The U.S. Securities and Exchange Commission (SEC) recently announced that it has barred a former corporate vice president and suspended a former controller that were involved with false accounting at a New York-based electronics company.
The agency’s investigation found that IEC Electronics Corp. (NYSEMKT: IEC) improperly overstated the company’s profits in financial statements by using false inventory accounting as orchestrated by IEC’s then-executive vice president of operations, Donald Doody, and the controller of one of IEC’s subsidiaries at the time, Ronald Years.
When the subsidiary wasn’t performing well financially, Doody and Years inappropriately inflated the work-in-process inventory in order to meet budgeted gross profit margins.
As a result, Doody is barred from serving as an officer or director of a public company for five years, and Years is permanently suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies.
Michele Layne, director of the SEC’s Los Angeles Regional Office, commented:
Company executives cannot use false accounting tactics to meet profit margins and other financial targets and expect to get away with it. Doody and Years made an ill-fated decision to pump up the numbers in financial statements relied upon by investors.
Without admitting or denying the findings, IEC, Doody and Years consented to the SEC’s order instituting a settled administrative proceeding. IEC agreed to pay a $200,000 penalty, Doody agreed to pay $29,204.48 in disgorgement and interest plus a $25,000 penalty, and Years agreed to pay a $40,000 penalty.
IEC’s former CEO William “Barry” Gilbert was not accused of any wrongdoing but has returned $42,072 in incentive-based compensation and stock sale profits, as well as 19,616 shares of company stock, pursuant to the SEC’s clawback provision.
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