Paul Humphreys, former chief financial officer of Safety-Kleen Corp, pleaded guilty in June to federal charges of securities and bank fraud, according to information posted on the Federal Bureau of Investigation (FBI) Web site.
Humphreys, 48, a Canadian citizen, pleaded guilty to charges of conspiracy to commit securities fraud, make false statements in SEC filings, falsify books and records, make false statements to the company’s auditors, and commit bank fraud; fraud in connection with the purchase and sale of Safety-Kleen’s common stock; and bank fraud, according to the FBI information.
Safety-Kleen, a privately held company, provides oil recycling and re-refining, parts cleaner, and industrial waste management services to customers in the United States, Canada, and Puerto Rico.
Humphreys faces a maximum of five years of imprisonment and a maximum $250,000-fine on the conspiracy charge, 10 years of imprisonment and a $1-million fine on the securities fraud count, and 30 years imprisonment and a $1-million fine on the bank fraud count. Sentencing is scheduled for October 19, 2007, in United States District Court in Manhattan NY.
The charges related to a scheme to manipulate Safety-Kleen’s financial statements in connection with the reporting of more than $250 million innumerous “adjustments” to Safety-Kleen’s books and records in 1998, 1999, and 2000, according to the FBI information.
The fraud was part of an attempt to meet earnings targets the company had predicted at the time Safety-Kleen was acquired by Rollins Environmental Services Inc in 1998. When Rollins acquired Safety-Kleen in 1998, the merged company predicted to the investing public that within one year of the merger, the company would realize combined annual earnings of approximately $500 million because of "synergies" and cost savings resulting from the combination of the two companies. After the merger, however, the company’s operations did not meet those predictions.
In an attempt to show the company was meeting the predicted earnings and to meet the earnings numbers expected by Wall Street analysts and the public, Humphreys and others participated in an unlawful scheme to falsify Safety-Kleen’s general ledger and its financial statements, according to the FBI information.