Friday, September 5, 2008
The SEC filed securities fraud charges against Retail Pro, Inc. (formerly known as Island Pacific, Inc.), and two former CEOs and a former CFO for their roles in an accounting fraud scheme designed to falsely inflate Island Pacific's revenues. The Commission's lawsuit names Retail Pro, Inc., Barry M. Schechter, Ran H. Furman, and Harvey Braun. Island Pacific, Schechter, and Braun have agreed to settle the charges.
The complaint alleges that Schechter, the former CEO, Furman, the former CFO, and Braun, another former CEO, caused Island Pacific to improperly record and report $3.9 million in revenue from a barter transaction. As alleged in the complaint, the barter transaction had little economic purpose or business substance aside from manipulating Island Pacific's financial statements. The complaint further alleges that as a result of improperly recognizing and reporting the $3.9 million as revenue, Island Pacific overstated its revenues by 140% for the second quarter of 2004, 29% for the nine months ending the third quarter of 2004, and 22% for the 2004 fiscal year. In addition, Island Pacific reported a small profit instead of a massive loss for the second quarter of 2004. In addition, the complaint alleges that Schechter sold 637,750 shares of Island Pacific stock for more than $1.5 million during the fraudulent scheme.