the Securities and Exchange Commission said Wednesday when it announced the settlement.
The company referred calls to an outside spokesman, who did not immediately return a phone message seeking comment.
The complaint, filed Tuesday in federal court in San Jose, Calif., claims the former executives inflated earnings by more than $9 million between 1996 and 1998 by failing to record losses, prematurely recognizing revenue and failing to write off worthless inventory in violation of standard accounting principles.
``This action presents a classic example of how excessive management pressure to report higher earnings can lead to improper accounting,'' the complaint says.
One executive named in the suit, former president and CEO Dale Peterson, said, ``I'm so sick of people hiding behind GAAP (generally accepted accounting principles) and thinking GAAP is important,'' the complaint alleges.
Another executive, former vice president of operations, and president of the company's Keltec division, Richard Nabozny, is quoted as saying, ``This is my (expletive) company and I'll treat it how I want.''
Peterson's home telephone was busy Wednesday afternoon.
Peterson's attorney, Leon Cunningham, said his client's remark was taken out of context. ``I know Mr. Peterson didn't do anything wrong at Signal Technology, so I expect we're going to defend vigorously,'' he said.
Nabozny's attorney, Lawrence Callaghan, did not immediately return a phone message seeking comment.
The suit seeks fines and to bar five of the defendants from holding officer or director positions in any public company.
The complaint alleges Signal Technology misstated net income between 8 percent and 294 percent in financial statements filed for periods between 1996 and 1998 and, despite losing money, reported a profit in 1997.
The accusations involve the company's Fort Walton, Fla.-based Keltec division, where four division presidents are accused of participating in the filing of false financial reports.
The SEC said new management that took over in 1998 discovered the irregularities and the company eventually restated its financial results for 1996 and 1997, by which time all seven defendants had left the company.
The SEC's investigation had previously been disclosed by Signal Technology, which was formerly headquartered in Sunnyvale, Calif.
The other defendants are: former chief financial officer Russell Kinsch; former president James Walsh; former marketing vice president Michael Smith; former Keltec controller Charles Balentine; and former Keltec president Wayne Armstrong.
Kinsch did not immediately return a phone message seeking comment.
The company's shares closed down 5 cents at $7.90 in trading Wednesday afternoon on the Nasdaq stock market.