US: Former Carter's president charged with fraud
The former president of Carter's Inc has been charged with a multi-million dollar securities fraud cover-up at the children's clothing maker between 2004 and December 2009.
The charges filed against Joseph Pacifico, are part of an ongoing investigation. Last year former executive vice president Joseph Elles pleaded not guilty to allegations of financial fraud and insider trading.
A statement from the US Attorney's Office yesterday (20 March) said Pacifico, who served as second-in-command of children's clothing company, has been indicted for securities fraud, causing the filing of false financial statements, and falsifying the books and records of a public company.
He is said to have been aware that Elles, the company's head of wholesale sales, was granting excessive discounts or rebates to department store retailer Kohl's, its largest wholesale customer, in order to induce Kohl's to buy greater quantities of Carter's products.
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.
Previous allegations claimed 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. It has cooperated fully with the investigation.
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