Bradley Stinn – Saint or Sinner? The CEO’s Role in Freidman’s Jewelers Collaspe…

April 5, 2008

Written in an earlier blog reporting Freidman’s former CEO’s conviction, I stated, “Following six weeks of trial – Bradley Stinn, age 47, – former CEO of Freidman’s, Inc. and Crescent Jewelers, found himself being convicted of securities fraud, mail fraud and conspiracy. Likewise, in addition to Stinn’s conviction, the former CFO, Victor Suglia and form Controller, John Mauro have entered guilty pleas into what was a massive accounting fraud.”

The facts seemed clear and a jury found Mr. Stinn guilty. But, as with any indictment, trial and verdict there seem to be multiple perspectives. Here are some comments made on the first blog that taken together have me confused. The question is – what is the truth? Take a look:

“All I have to say is that you have no clue what you are talking about about Brad Stinn. Yes it is true that the CFO, Victor Suglia, pleaded guilty to accounting fraud. The truth is that Mr. Suglia pointed to Mr. Stinn in order to reduce his own sentence. Mr. Stinn’s only fault has been to hire a crook CFO – nothing else.”

Now for the life of me, I can’t get my arms around how a jury can find the former CEO Stinn guilty and the person posting this comment so clueless? What does this person know that the jury didn’t? Perhaps facts can be shared with us to help those of us who don’t know Bradley Stinn – better know why a mistake was made! But here’s another comment:

“BRADLEY STINN IS N O T G U I L T Y.”

And yet another comment about Mr. Stinn’s character:

“Brad Stinn is a man of integrity, a great father to his children and husband to his wife. My thoughts and prayers are with his family.”

According to Wikipedia – Integrity – is defined as follows: “Integrity is the basing of one’s actions on an internally consistent framework of principles. Depth of principles and adherence of each level to the next are key determining factors. One is said to have integrity to the extent that everything one does and believes is based on the same core set of values.”

I do not doubt that Mr. Stinn is a wonderful person, husband and father. I was as well, yet I went to prison for lack of integrity – for an ethics failure. If the true principles of a CEO are to honestly run the company in compliance with the law for the best interest of the shareholders, then I would question Mr. Stinn’s integrity. He was convicted for running his company in what he thought might have been the best interests of the shareholders, but he was found guilty for doing that while breaking the law! That is not an example of integrity – is it?

Another posting from the former blog stated the following:

“Are you kidding me? These people are offering sympathy for this man? His fraudulant behavior threw the already troubled company into a talespin. Then enter the next set of crooks. These people made six figures on the hard work of peons like me. I made $10.50 an hour…I worked 14-16 hour days(most times with no break). Forgive me if I feel no sympathy for him. He lied. Bottom line. The evidence proved this. I hope his sentence is harsh and I hope more execs end up before a judge. I worked for this company for years and the higher ups (always thinking of their own gain) sold all of us out…with NO warning. Theft is theft…white collar is just a “more pleasant” was of putting it.”

Hum…well this person is obviously disgruntled and I can understand why. Part of what is said is true. Here’s a reality check – lying about your numbers is lying and knowledge that you’re lying is criminal.

The final comment thus far was the most telling. The question for anyone who might have been on the jury would have been – did he know and did he condone? Here’s what this poster had to say:

“I was not “at the top” but worked with those people, trust me Brad knew every detail of every stores P&l and directed all charge offs etc. Nothing happened without not only his knowledge but his direction.”

This last comment, if true, would clearly support why Mr. Stinn was convicted. Every choice you make has a consequence. As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences. Reality is – no one escapes the consequences of their choices. While Stinn may have looked good hitting the numbers for a time and avoided the consequences – he did not avoid the consequences all together. Prison is no fun and Stinn is facing 25 years for his conviction. Likely he will serve time and that will prove to be a dramatic change from his prior activities.

You do reap what you sow.

If anyone reading has any background on Stinnfeel free to comment.


Friedman’s Jewelers CEO Bradley Stinn – GUILTY – Accounting Fraud Scheme! Comments by White Collar Crime Speaker Chuck Gallagher

March 27, 2008

Pump up those sales! We’ve got to make the quarter! How often are those command heard and how tempting is it to make the wrong choices in order to please the investing public and Wall Street?

Following six weeks of trial – Bradley Stinn, age 47, – former CEO of Freidman’s, Inc. and Crescent Jewelers, found himself being convicted of securities fraud, mail fraud and conspiracy. Likewise, in addition to Stinn’s conviction, the former CFO, Victor Suglia and form Controller, John Mauro have entered guilty pleas into what was a massive accounting fraud.

friedmans-jewelers-store.jpg

So what happened? According to the US Attorney’s news release:

During the period of the conspiracy, Friedman’s was the third largest specialty retailer of fine jewelry in the United States, operating 686 stores in 20 states. The government’s proof at trial established that Friedman’s encouraged its sales personnel to increase sales by inducing customers to finance their jewelry purchases using the company’s installment credit program, which was used to finance more than half of Friedman’s $400 million in annual net sales. A major aspect of the fraud scheme was concealing that Friedman’s was increasingly unable to collect money owed by customers who bought jewelry on credit. Friedman’s collection problems stemmed from the company’s widespread failure to follow its own credit-granting guidelines – guidelines that STINN falsely told investors were strictly enforced. In fact, STINN and other senior executives encouraged routine violations of the guidelines to increase the company’s reported sales.

To cover up the collection problems, STINN caused Friedman’s quarterly reported credit statistics to understate the delinquency of its credit portfolio, and caused Friedman’s to report false earnings numbers. In some cases, the false earnings reported by Friedman’s met or exceeded the public estimates of professional stock analysts, and resulted in the artificial inflation of Friedman’s stock price.

Between November 2003 and May 2004, Friedman’s stock price lost more than half its value. On November 11, 2003, the stock closed at $11.99 per share. On May 6, 2004, the New York Stock Exchange halted trading in Friedman’s stock, at which time the stock was trading at $4.97 per share. On January 14, 2005, Friedman’s filed for Chapter 11 bankruptcy.

Stinn’s lawyer, David Shapiro, confirmed the verdict. “We’re obviously very disappointed,” Shapiro said. “We think it was against the weight of the evidence. We think that there were some significant appeal issues in the case, and we are going to pursue an appeal.”

Was the pressure of financial performance so great that you would jeopardize your freedom and life to hit the numbers?

Every choice has a consequence. As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences. Reality is – no one escapes the consequences of their choices. While Stinn may have looked good hitting the numbers for a time and avoided the consequences – he did not avoid the consequences all together. Prison is no fun and Stinn is facing 25 years for his conviction. Likely he will serve time and that will prove to be a dramatic change from his prior activities. You do reap what you sow.

If anyone reading has any background on Stinn – feel free to comment as I study the behaviors and backgrounds of those convicted of white collar crime.

White Collar Crime Speaker – Chuck Gallagher – signing off…

 


Chuck Norris’ Kickstart Foundation Former CEO James Brasher – Guilty! Comments By White Collar Crime Speaker Chuck Gallagher

January 28, 2008

Every choice has a consequence! Unfortunately James D. Brasher, age 47, is finding that out too well. As the former Chief Executive Officer of Chuck Norris’ Kickstart Foundation, Brasher has plead guilty to uttering a forged security. In layman’s terms – he took money from the foundation.039_20147chuck-norris-posters1.jpgAccording to the US Attorney’s office news release:

Brasher pleaded guilty before U.S. District Judge Keith P. Ellison, Thursday, Jan. 24, 2008. According to the factual basis recited in court during the hearing, Brasher confessed to opening bank accounts in names similar to that of Norris’ foundation. As donation checks to the foundation were received at headquarters, Brasher would fraudulently endorse them and deposit them to the accounts under his control. The checks included one from the Hugh Hawthorne Foundation in the amount of $30,000 and one from the Mitchell Foundation in the amount of $100,000. Both checks were intended as gifts to the Chuck Norris charity. Instead, Brasher used some of the money for paying debts and living expenses.

Brasher faces a maximum sentence of up to ten years imprisonment, a fine of $250,000 and a three-year-term of supervised release. Ellison has scheduled sentencing for April 10, 2008.

As a former convicted felon (not something I am proud of), I know where Brasher is headed. Some call it “Club Fed”. I can say from personal experience, it is fed, but there is no “club” about it. Life in prison is hard – even if you are placed in a minimum security facility. Brasher will have time, however, to think – realizing that the short-term benefit he thought he received from his theft will be far outweighed by the consequence he will face now and following for the rest of his life for his poor choices.

As I speak to groups about white collar crime and prevention techniques, it is clear that Brasher fit a classic pattern: (1) need; (2) opportunity and (3) rationalization. My guess is that Brasher had a need due to debt (perhaps excessive although I can’t say that as a fact) and opportunity due to his position of trust within the foundation. Internal controls would likely have prevented what may have been an otherwise, honest man, from exploiting a character flaw.

As I started with – Every choice has a consequence – perhaps Brasher will leave prison in years to come with an understanding of that fact and help others in some way. For now, he will soon experience the opposite of his role as CEO – likely he’ll be cleaning toilets in some federal prison, all the while being given time to think.