A civil securities fraud complaint has been filed against the former president of Carter’s, an Atlanta-based children’s apparel manufacturer.
The Securities and Exchange Commission is accusing Joseph Pacifico of misconduct that resulted in the company signifcantly misstating its earnings over several years.
The complaint, filed last week, is the latest in a string of federal civil or criminal actions against former Carter’s insiders over the past several years. It includes many of the same allegations as a March indictment of Pacifico on several criminal charges, including securities fraud.
Pacifico left Carter’s in late 2009 after an internal investigation revealed accounting irregularities from 2004 to 2009.
The SEC said Pacifico became aware of and hid a scheme by a former executive from auditors and shareholders. The alleged scheme by Joseph Elles involved falsifying financial records and misrepresenting the amount and timing of certain rebates Carter offered to its largest retail customer, Kohl’s.
The alleged misconduct resulted in losses to shareholders, the SEC said. Carter’s share price dropped nearly 24 percent on the day in October 2009 when the company announced it would delay the release of its financial results for the third quarter of that year. The company’s stock fell 9 percent on the day in November 2009 Carter’s announced it would restate several periods of earnings.
Scott Sorrels, an attorney for Pacifico, said he would “vigorously defend” his client against the allegations.
The SEC this week also sued Michael H. Johnson, a Wisconsin man and divisional merchandise manager for Kohl’s. The SEC said in the civil lawsuit that Johnson signed documents that helped Elles conceal the amount of rebates that Carter’s owed Kohl’s.
Messages left with Kohl’s and with an attorney for Johnson was not immediately returned.
Elles has pleaded not guilty in a separate federal criminal complaint.
Previously, Carter’s has said the SEC entered into a non-prosecution agreement with the apparel maker and Carter’s did not expect further action would be taken against it.
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