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SEC CHARGES ARIZONA-BASED HEALTH FOOD COMPANY AND FORMER EXECUTIVES WITH ACCOUNTING FRAUD
SEC CHARGES ARIZONA-BASED HEALTH FOOD COMPANY AND FORMER EXECUTIVES WITH ACCOUNTING FRAUD.
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[{"type":"text","content":"U.S. Securities and Exchange Commission Litigation Release No. 21819 / January 20, 2011 Accounting and Auditing Release No. 3234 / January 20, 2011 Securities and Exchange Commission v. NutraCea, et al., United States District Court, District of Arizona, Civil Action No. CV 11-0092-PHX-DGC SEC CHARGES ARIZONA-BASED HEALTH FOOD COMPANY AND FORMER EXECUTIVES WITH ACCOUNTING FRAUD On January 13, 2011, the Securities and Exchange Commission charged NutraCea, three former executives, and two former accounting personnel for engaging in a fraudulent accounting scheme to inflate NutraCea's product sales revenues.The SEC alleges that NutraCea overstated its sales revenues for the second and third quarters of its fiscal year 2007 and fiscal year 2007 by booking false sales and engaging in improper revenue recognition practices. Through misstated financial statements, NutraCea disguised its true operating results in the second and third quarter of 2007 and fiscal year 2007.The SEC charged NutraCea's former chief executive officer, Bradley D. Edson, former chief financial officer, Todd C. Crow, and former senior vice president and secretary, Margie Adelman, for their roles in the fraudulent accounting scheme. The SEC also charged former controller, Joanne D. Kline, and former director of financial services, Scott Wilkinson, for their roles in the improper accounting.NutraCea, an Arizona-based company that manufactures and sells health food products, agreed to settle the SEC's charges. Edson agreed to pay a $100,000 penalty, reimburse NutraCea $350,000 in bonuses he received in 2008, and agreed to a permanent officer and director bar to settle the SEC's charges against him. Adelman, Kline, and Wilkinson also agreed to settle the SEC's charges. The SEC's complaint, filed in federal district court in Arizona, alleges that NutraCea, Edson, Crow, and Adelman falsified NutraCea's sales revenues in 2007, and Kline and Wilkinson engaged in improper accounting by recording these false revenues. NutraCea booked $2.6 million in false sales to Bi-Coastal Pharmaceutical Corp. in the second quarter of 2007, resulting in overstated product sales revenue of as much as 35% in the second quarter of 2007. According to the SEC's complaint, Edson instructed Bi-Coastal's president to falsify his family's financial statements to reflect a higher net worth in orde...