SEC CHARGES 4 EX-EXECS OF CIRO COOKED THE BOOKS
NEW YORK — The Securities & Exchange Commission Tuesday charged four former executives of Ciro Inc. with fraud and said the group filed false annual and quarterly reports from 1989 through 1992 to hide the company’s crumbling finances.
According to the charges, filed in U.S. District Court here, Abraham Gold, the former chairman of the fashion jewelry chain, and Jack Levine, former president and chief financial officer, used phony franchise fees, fictitious sales and falsified ledgers to inflate revenue and turn red ink into profits.
In 1991, court papers charge, Ciro reported a profit of $1.2 million, when it actually lost $2.4 million.
More than once during the scheme, Levine, using Gold’s money and with Gold’s approval, lent more than $1 million to Ciro franchisees to enable them to pay franchise fees owed to Ciro, the SEC charged.
The fees were recorded as revenue and the true source of the money was not disclosed, according to the SEC. In one instance, the pair used two nonoperating “franchisees” that were “secretly formed and controlled by Gold and Levine,” said the SEC.
The fraud, which also included Howard Rubin, the former chief financial officer, and Alfons Van Wijk, the former chief operating officer, was blamed, in part, for Ciro’s Chapter 11 filing on July 19.
Originally, Ciro intended to reorganize, but a bankruptcy judge recently appointed a Chapter 11 trustee.
The SEC said, simultaneous with the filing of the charges, Gold, Levine and Rubin, without admitting or denying guilt, agreed to a final court order that closed the civil case. Under the order, Rubin and Levine agreed to pay a $50,000 fine each and Gold agreed to pay a $100,000 fine. Gold and Levine were barred from operating as officers of a public company.
The trustee, Alan Cohen, said Tuesday he planned to operate the Ciro stores in the near term, but would seek to maximize creditor value through a sale or other transaction. Cohen said he was planning to do his “own review” of the actions of past management.
Ciro operated 132 stores at the time of its Chapter 11 filing, under the Ciro, Ciro of Bond Street and Kenneth Jay Lane names. The Kenneth Jay Lane stores are operated under a license from the designer, who was out of town Tuesday and unavailable for comment.
— Fairchild News Service