The SEC sued a former California Amplifier controller, accusing h...
The SEC sued a former California Amplifier controller, accusing him of accounting fraud and insider trading, in inflating the company’s earnings during the 12 months to Nov. 2000. Richard Kusatzky allegedly concealed $5 million in manufacturing expenses to inflate…
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California Amplifier’s profit during fiscal years 2000 and 2001 by $7.83 million, the SEC said. A total of $8.61 million of pre-tax income was overstated during that period. California Amplifier -- a major supplier of LNBs and reflector dishes to EchoStar and DirecTV -- settled a separate administrative case alleging that it didn’t have enough accounting controls. Kusatzky, who was controller Jan. 1997- March 2001, is accused of profiting by exercising all his vested options in California Amplifier and selling 15,000 shares of stock, the SEC said. Kusatzky’s trading helped him avoid more than $350,000 in losses, according to the suit filed in U.S. Dist. Court, D.C. In fiscal 2000, Kusatzky hid $5.9 million in expenses, causing California Amplifier to report a profit when it actually incurred a loss, the SEC said. For the next 3 quarters of fiscal 2001, Kusatzky concealed another $1.9 million in expenses. Kusatzky’s alleged fraud wasn’t detected because California Amplifier lacked adequate internal controls, the SEC said. California Amplifier issued financial statements generated from a spreadsheet that Kusatzky maintained separately from the company’s accounting system, the SEC said. Once Kusatzky reduced expense figures on the spreadsheet, he could falsify California Amplifier’s financial statements filed directly with the SEC, the agency said. California Amplifier officials and Kusatzky weren’t available for comment. Meanwhile, California Amplifier said first-quarter net income improved to $3 million from $1 million, as revenue soared to $41.6 million from $26.1 million on strong sales of DBS components to EchoStar and DirecTV. Materials costs have risen in recent weeks for California Amplifiers’ LNBs and reflector dish, partly because steel prices have doubled, CEO Frederick Sturm said. To broaden its business -- 96% of revenue is satellite-related -- California Amplifier seeks to expand into the Wi-Fi market. Recently acquired Vytek will oversee California Amplifier’s wireless business and has 3-4 “product opportunities” including those for in-flight entertainment and Wi-Fi-equipped vending machines, Sturm said. California Amplifier will start a beta test this month with its raster enhanced access point product for 802.11 wireless, he said.