SEC Sues Former Surf Apparel Execs
Securities regulators have accused the former officers of a surfing apparel company of falsifying 1999 financial statements.
The Securities and Exchange Commission alleged in a lawsuit that Freedom Surf Inc.’s former president, Raece Richardson, 37, of Huntington Beach, and vice president, David McKenzie, 42, formerly of Huntington Beach, had added $5.2 million in fraudulently valued assets to the company’s books, apparently to attract interest from potential investors.
The company’s former auditor, James Slayton, and a friend of Richardson, Cameron Gorges of San Clemente, also were accused of taking part in the scheme.
Without admitting or denying the SEC allegations, Freedom Surf, which is now Freestar Technologies Inc. in the Dominican Republic, McKenzie and Gorges have settled the case, the commission said Thursday.
No fines were assessed.
The case against Richardson, who is facing other lawsuits and actions by the commission and state regulators, has not been settled.
A hearing date will be scheduled before an administrative law judge for the case against Slayton, the former auditor.
According to a civil complaint filed Wednesday in federal court in Washington, Richardson and McKenzie orchestrated a scheme to inflate the company’s assets with certain equipment in Costa Rica.
Richardson had Gorges appraise the equipment he had not seen at $5.2 million with figures provided by Richardson. The appraisal was then sent to Slayton, who allegedly signed off on it without conducting an audit.
The company subsequently reported total assets of $5.2 million in filings with the SEC in 2000 and reported in another SEC filing that it had sold the equipment for $4.8 million to a company owned by Richardson and his father. The SEC described the reported sale as a “sham.”
Richardson founded Freedom Surf in November 1999 to produce wetsuits and surfing apparel, the SEC said. He served as chief executive until resigning in August 2000.
FreeStar shares closed unchanged at 10 cents in over-the-counter trading.
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Times staff writer Marc Ballon contributed to this report.
