Risk & Compliance

Ex-CEO Pleads to Sarbox 302 Violation

Joseph Micatrotto received a $65,000 payment from a vendor so he could pay off a personal debt, then failed to disclose this payment in his company...
Stephen TaubJune 21, 2006

Federal prosecutors have finally secured a guilty plea under Section 302 of Sarbanes-Oxley, which requires CEOs and CFOs to certify their company’s financial results, according to the Associated Press.

The AP reported that Joseph Micatrotto, former chief executive officer of restaurant chain Buca Inc., pleaded guilty to wire fraud for receiving a $65,000 payment from a vendor, High Wire Networks, so he could pay off a personal debt. High Wire then inflated one of its bills to Buca, according to the report.

Micatrotto was charged, noted the wire service, because he failed to disclose this payment in Buca’s annual report filed with the Securities and Exchange Commission. The U.S. Attorney’s Office for the District of Minnesota had also charged former chief financial officer Greg Gadel with mail fraud and wire fraud and John Motschenbacher, who held a number of finance-related posts, with two counts of mail fraud.

Gadel and Motschenbacher are expected to plead guilty later this week, according to the AP.

Earlier this month, the SEC filed securities fraud charges against Micatrotto, Gadel, and former controller Daniel Skrypek. Without admitting or denying the allegations, Micatrotto agreed to settle with the SEC by consenting to a permanent injunction, disgorgement of $65,000 plus prejudgment interest, a civil penalty of $500,000, and a bar from serving as an officer or director of a public company.

The AP also noted that the first person charged with violating Section 302, former HealthSouth chief executive officer Richard Scrushy, was acquitted of all criminal counts against him in June 2005.