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Auditor, Ex-CEO at Warnaco to Settle SEC Charges

Pricewaterhouse, Linda Wachner will pay total of $3.7 million over their handling of overstated inventory in '98 results.

May 12, 2004|From Reuters

Accounting firm PricewaterhouseCoopers will pay $2.4 million in a settlement with U.S. market regulators that closes the book on an investigation of apparel maker Warnaco Group Inc.'s 1998 financial results, authorities said Tuesday.

As part of the agreement with the Securities and Exchange Commission, Warnaco -- maker of Speedo swimsuits and Calvin Klein jeans -- agreed to settle charges of securities fraud without admitting or denying wrongdoing.

Warnaco said it would hire an independent consultant to review its internal controls and to adopt the recommendations within six months. Former Warnaco Chief Executive Linda Wachner also agreed to disgorge 1998 bonuses plus interest, a total of $1.3 million.

"We're pleased that we've reached this settlement and the last chapter of 'Old Warnaco' is now closed," said Doug Morris, spokesman for the New York-based company.

PricewaterhouseCoopers, formerly Warnaco's auditor, was charged with "aiding and abetting Warnaco's reporting violations in the 1998 annual report," the SEC said.

The SEC said the case hinged on Warnaco's handling of its 1998 results, described as record setting in a March 1999 news release. But the release did not say that Warnaco had found a $145-million inventory overstatement, a problem that would require it to reduce results for three prior years, the SEC said.

PricewaterhouseCoopers, which audited the firm's 1998 results, failed to object to Warnaco's handling of the inventory problem, the agency said.

A month after the news release, the SEC said, Warnaco filed its 1998 financial report and correctly accounted for the restatement but described it as related to "start-up costs" rather than an inventory issue.

The case was aimed at showing companies and auditors "that simply 'getting the numbers right' is not enough," said Antonia Chion, an SEC enforcement officer.

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