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The Securities and Exchange Commission filed a civil suit May 14 against Albert “Chainsaw Al” Dunlap, the former chairman and CEO of now-bankrupt Sunbeam Corp., four other former officers of the company and an Arthur Andersen managing partner, charging them all with financial fraud. According to the SEC charges, which were filed in U.S. District Court in Miami, the Sunbeam officers violated anti-fraud, reporting and other provisions of federal securities laws from the fourth quarter of 1996 through the first quarter of 1998, allegedly bilking investors out of billions of dollars. In addition to Dunlap, the SEC also charged Sunbeam former principal financial officer Russell A. Kersh, former controller Robert J. Gluck, former vice-presidents Donald R. Uzzi and Lee B. Griffith and Arthur Andersen managing partner Phillip Harlow. The SEC is seeking civil penalties from the six men, which could amount to as much as $100,000 per violation per defendant. The number of violations must be determined by the court, said Richard C. Sauer, an SEC assistant director for the enforcement division. The agency is also seeking to permanently ban Dunlap and the other former officers from serving as an officer or director of any public company, the agency said Tuesday. “This is one of the more complicated financial cases that we have ever pursued because the company did so many things wrong,” Sauer said. While Gluck, Uzzi and Griffith couldn’t be reached for comment, both Dunlap and Kersh released statements lambasting the SEC’s actions. “I am outraged that the SEC has chosen to bring these baseless charges against me, and I intend to defend myself vigorously,” said Dunlap via a statement released by his attorneys, Donald S. Zakarin of Pryor Cashman Sherman & Flynn in New York and Frank Razzano of Dickstein Shapiro Morin & Oshinsky in Washington. Kersh, represented by those same lawyers, said in his statement that “The accusations made against me by the SEC are totally false. I believe today as I believed during my tenure at Sunbeam that the original financial statements audited by Arthur Andersen were true and accurate in all material respects and in accordance with generally accepted accounting principles.” While the SEC has not charged Arthur Andersen in the case, the accounting firm issued a statement Tuesday firmly supporting Harlow, a managing partner in the firm’s Fort Lauderdale, Fla., office, saying it will assist him in contesting the SEC’s charges. The agency alleges in its suit that Harlow authorized unqualified audit opinions on Sunbeam’s 1996 and 1997 financial statements even though he was aware of many of the company’s accounting improprieties and disclosure failures. “The SEC’s allegations reflect professional disagreements about the application of sophisticated accounting standards. They are not indicative of fraud,” Arthur Andersen said in a statement. “Differences of professional opinion about the proper interpretation of GAAP should be the subject of discussion but should not form the basis of allegations of fraud.” In a related proceeding, the SEC settled administrative proceedings against Sunbeam, as well as the company’s general counsel, David Fannin, neither of whom admitted or denied the agency’s allegations, the agency said. A prepared statement by Sunbeam Chairman and CEO Jerry W. Levin expressed relief that the SEC levied charges. “Since June 1998, when our new management team arrived at Sunbeam, we have been looking forward to resolving these issues, all of which involve periods during which the company was operated by Al Dunlap and his team,” Levin said. “As no issues between the company and SEC involve periods after June 1998, this allows us to finally put the SEC investigation behind us and concentrate on our business opportunities.” Burdened by shareholder lawsuits and a heavy debt load piled up from acquisitions during Dunlap’s tenure, Sunbeam filed for Chapter 11 protection Feb. 6 in New York, listing assets of $2.96 billion and $3.2 billion. The Chapter 11 filing was Sunbeam’s second. Boca Raton, Fla.-based Sunbeam shares traded at about $0.07 Tuesday. The SEC alleges in its complaint that the senior management of Sunbeam, led by Dunlap and Kersh, engaged in a fraudulent scheme to “create the illusion” of a successful restructuring of Sunbeam and thus facilitate its sale at an inflated price. Dunlap, the author of “Mean Business: How I Save Bad Companies and Make Good Companies Great,” was known as a slash-and-burn cost cutter that earned him the nickname “Chainsaw Al.” Sunbeam fired him in 1998. According to the complaint, the defendants employed a laundry list of fraudulent actions that inflated the price of Sunbeam shares to a high of $52 per share in March 1998. Copyright (c)2001 TDD, LLC. All rights reserved.

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