""""KENIA: 'DIRECTED' TO FIX BOOKS

Byline: Claire Schechter

SCRANTON, Pa.--Although he didn't name any names, Donald F. Kenia, former controller of The Leslie Fay Cos., said Friday that his "superiors" told him to falsify the company's books.
Kenia made his comments at his arraignment hearing at U.S. District Court here, where, as expected, he pleaded guilty to two federal felony counts of filing or causing others to file false information about the apparel manufacturer with the Securities and Exchange Commission.
Before accepting a plea agreement between Kenia and U.S. Attorney David Barasch, District Court Judge William J. Nealon pressed Kenia for the motive for his actions.
"I was directed to do it," said Kenia. "I discussed it with my superiors."
The 42-year-old Kenia refused to name his superiors or comment further following his arraignment. He faces a maximum sentence of 10 years in prison and $500,000 in fines. He has agreed to aid FBI agents with their continuing probe of Leslie Fay finances, authorities said. Barasch has declined to say if charges will be filed against others in connection with the Leslie Fay investigation.
In return for Kenia's help, Barasch said he might recommend that Kenia receive less than a maximum sentence, depending on his level of cooperation. Sentencing is scheduled for Jan. 6.
Leslie Fay has its manufacturing headquarters in the Wilkes-Barre area of Pennsylvania, where it employs about 1,000 workers. Since accounting irregularities were disclosed by the company in February 1993, it has been in a tailspin, operating for the past 19 months under Chapter 11 bankruptcy protection and suffering from declining sales.
According to government charges, the false information supplied to the SEC by Kenia and others he directed overstated Leslie Fay earnings by $119 million in 1990, 1991 and 1992. At the end of fiscal 1990, Kenia told Nealon, he knew there were items submitted to the SEC on 10-K forms that "were not proper under generally accepted accounting principles."
At the end of 1991, Kenia said, he again knowingly submitted false information to the SEC even though he held "some reasonable doubt it would reverse itself." By the third quarter of 1992, Kenia told Nealon, it was clear there would be no reversals, but he again filed false documents.
Friday's arraignment lasted 30 minutes and was interrupted for a brief recess during which Nealon told Kenia and his lawyer, Bradley Beckman, to rethink the guilty plea.
"I'm unwilling to accept a guilty plea if the defendant believes he just acted carelessly," Nealon said. "These are far more serious charges."
After the recess, Kenia told Nealon he'd been directed by superiors to make false accounting entries and the judge accepted the plea. Kenia and his boss, Paul Polishan, Leslie Fay's former chief financial officer, were both fired in September 1993. But Leslie Fay stopped short of blaming the men for fraud. There was no evidence, Leslie Fay officials have said, that Kenia or anyone else at the company took money from the firm.
In August, Charles Stillman, a court-appointed examiner, said he found no evidence top management knew of the fraud before Kenia disclosed the news to them.
Contacted on Friday, Polishan's attorney, Mark Ciavarella, said, "One of those superiors who did not tell him [Kenia] to cook the books was Paul Polishan."
A Leslie Fay spokesman declined comment on Kenia's remarks.

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