Bradley Stinn, the former chief executive of Friedman’s Inc. and its affiliate Crescent Jewelers, has been indicted on securities fraud and other charges in connection with a massive accounting fraud at the jeweler, The Associated Press reports.
Stinn, 47 years old, has been charged with conspiracy, securities fraud, making false filings with the Securities and Exchange Commission, mail fraud, and certification of a false financial report, The Associated Press reports.
“Brad intends to defend himself at the trial. He’s innocent of these charges,” said David Shapiro, Stinn’s lawyer told the AP. “Friedman’s was and still is a successful jewelry company, which Brad helped to build. The government pushed it into bankruptcy as the result of its three-and-a-half year investigation.”
Prosecutors, in its announcement on March 8, reportedly allege that Stinn and others engaged in a scheme to defraud investors by falsifying Friedman’s accounting data and misrepresenting its financial condition in public statements and reports.
The government said Stinn and others filed financial reports and made public statements that misrepresented the operation of the company’s installment credit program, the delinquency and collectibility of its outstanding credit accounts, and its earnings, the AP reports. As a result, the company’s stock price was artificially inflated, prosecutors said.
As an example, prosecutors reportedly alleged that Stinn and other executives learned in June 2002 that, due to a computer error, certain credit accounts totaling about $7.9 million had not aged properly. The files became known secretly in the company by a couple of names, including the “X-files.”
Prosecutors alleged that Stinn and others working at his direction deliberately concealed the existence and financial effect of these accounts, instead of charging them off as required under the company’s publicly disclosed credit policies, the AP reports. As a result, the company materially overstated its currency percentage and materially understated its delinquency percentage for fiscal year 2002, the government said.
Stinn resigned as CEO in December 2003.
Two former Friedman’s executives have already pleaded guilty to criminal charges in the matter.
In 2005, Friedman’s, without admitting or denying wrongdoing, settled civil charges by the SEC that it misled investors about its financial condition before it filed for bankruptcy protection in January 2005.
The company also agreed in 2005 to pay $2 million to a fund aimed at preventing fraud as part of a separate settlement with the Justice Department, in which the company avoided criminal prosecution.
Friedman’s, formerly headquartered in Savannah, Ga., was at one time the nation’s third-largest specialty retailer of jewelry. Now based in Addison, Texas, the company has emerged from bankruptcy.Follow JCK on Instagram: @jckmagazine
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