Accounting & Tax

Fraud Charges for Five Former Executives

Cornerstone Propane Partners eventually wrote off $9.8 million of unsubstantiated balances at fiscal year-end 2001 as a result of its accounting er...
Stephen TaubSeptember 27, 2005

The Securities and Exchange Commission has filed civil charges against five former executives of Cornerstone Propane Partners stemming from an alleged financial fraud.

The five individuals are former chief executive officer Keith G. Baxter, former chief financial officer Ronald J. Goedde, former vice president of finance and acting chief financial officer Richard D. Nye, former controller Robert E. Ellington, and former divisional chief financial officer Anthony W. O’Dell.

The commission alleged that the five individuals were responsible for
Cornerstone’s reporting false financial statements and results in regulatory filings and press releases for the periods from June 2000 through September 2001 and for concealing fundamental accounting errors from the company’s outside auditors.

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Cornerstone eventually wrote off $9.8 million of unsubstantiated balances at fiscal year-end 2001 as a result of its accounting errors, according to the complaint. The SEC added that Baxter and Nye mischaracterized the nature of the adjustment in order to hide the company’s past accounting failures from investors.

The SEC complaint was filed in U.S. District Court for the Northern District of California, near Cornerstone’s former Watsonville headquarters. According to a company press release, the public company emerged from Chapter 11 protection last December as a private company named Titan Propane LLC, whose headquarters is now in Florence, Kentucky.

The commission is seeking permanent injunctions, disgorgement with prejudgment interest, civil penalties, and officer-and-director bars.

The SEC noted that Ellington and O’Dell, without admitting or denying the allegations, each consented to a cease-and-desist order, and that Ellington agreed to pay a $25,000 civil penalty. The commission did not impose a penalty against O’Dell, based on his sworn financial statements and other documents submitted to the commission.