Securities Law Prof Blog

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

Wednesday, October 14, 2009

Former United Rental Officer Settles SEC Accounting Fraud Charges

The SEC announced that John N. Milne, a former Vice Chairman, President and Chief Financial Officer of United Rentals, Inc. (“URI”) has agreed to settle pending fraud charges filed against him by the Commission. The SEC alleged 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 others 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 URI stock that he owned, knowing that the company’s announced financial results were materially overstated.

Without admitting or denying the allegations in the complaint, Milne consented to the entry of a Final Judgment, subject to the court’s approval, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933, and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934, and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13, thereunder, imposing a permanent officer and director bar against him, and ordering him to pay disgorgement and prejudgment interest of $6.25 million

The U.S. Attorney’s Office for the District of Connecticut also announced that Milne today pleaded guilty to one count of conspiracy to falsify the books and records of URI while he served as its CFO, and that he has agreed to a term of incarceration of 24–30 months.

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