UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
LITIGATION RELEASE NO. 16692 / SEPTEMBER 7, 2000
ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 1299
SECURITIES AND EXCHANGE COMMISSION V. ROBERT H. SUTTON, U. S. District
Court for the Northern District of Illinois, Civil Action No. 99 C
6342 (N.D. Ill. September 27, 1999)
The Securities and Exchange Commission announced today that on May 18,
2000, the United States District Court for the Northern District of
Illinois ordered the entry of a permanent injunction against Robert H.
Sutton, thus settling the Commission's securities fraud action against
Sutton.
Without admitting or denying the Commission's allegations, Sutton
consented to the entry of the judgment, which permanently enjoins him
from violating Section 10(b) of the Securities Exchange Act of 1934
("Exchange Act") and Rule 10b-5 promulgated thereunder. Sutton also
consented to the entry of the judgment that Sutton violated Section
13(b)(5) of the Exchange Act and Rule 13b2-1 promulgated thereunder by
circumventing internal accounting controls and falsifying books,
records and accounts. Sutton was ordered to pay a civil money penalty
of $15,000.
The Complaint alleged that Sutton, at the time a plant controller for
a unit of Material Sciences Corporation ("MSC"), a Delaware
corporation based in Elk Grove Village, Illinois, violated the federal
securities laws by making false entries in the company's inventory and
accounts payable records. The Complaint alleges that, as a result of
Sutton's false entries, MSC overstated by 29% the net earnings
disclosed in its financial statements for the fiscal year ended
February 29, 1996. The Complaint also alleges that the false entries
caused MSC to overstate the net earnings disclosed on MSC's Forms 10-Q
during fiscal years 1996 and 1997 by amounts ranging between 6.27% and
more than 300%.
According to the Complaint, between March 1, 1995, and February 28,
1997, Sutton intentionally fabricated the inventory work in process
and entered these values into the general ledger of MSC's Laminates
and Composites unit. According to the Complaint, Sutton's fabrications
falsely increased MSC's earnings by artificially inflating the book
value of the unit's inventory on hand and understating the unit's cost
of sales.
The Complaint also alleges that from March 1, 1996, to February 28,
SNIPPETS:
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION V. ROBERT H. SUTTON, U. S. District Court for the Northern
The Securities and Exchange Commission announced today that on May 18, 2000, the United
Without admitting or denying the Commission's allegations, Sutton consented to the entry of
Sutton also consented to the entry of the judgment that Sutton violated Section 13of the
Sutton was ordered to pay a civil money penalty of $15,000.
The Complaint alleged that Sutton, at the time a plant controller for a unit of Material
The Complaint alleges that, as a result of Sutton's false entries, MSC overstated by 29% the
The Complaint also alleges that the false entries caused MSC to overstate the net earnings
According to the Complaint, Sutton's fabrications falsely increased MSC's earnings by
The Complaint also alleges that from March 1, 1996, to February 28, 1997, Sutton
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