SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16309 / September 28, 1999
SEC v. HAROLD M. ICKOVICS and STEPHEN J. KESH, Civil Action No. 1
99CV02563 (D.D.C.) (September 28, 1999)
SEC v. ROBERT M. CANKES, Civil Action No. 1 99CV02564 (D.D.C.)
(September 28, 1999)
SEC CHARGES FORMER PERFUME COMPANY EXECUTIVES WITH FALSIFYING
FINANCIAL STATEMENTS, INFLATING OPERATING RESULTS AND MAKING
UNDISCLOSED PAYMENTS
The Securities and Exchange Commission ("Commission") today filed a
complaint in the United States District Court for the District of
Columbia charging two former officers of Model Imperial, Inc. with
falsifying Model Imperial's financial statements and fraudulently
inflating the company's sales and net income. Model Imperial, based in
Boca Raton, Florida, is a wholesale distributor of brand name
fragrances and cosmetics to discount retailers, drugstore and
supermarket chains and other mass merchants. At the time of the
actions alleged in the Commission's complaint, Model Imperial was a
public company. All of its stock, however, has subsequently been
acquired by a private entity.
The officers of Model Imperial named in the first complaint are Harold
M. Ickovics and Stephen J. Kesh. Ickovics, a resident of Boca Raton,
Florida, was Model Imperial's President, Chief Executive Officer and
Chairman. Kesh, also a resident of Boca Raton, Florida, was Model
Imperial's Chief Financial Officer. The complaint alleges that during
1994 and 1995, Ickovics and Kesh caused Model Imperial to record (1) a
$1.3 million gain from a "barter" transaction which lacked economic
substance; (2) sales revenue from consignment shipments; (2) customer
returns of merchandise as purchases of goods; and (3) sham sales
transactions to create fraudulent receivables in connection with a
revolving credit agreement. In addition, Model Imperial overstated
gross profits on retail sales and made payments to an officer of a
perfume supplier to obtain a supply of product and recorded fictitious
purchases to conceal the nature of those payments. These practices,
which were not in conformity with generally accepted accounting
practices, resulted in the filing with the Commission of numerous
false and misleading periodic reports during 1994 and 1995.
Simultaneous with the filing of the complaint in this action, Harold
Ickovics and Stephen Kesh each consented, without admitting or denying
the Commission's allegations, to a Final Judgment that permanently
enjoins each of them from violating or aiding and abetting violations
SNIPPETS:
SEC v. ROBERT M. CANKES, Civil Action No. 1 99CV02564
The Securities and Exchange Commission today filed a complaint in the United States District
The officers of Model Imperial named in the first complaint are Harold M. Ickovics and
Ickovics, a resident of Boca Raton, Florida, was Model Imperial's President, Chief Executive
Model Imperial overstated gross profits on retail sales and made payments to an officer of a
These practices, which were not in conformity with generally accepted accounting practices,
Simultaneous with the filing of the complaint in this action, Harold Ickovics and Stephen
Kesh has also consented to the entry of an order, in an administrative proceeding to be
Named in a separate Complaint, also filed today in the U.S. District Court of the District of
From April 1991 until July 1996, Cankes was the president of a major fragrance company which
The complaint alleges that Cankes was questioned by Model Imperial's outside auditors about
In so doing, Cankes aided and abetted Icovicks' violations of Exchange Act Rule 13b2-2, or
Simultaneously with the filing of the complaint in this action, Cankes consented, without
In a related matter, the Commission instituted an administrative proceeding against Kenneth
According to the Order Instituting that proceeding, in order to ensure a continuing supply of
On at least three occasions, Ickovics delivered a Model Imperial check to Schwartz and
The Commission's order finds that Schwartz and Steinberg, through this conduct, were each a
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