JFF’s Gilburne Gets Probation in Ad Charge Fraud Case

Adam Gilburne, the former president of Just for Feet stores, was sentenced by Chief United States District Judge U.W. Clemon to 60 months probation, $1,000.00 fine, and $389,000.00 in restitution. This sentencing follows his May 2004 guilty plea to one count of conspiracy to commit wire fraud and securities fraud.

Adam Gilburne, 41, of Paradise Valley, Arizona, had been employed in a variety of positions with Just for Feet, Inc. (JFF) since March 1994, including Executive Vice-President and President of the Superstore Division. Adam Gilburne E reported directly to JFF's Chief Executive Officer.

According to U.S. Attorney Alice H. Martin, Adam Gilburne and others devised a scheme to artificially inflate JFF's financial condition through the improper recognition of income received from Birmingham-based Rogers Advertising. JFF's CEO and the president of Rogers Advertising would meet prior to the end of JFF's fiscal year and agree that Rogers Advertising would pay back to JFF a portion of advertising commissions that it would earn for the upcoming year for the sale of advertisements to television stations and others. This became known among JFF insiders as the “Rogers Rebate.” Adam Gilburne, Rogers, and others knew that the “Rogers Rebate” represented money which was anticipated to be earned by Rogers Advertising and paid to JFF in the following fiscal year. Nevertheless, JFF fraudulently recorded the Roger's Rebate as a receivable due from Rogers Advertising in JFF's current fiscal year and fraudulently treated it as earned income for the current fiscal year.

In addition, Adam Gilburne and others made false and fraudulent entries in JFF's financial books and records and caused false entries to be filed with the Securities and Exchange Commission. As a result of the “Rogers Rebate” scheme, the company's income was overstated by $3 million for fiscal year 1997, and overstated by $5.3 million for fiscal year 1998.

The investigation was conducted by the FBI, Birmingham Field Office. The case was prosecuted by the U.S. Attorney's Office, Northern District of Alabama with assistance from attorneys with the Fraud Section, Criminal Division, Department of Justice.