Securities Law Prof Blog

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

Sunday, May 15, 2011

Thor Industries and Former VP-Finance Settle SEC Charges Involving Fraudulent Accounting

The SEC filed a settled enforcement action charging Ohio-based producer of recreational vehicles Thor Industries, Inc. with issuer reporting, record-keeping, and internal control violations. Thor agreed to be permanently enjoined and to pay a $1 million civil penalty for violating a 1999 Commission cease-and-desist Order prohibiting violations of the books and records and internal controls provisions. The SEC also charged Mark C. Schwartzhoff, a former Vice President of Finance at Thor’s Dutchmen Manufacturing, Inc. subsidiary, with securities fraud and other violations. Schwartzhoff agreed to be permanently enjoined, to be permanently barred from serving as an officer or director of a public company, and to be permanently suspended from appearing or practicing before the Commission as an accountant. Schwartzhoff also agreed to pay disgorgement of $394,830, which shall be deemed satisfied by the entry of a restitution order against Schwartzhoff in a parallel criminal case.

The SEC’s complaint alleges that from approximately December 2002 to January 2007, while serving as the senior financial officer of Dutchmen, one of Thor’s principal operating subsidiaries, Schwartzhoff engaged in a fraudulent accounting scheme to understate Dutchmen’s cost of goods sold in order to avoid recognizing inventory costs that were not reflected in Dutchmen’s financial accounting system.

As alleged in the complaint, Schwartzhoff’s fraud overstated Dutchmen’s pre-tax income by nearly $27 million from fiscal year 2003 to the second quarter of fiscal 2007, and allowed him to obtain nearly $300,000 in ill-gotten bonuses. In June 2007, Thor filed restated financial statements for fiscal years 2004 to 2006, each of the quarters of fiscal 2005 and 2006, and the first quarter of fiscal 2007, reducing its pre-tax income by approximately $26 million in the aggregate.

These settlements are subject to the approval of the United States District Court for the District of Columbia. The settlement with Thor takes into account the company’s self-reporting and significant cooperation in the SEC’s investigation.

Separately, on May 12, 2011, the United States Attorney’s Office for the Northern District of Indiana filed a related criminal action against Schwartzhoff, and Schwartzhoff agreed to plead guilty to an Information charging him with one count of wire fraud and to pay restitution of approximately $1.9 million.

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