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SEC Sues ACLN for Alleged Fraud

Regulation: Three former executives at Belgian shipping firm also face civil charges.

October 09, 2002|NEIL ROLAND | BLOOMBERG NEWS

ACLN Ltd., a Belgian-based company that maintained its U.S. investor relations office in Los Angeles, was charged Tuesday with "an exceptionally bold and elaborate financial fraud" in a Securities and Exchange Commission suit.

The transport firm, which said it shipped used cars to Africa from Europe and sold new cars in Africa, was "little more than a shell company" whose executives defrauded investors of millions of dollars by cooking the books from 1998 to the third quarter of 2001, the SEC said.

The company's stock, which traded on the New York Stock Exchange, was suspended in March by order of the SEC--the first time the agency had ordered such a halt for a Big Board stock since 1975.

ACLN reported profit of $42.4 million on $168 million of revenue in 2000, much of which it credited to a new-car exporting business that never existed, the lawsuit contends.

The company never owned a car-carrier ship that it said was its largest physical asset, and reported $117 million in bank deposits last year when its balance was less than $2 million, the SEC said.

ACLN's shares, which traded as high as $50 on the NYSE in September 2001, fell 5 cents to 25 cents Tuesday in over-the-counter trading. The stock once was recommended by brokerages including J.P. Morgan Chase.

The SEC also filed charges against three former executives who it said controlled the company and exploited the fraud through stock sales. The executives--former ACLN Chairman Joseph Bisschops, former Chief Executive Aldo Labiad and former Chief Operating Officer Alex de Ridder--sold $80 million of company stock at inflated prices, the suit alleges.

Bisschops and de Ridder also are targets of criminal money-laundering investigations by Belgian authorities, SEC assistant enforcement director Richard Sauer said. Bisschops is a fugitive, and Labiad and De Ritter live in Belgium, he said.

It is not clear if ACLN and the three former executives will contest the U.S. civil fraud charges, Sauer said. Lawyers for the company and Labiad didn't respond to requests for comment. The two other defendants don't yet have attorneys, the SEC official said.

The SEC and other authorities have frozen $45 million in bank accounts in Denmark, the Netherlands, Luxembourg and Monaco. The agency said it will try to distribute this money to defrauded shareholders, many of whom live in the United States. It also is seeking to fine the defendants.

In addition to suing the ACLN executives, the SEC said it settled civil fraud charges against the Cyprus affiliate of BDO International, ACLN's former auditor, and two former BDO partners.

They failed to conduct "even the most basic audit procedures," the SEC said. ACLN is incorporated in Cyprus.

BDO agreed to pay $62,196 of fees received from the company, and BDO's partners--Minas and Christakis Ioannou--accepted a permanent ban on auditing public companies trading in the U.S., the SEC said. The Ioannous did not admit or deny the charges.

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