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News and Press Releases |
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HEADLINE:
Ex-CEO Convicted In IPO Fraud
By: Greg Farrell
USAToday.com. August 08, 2003
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EXCERPT: In what could be a preview of securities fraud cases to come, a jury in Manhattan federal court convicted a former CEO of pumping up his company's earnings so a 1998 IPO would succeed. The jury found that Morris "Mickey" Weissman, former chairman and CEO of American Banknote, had inflated his company's earnings in 1996 and 1997. Based on the false numbers, the 1998 public offering of the company's subsidiary, American Banknote Holographics, was a success, netting the company $115 million. When the accounting fraud was uncovered in early 1999, the spinoff's shares dropped from about $16 a share to $1.80 a share. The stock was delisted in August 1999. As a result of the fraud, investors were bilked of more than $100 million, prosecutors say. While that sum pales in comparison with the money lost through the accounting frauds at Enron and WorldCom, the conviction is significant. Until last year's wave of financial scandals, securities fraud cases, particularly against CEOs, were difficult to prove. Top executives often claimed they weren't aware of the dirty work done by their underlings. In this case, New York prosecutors Andrew Ceresney and Joshua Klein convinced the jury not only of the existence of fraud at American Banknote but that the former CEO was behind it. Two years ago, before Enron's meltdown, there was a prevailing attitude among most federal prosecutors that securities fraud cases were losers. Outside of New York, few prosecutors were eager to get bogged down in a paper-intensive case that could last years. Even worse, securities fraud cases were difficult to present to juries because they often involved the abuse of arcane accounting standards. Experts say the Weissman verdict is a sign that today's juries won't be confused.
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