Jury Convicts Former Friedman's CEO of Fraud
March 26, 08
Bradley Stinn, the former CEO of jewelry company Friedman's Inc and its affiliate, Crescent Jewelers, was convicted on Monday of securities fraud, mail fraud and conspiracy for his role in “a massive accounting fraud scheme designed to inflate Friedman’s financial performance.”
Stinn and a number of other officers, including Friedman’s former chief financial officer Victor Suglia, were indicted for “repeatedly” lying to shareholders about Friedman’s financial performance.
Suglia and Friedman’s former controller, John Mauro, pleaded guilty to conspiracy and mail fraud last year.
Following the conviction by a federal jury in
Once the U.S.’ third-largest specialty jewelry retailer, Friedman's declared bankruptcy in January 2005, and filed again for Chapter 11 bankruptcy in January 2008.
According to the verdict, Friedman’s encouraged its sales staff to increase sales by enticing customers to finance their jewelry purchases using the company’s installment credit program. The program was used to finance more than half of Friedman’s $400 million in annual net sales.
The company, however, was increasingly unable to collect money owed by customers who bought jewelry on credit. A major aspect of the fraud was concealing this from shareholders.
According to prosecutors, Friedman’s collection problems stemmed from the company’s widespread failure to follow its own credit-granting guidelines, which Stinn “falsely told investors were strictly enforced.” Stinn and others are accused of encouraging routine violations of the guidelines to increase reported sales.
To conceal the collection problem, Friedman’s understated credit delinquency in its quarterly reports and reported false earnings.