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Count 'Em: 63 CFOs Convicted in Past Five Years

The DoJ, asked for names based on its earlier count, identified 53 former CFOs in all; CFO.com adds another 10 from its files.
Kate Plourd, CFO.com | US
August 3, 2007

The Department of Justice, which has said that at least 53 finance chiefs have been convicted in the five-year life of the President's Corporate Fraud Task Force, has provided CFO.com with a list of 53 people who either pleaded guilty or were found guilty. After recalculating to include other cases, CFO.com has confirmed another 10, bringing the total to 63 ex-CFOs who either pleaded guilty or were convicted by juries since July 9, 2002.

The government's list excludes the names of some well-known former finance chiefs who wound up in jail, including Enron's Andrew Fastow, WorldCom's Scott Sullivan, Tyco International's Mark Swartz, and Rite-Aid's Frank Bergonzi. Fastow's and Sullivan's cases, for example, were handled by the fraud team of the U.S. Attorney's office, which is why they were not included on the list, according to the DoJ. Likewise, Swartz was prosecuted by Manhattan District Attorney Robert M. Morgenthau. The list provided by the DoJ was assembled by collecting cases from U.S. Attorneys' offices around the country that had tried corporate fraud cases.

The DoJ list actually contains more than 70 names, although research by CFO.com shows that a number of those listed were not officially CFOs of their companies; some were company presidents, CEOs, or COOs. On its list, the government also included James Doyle, the former CFO of Mercury Finance, who died before being charged with a crime. Although prosecutors expected to convict Doyle, who was cooperating with them as part of a plea agreement, his appearance on the list is a reminder that the government lost one of its biggest convictions when the death of Enron's Kenneth Lay caused his record to be posthumously cleared.

In its July 18 announcement, the DoJ said it counted 214 chief executives, 23 corporate counsels or attorneys, and 128 vice presidents as having been convicted since July 2002, in addition to "at least 53" CFOs. The government list did include other ex-CFOs who were convicted or pleaded guilty in highly publicized trials, including Adelphia Communications's Timothy Rigas and four of the five former HealthSouth CFOs: Aaron Beam, Michael Martin, William T. Owens, and Weston L. Smith (it did not include Malcolm McVay, who also was convicted).

Through news reports, court filings, press releases, and CFO.com's own Website, 53 ex-CFOs on the DoJ list were confirmed as having been convicted of charges that included conspiracy; insider trading; money laundering; racketeering; embezzlement; accessory to fraud; and bank, mail, wire, and securities fraud. CFO.com also confirmed the charges of the 10 other ex-CFOs.

The Justice Department noted the role of the Sarbanes-Oxley Act of 2002 in leading to the five years of enforcement, citing it as one of the tools Congress has given prosecutors to target corporate fraud. However, only three ex-CFOs on its list, Steven Garfinkel of DVI, and Smith and Owens of HealthSouth, were convicted of direct violations of Sarbanes-Oxley. Most cases ended in a plea agreement, with more than 75 percent of defendants pleading guilty to charges brought against them.

The task force, created after a storm of corporate scandals, also gave itself unusual credit for the convictions in the July 18 press conference, saying that it "has compiled a strong record of combating corporate fraud and punishing those who violate the trust of employees and investors." Actually, the task force's main role has been to coordinate various federal enforcement efforts. Chaired by Deputy Attorney General Paul J. McNulty, the task force includes senior DoJ officials and seven U.S. Attorneys, along with the head of the Departments of Treasury and Labor, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Energy Regulatory Commission, the Federal Communications Commission, the U.S. Postal Inspection Service, and the Department of Housing and Urban Development's Office of Federal Housing Enterprise Oversight.

63 CFOs Convicted of Corporate Fraud in Five Years
July 9, 2002, to July 9, 2007
Date
CFO
Company
Charges
Plea or Jury Trial
July 2002 to December 2002
Peter Bromberg
Motorcar Parts and Accessories
Making false statements
Plea Agreement
Joseph Shew
Homestore
Conspiracy to commit securities fraud
Plea Agreement
Steven Allan
Media Vision Inc.
Securities fraud
Jury Trial
Gary Duane Schultz
Lund Boats
Mail fraud, money laundering
Plea Agreement
2003
Thomas Lambach
Quaker Alloy Inc. (Atchison Casting Corp.)
Wire fraud, conspiracy
Plea Agreement
Aaron Beam
HealthSouth
Bank fraud
Plea Agreement
Michael Martin
HealthSouth
Conspiracy, filing false financial statements
Plea Agreement
Weston Smith
HealthSouth
Conspiracy to commit wire fraud and securities fraud, filing false statements, violating the certification provision of Sarbanes-Oxley
Plea Agreement
William Owens
HealthSouth
Conspiracy to commit wire and securities fraud, violating the certification provision of Sarbanes-Oxley
Plea Agreement
Malcolm McVay*
HealthSouth
Conspiracy to commit wire and securities fraud, filing false financial reports
Plea Agreement
Jay Gilbertson
McKesson Corp.(HBO and Co.)
Securities fraud
Plea Agreement
Donna Richardson
Craig Consumer Electronics
Bank fraud
Plea Agreement
Matthew Gless
Peregrine
Conspiracy, securities fraud
Plea Agreement
Steven Lash
FPA Medical Management
Wire and mail fraud
Jury Trial
Gary Atnip
Franklin American Corp.
Money laundering, racketeering
Plea Agreement
Lawrence Simon
Media-Hut
Lying to investigators, conspiracy to inflate earnings and revenues
Plea Agreement
Edward Stein
American Tissue
Securities and bank fraud
Plea Agreement
Stephen Lowber
Cutter & Buck Inc.
Accessory after the fact to wire fraud
Plea Agreement
Frank Bergonzi
Rite Aid
Making false statements to the SEC, obstructing justice, witness tampering
Plea Agreement
2004
Thomas Sebastian
L90
Conspiracy to commit securities fraud
Plea Agreement
Kirk Dischino
Measurement Specialties Inc.
Insider trading
Plea Agreement
Ira Zar
Computer Associates
Conspiracy, securities fraud, obstruction
Plea Agreement
Timothy Rigas
Adelphia Communications
Conspiracy, bank fraud, securities fraud
Jury Trial
Jon Clark
Vari-L Company Inc.
Fraudulently inflating earnings
Plea Agreement
James Cutler
Tollman-Hundley Hotels
Conspiracy to commit bank fraud, bank fraud, making false statements to banks
Jury Trial
Scott Sullivan*
WorldCom
Conspiracy, fraud, and making false statements
Plea Agreement
John Howard Daws*
Cylink Corp.
Conspiracy to falsify accounting records, securities fraud
Plea Agreement
Thomas Bray*
Network Technologies Group
Wire fraud
Plea Agreement
2005
Lawrence Teodoro
Timeless Toys Inc.
Wire fraud
Plea Agreement
John Garitta
PinnFund, USA
Conspiracy to commit wire fraud and money laundering, tax evasion, filing false statements
Plea Agreement
Robin Szeliga
Qwest
Insider trading
Plea Agreement
John Jacobs
Hamilton Bank
Securities and wire fraud, false filings with the SEC
Plea Agreement
Steven Davis
Berkeley Risk Administrators Co., LLC
Mail fraud
Plea Agreement
Kent Kalkwarf
Charter Communications
Wire fraud
Plea Agreement
David Cammarata
Impath
Conspiracy, securities fraud, bank fraud, making false statements to the SEC, soliciting proxies with false proxy statements
Plea Agreement
Wakon Redcorn
Heritage National Insurance Co.
Embezzlement, wire fraud, money laundering
Jury Trial
Rondal Cavender
Safescript Pharmacies
Conspiracy to commit securities fraud, money laundering
Plea Agreement
Mark Swartz***
Tyco International
Grand larceny and conspiracy, securities fraud, falsifying business records, violating business law
Jury Trial
2006
Rudolph Terry
Terry Manufactoring
Conspiracy
Plea Agreement
Joseph Zumwalt
Weida
Mail fraud
Plea Agreement
William Scott DeLoach
PBSJ Corp.
Conspiracy to commit wire fraud, the unlawful reimbursement of federal campaign contributions
Plea Agreement
Donald Welchko
Anicom Inc.
Falsely inflating sales and profits
Plea Agreement
William Rauwerdink
Lason
Conspiracy to commit mail, wire, and bank fraud; making false statements to the SEC
Plea Agreement
Greg Gadel
Buca Inc.
Mail and wire fraud
Plea Agreement
Marion Markle
National School Fitness Foundation
Misprison (failure to report) of a scheme to defraud
Plea Agreement
Robert Gagalis
Enterasys
Conspiracy, wire, and securities fraud
Jury Trial
Michael Resnick
U.S. Foodservice Inc.
Conspiracy
Plea Agreement
Patrick Buttery
Computer Personalities Systems Inc.
Wire and mail fraud, money laundering
Plea Agreement
John Monteclavo
Hillside Health Center
Embezzlement, money laundering, Medicare fraud
Plea Agreement
Andrew Fastow*
Enron
Conspiracy to commit wire fraud, conspiracy to commit securities fraud
Plea Agreement
Keith Howard*
Enron Broadband
Fraud, conspiracy, falsifying records
Plea Agreement
David Kreinberg*
Comverse Technology
Conspiracy to commit securities, mail, and wire fraud; securities fraud
Plea Agreement
2007
Steven Garfinkel
DVI
Mail fraud, violating the certification provision of Sarbanes-Oxley
Plea Agreement
Robert Gordon
TeleServices Internet Group
Securities fraud, money laundering
Jury Trial
Victor Suglia
Friedman Jewelers
Fraud
Plea Agreement
Michael Suhadolnik
HealthCare Financing Administration
Wire fraud
Jury Trial
Joseph Connors
Kleinert's Corp.
Fraud, making false statements
Jury Trial
Samuel Sacco
Spectra Systems Inc.
Mail and wire fraud
Plea Agreement
Prahbat Goyal
McAfee (Network Associates)
Securities fraud, filing false reports with the SEC, making false statements to auditors
Jury Trial
Jack Grace
BestBank
Conspiracy; bank and wire fraud; falsifying bank reports
Jury Trial
Eric McCracken
Aerosonic Corp.
Conspiracy to commit wire fraud, wire fraud
Plea Agreement
Steve Venechanos
Supreme Specialties Inc.
Conspiracy; mail, bank, and wire fraud; making false statements to the SEC
Jury Trial
John Boultbee*
Hollinger
Mail fraud
Jury Trial
Sources: Department of Justice press releases, various news reports, and court filings. *Name not provided in the list from the U.S. Department of Justice.**Case prosecuted in state court.



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