United States Attorney Alice H. Martin of the Northern District of Alabama announced Friday that Jonathan G. Epstein, former President and CEO of Fila USA, an athletic footwear and apparel company was sentenced by United States District Judge Karon O. Bowdre to 5 years probation, 6 months home detention, and $10,000 fine.
The criminal information charges that during the course of JFF's annual audit, an executive vice president of JFF caused the company's accounting department to record an additional $1.4 million in fictitious accounts receivable allegedly due to JFF from Fila as of January 30, 1999. This caused JFF's income to be overstated by approximately $1.4 million.
According to the charges, the executive vice-president sent Epstein an audit confirmation letter, requesting that Epstein, on behalf of Fila, confirm to Deloitte & Touche that Fila actually owed JFF approximately $1.4 million “for advertising that ran or merchandise sold prior to January 30, 1999.” Epstein, knowing that the information contained in the audit confirmation letter was false, and that Fila did not, in fact, owe JFF approximately $1.4 million, signed it and sent it to Deloitte & Touche. Subsequently, Deloitte & Touche included the false financial information when preparing JFF's annual financial reports for public filing with the Securities and Exchange Commission. As a result, JFF's earnings for fiscal year ending January 30, 1999, as stated in its annual audited financial statement and SEC filings, were overstated by at least approximately $1.4 million, thereby defrauding the shareholders of JFF.
“As the president and CEO of Fila USA, Mr. Epstein clearly crossed the legal line and entered into this conspiracy to submit false statements to the auditors,” said U.S. Attorney Alice H. Martin. “This office will prosecute those who would undermine the integrity of the independent auditor process and deprive the investing public of true financial facts.”
The investigation was conducted by the FBI-Birmingham Field Office, with assistance from SEC, Atlanta District-Enforcement Division and the prosecution was handled jointly by the United States Attorney's Office and the Fraud Section of the Criminal Division of the Department of Justice in Washington, D.C.