U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18371 / September 29, 2003
Accounting and Auditing Enforcement Release No. 1877 / September 29,
2001
Civ. Action No. 03-Z-1917(CBS) (District of Colorado)
On Friday, September 26, 2003, the Securities and Exchange Commission
("Commission") filed suit in the United States District Court for the
District of Colorado against Sport-Haley, Inc. ("Sport-Haley"), its
chairman of the board, and former controller for violations of the
antifraud, periodic reporting, record keeping, and internal controls
provisions of the federal securities laws. Sport-Haley, located in
Denver, Colorado, designs, markets, and contracts for the manufacture
of golf apparel and outerwear under the Haley-Registered Trademark
label. According to the Complaint, Sport-Haley materially misstated
inventory, improperly capitalized period costs and materially
misstated losses on the sale of headwear equipment in its quarterly
and annual 1998, 1999, and 2000 financial statements.
Named as defendants in the Complaint are Sport-Haley, R.G. Tomlinson
of Scottsdale, Arizona, the current chairman and former chief
executive officer, and Steve S. Auger of Morrison, Colorado, the
former controller of Sport-Haley.
The Commission asserts that Sport-Haley materially overstated
inventory in its financial statements during its 1998 and 1999 fiscal
years. According to the Complaint, Tomlinson and Auger knowingly
concealed that inventory was materially overstated by $1.2 million at
June 30, 1999 and agreed to eliminate the overstated inventory by
writing the inventory off at the rate of $100,000 per month during its
2000 fiscal year. The Commission alleges Sport-Haley failed to
disclose the inventory overstatement or the company's elaborate
measures to adjust the financial statements for the overstatement. The
Complaint asserts that Sport-Haley materially understated expenses
related to period costs in financial statements filed with the
Commission during its 1998 and 1999 fiscal years and first three
quarters of 2000. The Commission also alleges that Tomlinson and Auger
knowingly or recklessly allowed the company to materially misstate
losses on the sale of headwear equipment in Sport-Haley's 1999
year-end financial statements and quarterly financial statements
during the first three quarters of its 2000 fiscal year. The Complaint
asserts that Tomlinson and Auger reviewed and signed filings with the
Commission that they knew or were reckless in not knowing contained
false financial statements.
SNIPPETS:
U.S. SECURITIES AND EXCHANGE COMMISSION
Action No. 03-Z-1917(District of Colorado)
On Friday, September 26, 2003, the Securities and Exchange Commission filed suit in the
Sport-Haley, located in Denver, Colorado, designs, markets, and contracts for the manufacture
According to the Complaint, Sport-Haley materially misstated inventory, improperly
According to the Complaint, Tomlinson and Auger knowingly concealed that inventory was
The Commission alleges Sport-Haley failed to disclose the inventory overstatement or the
The Complaint asserts that Sport-Haley materially understated expenses related to period
The Commission also alleges that Tomlinson and Auger knowingly or recklessly allowed the
The Complaint asserts that Tomlinson and Auger reviewed and signed filings with the
According to the Complaint, as a result of these and other accounting errors, Sport-Haley
As a result of the conduct described in the Complaint, the Commission charged Sport-Haley,
Tomlinson and Auger are also charged with violating Section 13of the Exchange Act
According to the Complaint, the Commission also seeks an officer and director bar against
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