Ex-Officers of Matrix Science Settle SEC Fraud Complaint
Three former top officers of Matrix Science Corp., a Torrance manufacturer of electrical connectors, coped with quarterly sales quotas by stretching the boundaries of several quarters by a day or two, a government lawsuit alleged Tuesday.
The Securities and Exchange Commission complaint accused the defendants of holding quarters open past their calendar cutoffs to record additional sales as revenues. Their actions resulted in overstatement of Matrix net income for the periods, the suit said.
Matrix was acquired last August by AMP Inc. of Harrisburg, Pa. Matrix directors sought and received resignations of the three in October, 1987, according to the SEC.
Accused in the SEC suit of violating anti-fraud provisions of the securities laws were Ronald A. Hammond, John H. MacQueen and Thomas O. Fleming Jr., the former chief executive, executive vice president and chief financial officer, respectively.
Filed simultaneously with the SEC suit were consent settlements in which the three men agreed to court orders in which they promised not to violate securities laws in the future. They did not admit or deny allegations of the complaint, filed in U.S. District Court in Washington.
Matrix was not named as a defendant. Separately, however, the SEC issued an administrative finding Tuesday that Matrix “failed to comply” with federal securities laws by reason of filing false and misleading financial reports for the second fiscal quarter of 1986 and the first two quarters of 1987.
The SEC further found that Joseph S. O’Flaherty, former chairman and chief executive, as well as six other past and present employees, each was “a cause” of the company’s failure to comply.
Settlement Officers
The agency alleged in the administrative proceeding that O’Flaherty “adopted and implemented a policy of holding open quarters” in the mid-1960s, when Matrix was a private company. The SEC added that the practice was followed until August, 1987, with his knowledge and approval. The filing said O’Flaherty ceased to be chief executive in May, 1986, and served as chairman until the AMP merger last August.
The SEC said it accepted offers of settlement from the company and all seven individuals, in which they did not admit or deny any of the facts or conclusions of the administrative proceeding.
Matrix referred a press inquiry Tuesday to an AMP spokesman, who noted that the SEC ordered Matrix and the individuals to comply with legal reporting requirements “in the event that” the firm or the individuals again become subject to reporting provisions of the securities laws. As an AMP subsidiary, he added, Matrix is no longer a reporting entity.
