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William J. Rauwerdink, who once settled insider trading charges as CFO of Medstat, was sentenced to three years in prison for committing securities fraud as CFO of Lason, Inc.
Stephen Taub, CFO.com | US
June 11, 2007
William J. Rauwerdink, the former CFO of Lason, Inc., was sentenced to 3 years and nine months in prison for his role in the company's accounting fraud nearly 10 years ago, according to the U.S. attorney's office
Rauwerdink pleaded guilty last November to conspiring to commit mail, wire, and bank fraud and making false statements to the Securities and Exchange Commission, and to filing a false and fraudulent quarterly report with the SEC — offenses which date back to early 1998 through late 1999. It was also not the first time Rauwerdink had run afoul of federal regulators — as CFO of Medstat Group, he agreed in December 1995 to settle charges of insider trading in Medstat stock and was permanently enjoined by a federal district judge from committing securities fraud.
Rauwerdink joined Lason, a printing, mail-processing, and electronic information service provider, as CFO in May 1996, and the company completed its initial public offering in October of that year. The conspiracy charge to which Rauwerdink pleaded guilty was based on Lason's accounting fraud in 1998 and the first three quarters of 1999. Lason was accused of fraudulently managing the company's earnings and boosting its reported earnings per share by shifting revenues and expenses when it acquired other companies and by fabricating revenues.
"Rauwerdink was deeply involved in this accounting fraud," said a press release from Stephen J. Murphy, United States Attorney for the Eastern District of Michigan. Rauwerdink, Murphy said, met with other Lason executives "to ensure that Lason's reported earnings per share met or exceeded the estimates of stock analysts."
According to the announcement, Lason reported its inflated earnings per share figures every quarter through press releases drafted by Rauwerdink, conference calls in which he participated, and quarterly and annual filings with the SEC that he signed.
The DOJ asserted that the scheme began to seriously unravel on December 17, 1999, when Lason announced that it would not meet Wall Street's earnings projections for the fourth quarter. By the end of 2000, Lason's stock was virtually worthless. On December 5, 2001, Lason filed for bankruptcy protection and on July 1, 2002, it emerged from bankruptcy as a privately held company.
In addition to receiving jail time, Rauwerdink was ordered to pay $115 million in restitution to Lason's former shareholders and $170 million in restitution to Lason's principal lender, a bank group led by Bank One, Michigan (now a part of JPMorgan Chase Bank). He also was ordered to serve two years of supervised release following his release from prison.
In imposing the sentence, Judge Arthur Tarnow said that "greed and avarice" prevailed at Lason "at the expense of Lason's shareholders, banks, employees, and customers. On April 4, Tarnow sentenced the former chairman and CEO of Lason, Gary Monroe, to 15 months in prison and two years supervised release, and ordered him to pay $20 million in restitution to Lason's former shareholders.
On March 16, Tarnow sentenced former COO John Messinger to a year and a day in prison and three years supervised release and ordered him to pay $20 million in restitution to the former shareholders.
The sentences of Monroe and Messinger were based in part on the cooperation they provided to the government in connection with the prosecution of Rauwerdink. Civil charges against Rauwerdink, Monroe, Messinger and former assistant controller Robert Bassman are still pending.