On March 26, 2007, the Securities and Exchange Commission filed a complaint alleging that Collins & Aikman Corporation (“Collins & Aikman”), David A. Stockman, J. Michael Stepp, David R. Cosgrove, Elkin B. McCallum, Paul C. Barnaba, John G. Galante, Gerald E. Jones, Christopher M. Williams, and Thomas V. Gougherty (collectively, the “Defendants”) violated Section 17(a) of the Securities Act of 1933 (“Securities Act”), Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5, 12b-20, 13a-11, and 13a-13 thereunder. The Complaint alleged that for more than three years from the fourth quarter of 2001 until early 2005, Collins & Aikman and several of its former officers and employees, entered into numerous improper “round-trip” transactions with Elkin B. McCallum (“McCallum”), a member of Collins & Aikman’s Board of Directors and a supplier to the Company, knowing that they were intended to improperly inflate Collins & Aikman’s earnings and provide Collins & Aikman with false documents to justify the improper accounting. The Complaint further alleged that Collins & Aikman also inflated its quarterly earnings by improperly recognizing in income numerous rebates received from suppliers in return for anticipated future business and other benefits and improperly recorded discounts on equipment as rebates for past purchases of non-capital goods or services. According to the Complaint, Collins & Aikman and its executives knowingly or recklessly played important roles in connection with the McCallum round-trip transactions, the supplier rebate scheme, or both.
On April 20, 2010, the Court entered a Final Judgment as to Defendant Stockman, ordering him to pay disgorgement and prejudgment interest of $2.4 million and a civil penalty of $400,000 to the Court. On or about April 28, 2010, Defendant Stockman paid $2.8 million to the Clerk of the Court and the funds were deposited into the Court Registry Investment System.
By order dated December 2, 2019, a Fair Fund was established for the $2.8 million, along with any accrued interest and earnings thereon, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002 and a Tax Administrator, Miller Kaplan Arase LLP, was appointed to fulfill the tax obligations of the Fair Fund. By order dated December 3, 2019, the Court appointed Epiq Class Action & Claims Solutions, Inc. as the Distribution Agent to assist in developing a Distribution Plan to distribute monies in the Collins & Aikman Fair Fund to investors harmed by the violations alleged in the Complaint.
The SEC submitted the Distribution Plan to the Court for its approval. The Court approved the Distribution Plan in its entirety on March 4, 2020.
If you have any questions, you may call 1-833-991-1534 in the United States, or send an email to Questions@SECvCollinsandAikmanFairFund.com.
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