Risk Management

Former Spiegel Heads Settle SEC Charges

The commission charges former executives with overstating the performance of the company's credit card-receivables portfolio.
Stephen TaubNovember 2, 2006

Eight former officers and directors of Spiegel, Inc.—including an ex-CFO and a treasurer—settled fraud charges leveled against them by the Securities and Exchange Commission.

Five previous executives of the catalogue retailer settled charges of overstating the performance of Spiegel’s credit card-receivables portfolio. They were ex-CFO James Cannataro; former treasurer John Steele; former co-presidents Michael Moran and James Sievers; and former chief executive officer Martin Zaepfel.

The former directors settled SEC charges linked to a decision to withhold Spiegel’s required financial reports to avoid issuance by its outside auditor of a “going concern” opinion. They were former chairman Michael Otto; two former directors, Michael Crusemann and Horst Hansen; and Zaepfel.

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Concerning the settling executives, the SEC charged that they had “improperly increased” inter-company fees between Spiegel’s retail subsidiaries and Spiegel’s bank subsidiary. Those actions allegedly “had the effect of hiding the deteriorating performance of the company’s credit card-receivables portfolio.” As a result, Spiegel could improperly benefit from the securitization of that portfolio, the complaint stated.

Commenting on the SEC’s action against the ex-board members, Linda Chatman Thomsen, the commission’s enforcement chief, said it shows that the regulator will hold the highest levels of corporate leadership accountable for their conduct. “Directors who keep important financial information from the investing public by purposely failing to file required financial reports will be sanctioned,” she warned.

Without admitting or denying the commission’s charges, Moran, Sievers, Cannataro, Steele, Otto, Crusemann, Hansen, and Zaepfel agreed to refrain from future violations of the federal securities laws. Further, these individuals agreed to pay the following penalties: Zaepfel, $170,000; Moran, Sievers, Cannataro, and Steele, $120,000; Otto and Crusemann, $100,000.