The Securities and Exchange Commission charged American Italian Pasta Co. and its former senior executives with participating in a fraudulent accounting scheme to artificially increase the company's stock price, and the company agreed to pay $7.5 million to settle the charges.
The SEC alleged that AIPC's former CEO Timothy S. Webster, former CFO Warren B. Schmidgall and former executive vice president of corporate development and strategy David E. Watson, orchestrated the scheme. Webster agreed to pay $1 million to settle the SEC charges. He and Schmidgall also pled guilty to one count of conspiracy to commit wire fraud for their roles in concealing AIPC's financial condition and filing materially false statements with the SEC.
The SEC alleged that the executives engaged in fraudulent accounting from fiscal year 2002 through the second quarter of fiscal 2004 to inflate AIPC's earnings, and that they failed to write off obsolete or missing spare parts, structured fraudulent round-tripping of cash transactions and recorded false receivables. The SEC said the misstatements and errors resulted in an overstatement of approximately $59 million, or 66 percent, for the relevant period. The SEC also charged the company's former controller, Stephanie Ruskey, in a civil action and brought a settled administrative proceeding against former vice president of accounting and finance Mark A. Peterson.
AIPC said that it has appointed new senior officers and put in place new financial processes and controls, restructured its ethics policy and established a compliance office. "These settlements complete the process begun in July 2005 and enable us to focus entirely on the future," said chairman Bill Patterson in a statement.
