Newman Changes Plea to Guilty
Maurice “Corky” Newman, former chief executive officer of Sirena Apparel Group Inc. and the California Mart among other firms, pleaded guilty Wednesday to three counts of conspiracy and securities fraud relating to charges that he manipulated Sirena’s 1999 third-quarter earnings statement to reflect artificially inflated results.
Newman will be sentenced in Los Angeles federal court on June 25. Under federal guidelines, the 68-year-old apparel executive can potentially receive a maximum sentence of 25 years and a fine of $2.25 million, though his attorney believes that’s not likely.
However, federal prosecutors acknowledged the government would be seeking unspecified restitution. There is no minimum sentence associated with the charges, so Newman can evade jail time, which is the chief goal of his plea agreement, said Newman’s attorney, Michael Fitzgerald.
Newman and Sirena’s ex-chief financial officer Richard Gerhart were indicted last fall on 10 felony counts of conspiracy and making false statements to the Securities and Exchange Commission (SEC). Newman initially pleaded not guilty; Gerhart is scheduled to appear in federal court May 8.
Seven counts against Newman were dismissed by his pleading guilty to three counts: making false statements to the SEC, falsifying books and records and circumvention of accounting controls. His admissions related to “holding the quarter open” beyond the close of the period for the third quarter in 1999 until revenues reflected estimates made by Wall Street analysts and manipulating Sirena’s internal computer clocks so they would not close out the quarter until these revenues were reflected.
The NASDAQ-traded company until then reported six straight quarters of earnings growth and any indication of a slowdown might have negatively affected the company’s stock. When the quarter closed, $4.4 million in additional revenues beyond the legal closing date were recorded, prompting several analysts to give Sirena “buy” recommendations.
Following his hearing, Newman, through his attorney, disputed any claims by prosecutors that his actions were done “to harm and deceive. Sirena’s [demise] was a result of the business condition of the company,” said Fitzgerald. The swimwear manufacturer has since been delisted from the NASDAQ. Newman, who left Sirena in June 1999, is currently running a management consulting business. —Robert McAllister
