Risk & Compliance

Implanting Fraud? Ex-CFO Settles SEC Charges

Commission alleged inflation of 2002 income at Centerpulse, a Swiss maker of hip, knee, spine, and dental medical devices.
Stephen TaubJune 2, 2008

A former CFO of Swiss health-care products company Centerpulse settled Securities and Exchange Commission charges related to his alleged involvement in the fraudulent inflation of Centerpulse’s income during the third and fourth quarters of 2002.

Urs Kamber, the ex-finance chief, is among a number of finance executives who have been cited in connection with the fraud. He consented to a final judgment without admitting or denying the Commission’s allegations against him.

Originally named Sulzer Medica AG, Centerpulse was a publicly traded corporation headquartered that manufactured a variety of medical devices, including hip, knee, spine, and dental implants. From at least January 2001 through October 2003, Centerpulse’s American depository shares were registered with the SEC.

Under the deal with the SEC, Kamber agreed to pay a $50,000 civil penalty, $65,013 in disgorgement, and $22,824 in prejudgment interest. The judgment also bars Kamber for five years from acting as an officer or director of any public company with SEC-registered securities, and permanently enjoins him from violating the antifraud, falsification of books and records, and annual certification provisions of federal securities laws. Kamber, a chartered accountant in Switzerland, also consented to be suspended from appearing or practicing before the SEC as an accountant, with the right to apply for reinstatement after five years.

The SEC’s alleged that Kamber, along with two other former Centerpulse executives, fraudulently inflated Centerpulse’s third-quarter 2002 income by improperly deferring recognition of a $25 million expense, refusing to write down $3.4 million in costs associated with an impaired asset, and approving $3.6 million in improper reserve adjustments. It alleged that he fraudulently inflated Centerpulse’s fourth quarter and fiscal 2002 income by refusing to increase a reserve to cover at least $18 million in liabilities, improperly using anticipated refund credits to offset another $5 million in expenses, and again refusing to write down $3.4 million in costs associated with an impaired asset.

In related administrative proceedings, Dennis L. Hynson, Christopher W. Kelford, and Paula J. Norbom, the former vice presidents of finance for Centerpulse’s three U.S. divisions, consented to the entry of cease-and-desist orders relating to improper accounting decisions they made during the third quarter of 2002.

The SEC litigation against former Centerpulse controller Stephan Husi, and the former group vice president of finance, tax counsel, and treasurer of Centerpulse USA Holding, Richard May, is continuing. Kamber, Husi and May were charged last October.