Business Crimes Hotline

According to the criminal information, from about December 1996 until approximately November 1999, Gilburne and others allegedly devised a scheme to artificially inflate Just for Feet's financial condition through the improper recognition of income received from Birmingham-based Rogers Advertising, the company's sole advertising agency. The information alleges that beginning in or about 1996, Just for Feet's CEO allegedly would conduct meetings at the end of every quarter in which he would lay out analysts' expectations of the company's earnings, and then draw up a list of 'goods' (items that produced or added income) and 'bads' (those that reduced income). The information alleges that the CEO directed Just for Feet's employees to increase the 'goods' and decrease the 'bads' in order to meet his own earnings expectations and those of Wall Street analysts.

According to the charges, the CEO of Just for Feet and the President of Rogers Advertising allegedly would meet prior to the end of Just for Feet's fiscal year and agree that Rogers Advertising would pay the agency commissions for the upcoming year, minus a monthly retainer, back to Just for Feet. This allegedly became known within Just for Feet as the 'Rogers rebate.' The information further alleges that although Gilburne, the CEO, and others knew that the Rogers rebate represented income earned by and paid to Just for Feet in the following fiscal year, they nonetheless caused Just for Feet to record the rebate as a receivable due in the current fiscal year. When insufficient rebates would not support the previously booked receivable, Just for Feet allegedly authorized Rogers Advertising to submit bogus bills to Just for Feet to generate income for Rogers Advertising, in order to pay down the receivable on Just for Feet's books.

The information also alleges that Gilburne and others made false and fraudulent entries in Just for Feet's financial books and records, and caused false entries to be filed with the Securities and Exchange Commission. Specifically, on or about April 24, 1998, the CEO signed Just for Feet's 10-K for fiscal year 1997, allegedly knowing that the company's income was overstated by $3 million due to the Rogers rebate scheme. In addition, the 10-K for fiscal year 1998 was allegedly overstated by $5.3 million as a result of the scheme.

Gilburne faces a maximum sentence of 5 years in prison and a $250,000 fine on the charge of conspiracy to commit wire fraud and securities fraud. As part of his plea agreement, Gilburne is cooperating with the government's ongoing investigation into Just for Feet's finances.

MISSOURI

Former Bank Owner and Director Charged with Making False Statements

Susan Sinclair Wintermute, the former owner and director of Sinclair National Bank (SNB), was arrested on charges of making false statements to a federal agency in connection with her efforts to acquire control of the bank. According to a criminal complaint filed in the United States District Court for the Western District of Missouri, Wintermute and her then-husband acquired control of SNB in March 2002 after selling Sinclair Financial Group, Inc. (SFG), a Missouri financial services firm, in October 1999. SNB was later closed by the Office of the Controller of the Currency (OCC), and SFG filed for bankruptcy in 2001, leaving approximately 2900 investors with more than $60 million in losses. Wintermute and her then-husband allegedly submitted an application to the OCC in December 1999, in furtherance of their efforts to acquire control of the national bank. That application required disclosure of certain information concerning their background, employment history, and financial condition. In providing her employment history, Wintermute allegedly failed to disclose that she and her then-husband had been employed by Sinclair Management Services, Inc., an entity that owed SFG approximately $5 million. Wintermute also allegedly failed to disclose that she and her then-husband were owed $5 million by SFG's owner as a result of their transfer of SFG to the new owner in October 1999. Based on Wintermute's application, the OCC allowed her and her then-husband to take control of SNB, which subsequently used insured depositor funds to purchase subprime consumer loans from SFG.

Wintermute faces a maximum sentence of 5 years in prison and a $250,000 fine if convicted of the false statement charge.

SOUTH CAROLINA

Tin Products Defendants Sentenced for Clean Water Act Violations

Judge Cameron Currie of the United States District Court for the District of South Carolina imposed sentences in what the government calls 'one of the most significant environmental crimes case in South Carolina history' relating to the discharge of toxic wastewater from the Tin Products, Inc. chemical plant. Tin Products, Inc. produces chemicals, known as organotins, that are used for plumbing pipes, glass coatings, and fixtures.

James Goldman, the vice president of Tin Products, Inc., was sentenced to 18 months in prison, 100 hours of community service, and a $100 special assessment. Melanie Purvis, who had served as environmental supervisor under Goldman, was sentenced to 5 months in prison, 5 months' home detention, a $7500 fine, and $100 special assessment. George Metts, a wastewater operator who served under both Purvis and Goldman, was sentenced to 6 months' home detention, 5 years' probation, 100 hours community service, and $100 special assessment. The sentencing of Tin Products Inc., a defunct entity, was stayed.

An indictment had been returned in May 2002 charging the defendants with conspiracy to violate the Clean Water Act and six substantive Clean Water Act violations. On January 27, 2003, Goldman entered a plea of guilty for himself and on behalf of the corporation to violating the Clean Water Act. Melanie Purvis, the corporation's environmental supervisor, pleaded guilty in June 2002 to one count of conspiracy to violate the Clean Water Act. George Metts, a wastewater operator at the facility, also pleaded guilty to conspiracy to violate the Clean Water Act in November 2002.

Goldman pleaded guilty to knowingly discharging and causing Tin Products' employees to discharge organotins wastewater to the Two Notch Publicly Owned Treatment Works (POTW). The discharges occurred from July 1999 until February 2000 and were in violation of Tin Products' industrial user discharge permit. Other organotins discharges occurred from March 1999 until February 2000. The organotins contamination eventually passed through the POTW into Red Bank Creek in mid-February 2000, causing the death of nearly 1000 fish.

Wintermute faces a maximum sentence of 5 years in prison and a $250,000 fine if convicted of the false statement charge.Judge Cameron Currie of the United States District Court for the District of South Carolina imposed sentences in what the government calls 'one of the most significant environmental crimes cases in South Carolina history' relating to the discharge of toxic wastewater from the Tin Products, Inc. chemical plant. Tin Products, Inc. produces chemicals, known as organotins, that are used for plumbing pipes, glass coatings, and fixtures.

James Goldman, the vice president of Tin Products, Inc., was sentenced to 18 months in prison, 100 hours of community service, and a $100 special assessment. Melanie Purvis, who had served as environmental supervisor under Goldman, was sentenced to 5 months in prison, 5 months' home detention, a $7500 fine, and $100 special assessment. George Metts, a wastewater operator who served under both Purvis and Goldman, was sentenced to 6 months' home detention, 5 years' probation, 100 hours community service, and $100 special assessment. The sentencing of Tin Products Inc., a defunct entity, was stayed.

An indictment had been returned in May 2002 charging the defendants with conspiracy to violate the Clean Water Act and six substantive Clean Water Act violations. On January 27, 2003, Goldman entered a plea of guilty for himself and on behalf of the corporation to violating the Clean Water Act. Melanie Purvis, the corporation's environmental supervisor, pleaded guilty in June 2002 to one count of conspiracy to violate the Clean Water Act. George Metts, a wastewater operator at the facility, also pleaded guilty to conspiracy to violate the Clean Water Act in November 2002.

Goldman pleaded guilty to knowingly discharging and causing Tin Products' employees to discharge organotins wastewater to the Two Notch Publicly Owned Treatment Works (POTW). The discharges occurred from July 1999 until February 2000 and were in violation of Tin Products' industrial user discharge permit. Other organotins discharges occurred from March 1999 until February 2000. The organotins contamination eventually passed through the POTW into Red Bank Creek in mid-February 2000, causing the death of nearly 1000 fish.

The Business Crimes Hotline and In the Courts were compiled by Bradley J. Bondi, Esq., an associate with Williams & Connolly LLP, Washington, DC, and Associate Editor of this newsletter.

ALABAMA

Plea Agreement in Conspiracy to Commit Wire, Securities Fraud

Adam Gilburne of Paradise Valley, AZ, a former executive of Just for Feet, Inc., pleaded guilty in the Northern District of Alabama to a charge of conspiracy to commit wire fraud and securities fraud, in violation of 18 U.S.C. ' 371, related to an alleged scheme to fraudulently inflate the company's earnings.

According to the criminal information, from about December 1996 until approximately November 1999, Gilburne and others allegedly devised a scheme to artificially inflate Just for Feet's financial condition through the improper recognition of income received from Birmingham-based Rogers Advertising, the company's sole advertising agency. The information alleges that beginning in or about 1996, Just for Feet's CEO allegedly would conduct meetings at the end of every quarter in which he would lay out analysts' expectations of the company's earnings, and then draw up a list of 'goods' (items that produced or added income) and 'bads' (those that reduced income). The information alleges that the CEO directed Just for Feet's employees to increase the 'goods' and decrease the 'bads' in order to meet his own earnings expectations and those of Wall Street analysts.

According to the charges, the CEO of Just for Feet and the President of Rogers Advertising allegedly would meet prior to the end of Just for Feet's fiscal year and agree that Rogers Advertising would pay the agency commissions for the upcoming year, minus a monthly retainer, back to Just for Feet. This allegedly became known within Just for Feet as the 'Rogers rebate.' The information further alleges that although Gilburne, the CEO, and others knew that the Rogers rebate represented income earned by and paid to Just for Feet in the following fiscal year, they nonetheless caused Just for Feet to record the rebate as a receivable due in the current fiscal year. When insufficient rebates would not support the previously booked receivable, Just for Feet allegedly authorized Rogers Advertising to submit bogus bills to Just for Feet to generate income for Rogers Advertising, in order to pay down the receivable on Just for Feet's books.

The information also alleges that Gilburne and others made false and fraudulent entries in Just for Feet's financial books and records, and caused false entries to be filed with the Securities and Exchange Commission. Specifically, on or about April 24, 1998, the CEO signed Just for Feet's 10-K for fiscal year 1997, allegedly knowing that the company's income was overstated by $3 million due to the Rogers rebate scheme. In addition, the 10-K for fiscal year 1998 was allegedly overstated by $5.3 million as a result of the scheme.

Gilburne faces a maximum sentence of 5 years in prison and a $250,000 fine on the charge of conspiracy to commit wire fraud and securities fraud. As part of his plea agreement, Gilburne is cooperating with the government's ongoing investigation into Just for Feet's finances.

MISSOURI

Former Bank Owner and Director Charged with Making False Statements

Susan Sinclair Wintermute, the former owner and director of Sinclair National Bank (SNB), was arrested on charges of making false statements to a federal agency in connection with her efforts to acquire control of the bank. According to a criminal complaint filed in the United States District Court for the Western District of Missouri, Wintermute and her then-husband acquired control of SNB in March 2002 after selling Sinclair Financial Group, Inc. (SFG), a Missouri financial services firm, in October 1999. SNB was later closed by the Office of the Controller of the Currency (OCC), and SFG filed for bankruptcy in 2001, leaving approximately 2900 investors with more than $60 million in losses. Wintermute and her then-husband allegedly submitted an application to the OCC in December 1999, in furtherance of their efforts to acquire control of the national bank. That application required disclosure of certain information concerning their background, employment history, and financial condition. In providing her employment history, Wintermute allegedly failed to disclose that she and her then-husband had been employed by Sinclair Management Services, Inc., an entity that owed SFG approximately $5 million. Wintermute also allegedly failed to disclose that she and her then-husband were owed $5 million by SFG's owner as a result of their transfer of SFG to the new owner in October 1999. Based on Wintermute's application, the OCC allowed her and her then-husband to take control of SNB, which subsequently used insured depositor funds to purchase subprime consumer loans from SFG.

Wintermute faces a maximum sentence of 5 years in prison and a $250,000 fine if convicted of the false statement charge.

SOUTH CAROLINA

Tin Products Defendants Sentenced for Clean Water Act Violations

Judge Cameron Currie of the United States District Court for the District of South Carolina imposed sentences in what the government calls 'one of the most significant environmental crimes case in South Carolina history' relating to the discharge of toxic wastewater from the Tin Products, Inc. chemical plant. Tin Products, Inc. produces chemicals, known as organotins, that are used for plumbing pipes, glass coatings, and fixtures.

James Goldman, the vice president of Tin Products, Inc., was sentenced to 18 months in prison, 100 hours of community service, and a $100 special assessment. Melanie Purvis, who had served as environmental supervisor under Goldman, was sentenced to 5 months in prison, 5 months' home detention, a $7500 fine, and $100 special assessment. George Metts, a wastewater operator who served under both Purvis and Goldman, was sentenced to 6 months' home detention, 5 years' probation, 100 hours community service, and $100 special assessment. The sentencing of Tin Products Inc., a defunct entity, was stayed.

An indictment had been returned in May 2002 charging the defendants with conspiracy to violate the Clean Water Act and six substantive Clean Water Act violations. On January 27, 2003, Goldman entered a plea of guilty for himself and on behalf of the corporation to violating the Clean Water Act. Melanie Purvis, the corporation's environmental supervisor, pleaded guilty in June 2002 to one count of conspiracy to violate the Clean Water Act. George Metts, a wastewater operator at the facility, also pleaded guilty to conspiracy to violate the Clean Water Act in November 2002.

Goldman pleaded guilty to knowingly discharging and causing Tin Products' employees to discharge organotins wastewater to the Two Notch Publicly Owned Treatment Works (POTW). The discharges occurred from July 1999 until February 2000 and were in violation of Tin Products' industrial user discharge permit. Other organotins discharges occurred from March 1999 until February 2000. The organotins contamination eventually passed through the POTW into Red Bank Creek in mid-February 2000, causing the death of nearly 1000 fish.

Wintermute faces a maximum sentence of 5 years in prison and a $250,000 fine if convicted of the false statement charge.Judge Cameron Currie of the United States District Court for the District of South Carolina imposed sentences in what the government calls 'one of the most significant environmental crimes cases in South Carolina history' relating to the discharge of toxic wastewater from the Tin Products, Inc. chemical plant. Tin Products, Inc. produces chemicals, known as organotins, that are used for plumbing pipes, glass coatings, and fixtures.

James Goldman, the vice president of Tin Products, Inc., was sentenced to 18 months in prison, 100 hours of community service, and a $100 special assessment. Melanie Purvis, who had served as environmental supervisor under Goldman, was sentenced to 5 months in prison, 5 months' home detention, a $7500 fine, and $100 special assessment. George Metts, a wastewater operator who served under both Purvis and Goldman, was sentenced to 6 months' home detention, 5 years' probation, 100 hours community service, and $100 special assessment. The sentencing of Tin Products Inc., a defunct entity, was stayed.

An indictment had been returned in May 2002 charging the defendants with conspiracy to violate the Clean Water Act and six substantive Clean Water Act violations. On January 27, 2003, Goldman entered a plea of guilty for himself and on behalf of the corporation to violating the Clean Water Act. Melanie Purvis, the corporation's environmental supervisor, pleaded guilty in June 2002 to one count of conspiracy to violate the Clean Water Act. George Metts, a wastewater operator at the facility, also pleaded guilty to conspiracy to violate the Clean Water Act in November 2002.

Goldman pleaded guilty to knowingly discharging and causing Tin Products' employees to discharge organotins wastewater to the Two Notch Publicly Owned Treatment Works (POTW). The discharges occurred from July 1999 until February 2000 and were in violation of Tin Products' industrial user discharge permit. Other organotins discharges occurred from March 1999 until February 2000. The organotins contamination eventually passed through the POTW into Red Bank Creek in mid-February 2000, causing the death of nearly 1000 fish.

The Business Crimes Hotline and In the Courts were compiled by Bradley J. Bondi, Esq., an associate with Williams & Connolly LLP, Washington, DC, and Associate Editor of this newsletter.