Press Release: SEC Charges Two Former Supermarket Executives With Financial Fraud
Former Penn Traffic executives Leslie H. Knox and Linda J. Jones were charged by the SEC and U.S. Attorney with orchestrating a fraud scheme that prematurely recognized $10 million in vendor rebates to inflate income, resulting in false financial filings and ongoing civil and criminal proceedings.
The SEC charged former Penn Traffic executives Leslie H. Knox and Linda J. Jones with fraud for prematurely recognizing approximately $10 million in vendor rebates and promotional allowances between FY2001 and FY2003 to meet internal budget targets. They allegedly directed marketing staff to submit false invoices and deceive accounting personnel, causing material misstatements in the company’s public filings. The U.S. Attorney’s Office filed related criminal charges, while the SEC seeks injunctive relief, disgorgement with interest, civil penalties, and officer/director bars, with the investigation still ongoing.
Former Penn Traffic executives Leslie H. Knox and Linda J. Jones were charged by the SEC and a federal grand jury with orchestrating a widespread financial fraud scheme to inflate the company’s reported income by prematurely recognizing approximately $10 million in vendor rebates and promotional allowances from the second quarter of FY2001 through at least the fourth quarter of FY2003. They directed employees in the marketing department to submit false invoices and misleading information to accounting staff, ensuring these allowances were booked before the required performance conditions were met. This manipulation falsified Penn Traffic’s financial reports, which were then included in public SEC filings, misleading investors and distorting the company’s financial condition. The SEC’s complaint alleges that Knox and Jones lied to and deceived internal accounting personnel to carry out the scheme, all to meet internal budget goals. The U.S. Attorney’s Office for the Northern District of New York separately indicted them on criminal charges, while the SEC seeks injunctive relief, disgorgement of all ill-gotten gains with prejudgment interest, civil monetary penalties, and bars from serving as officers or directors of public companies. The SEC acknowledged the assistance of the FBI and the U.S. Attorney’s Office in the investigation, which remains active as of the filing date. Both civil and criminal proceedings are ongoing, underscoring the regulatory focus on accounting fraud by corporate officers.
Extracted insights
- $10.00M $10 million $10M–$100M
- person civil fraud charges
- person civil monetary penalties
- agency Federal Grand Jury
- person leslie h. knox
- person linda j. jones
- person penn traffic
- person penn traffic accounting personnel
- Securities And Exchange Commission filed civil fraud charges
- Securities And Exchange Commission charged Leslie H. Knox
- Securities And Exchange Commission charged Linda J. Jones
- Leslie H. Knox orchestrated scheme to inflate Penn Traffic's income
- Linda J. Jones orchestrated scheme to inflate Penn Traffic's income
- Federal Grand Jury indicted Leslie H. Knox
- Federal Grand Jury indicted Linda J. Jones
- Penn Traffic recognized approximately $10 million in operating income
- Leslie H. Knox deceived Penn Traffic accounting personnel
- Linda J. Jones deceived Penn Traffic accounting personnel
- Commission seeks disgorgement of all ill-gotten gains
- Commission seeks civil monetary penalties
SEC Charges Two Former Supermarket Executives With Financial Fraud FOR IMMEDIATE RELEASE 2007-184 Washington, D.C., Sept. 17, 2007 - The Securities and Exchange Commission today announced that it filed civil fraud charges against two former officers of a Syracuse-based retail and wholesale food company for repeatedly inflating reported income by improperly accounting for vendor rebates and other promotional allowances. The Commission's complaint, filed in the United States District Court for the Northern District of New York, alleges that the former Senior Vice President and Chief Marketing Officer of the Penn Traffic Company, Leslie H. Knox, and a former Penn Traffic Vice President, Linda J. Jones, orchestrated a scheme to inflate Penn Traffic's income and other financial results by prematurely recognizing promotional allowances at Penn Traffic. Promotional allowances — also referred to as rebates, slotting fees, or vendor allowances — are fees paid from vendors in exchange for various marketing and promotional activities, such as inclusion in a supermarket's weekly circular. The U.S. Attorney for the Northern District of New York, Glenn T. Suddaby, today separately announced that a federal grand jury impaneled within the Northern District of New York has returned an indictment against Knox and Jones on related criminal charges. David Rosenfeld, Associate Director of the SEC's New York Regional Office, said, "These defendants engaged in a widespread scheme to falsify Penn Traffic's financial reports. The Commission continues to focus on accounting improprieties and will take strong action when officers of a public company engage in fraudulent conduct that distorts the company's financial condition." According to the complaint, from approximately the second quarter of Penn Traffic's Fiscal Year (FY) 2001 through at least the fourth quarter of FY 2003, Penn Traffic prematurely recognized promotional allowances in advance of Penn Traffic's performance of certain key, contingent activities. Knox and Jones orchestrated, directed, and participated in this scheme in an effort to meet internal budget plans. The complaint further alleges that Knox and Jones lied to and otherwise deceived Penn Traffic accounting personnel in order to carry out their fraudulent scheme. For example, at the direction of Knox and Jones, personnel in Penn Traffic's marketing department routinely submitted false invoices and other information to Penn Traffic's accounting department so that promotional allowances were booked before they were actually earned. The complaint alleges that as a result of the willful misconduct of Knox and Jones, Penn Traffic pulled forward approximately $10 million in operating income, and these falsified financials were included in Penn Traffic's public filings. The Commission's lawsuit seeks an order against both defendants enjoining them from violations of the antifraud, reporting, books-and-records and internal controls provisions of the federal securities laws, ordering disgorgement of all ill-gotten gains with prejudgment interest, and imposing civil monetary penalties and officer and director bars. The Commission acknowledges the assistance of the United States Attorney's Office for the Northern District of New York and the Federal Bureau of Investigation in this matter. The Commission's investigation is continuing. # # # For more information, contact: David Rosenfeld (212) 336-0153 Associate Regional Director SEC's New York Regional Office David A. Markowitz (212) 336-0128 Assistant Regional Director SEC's New York Regional Office Additional materials: Litigation Release No. 20285 http://www.sec.gov/news/press/2007/2007-184.htm Home | Previous Page Modified: 09/17/2007
SEC Charges Two Former Supermarket Executives With Financial Fraud FOR IMMEDIATE RELEASE 2007-184 Washington, D.C., Sept. 17, 2007 - The Securities and Exchange Commission today announced that it filed civil fraud charges against two former officers of a Syracuse-based retail and wholesale food company for repeatedly inflating reported income by improperly accounting for vendor rebates and other promotional allowances. The Commission's complaint, filed in the United States District Court for the Northern District of New York, alleges that the former Senior Vice President and Chief Marketing Officer of the Penn Traffic Company, Leslie H. Knox, and a former Penn Traffic Vice President, Linda J. Jones, orchestrated a scheme to inflate Penn Traffic's income and other financial results by prematurely recognizing promotional allowances at Penn Traffic. Promotional allowances — also referred to as rebates, slotting fees, or vendor allowances — are fees paid from vendors in exchange for various marketing and promotional activities, such as inclusion in a supermarket's weekly circular. The U.S. Attorney for the Northern District of New York, Glenn T. Suddaby, today separately announced that a federal grand jury impaneled within the Northern District of New York has returned an indictment against Knox and Jones on related criminal charges. David Rosenfeld, Associate Director of the SEC's New York Regional Office, said, "These defendants engaged in a widespread scheme to falsify Penn Traffic's financial reports. The Commission continues to focus on accounting improprieties and will take strong action when officers of a public company engage in fraudulent conduct that distorts the company's financial condition." According to the complaint, from approximately the second quarter of Penn Traffic's Fiscal Year (FY) 2001 through at least the fourth quarter of FY 2003, Penn Traffic prematurely recognized promotional allowances in advance of Penn Traffic's performance of certain key, contingent activities. Knox and Jones orchestrated, directed, and participated in this scheme in an effort to meet internal budget plans. The complaint further alleges that Knox and Jones lied to and otherwise deceived Penn Traffic accounting personnel in order to carry out their fraudulent scheme. For example, at the direction of Knox and Jones, personnel in Penn Traffic's marketing department routinely submitted false invoices and other information to Penn Traffic's accounting department so that promotional allowances were booked before they were actually earned. The complaint alleges that as a result of the willful misconduct of Knox and Jones, Penn Traffic pulled forward approximately $10 million in operating income, and these falsified financials were included in Penn Traffic's public filings. The Commission's lawsuit seeks an order against both defendants enjoining them from violations of the antifraud, reporting, books-and-records and internal controls provisions of the federal securities laws, ordering disgorgement of all ill-gotten gains with prejudgment interest, and imposing civil monetary penalties and officer and director bars. The Commission acknowledges the assistance of the United States Attorney's Office for the Northern District of New York and the Federal Bureau of Investigation in this matter. The Commission's investigation is continuing. # # # For more information, contact: David Rosenfeld (212) 336-0153 Associate Regional Director SEC's New York Regional Office David A. Markowitz (212) 336-0128 Assistant Regional Director SEC's New York Regional Office Additional materials: Litigation Release No. 20285 http://www.sec.gov/news/press/2007/2007-184.htm Home | Previous Page Modified: 09/17/2007