The Securities and Exchange Commission has settled fraud charges against four former officers of a document-management company, including two finance executives. The four are William Rauwerdink, the ex-CFO of Lason Inc.; Robert Bassman, the company’s onetime controller; Gary Monroe, who was CEO; and John Messinger, who was COO.
Under the deal, they are barred from serving as officers or directors of public companies, though they did not admit or deny the allegations. Bassman agreed to pay $240,000 in disgorgement and prejudgment interest, though all but $35,000 was waived because of his financial condition.
In related administrative proceedings, Bassman agreed to be suspended from appearing or practicing before the SEC as an accountant for three years based on the entry of an injunction against him, and Rauwerdink was suspended based on his criminal conviction.
In 2007 Rauwerdink pleaded guilty to conspiracy and making false statements to a federal agency, and Monroe and Messinger pleaded guilty to the false-statements charges. They were sentenced to 45 months, 15 months, and 12 months imprisonment, respectively. In addition, Rauwerdink was ordered to pay restitution of $285 million, and Monroe and Messinger were ordered to pay restitution of $20 million each.
The SEC had alleged that during 1998 and 1999, the four men schemed to fraudulently overstate Lason’s earnings in order to meet or exceed Wall Street expectations. The effort culminated in the third quarter of 1999, when Lason’s earnings were overstated by about 65 percent, the SEC noted.
According to the complaint, in a so-called tailwind scheme, Monroe and Rauwerdink instructed companies that were acquired by Lason to delay recognizing revenue until after the purchase was completed and to prepay expenses before the acquisition. In addition, Monroe, Rauwerdink, and Bassman improperly booked a forgiven loan as revenue for Lason in the fourth quarter of 1998, the SEC charged.
The commission also said Lason improperly claimed an invalid invoice as a legitimate receivable in the fourth quarter of 1998. When Lason’s auditors questioned the legitimacy of the receivable, Monroe, Messinger, and Bassman allegedly obtained a check that improperly appeared to make payment on the receivable.
Lason also was accused of making numerous fraudulent Work in Process accounting.
The SEC said the individuals profited from the scheme through their salaries as well as bonuses, stock options, and executive loans that were affected by Lason’s artificially inflated stock price.