The former president of children’s apparel maker Carter’s Inc. was indicted on Tuesday on federal securities fraud and other charges in the wake of a scandal that involved the alleged doctoring of the Atlanta company’s books.
Joseph Pacifico, 62, left Carter’s in December 2009, after an internal investigation into accounting irregularities. The company, maker of OshKosh B’gosh and other children’s brands, later restated financial results for several years.
Federal authorities said Pacifico became aware of and hid a scheme from other Carter's executives, auditors and shareholders that involved falsifying financial records and providing improper rebates to retailers.
Pacifico was also indicted on charges of causing the filing of false financial statements, and falsifying the books and records of a public company, according to a news release from the U.S. Attorney’s Office in Atlanta.
U.S. Attorney Sally Quillian Yates said Pacifico “is accused of trying to hide a multi-million dollar fraud, lying to shareholders, and committing additional crimes in the course of the attempted cover-up. Shareholders expect and deserve far more from their corporate leaders.”
A message left for Pacifico and Carter's were not immediately returned. Scott Sorrels, an attorney for Pacifico, said he had not yet seen the indictment and declined to comment.
Another Carter’s executive that Pacifico supervised, Joseph M. Elles, 57, of Las Vegas, pleaded not guilty last year to more than 30 federal counts related to the alleged wrongdoing.
Elles allegedly enticed Carter’s largest wholesale customer, Kohl’s, to buy more Carter’s products by giving the retailer larger discounts than Carter’s had budgeted, prosecutors previously said. Elles was also accused of altering the time frame when those larger discounts were reported in Carter’s earnings, making them appear lo be related to sales in future quarters.
This essentially caused Carter's costs to be higher than the firm reported.
Prosecutors have previously said Carter’s failed to report $16 million in expenses from 2006 to 2009 that had been hidden as a result of the fraud, resulting in overstatements of earnings.
Shareholders were hurt when Carter’s stock price slumped after revelations about financial irregularities were disclosed.
Prosecutors said Pacifico, after discovering the fraud, lied to other senior company officials, signed false documents and dissuaded other employees from giving information about the rebates to other executives.
As a result of the alleged fraud and cover-up, prosecutors said Pacifico caused the company to misstate its earnings and other information in its financial statements from April 2009 to July 2009.
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