U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 19156 / March 24, 2005
ACCOUNTING AND AUDITING ENFORCEMENT
Rel. No. 2218
SEC v. KENNETH W. HAWK, MICHAEL J. DELARGY, AND THOMAS R. DE JONG, Civil Action No. CV-N-0172-LRH-VPC (D. Nev. March 24, 2005)
SEC FILES FINANCIAL FRAUD ACTION AGAINST FORMER
SENIOR OFFICERS OF IGO CORPORATION
The Securities and Exchange Commission ("Commission") today filed a civil injunctive action in the United States District Court for the District of Nevada against three former senior officers of iGo Corporation ("iGo") for violations of the antifraud, periodic reporting, record keeping, internal controls, and lying to auditors provisions of the federal securities laws. The Complaint alleges that the defendants engaged in fraudulent accounting practices in fiscal years 1999 and 2000 that caused iGo to materially overstate its revenues by millions of dollars.
Named as defendants in the Complaint are Kenneth W. Hawk ("Hawk"), iGo's founder and former chairman of the board and chief executive officer; Michael J. Delargy ("Delargy"), iGo's former chief financial officer and chief operating officer; and Thomas R. de Jong ("de Jong"), iGo's former senior vice president of sales. IGo, which was located in Reno, Nevada, manufactured and distributed parts and accessories for mobile technology products such as laptops and cellular phones. IGo was acquired by Mobility Electronics, Inc. on September 4, 2002 and is no longer a public company.
The Complaint alleges, among other things, that:
On December 31, 1999, the last day of fiscal year 1999, Hawk and Delargy caused iGo to materially overstate its fourth quarter revenue by a total of approximately $912,100 by improperly recording $474,933 in revenue on consignment sales to Laptop Lane, Inc and improperly recording $437,254 in revenue on a transaction that was a loan to HardwareStreet.com. The approximate 12% overstatement of fourth quarter revenue was disclosed to the public in a January 2000 earnings release and reported in iGo's fiscal 1999 Form 10-K filed with the Commission on March 29, 2000;
At the end of iGo's third quarter of fiscal year 2000, the defendants caused iGo to fraudulently record revenue of approximately $688,100 on a sale to M.Block & Sons, Inc., which could not properly be recognized until the fourth quarter of fiscal year 2000. In addition, Hawk and Delargy caused iGo to improperly record revenue of approximately $107,000 on continued consignment sales to Laptop Lane, Inc. The approximate 7.6% overstatement of third quarter revenue was disclosed to the public in an October 2000 earnings release and reported in iGo's Form 10-Q for the third quarter of fiscal 2000 filed with the Commission on November 14, 2000;
In the final days of the fourth quarter of fiscal year 2000, the defendants collectively caused iGo to recognize fraudulently approximately $1.18 million in fourth quarter revenue by improperly recognizing revenue on consignment sales, sham transactions, product that was not shipped, and product that was shipped after the end of the fiscal year. The approximate 9% overstatement of fourth quarter revenue was disclosed to the public in a January 2001 earnings release. IGo made additional materially false and misleading statements in two March 2001 releases regarding the amount of revenue it would record in the first quarter of fiscal 2001, and the reasons for those amounts, as a result of reversing improperly recorded fourth quarter 2000 transactions.
Hawk and Delargy signed management representation letters, given to iGo's independent auditors in 2000, which were false and misleading. In addition, in early 2001, Delargy and de Jong made false and misleading statements to iGo's independent auditors regarding the propriety of recording the M.Block transaction in the third quarter of fiscal year 2000.
In its Complaint, the Commission requests that the Court issue a final judgment permanently restraining and enjoining the defendants from violating and/or aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-1, and 13b2-2. Also, as to Hawk, the Commission is seeking an order holding him liable as a control person, under Section 20(a) of the Exchange Act, for iGo's violations of Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-13. The Commission also is seeking an order that each defendant be prohibited from acting as an officer or director of a public company, that the defendants disgorge all ill-gotten gain, including compensation and other remuneration, they received by virtue of their misconduct, and that the defendants pay civil penalties.
The Commission's investigation in this matter is continuing.
SEC Complaint in this matter
http://www.sec.gov/litigation/litreleases/lr19156.htm
