JUDGE SETS NEWMAN’S SENTENCE
Byline: Kristin Young
LOS ANGELES — Maurice “Corky” Newman, 68, the former chief executive officer of swimwear manufacturer Sirena Apparel Group Inc. who was charged last year with securities fraud, was sentenced to $30,300 in fines and six months in a community confinement center in a federal court here late Monday.
Newman’s attorney, Michael W. Fitzgerald, had hoped for probation with a six-month house arrest and the fine of $30,000 Newman has already paid the Securities and Exchange Commission. Newman had faced a maximum sentence of 25 years in prison and a $2.25 million fine.
While the sentence was somewhat more stringent, Fitzgerald, speaking to WWD just after the sentence was handed down, was pleased. “We’re glad that the court considered his entire career,” he said. “We are grateful that the court did not impose a prison sentence.”
Judge Dickran Tevrizian Jr. handed down the sentence before a courtroom that included Newman’s daughter Lori, other family members and a number of Newman’s industry friends.
Newman, who declined comment following sentencing, was tearful and appeared relieved. Prior to the sentencing, he apologized for his actions. “I take responsibility for what I did,” he told the court. “I reached a level of stupidity I never thought I could reach.” He pleaded guilty to the charges last April.
Judge Tevrizian considered a number of factors in making his determination, among them Newman’s somewhat fragile health and the corresponding difficulty experienced by the apparel industry in recent years. Likening the struggles of apparel companies in recent years to those of the dot-coms over the past months, he commented, “You develop a love for your company and want to keep it alive.”
He noted that the company was already in trouble at the time of the criminal activity.
Of the total fine, $300 is due immediately. A determination of restitution will be made by the court and has been scheduled for 1:30 pm on Oct. 29.
The U.S. Attorney’s Office and the SEC charged Newman and Sirena’s former chief financial officer, Richard Gerhart, last October with falsely inflating Sirena’s third-quarter 1999 earnings. The executives allegedly tampered with computer clocks to hold the quarter open, giving earnings a 30 percent boost to meet Wall Street expectations.
Newman pleaded guilty in April to three counts of the 10-count indictment against him including conspiracy to commit a crime, making false statements to the SEC, and accounting fraud. Gerhart, 50, pleaded guilty to nine of the 10 counts.
Upon his arrest by the FBI last September, Newman spent one day in prison and was released on bail of $100,000.
There have been several shareholder lawsuits as a result of the scheme and the government is seeking an undetermined amount of restitution for shareholders.
Several analysts issued “strong buy” recommendations on Sirena’s stock after the falsely inflated earnings were revealed in a press release and conference call. One analyst called it “a potential home-run stock.”
According to the government, Sirena employees were aware that computers registered March dates as late as April 12 and even held an office pool on how long the quarter would be held open.
Sirena filed for bankruptcy in June 1999 and emerged from it in August 2000 as a private company. Fitzgerald argued the bankruptcy was a result of a variety of factors, not from the fact that its two key executives had fraudulently reported earnings. Furthermore, the sales that were recorded were real sales, he claimed.
Meanwhile, Sirena is on the rebound under the leadership of Brian Zientek, ceo, with reduced operating expenses and orders continuing for its Sirena, Wear Abouts, Elisabeth and Liz Claiborne labels as well as private label orders coming in from Wal-Mart and Kmart. The company counted approximately $38 million in revenues last year and is concentrating on rebuilding its profitability.
A sentencing hearing for Gerhart before the same judge has been scheduled on Aug. 13. He faces a maximum sentence of 85 years in prison and $8.25 million in fines. Still pending is the SEC case against Gerhart that seeks, among other punitive measures, an order barring him from serving as an officer or director of a public company.