Securities and Exchange Commission
filed a lawsuit against Albert J. "Chainsaw Al" Dunlap and five others Tuesday, leveling charges of accounting fraud against the former chairman and chief executive of
, four former Sunbeam officials and a partner at
The SEC says Dunlap and the former Sunbeam officials cooked the consumer-products company's books in a failed attempt to gussy it up for a sale. What resulted, the SEC says, was billions of dollars in losses for investors.
"Dunlap and his cronies' actions led to a market-cap peak
for Sunbeam of $5 billion," said Thomas Newkirk, associate director of the division of enforcement at the SEC. "Today, it's zilch."
Sunbeam, which filed for bankruptcy reorganization on Feb. 6, was recently trading at 7 cents a share on the bulletin boards, for a market cap of $8 million.
Neither Dunlap nor the other defendants in the suit could be reached for comment.
The suit, filed in the
U.S. District Court
in Miami, marks another milepost in the rise and precipitous fall of Dunlap, who achieved notoriety on Wall Street for his aggressive cost-cutting moves and staff-reducing zeal as a turnaround specialist.
With his reputation -- and nickname -- cemented after turnaround stints at
Scott Paper, Consolidated Press Holdings
and elsewhere, Dunlap came aboard struggling Sunbeam in July 1996 and dazzled Wall Street in a hurry.
The stock soared as high as $52 a share in March 1998 as Sunbeam notched massive gains in revenue and earnings. But after questions arose about Sunbeam's accounting practices --
was among the first journalists to cast light on
accounting improprieties -- the company had to restate earnings for the fourth quarter of 1996 through the first quarter of 1998.
Dunlap and several other executives were fired by Sunbeam in 1998. The others named in the suit are former principal financial officer Russell Kersh, former controller Robert Gluck, former vice presidents Donald Uzzi and Lee Griffith, and Phillip Harlow, a partner at Arthur Andersen, the company's accounting firm.
The SEC, among other things, seeks to bar Dunlap, Kersh, Gluck and Uzzi from acting as an officer or director of any publicly traded company.
The SEC offered a laundry list of fraud charges against Dunlap and the ex-Sunbeam officials, including accelerated reporting of sales in earlier quarters and creating "cookie jar" revenues -- using a restructuring reserve fund to defray the cost of ongoing business.
"The joke is that when earnings are sagging, you reach into the cookie jar for a sugar jolt of earnings," Newkirk said.
The SEC says Harlow "authorized unqualified audit opinions" on Sunbeam's 1996 and 1997 financial statements, even though he was aware of many of Sunbeam's accounting improprieties.
Arthur Andersen, in a statement today, said, "the SEC's allegations reflect professional disagreements about ... the proper interpretation of
generally accepted accounting principles." Arthur Andersen also said it "fully supports" Harlow.
Meanwhile, the SEC said it settled charges against David Fannin, Sunbeam's former general counsel. The SEC had alleged that Fannin helped draft press releases that misled Wall Street about the state of Sunbeam's fiscal health. Fannin neither denied nor admitted the charges.
In a press release, Jerry Levin, Sunbeam's current chairman and CEO, said that the company has been looking to resolve the investigations since the arrival of the new management team in June 1998.