|
United States v. Martin G. Fraser and Don W. Watson - Court Docket Number: 2:09-CR-00372-PHX-SRB
This case is assigned to the Honorable Susan R. Bolton, United States District Court Judge for the District of Arizona, Sandra Day O’Connor United States Courthouse, 401 West Washington Street, Phoenix, Arizona. Arraignment as to defendant Fraser was held on April 29, 2009 before Magistrate Judge Edward Voss. At this time, trial is set for June 2, 2009 at 9:00 a.m. in Courtroom 502 before Judge Bolton.
Martin G. Fraser, former president and chief operating officer of Phoenix-based CSK Auto Corporation (CSK), a large specialty retailer of auto parts and accessories in the western United States, and former CSK chief financial officer Don W. Watson were indicted by a federal grand jury and charged with one count of conspiracy (Count 1: 18 U.S.C. § 371), six counts of securities fraud (Counts 2-7: 15 U.S.C. § 78j(b)), six counts of false filings (Counts 8-13: 15 U.S.C. §§ 78m(a) and 78ff), eleven counts of mail fraud (Counts 14-24: 18 U.S.C. §§ 1341 and 1346), two counts of false books and records (Counts 25-26: 15 U.S.C. §§ 78m(b) and 78ff), and six counts of false statements to auditors (Counts 27-32: 15 U.S.C. § 78ff). Watson also is charged with two counts of false certification of financial reports (Counts 33-34: 18 U.S.C. § 1350(c)). The grand jury returned the indictment on April 7, 2009.
According to the indictment, defendants Fraser and Watson engaged in a scheme from 2001 to 2006 to misstate CSK’s income by, primarily, concealing that the company had tens of millions of dollars of uncollectible receivables that it should have written off. Uncollectible receivables are funds that a company originally reported as income because it expected to collect the funds, but later determines the funds not to be collectable. According to the indictment, CSK purchased hundreds of millions of dollars worth of auto parts every year, and its vendors gave CSK allowances, or rebates, for products CSK purchased in exchange for CSK using the allowances, generally, for marketing of the vendors’ products for sale in its stores. The vendor allowances reduced CSK’s expenses and thus increased its income.
As the indictment alleges, instead of writing off these uncollectible receivables, the conspirators concealed them by moving vendor allowance collections from later years to cover the shortfalls in earlier years, by moving uncollectible receivable balances to subsequent years to hide them, and by billing vendors to try to collect allowances CSK was not owed. As a result of the scheme, CSK is alleged to have misstated its receivables and pre-tax income in its annual reports (Forms 10-K) in fiscal years 2002, 2003 and 2004 by approximately $10 million, $24 million and $19 million, respectively.
The case is being prosecuted by Fraud Section Senior Trial Attorney Patrick Stokes and Trial Attorney Andrew Warren.
The charges against Fraser and Watson are merely accusations and they are presumed innocent unless and until proven guilty.
|
