A Mill Creek resident pleaded guilty in Seattle federal court Aug. 7 to federal felony charges of being an accessory to wire fraud.
Stephen Scott Lowber, 52, former Chief Financial Officer of Seattle-based clothing retailer Cutter &Buck, Inc., also faces securities fraud charges from the Securities and Exchange Commission, according to a U.S. Department of Justice news release.
The felony could land Lowber, who resigned from the company last August, in prison for two and a half years and could face a fine of up to $125,000. Sentencing will occur before U.S. District Judge Thomas Zilly on a date to be determined.
Lowber has agreed to cooperate fully with the government in its investigation of the scheme associated with his former firm’s improper recognition of revenue.
As part of his plea, Lowber admitted that he knew by late 2000 that Cutter &Buck’s recognition of the $5.7 million of revenue, and SEC reports containing false financial statements, was part of a fraudulent scheme.
In addition, the SEC filed civil securities fraud charges against Cutter &Buck’s former Regional Sales Vice President David Andrew Hilton, 46, of Parkville, Mo. Without admitting or denying the allegations of the SEC’s complaint, Lowber and Hilton agreed to pay civil penalties of $50,000 and $25,000, respectively.
Lowber also consented to the entry of an order barring him from serving as an officer or director of a public company, and an order prohibiting him from practicing before the commission as an accountant.
Court documents alleged that former company executives caused Cutter &Buck to fraudulently inflate its financial results for the fiscal quarter and year ended April 30, 2000, by improperly recognizing as revenue $5.7 million in shipments to distributors functioning as company warehouses, and later concealed the improper transactions from the company’s auditors, board of directors, and shareholders.
According to the pleadings filed Aug. 7, Cutter &Buck was encountering declining sales as it approached the end of its fiscal year ended April 30, 2000. In the final days of April, the company negotiated deals with three distributors under which Cutter &Buck would ship them a total of $5.7 million in products. Hilton assured the distributors that they had no obligation to pay for any of the goods until customers located by Cutter &Buck paid the distributors.
In news releases and in filings with the SEC, Cutter &Buck announced revenue of $54.6 million for the fourth quarter of Fiscal Year 2000 and $152.5 million for the entire fiscal year. Those figures, however, included $5.7 million in improperly recognized revenue on the distributor sales.
The SEC’s civil complaint charges Hilton and Lowber with securities fraud and causing Cutter &Buck to report false financial information to the commission. The complaint additionally charges Lowber with lying to accountants, falsifying the company’s books and records, and causing the company’s failure to maintain accurate books and records and internal controls.
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