SEC v. Collins & Aikman Corporation

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.

You received a Claim Packet because records indicate you may have purchased or acquired Collins & Aikman common stock (the “Eligible Securities”) during the period from February 21, 2002, through May 17, 2005 (the “Relevant Period”). The packet you received is designed to inform you that you may be eligible to receive payment from the SEC v. Collins & Aikman Fair Fund.

To qualify for a payment from the SEC v. Collins & Aikman Fair Fund, you must satisfy certain eligibility criteria that are described in detail in the Distribution Plan and the Plan of Allocation, attached to the Distribution Plan as Exhibit A. Those criteria include the following:

1. You must have purchased or acquired Collins & Aikman common stock during the period from February 21, 2002, through May 17, 2005, as described in the Plan of Allocation; and
2. Your approved transactions must calculate to a total eligible loss amount and your Distribution Payment must equal or exceed $10.00.

You are excluded from participation in the SEC v. Collins & Aikman Fair Fund if you are:

• Any defendant named in the Complaint or in the Class Action(s);
• Members of the immediate family of the individual defendants named in the Complaint or in the Class Action(s);
• Any firm, trust, partnership, corporation, present or former officer, director or other individual or entity in which any of the defendants named in the Complaint or in the Class Action(s) have a controlling interest or which is related to or affiliated with any of the defendants named in the Complaint or in the Class Action(s);
• The legal representatives, heirs, successors-in-interest or assigns of any such excluded persons or entities;
• Persons or entities whose only acquisition of Eligible Securities during the Relevant Period was via gift or inheritance if the person from which the Eligible Securities were received did not themselves acquire the Eligible Securities during the Relevant Period; and
• The Distribution Agent, its employees, and those persons assisting the Distribution Agent in its role as the Distribution Agent.

Approximately $2.8 million.

You must complete and sign the Proof of Claim Form and submit it, along with appropriate supporting documentation, to the Distribution Agent so that it is postmarked, or if not sent by U.S. Mail, received, no later than July 17, 2020, at the address listed below in order to be eligible to recover from the SEC v. Collins & Aikman Fair Fund:

SEC v. Collins & Aikman Fair Fund
P.O. Box 10668
Dublin, OH 43017-9368

You must document each transaction that you include on your Claim Form. Acceptable forms of supporting documentation include:

1. Trade confirmation slips from brokerage firms that list the security name, the name of the beneficial owner, the type of transaction, the date of the transaction, the number of shares, and the total amount of the transaction; or
2. Monthly statements from brokerage firms that detail all account activity within a month.

The deadline to submit a completed and signed Proof of Claim Form with the necessary documentation is July 17, 2020, (the “Claims Bar Date”). It must be postmarked, or if not sent by U.S. Mail, received, by this date.

The Distribution Agent will acknowledge receipt of your Claim Form by regular or electronic mail within 60 days of receipt. Your claim is not deemed filed until you receive an acknowledgment postcard or email. If you do not receive an acknowledgment postcard or email within 60 days, please call the Distribution Agent toll free at 1-833-991-1534.

Yes. If your Proof of Claim form is deficient, you will receive a Claim Deficiency Notice setting forth the reason why the Claim is deficient and advising you of the opportunity to cure such deficiency.

Yes, you may file on behalf of all your clients, provided you are authorized to do so and provide us with that valid written authorization. If you would like to file these claims together, you should file your claims electronically.

Please Note: Claims with 100 or more transactions or on behalf of 20 or more different accounts must be submitted electronically and in the required format. You can obtain the mandatory electronic filing requirements and file layout on this website here, or you may email the Distribution Agent at Eclaim@EpiqGlobal.com. Any submission not in accordance with the required electronic filing format may be rejected. Proof of authority to submit a Proof of Claim Form on behalf of any managed accounts must be submitted with any Proofs of Claim for such accounts. If you intend to file electronically, you can submit and track the history of your claims by using our secure website, GCG ICE ^™ (www.gcgice.com), which is available 24/7. GCG ICE ^™ allows institutional investors to upload electronic claims and documents, track the history and status of submissions, view claim rejections and how to fix them, update contact information, and receive important status alerts via email.

Until all claims have been fully processed, it is not possible to determine the amount of any individual payment because the amount will depend on a variety of factors, including the number of valid claims processed, the amount of eligible securities that you purchased, and when you purchased and sold these shares. In addition, in order for a claim to be paid, it must equal or exceed the Minimum Distribution Amount of $10.00.

For additional information as to how your claim will be calculated, please view the Plan of Allocation for the SEC v. Collins & Aikman Fair Fund located here.

The Court has appointed Epiq Class Action & Claims Solutions, Inc. (“Epiq”) as the Distribution Agent for the Fair Fund.

You can obtain a Distribution Plan Notice and Proof of Claim form by either downloading these documents from this website by clicking here or we can mail you these documents if you provide your name and address by clicking here and request that we mail you a Claim Packet.

Additional information regarding the SEC v. Collins & Aikman Fair Fund can be found in the Court Documents, available here. You can also obtain additional information or request copies of forms and notices by calling the SEC v. Collins & Aikman Fair Fund’s toll-free hotline at 1-833-991-1534 in the United States, or by email at Questions@SECvCollinsandAikmanFairFund.com.