The Securities and Exchange Commission has barred a former corporate vice president and suspended a former controller behind false accounting at IEC Electronics Corp., following an investigation.
The SEC found that IEC improperly overstated the company’s profits in financial statements by using false inventory accounting as orchestrated by IEC’s then-executive vice president of operations Donald Doody and the controller of one of IEC’s subsidiaries at the time, Ronald Years.
When the subsidiary wasn’t performing well financially, Doody and Years inappropriately inflated the work-in-process inventory in order to meet budgeted gross profit margins, the SEC reported in a release.
Doody is barred from serving as an officer or director of a public company for five years, and Years is permanently suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies.
“Company executives cannot use false accounting tactics to meet profit margins and other financial targets and expect to get away with it,” said Michele Layne, director of the SEC’s Los Angeles Regional Office. “Doody and Years made an ill-fated decision to pump up the numbers in financial statements relied upon by investors.”
Without admitting or denying the findings, IEC, Doody, and Years consented to the SEC’s order instituting a settled administrative proceeding.
IEC agreed to pay a $200,000 penalty, Doody agreed to pay $29,204.48 in disgorgement and interest plus a $25,000 penalty, and Years agreed to pay a $40,000 penalty.
IEC’s former CEO Barry Gilbert was not accused of any wrongdoing, but has returned $42,072 in incentive-based compensation and stock sale profits as well as 19,616 shares of company stock pursuant to the clawback provision of the Sarbanes-Oxley Act, the SEC reported.
Gilbert was terminated last year following a shakeup at the company led by its largest shareholder, Vintage Capital Management LLC.
The Florida-based firm had said it was displeased with IEC’s recent performance and introduced its own board of directors to be voted on at the firm’s annual shareholder’s meeting last January. The alternative slate was elected.
Gilbert was succeeded by current President and CEO Jeffrey Schlarbaum, who had previously served as IEC’s president, but left in 2013. He is also now a director.
IEC officials could not immediately be reached for comment.
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