March 29, 2005
SEC Sues Former IMPATH Inc. Officers for Fraudulent Accounting
The SEC filed a securities fraud lawsuit alleging accounting fraud and self-dealing against seven former top executives at IMPATH, Inc., a company that provided diagnostic and laboratory services for cancer treatments before it filed for bankruptcy in 2003 (complaint here). Among the seven former executives named as defendants are Anuradha Saad, former CEO and chairman of the board, Richard Adelson, former president, and David Cammarata, former CFO. The SEC Litigation Release states:
As a result of the accounting fraud, Impath falsely reported multimillion dollar profits when it had actually suffered huge losses. To meet financial projections and boost Impath's stock price, the defendants made, or directed others to make, phony accounting entries that artificially increased revenue and improperly reduced operating expenses . . . While the accounting fraud was occurring, Saad, Adelson and Cammarata also engaged in undisclosed self-dealing. Not only did they exercise stock options and sell Impath stock during the fraud, they used over $850,000 in corporate funds to pay for option exercises without obtaining board approval or making the required proxy statement disclosures. Saad also used corporate funds to pay for other personal expenses without the requisite approval or disclosure, including vacations, country club dues and artwork.
One defendant settled the suit, disgorging a $100,000 bonus he received as a result of the company meeting certain financial goals, and a $150,000 civil penalty. (ph)
UPDATE (3/30): The New York Times reports (here) that Saad and Adelson were indicted on conspiracy and securities fraud charges, and four other executives have pleaded guilty to charges arising from the accounting fraud at the company.
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