Two Former Swisher Hygiene Inc. Executives Indicted on Securities Fraud and Obstruction of Justice Charges
Former Senior Level Corporate Employee to Plead Guilty to Securities Fraud Conspiracy
A federal grand jury in Charlotte, North Carolina, has indicted two former executives of Swisher Hygiene Inc. (Swisher) on securities fraud and obstruction of justice charges, announced U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina. Joining in today’s announcement is Special Agent in Charge John A. Strong of the FBI’s Charlotte Division.
Swisher’s former chief financial officer, Michael Kipp, 61, of Charlotte, and certified public accountant and Swisher’s former director of external reporting, Joanne Viard, 36, of Santa Rosa Beach, Florida, have been charged in connection with a securities fraud conspiracy allegedly carried out at Swisher throughout fiscal year 2011 and a subsequent obstruction of justice scheme in 2012. The federal indictment was returned late afternoon and Kipp and Viard are scheduled to make their initial appearances in federal court on Tuesday, Oct. 20, 2015.
“My office has a long record of holding corporate executives accountable for their criminal conduct,” said U.S. Attorney Rose. “Today’s charges continue to make clear that regardless of title or position, my office will prosecute corporate executives who engage in financial fraud schemes that defraud the investing public and undermine the integrity of our financial markets. We will work diligently to uncover such fraud, no matter how pernicious the cover-up.”
“As alleged in the indictment, these corporate executives were entrusted to fairly and accurately report the earnings of their employer; instead, they manipulated and falsified the numbers putting the hard earned money of shareholders at risk and undermining the laws in place to protect our financial markets,” said Special Agent in Charge Strong. “The FBI will root out corporate fraud wherever it exists and ensure those who engage in such practices are held accountable.”
Today’s charges follow the Oct.7, 2015, announcement that Swisher had entered into a deferred prosecution agreement with the United States, in which Swisher accepted and acknowledged responsibility for the conduct of its former employees and agreed to pay a $2 million penalty. Formal charges were also filed on Oct. 7, 2015, against Swisher’s former senior-level accounting employee, John Pierrard, who is scheduled to enter his guilty plea on Tuesday, Oct. 20, 2015, for his role in the alleged accounting fraud conspiracy.
According to allegations contained in the indictment and documents filed in related cases:
Throughout fiscal year 2011, Kipp, Viard and their conspirators engaged in an accounting fraud scheme to ensure that Swisher’s reported earnings had met or exceeded executive management’s forecasts, and to conceal the existence of the fraud from Swisher’s auditors, Wells Fargo, the investing public and others. Some of the fraudulent methods Kipp, Viard and their conspirators used to manipulate Swisher’s books and records to fraudulently increase the company’s income included reducing expenses by moving them from the company’s profit and loss statement to its balance sheet as well as engaging in what is commonly referred to as “cookie jar” accounting.
The accounting fraud scheme began to unravel when Swisher’s then-controller pushed back on making a fraudulent entry during the year end close. The controller wrote in an email, “I’ll run it by BDO [Swisher’s auditors] so we’re on the same page,” to which Kipp responded, “You’ll run it by me since I’m the chief accounting officer. I’m out of patience with this.” The controller persisted in his refusal to book the fraudulent entry and Kipp fired him. Swisher’s audit committee learned of the controller’s allegations and promptly commissioned an independent internal investigation. After the allegations of fraud were reported, Kipp and Viard almost immediately began to engage in misleading conduct to conceal the accounting fraud conspiracy and to obstruct justice by lying to the investigators hired by the audit committee.
Approximately 11 months following the announcement of the investigation, Swisher filed restated financial reports for the first three quarters of 2011 and filed its Form 10-K for the 2011 year. The restatement reflected, among other things, that Swisher had substantially overstated its earnings and significantly understated its losses during the relevant time period.
The indictment charges Kipp and Viard each with one count of conspiracy to commit securities fraud, to falsify books, records and accounts of Swisher, and to make misleading statements to Swisher’s auditors and accountants; one count of securities fraud; one count of wire fraud; and one count of obstruction of justice. Kipp is also charged with one count of bank fraud. The conspiracy charge carries a maximum prison term of five years. The securities fraud, wire fraud and obstruction offenses each carry a maximum prison term of 20 years. The bank fraud charge carries a maximum prison term of 30 years.
The details contained in the indictment are allegations. The defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
U.S. Attorney Rose praised the FBI for its outstanding work in leading the ongoing investigation that resulted in the filing of these charges. Rose also thanked the U.S. Securities and Exchange Commission for their assistance in the investigation.
Assistant U.S. Attorneys Mark T. Odulio and Maria K. Vento of the U.S. Attorney’s Office in Charlotte are assigned to this case.