U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19391 / September 23, 2005
Accounting and Auditing Enforcement
Release No. 2319 / September 23, 2005
SEC V. KEITH G. BAXTER, RONALD J. GOEDDE, RICHARD D. NYE, ROBERT E. ELLINGTON AND ANTHONY W. O'DELL, (United States District Court for the Northern District of California, Civil Action No. C05-3843 (PVT))
SEC CHARGES FIVE FORMER EXECUTIVES OF CORNERSTONE PROPANE PARTNERS, L.P. WITH FALSE FINANCIAL REPORTING
The Securities and Exchange Commission today filed civil charges against five individuals formerly associated with Cornerstone Propane Partners, L.P. ("Cornerstone"): former chief executive officer, Keith G. Baxter; former chief financial officer, Ronald J. Goedde; former vice president of finance and acting chief financial officer, Richard D. Nye; former controller, Robert E. Ellington; and former divisional chief financial officer, Anthony W. O'Dell. During the time period referenced in the Commission's complaint, Cornerstone was headquartered in Watsonville, California and sold retail propane and traded other wholesale energy commodities. The Commission's complaint, filed in the United States District Court for the Northern District of California, alleges that these five individuals were responsible for Cornerstone's reporting of materially false financial results in Commission filings and press releases for the period June 2000 through September 2001.
The Commission's complaint alleges that, during Cornerstone's 2000 and 2001 fiscal years, the defendants caused Cornerstone to file financial statements that were materially inaccurate and unreliable in light of Cornerstone's failure to properly track its assets and liabilities. The complaint further alleges that the defendants failed to make other required disclosures in Cornerstone's filings, and that they concealed Cornerstone's fundamental accounting errors from the company's outside auditors. According to the complaint, Cornerstone eventually wrote off $9.8 million of unsubstantiated balances at fiscal year-end 2001 as a result of its accounting errors, but Baxter and Nye mischaracterized the nature of this adjustment in order to hide the company's past accounting failures from investors.
The Commission's complaint charges Baxter, Goedde and Nye with violations of Section 10(b) of the Securities and Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint further charges all defendants with violations of Section 13(b)(5) of the Exchange Act and Rules 13b2-1, and 13b2-2 thereunder, and with aiding and abetting Cornerstone's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. The Commission's complaint seeks permanent injunctions, disgorgement with prejudgment interest, civil penalties, and officer and director bars.
Ellington and O'Dell, without admitting or denying the allegations in the Commission's complaint, each consented to an entry of a final judgment permanently enjoining them from violating or aiding and abetting violations of the provisions they allegedly violated, imposing a $25,000 civil penalty against Ellington and waiving the imposition of a civil penalty against O'Dell based upon his sworn financial statements and other documents submitted to the Commission.
http://www.sec.gov/litigation/litreleases/lr19391.htm
