Two former executives of NewCom Inc., a defunct maker of computer accessories in Westlake Village, were sentenced Wednesday to two years each in federal prison for their roles in a scheme to book fake sales and deceive regulators and investors.
NewCom's former chief executive, Sultan W. Khan of Pacific Palisades, and the company's former executive vice president, Asif M. Khan of Westlake Village, both 60, had asked to be given probation. Their attorneys had argued that they were solid members of their communities, with no prior convictions, and had health problems.
The case involved quarterly financial reports that the company filed with the Securities and Exchange Commission in 1998. Authorities said NewCom had reported tens of millions of dollars in fake sales intended to pump up its stock price. When the revenue was later reversed, the market value of NewCom shares plummeted by $140 million.
Prosecutors had told U.S. District Judge Florence-Marie Cooper in Los Angeles that the men deserved longer prison terms because their actions had contributed to the public company's shutting down in 1999.
"We believed people running a company who conducted such a substantial fraud should go to jail for at least five years," said Assistant U.S. Atty. Pamela Johnston.
At the sentencing hearing, Cooper determined that the Khans' incarceration under federal sentencing guidelines should be four years and nine months. But the judge reduced the sentences, citing a U.S. Supreme Court decision this year that declared the guidelines to be only advisory.
Cooper cited the defendants' age, health issues such as diabetes and heart trouble and lack of criminal histories in sentencing them to 24 months each.
The Khans, who are not relatives of each other, pleaded guilty in October 2003 to securities violations, wire fraud, money laundering and conspiracy. Sultan Khan also pleaded guilty to participating in a kickback scheme with a vendor enabling the men to embezzle more than $1 million from NewCom.
The two were indicted in September 2002 along with Steven C. Veen, NewCom's chief financial officer, in what prosecutors portrayed as part of President Bush's crackdown on white-collar crime. However, a Los Angeles federal jury later acquitted Veen of charges that he filed inflated financial reports and lied under oath to regulators.
NewCom was a 1997 spinoff from El Segundo-based Aura Systems Inc., which also had run-ins with securities regulators. Aura's longtime chief executive, Harry Kurtzman, quit in 2002 as the SEC was preparing accounting fraud charges against him, Veen and the Khans. Kurtzman eventually was fined $75,000 and barred from serving as a corporate executive or director for life.