The SEC says the former chief executive and chief financial officers inflated company earnings and cashed in.
By HELEN HUNTLEY
Published October 21, 2004
The Securities and Exchange Commission has filed civil fraud charges against Aerosonic Corp.'s former chief executive and chief financial officers, accusing them of using "accounting tricks" to inflate the Clearwater company's earnings.
The SEC says former CEO J. Mervyn Nabors, 61, and former finance officer Eric McCracken, 38, falsified inventory records, recorded fictitious revenue and failed to provide adequate reserves for obsolete inventory. The sham transactions included a deal in which Aerosonic sold 908 obsolete altitude counters to a Czechoslovakian company, then bought them back, putting them in inventory at an inflated price.
The SEC said the tricks gave the aircraft instrument manufacturer an artificial boost of more than $8-million to its pretax earnings from 1999 to 2003.
The strong financial results led to bonuses - $210,200 for Nabors and $127,250 for McCracken - and a surge of investor interest. The price of the company's stock soared to as high as $30 a share.
McCracken sold 7,500 shares of his stock at higher prices, reaping what the SEC called "illegal proceeds" of $160,705.
Nabors and McCracken resigned two years ago and new managers restated financial results. The company previously said it was cooperating with SEC investigators. The stock closed Wednesday at $4.10 a share.
Nabors settled with the SEC, consenting to the findings without admitting or denying them. Under the settlement, he is barred from serving as an officer or director of a public company and has agreed to pay back his $210,200 bonus and pay a penalty of $50,000. The SEC said the money will go into a fund to compensate defrauded investors, including those who bought Aerosonic shares.
The case was filed in U.S. District Court in Tampa.
Neither Nabors, who lives in Clearwater Beach, nor McCracken, who lives in New York, could be reached for comment.
