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Swimwear Makers Face Charges

Courts: Two Sirena Apparel executives are charged with shifting quarterly sales.

September 28, 2000|EDMUND SANDERS | TIMES STAFF WRITER

Maurice "Corky" Newman, a well-known Southern California fashion executive who was fired last year amid allegations of misconduct at Los Angeles-based Sirena Apparel Group, will face criminal charges of accounting fraud, federal prosecutors said Wednesday.

Newman, 67, former chief executive at bathing-suit maker Sirena, was arrested Tuesday by FBI agents and named in a 10-count indictment for misleading investors last year about Sirena's financial health.

Newman is the former president of CaliforniaMart and is credited with helping to reinvigorate the wholesale apparel marketplace in Los Angeles' fashion district.

Also named in the indictment is Richard A. Gerhart, 49, who was fired along with Newman in June 1999 after Sirena announced it would have to restate its financial results for three quarters.

An attorney for Newman denied that her client engaged in criminal wrongdoing and called some of the government's allegations "laughable."

"The grand jury did not hear all the relevant facts," said Deborah Klar, a Century City attorney.

An attorney for Gerhart declined to comment. Both Newman, of Marina del Rey, and Gerhart, of Irvine, were freed after posting bonds.

Officials at Sirena, whose fashion labels include Anne Klein, Hang Ten and Liz Claiborne, did not return phone calls Wednesday. The company is not named in the government action, though it was hit with four lawsuits by shareholders.

Government officials said the Sirena case, along with several other accounting fraud indictments announced Wednesday, are part of a crackdown by the U.S. Securities and Exchange Commission and U.S. attorney's offices on companies that allegedly "cook the books."

According to government attorneys, Newman and Gerhart attempted to inflate the company's revenue and profit by shifting sales from one quarter to another, allowing the company to meet the expectations of Wall Street analysts.

The practice was so well-known at Sirena that employees began an office pool to place bets on which day they predicted the quarter would end, according to Assistant U.S. Atty. Gregory Weingart. An employee who objected to the practice was fired, and at one point, Weingart alleged, Newman tried to bribe a Sirena employee to make it appear as if Gerhart was responsible for the scheme.

Newman and Gerhart are scheduled to be arraigned Oct. 2. If convicted of all counts, Newman faces a maximum sentence of 95 years; Gerhart could receive up to 85 years.

In a separate case, the U.S. attorney also filed criminal accounting fraud charges against three former executives at defunct stereo and electronics maker Craig Consumer Electronics Inc. Those named are: former Craig CEO Richard I. Berger, 57, of Rolling Hills Estates; former Craig Chief Financial Officer Donna Richardson, 44, of Dracut, Mass.; and former Craig Vice President Bonnie Metz, 51, of Newport Beach.

The three were indicted Tuesday by a federal grand jury on charges of inflating the value of the company's receivables and inventory to secure a $40-million line of credit from four banks.

Craig, formerly based in Cerritos, filed for bankruptcy in August 1997. Michael Doyen, an attorney for Berger, said his client would plead not guilty to the charges.

Richardson's attorney, Donald Hamman, said his client had "done nothing improper and would vigorously defend these unfounded allegations."

An attorney for Metz could not be reached for comment.

In a civil suit announced Wednesday, the SEC accused a former executive of troubled Premier Laser Systems Inc. of inflating the Irvine company's revenue nearly three years ago.

Michael L. Hiebert, former chief financial officer, agreed to pay a $10,000 fine and to refrain from future violations, the SEC said. He neither admitted nor denied any wrongdoing.

Earlier this year, Premier filed for bankruptcy and shut down its operations.

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Times staff writer Marc Ballon contributed to this story.

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