Debra W. Yang
United States Attorney
Central District of California
United States Courthouse
312 North Spring Street
Los Angeles, California 90012
May 11, 2005
Thom Mrozek (213) 894-6947
Los Angeles, CA - The former chief executive officer of NewCom, Inc. was sentenced late this afternoon to two years in federal prison for devising and carrying out an elaborate scheme to defraud NewCom's investors and the United States Securities and Exchange Commission by falsely inflating the company's revenues.
Sultan Warris Khan, 60, of Pacific Palisades, who was the president, chief executive officer, and chairman of the board of directors of NewCom, was sentenced by United States District Judge Florence-Marie Cooper. Sultan Khan received the prison sentence for orchestrating an extensive accounting fraud scheme at NewCom, a publicly-traded company that sold computer peripherals. NewCom was based in Westlake Village from 1994 through 1999.
Asif Mohammad Khan (no relation to Sultan Khan), 60, of Westlake Village, the former executive vice president and a director of NewCom, also was sentenced this afternoon by Judge Cooper to two years in federal prison.
Both defendants were ordered to pay a $15,000 fine.
In sentencing the defendants, Judge Cooper determined that the Khans' sentence under the United States Sentencing Guidelines should be 57 months in prison. But relying upon the United States Supreme Court's decision earlier this year in United States v. Booker, which declared the Sentencing Guidelines to be only advisory and not mandatory, Judge Cooper reduced each defendant's sentence to 24 months in federal prison. In reducing the sentences, Judge Cooper cited the defendants' lack of prior convictions, their age and certain medical conditions.
Appearing in United States District Court in Los Angeles, Sultan Khan was sentenced after pleading guilty in October 2003 to conspiracy, filing false quarterly reports with the SEC, wire fraud, and money laundering. In his guilty plea, Sultan Khan admitted that he and Asif Khan conspired to inflate NewCom's gross revenue through false sales. Sultan Khan also admitted that he aided and abetted the making of false statements in quarterly reports that NewCom filed with the SEC. Sultan Khan admitted that he caused NewCom to record revenue from fictitious sales that never occurred. Sultan Khan, with the help of Asif Khan, subsequently caused NewCom employees to create or forge false paperwork to substantiate the bogus sales. In this way, NewCom's gross revenue was overstated by more than $20 million in its filings with the SEC for the fiscal quarters ending August 31 and November 30, 1998.
Sultan Khan and Asif Khan were also convicted of defrauding their company by concealing more than $1 million in "loans" made by a vendor of the company. In connection with the sentencing, prosecutors presented evidence that the monies described by the defendants as "loans" were, in reality, kickbacks from the vendor that the Khans laundered through an attorney's client trust account.
In addition to charges related to the false filings with the SEC, Asif Khan pleaded guilty in October 2003 to a count that charged him with fabricating phony invoices for products in an effort to deceive NewCom's accountants during an audit of the company's books.
The investigation into NewCom and its executives was conducted by the Federal Bureau of Investigation and IRS-Criminal Investigation Division.
Release No. 05-072
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