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Sunbeam's Dunlap to Settle Charges

Accounting: Ex-CEO of appliance maker will pay $500,000 over allegations that he used illegal techniques to hide financial problems.

September 05, 2002|From Reuters

Former Sunbeam Corp. Chief Executive Albert J. Dunlap, known as "Chainsaw Al" for cutting thousands of jobs in the 1990s before the appliance maker filed for bankruptcy reorganization, will pay $500,000 to settle charges he used accounting techniques that hid Sunbeam's financial problems, regulators said Wednesday.

Former Chief Financial Officer Russell Kersh will pay $200,000. They also were barred from serving as officers or directors of any public company, the Securities and Exchange Commission said.

They did not admit or deny the charges in settling the case and neither sold Sunbeam stock nor received performance-related bonuses during the allegedly illegal accounting activity, the SEC said.

Dunlap already has paid $15 million and Kersh $250,000 to settle a class-action lawsuit similar to the SEC's.

Dunlap's attorney, Frank Razzano, said his client has been living in retirement for the last four years and the agreement "will allow him to pursue his retirement and, therefore, is a welcome outcome."

Kersh's lawyer, Jeffrey Tew, pointed to the SEC statement that said his client did not sell Sunbeam stock, which "differentiates him from some other executives we've been reading about. I think it's an important distinction."

The allegedly illegal conduct began toward the end of 1996, when Kersh and others created inappropriate "cookie jar" accounting reserves that increased Sunbeam's reported loss for 1996.

The reserves then were used to inflate income in 1997, thus contributing to the false picture of a rapid turnaround in Sunbeam's financial health, according to the complaint, filed in Miami.

Dunlap and Kersh also failed to disclose that Sunbeam's 1997 revenue growth was achieved partly at the expense of future results.

The firm had offered discounts and other incentives to customers to sell merchandise immediately that otherwise would have been sold later, a practice known as "channel stuffing," the SEC said.

The improper accounting and channel stuffing in 1997 created the prospect of diminished results in 1998, when Dunlap, Kersh and others took "increasingly desperate measures to conceal the company's mounting financial problems," regulators added.

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