Defense contractor’s ex-CFO is charged
The former chief financial officer for defense contractor DRS Technologies Inc.’s Engineered Support Systems unit backdated stock options without disclosing his actions, then made false statements in reports to regulators, the U.S. attorney’s office in St. Louis said Monday.
Gary Gerhardt, 62, of St. Charles, Mo., was charged in a 10-count indictment that includes one count of falsifying books and records of a publicly traded company; one count of conspiracy; four counts of making false statements in reports filed with the Securities and Exchange Commission; two counts of mail fraud; and two counts of wire fraud.
For the record:
12:00 a.m. March 29, 2007 For The Record
Los Angeles Times Thursday March 29, 2007 Home Edition Main News Part A Page 2 National Desk 2 inches; 77 words Type of Material: Correction
Stock-option inquiry: Articles in Business on Tuesday and Feb. 7 about the alleged backdating of stock options at Engineered Support Systems Inc. from 1997 to 2002 described the company as a unit of DRS Technologies Inc. However, DRS did not acquire Engineered Support until 2006, after the two former Engineered Support executives who are accused of wrongdoing in the case left the company. The name Engineered Support Systems was not used for the business after the acquisition.
The indictment alleges that Gerhardt and others illegally backdated stock options on at least eight occasions from 1996 to 2002.
Asst. U.S. Atty. Michael Reap said the practice diluted profits for shareholders and deprived the public of accurate information concerning the company’s earnings and compensation for its executives.
Some of the charges carry penalties of as many as 20 years in prison if convicted.
Gerhardt’s attorney, Ed Dowd, said Gerhardt “served this company for 24 years and did a great job of increasing value for the shareholders. I want to remind everyone that he is presumed innocent and that he did not get to present any evidence to this grand jury.”
St. Louis-based Engineered Support Systems was sold to Parsippany, N.J.-based DRS Technologies Inc. last year. A DRS spokesman declined to comment. The company provides services that include adding armor to military trucks, refurbishing trailers the Army uses to haul tanks and supporting satellite communications.
Another former executive of Engineered Support Systems, ex-Controller Steven Landmann, pleaded guilty March 16 under a plea agreement to one count of making false statements in a filing to the SEC. At the time, Landmann said he had acted on orders from unidentified senior executives.
In his plea, Landmann said the executives told him to set the price of stock options not on the dates they were issued but on a date when the prices were lower.
