FORMER Sunbeam executives deny fraudulent accounting SEC charges
Wednesday, May 16th 2001, 12:00 am
By: News On 6
MIAMI (AP) _ Sunbeam Corp.'s former chief Albert ``Chain Saw Al'' Dunlap, who made his reputation by slashing jobs, denied federal allegations that he helped cook the books to make the company look healthier.
The Securities and Exchange Commission made its allegations in a lawsuit filed Tuesday.
It charged that Dunlap and four other former Sunbeam executives along with a one-time partner at the Arthur Andersen accounting firm who audited Sunbeam had inflated earnings through fraudulent accounting methods.
In a statement, Dunlap called the charges ``totally false,'' adding ``I am outraged that the SEC has chosen to bring these baseless charges against me.''
Dunlap earned his nickname for whacking away thousands of jobs at the Boca Raton-based maker of Sunbeam, Oster, Mr. Coffee, First Alert and other appliances, and similar moves earlier in his career at Scott Paper Co. and Lily-Tulip Inc. In the process, he made millions, and his memoir ``Mean Business: How I Save Bad Companies and Make Good Companies'' became a best-seller.
But the SEC charged that Dunlap led a ``cookie jar'' scheme to create the illusion of a speedy turnaround after he arrived in 1996 by shifting revenue to inflate losses under the old management and inflate income for 1997. The agency also said the company practiced ``channel stuffing'' by inducing retail customers to sell merchandise more quickly than normal.
By 1998, the SEC contended, Sunbeam was getting more desperate and misrepresented its performance and prospects in its first quarterly report, bond offering materials, press releases and statements to stock analysts. Dunlap was forced to resign.
Shareholders have made similar allegations in fraud suits and agreed to a $110 million settlement last month with the Andersen accounting firm following Sunbeam's fall into bankruptcy court. At its peak, the company's market value was $5 billion. As part of its bankruptcy restructuring under Chapter 11, Sunbeam decided to drop its nine-year listing on the New York Stock Exchange and go private, which means shareholders will get nothing if the plan is approved.
Sunbeam admitted no wrongdoing in response to charges that its financial disclosures were wrong for six quarters from 1996 to 1998.
Dunlap, former chief financial officer Russell Kersh, former controller Robert Gluck and former vice president Donald Uzzi could face permanent bans from leadership in public companies plus fines of $100,000 per violation. Lee Griffith, former vice president of sales, and Andersen's Phillip Harlow also were charged in the lawsuit.
A law firm representing Dunlap and Kersh said in a statement that its analysis of Sunbeam accounting would be presented in their defense. The firm did not respond to the specific charges.
Gluck's attorney, Thomas McGonigle, said, ``We're looking forward to our day in court because we believe that a fair and neutral evaluation of this evidence is going to show that Bob Gluck acted properly.'' Attorneys for Griffith and Harlow also denied wrongdoing by their clients, and Arthur Andersen LLP released a statement saying it will assist Harlow vigorously in contesting the SEC's allegations.
A message left with Uzzi's attorney was not returned.
Former general counsel David Fannin settled administrative actions rather than be named in the federal lawsuit filed in Miami.