December 18, 2004
Former Cutter & Buck President Settles SEC Charges
Martin Marks, the former President and COO of Cutter & Buck Inc., a Seattle sportswear company, settled charges filed by the SEC that he inflated revenue at the end of the April 2000 quarter by shipping goods to three "distributors" who in fact could not pay for the items. According to the SEC Litigation Release (No. 2154, Dec. 17 and complaint):
Cutter negotiated deals with three purported distributors under which Cutter would ship them a total of $5.7 million in products. Cutter recognized revenue for the supposed sales, which constituted over 10% of the quarter's revenue. In reality, the distributors had no obligation or ability to pay for any of the goods unless and until Cutter's sales force found actual customers to purchase the products. The distributors essentially acted as warehouses, rendering revenue recognition for the shipments improper under generally accepted accounting principles (known as "GAAP"). Marks signed Cutter's annual Commission filings falsely announcing revenue of $54.6 million for the fourth quarter and $152.5 million for the fiscal year; because these amounts included $5.7 million in bogus revenue on the distributor sales, they overstated Cutter's true quarterly and annual revenue by 12% and 4%, respectively.
Marks agreed to pay $45,777 in disgorgement and prejudgment interest.
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