US: Former Carter's exec charged with fraud
A former executive vice president of Carter's Inc has been charged with financial fraud and insider trading at the children's clothing maker between 2004 and March 2009.
Joseph Elles, who was executive director of sales at the time of the allegation, has been indicted by a federal grand jury for lying about the company's financial picture and selling shares when their price was artificially high.
The charges mirror those filed by the Securities and Exchange Commission (SEC) in December 2010.
These discounts - known in the clothing industry as "accommodations" - were intended to help Kohl's defray costs related to inventory clearance and sales promotions, and to allow Kohl's to achieve a desired profit margin on its sales of goods purchased from Carter's.
To conceal his actions from Carter's accounting personnel, Elles persuaded Kohl's to postpone deducting these accommodations from invoice payments until later quarters. The cost of the discounts was not reflected in Carters' quarterly financial reports, leading the company to overstate its quarterly profit.
The SEC filing also claims Elles made $4.7m between May 2005 and March 2009 by selling Carter's shares.
Atlanta-based Carter's makes apparel exclusively for babies and young children under its own Carter's and Osh Kosh brands, as well as private label apparel. However, it has cooperated fully with the investigation.
Ellis, meanwhile, claims he is not guilty to the 32 criminal charges. His attorney said he acted at the direction, and with the knowledge, of Carter's senior management.
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