U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17165 / September 28, 2001
ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 1461
(United States District Court for the Northern District of Illinois,
Civ. No. 00-C-5935)
FORMER OAKGRIGSBY, INC. CONTROLLER ENJOINED, ORDERED TO PAY
DISGORGEMENT IN CONNECTION WITH FINANCIAL FRAUD SCHEME
The Securities and Exchange Commission announced today that on
September 27, 2001, the Hon. Ronald A. Guzmān of the United States
District Court for the Northern District of Illinois entered an Order
enjoining Defendant Matthew Welch from future violations of the
antifraud, issuer reporting, books and records and internal accounting
controls provisions of the federal securities laws and ordering him to
pay disgorgement and prejudgment interest of $21,526, provided,
however, that payment of all but $10,000 is waived, and penalties not
assessed, based on his demonstrated inability to pay additional
amounts. The Commission's enforcement action is the result of Welch's
fraudulent scheme to falsify the operating results of OakGrigsby, Inc.
to make the company appear more profitable than it was. OakGrigsby,
located in Sugar Grove, Illinois, was a division of Oak Industries,
Inc., headquartered in Waltham, Massachusetts. In January 2000, Oak,
whose shares had been publicly traded on the New York Stock Exchange,
was acquired by Corning, Incorporated. Defendant Welch consented to
the entry of the injunction and payment of disgorgement without
admitting or denying the allegations of the Commission's Complaint.
The Commission's complaint, filed September 27, 2000, alleged that
between July 1995 and January 3, 1997, defendants James Horne and
Matthew Welch, respectively the former president and controller of
OakGrigsby, inflated OakGrigsby's reported operating profits by 108%
to 371%. Oak Industries incorporated OakGrigsby's inflated numbers in
its periodic reports and press releases and, as a result, Oak
Industries' income and earnings per share during this period were
overstated in amounts ranging from 2% to 15%.
Specifically, the Complaint alleged that Defendant Welch fraudulently
concealed expenses such as salaries, shipping and travel. The
Complaint alleged that several of these fraudulent entries were made
with the knowledge and approval of Defendant Horne, the divisional
president of OakGrigsby until March 1996. OakGrigsby's results were
consolidated with other Oak divisions and incorporated into Oak's
periodic reports and press releases. As a result of Welch and Horne's
actions, Oak's income per share for the quarter ended December 31,
SNIPPETS:
(United States District Court for the Northern District of Illinois,
FORMER OAKGRIGSBY, INC. CONTROLLER ENJOINED, ORDERED TO PAY DISGORGEMENT IN CONNECTION WITH
The Securities and Exchange Commission announced today that on September 27, 2001, the Hon.
Ronald A. Guzmān of the United States District Court for the Northern District of Illinois
to pay additional amounts.
The Commission's enforcement action is the result of Welch's fraudulent scheme to falsify the
Defendant Welch consented to the entry of the injunction and payment of disgorgement without
The Commission's complaint, filed September 27, 2000, alleged that between July 1995 and
Oak Industries incorporated OakGrigsby's inflated numbers in its periodic reports and press
The Complaint alleged that several of these fraudulent entries were made with the knowledge
As a result of the conduct described in the Complaint, the Commission charged Welch and Horne
The defendants are also charged with aiding and abetting violations of Sections 13, 13and
The litigation is continuing as to Defendant Horne.
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