Securities Law Prof Blog

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

Monday, January 30, 2012

SEC Charges Former Execs at British Sub of NYSE Company with Accounting Fraud

The SEC charged four former senior executives and accountants at the British subsidiary of NYSE-listed Symmetry Medical Inc, a manufacturer of medical devices and aerospace products, for their roles in an accounting fraud that was so pervasive that it distorted the financial statements of the parent company.  The SEC also reached settlements with the company’s former CEO and current CFO, who were not involved or aware of the scheme at the subsidiary, to recover bonus compensation and stock profits they received while the fraud was occurring and inflating company profits.

The SEC alleges that vice president for European operations Richard J. Senior, finance director Matthew Bell, controller Lynne Norman, and management accountant Shaun P. Whiteley orchestrated and carried out the fraud at Thornton Precision Components (TPC), which is the Sheffield, England-based subsidiary of Symmetry Medical Inc. The accounting scheme involved the systematic understatement of expenses and overstatement of assets and revenues at TPC, and materially distorted Symmetry’s financial statements for a three-year period.

The four executives and accountants, as well as Symmetry in a separate administrative proceeding, agreed to settle the SEC’s charges, and the subsidiary’s two outside auditors formerly of Ernst & Young LLP UK agreed to suspensions for their deficient audits.

According to the SEC’s complaint filed in federal court in South Bend, Ind., Symmetry’s annual financial statements for 2005 and 2006 as well as other reporting periods were materially misstated as a result of misconduct in the reporting of TPC’s financials. In a separate complaint also filed in the same federal court, the SEC is seeking reimbursement for bonuses and other incentive-based and equity-based compensation received by Symmetry’s former CEO Brian S. Moore under Section 304 of the Sarbanes-Oxley Act. Under the settlement, subject to court approval, Moore agreed to reimburse $450,000 to Symmetry.

The SEC also instituted separate settled administrative proceedings against Symmetry and its CFO Fred L. Hite. The SEC finds that Hite failed to provide an internal audit status report concerning TPC to Symmetry’s Audit Committee in July 2006. For its part, Symmetry agreed to a cease-and-desist order against future financial reporting, books-and-records and internal controls violations.

The SEC separately instituted and settled administrative proceedings against two associate chartered accountants in the United Kingdom – Christopher J. Kelly and Margaret Hebb née Whyte – who were the former audit partner and audit manager on Ernst & Young LLP UK’s audits of TPC for its 2004 to 2006 fiscal years (in the case of Kelly) and its 2005 and 2006 fiscal years (in the case of Hebb).

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