Newman Sentenced to Probation, Halfway House
Maurice “Corky” Newman, former chief executive officer of Los Angeles-based swimwear manufacturer Sirena Apparel Group Inc., was sentenced by a federal court in Los Angeles on July 23 to three years’ probation and six months in a community confinement center for the crime of securities fraud. Newman pleaded guilty to charges last April.
Michael Fitzgerald, Newman’s attorney, asserted that Newman’s case was “not a classic securities fraud case, not a classic apparel-industry fraud case” and asked the court to “depart from harsh sentencing.”
In sentencing Newman, Judge Dickran Tevrizian took into account Newman’s age, health and prior history in the apparel industry without incident. Tevrizian also stated that he found the government “aggressive” in their calculation of loss as a result of Newman’s crime and expressed his belief that even with accurate financial reporting, Sirena would have been forced into the bankruptcy protection that it ended up filing.
Newman told the court, “I reached a level of stupidity I never thought I’d reach. Hopefully, you can take the 40 years I’ve [spent in the apparel industry] and take that into account against the one stupid mistake.”
The mistake Newman made, according to assistant U.S. attorney Gregory Weingart, was holding open the third fiscal quarter of Sirena in order to inflate the company’s announced earnings. That was accomplished by repeatedly resetting Sirena’s internal network computer clock so that the company’s accounting software would book sales into an earlier time frame.
Holding that quarter open inflated the quarter’s revenues by approximately $4.4 million, resulting in several analysts making “strong buy” recommendations on Sirena. The company also filed a false report with the Securities Exchange Commission (SEC).
Newman must also make restitution for financial damage caused by his actions. The determination of restitution was delayed until Oct. 29 in order to provide the judge with more time to ascertain the actual loss and, accordingly, the amount for which Newman should be responsible. According to Fitzgerald, “The government and Mr. Newman are very far apart on what they believe is appropriate [in terms of restitution].”
The judge granted a two-week delay before Newman has to begin serving out his sentence.
Newman, along with Richard A. Gerhart, Sirena’s former chief financial officer, was indicted last September for securities fraud. Gerhart, who is still a defendant in a related action filed by the SEC, is scheduled for sentencing on Aug. 13 and faces a maximum of 85 years in federal prison.
After eventually filing for Chapter 11 bankruptcy protection, Sirena was delisted from the NASDAQ stock exchange. Following its reorganization, the company installed new management.
