Former Carter's VP charged with fraud
The former vice president of sales at Carter's, an Atlanta-based children's clothing company, was charged Monday with fraud and insider trading while at the company.
The company will not face any charges from the U.S. Securities and Exchange Commission, which entered a non-prosecution agreement, the SEC announced.
Joseph M. Elles, 55, Carter's former executive vice president of sales, was charged with four counts of fraud after giving huge discounts to Kohl's, Carter's largest customer, and delaying disclosure of the discounts in Carter's financial reports. Elles allegedly exercised stock options and sold stock, earning more than $4.7 million, before the fraud was disclosed and the stock price dropped.
Elles was the top executive for sales at the company for 12 years, until he was terminated in March 2009. He now lives in Las Vegas.
The discounts Elles gave were above what was budgeted for Kohl's, and were used to convince Kohl's to buy more of the company's clothes to resell, the SEC said. Elles also lied to senior officers about the alleged fraud after being told that altering when Kohl's took the discounts was illegal, and he falsified documents that had details of the deals, the SEC's complaint said.
By 2009, the worth of the deferred discounts totaled more than $18 million, the SEC said.
Carter's first discovered the actions and began an internal investigation; the U.S. District Attorney's office, the Federal Bureau of Investigation and the SEC later got involved. Carter's had no comment on the charges. The SEC's investigation is ongoing.
A year ago, the investigation led to the ouster of former president Joseph Pacifico and others.
When the company announced it was looking into the fraud, its stock dropped 23.8 percent, the SEC said. Carter's restated its financial statements for a four-year period, and the SEC said Elles' actions caused Carter's to overstate its quarterly net income by as much as 19.1 percent.
About the Author
Arielle Kass covers Gwinnett County for The Atlanta Journal-Constitution. She started at the paper in 2010, and has covered business and local government beats around metro Atlanta. Arielle is a graduate of Emory University.
