Two former executives of now-defunct cheese manufacturer Suprema Specialties have been convicted by a federal jury of booking millions of dollars in phony sales to defraud the company’s lenders and investors.
Co-founder, former chairman, and former chief executive officer Mark Cocchiola, as well as former chief financial officer and corporate secretary Steven Venechanos, were each found guilty of 38 counts including conspiracy, bank fraud, securities fraud, and mail and wire fraud, according to published accounts.
“These were corrupt businessmen,” U.S. Attorney Christopher J. Christie said in a statement. “They bankrupted a company that was in reality a myth built on phony sales. They were driven by unbridled greed without a thought to the investors they charmed with their illusion of Suprema’s success.”
According to the criminal indictment, handed up in July 2005, the Paterson, New Jersey-based seller of “all-natural Italian cheeses” booked more than $1 billion in sales between 1994 and January 2002. More than $600 million worth was to customers who participated in the scheme; most of that amount involved fictitious transactions, added the indictment, for which no products were sold or shipped.
Christie noted in 2005 that Suprema had been widely touted in the financial press as one of the best-performing small companies in America. Suprema’s “apparently astronomic growth,” the U.S. attorney continued, enabled the company to engage in a series of secondary stock offerings, netting the company millions in capital from investors. In the last of those offerings, in November 2001, Cocchiola earned more than $2.5 million and Venechanos made more than $1 million in proceeds directly from stock sales. The phony cheese sales were also allegedly used to persuade lenders to increase Suprema’s credit line, which grew to as much as $140 million.
Suprema’s scheme started to unravel in late 2001. On the same day in December that year, Venechanos abruptly resigned, as did controller Arthur Christensen. Nasdaq suspended trading of Suprema shares shortly thereafter and delisted the stock in March 2002, after Suprema filed for bankruptcy protection.
In January 2004, three former customers and one former manager of Suprema pleaded guilty to conspiracy, securities fraud, and food-adulteration charges in connection with the criminal scheme, according to the U.S. Attorney. That same month, SEC settled securities fraud and related charges with Christensen, a former operations manager, and several former customers and vendors of Suprema and their owners. In March 2005, another former customer of Suprema pleaded guilty to criminal charges of conspiracy and securities fraud.
The two individuals, who are still the subject of parallel proceedings brought by the Securities and Exchange Commission, could easily spend the rest of their lives in prison; they also face millions of dollars in fines when they are sentenced on July 10.