Friedman’s Inc., said Wednesday that it has settled fraud allegations with the Securities and Exchange Commission and the U.S. Attorney’s Office for the Eastern District of New York.
The Savannah, Ga.-based company settled its case with the U.S. Attorney’s Office by agreeing to pay $2 million to the United States Postal Inspection Service Consumer Fraud Fund to settle support fraud prevention and consumer education initiatives, and to make certain reforms to its corporate governance and financial accounting controls, according to statement by the law firm White & Case, which is handling the case for Friedman’s. Under the agreement, no criminal charges will be filed against Friedman.
Under the terms of the SEC agreement, no monetary fines will be imposed on the company, but Friedman’s has consented to a permanent injunction against future violations of the antifraud, reporting, books and records, and internal control provisions of federal securities laws and other relief, according to the statement.
“We are pleased that the company has been able to resolve these matters on fair terms with both the US Attorney’s Office and the SEC,” said Larry Byrne, White & Case corporate defense attorney who is representing Friedman’s.
Federal regulators had accused senior Friedman’s executives of violating company policy from fiscal 2001 through 2003 by avoiding taking write-offs for uncollectible debts. The uncollectible bills surged after Friedman’s offered easy credit to its low- and middle-income customers, even as the jeweler publicly maintained that customers were subject to strict application guidelines, according to an SEC complaint.
A bankruptcy court earlier this week signed off on a plan that will clear the way for the jewelry store to exit Chapter 11 bankruptcy protection, according to the Associated Press.
“Being able to resolve both of these outstanding matters should help enable Friedman’s to emerge from bankruptcy in the near future,” said White & Case corporate defense partner Lance Croffoot-Suede, who also is advising Friedman’s.