Risk & Compliance

Ironclad Execs Accused of $6M Accounting Fraud

The SEC says former CFO William Aisenberg and two colleagues improperly recognized revenue to inflate the work glove maker's revenue by as much as ...
Matthew HellerApril 9, 2020

Three former executives of Ironclad Performance have been charged with inflating the work glove maker’s revenues by improperly recognizing more than $6 million in revenue.

The U.S. Securities and Exchange Commission said CEO Jeffrey Cordes, CFO William Aisenberg, and Senior VP Thomas Felton used manipulative and deceptive accounting gimmicks to inflate revenues by as much as 24% from the fourth quarter of 2015 to the first quarter of 2017.

“The defendants orchestrated and implemented a deceptive plan to artificially inflate Ironclad’s reported revenues by recognizing more than an aggregate of $3.3 million in revenue in the quarter before it was actually earned and more than an aggregate of $3 million in revenue that should never have been booked,” the SEC said in a civil complaint.

Cordes and Aisenberg have agreed to each pay a $173,437 civil penalty to settle the charges while the litigation against Felton is ongoing.

Farmers Branch, Texas-based Ironclad made high-performance gloves for use in the construction, manufacturing, oil and gas, and automotive industries. Cordes became CEO in February 2014 while Aisenberg took over as CFO two months later.

Starting in the fourth quarter of 2015, the SEC alleged, Ironclad recognized more than $3.3 million in revenue for more than 50 orders that were processed on the last day or two of the quarter but were not shipped until after the quarter ended.

“In at least the fourth quarter of 2016, Aisenberg was aware that orders that were included in the reported revenues for that quarter were still in the warehouse after quarter-end; he even wrote an email to Cordes noting: ‘[w]hy aren’t these orders getting picked up, we are already at January 5th,’” the commission said.

Additionally, Ironclad allegedly improperly recognized revenue from sales of products that were never shipped to, or paid for, by customers. Instead, the products were returned or bought back into Ironclad’s inventory and sold to different customers without reversing the original sale, the SEC said.

After the company disclosed the alleged fraud in July 2017, it filed bankruptcy and was acquired by Brighton Best International.