Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Monday, April 7, 2008

SEC Charges former CFO of United Rentals

The SEC filed securities fraud charges against John N. Milne, a former Vice Chairman, President, and Chief Financial Officer of United Rentals, Inc. ("URI"). Milne is the second URI officer, and the third CFO, charged in connection with the alleged violations. On December 12, 2007, the SEC filed settled financial fraud charges against Michael J. Nolan, another former CFO of URI. On December 27, 2001, the Commission charged Joseph F. Apuzzo, a former CFO of Terex Corporation, with aiding and abetting the fraudulent scheme.

The complaint, filed in the United States District Court for the District of Connecticut, alleges that, from 2000 through 2002, Milne engaged in a series of fraudulent transactions undertaken in order to meet URI's earnings forecasts and analyst expectations. The complaint alleges that Milne and Nolan carried out the fraud through a series of interlocking three-party transactions, structured as "minor sale-leasebacks," to allow URI to recognize revenue prematurely and to inflate profits generated from the sales. As a result of the fraud, URI materially overstated its financial results in its Forms 10-K for fiscal years 2000 and 2001, and its Forms 10-Q for the periods ended June 30, 2001 and March 31, 2002, as well as in other public releases.

The complaint further alleges that shortly after URI announced 2001 and 2002 year-end results, Milne sold approximately $38 million of URI stock that he owned, knowing that the company's announced financial results were materially overstated.

The Commission's complaint alleges that, as a result of his actions, Milne violated the securities laws and seeks a permanent injunction, an officer and director bar, disgorgement and prejudgment interest, civil penalties, and other equitable relief.

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