Two more former high-level executives at Charlotte-based cleaning company Swisher Hygiene have been charged in connection with an accounting fraud case, according to a federal indictment filed Monday.
Michael Kipp, Swisher’s former chief financial officer, and Joanne Viard, the company’s former director of external reporting, both face multiple charges. Kipp, 61, is charged with conspiracy to defraud the U.S., wire fraud, securities fraud and bank fraud, as well as obstruction of justice. Viard, 36, is charged with conspiracy to defraud the U.S., wire fraud, securities fraud and obstruction of justice.
Kipp’s attorney couldn’t immediately be reached late Monday. Viard didn’t have an attorney listed in federal records, and could not be reached by phone. St. Joe Company, a Florida real estate firm, said in a securities filing that Viard resigned on Friday for personal reasons.
Earlier this month, federal prosecutors said Swisher had agreed to accept responsibility and pay a $2 million fine for a long-running scheme to make its results appear better than they really were by hiding losses and inflating profits. A former senior accounting official, John Pierrard, agreed to plead guilty to fraud charges.
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Kipp and Viard are scheduled to make their initial appearance in federal court in Charlotte on Tuesday.
“Today’s charges continue to make clear that regardless of title or position, my office will prosecute corporate executives who engage in financial fraud schemes that defraud the investing public and undermine the integrity of our financial markets,” said U.S. Attorney for the Western District of North Carolina Jill Rose, in a statement. “We will work diligently to uncover such fraud, no matter how pernicious the cover-up.”
John Strong, special agent in charge of the FBI’s Charlotte division, said Kipp and Viard deceived shareholders.
“They manipulated and falsified the numbers putting the hard earned money of shareholders at risk and undermining the laws in place to protect our financial markets,” said Strong, in a statement.
The charges carry potential prison terms of between five and 30 years.
Swisher, a provider of janitorial and cleaning-supply services, is being acquired by Ecolab in a $40 million deal. The company has been dogged by allegations of financial wrongdoing since 2012, when the fast-growing company said that it was conducting an internal investigation of its accounting practices after a former employee raised concerns. Swisher’s stock plunged and investors filed suit.
Kipp, the former CFO, was fired in 2012 as part of the probe, Swisher said. According to the federal indictment, Kipp, Viard, Pierrard and other employees who haven’t been charged used a variety of tricks to juice the company’s earnings in order to hit predetermined target numbers.
For example, the company allegedly used “cookie jar” accounting, inflating reserves of other companies it acquired and then drawing those reserves down to inflate earnings. Prosecutors say the company also took expenses that should have been booked on the profit-and-loss sheet and moved them to Swisher’s balance sheet, fraudulently reducing its reported expenses.
According to prosecutors, Kipp emailed Viard on Oct. 15, 2011, and said “I need to get about $300k in expense reductions.”
Viard responded with ideas of accounting items they could adjust, prosecutors said, and wrote back that “As long as the changes aren’t material, I wouldn’t need to disclose.” They reduced an accounting charge by $500,000, prosecutors charge, inflating earnings by the same amount.
Later that same day, Kipp emailed Viard again, prosecutors said, to tell her they would be able to make their earnings target.
“Here is the sum of my handy work for the day. I think if we can make all these stick, we can make it to the forecast of $3.5 million,” prosecutors say Kipp wrote.
Observer researcher Maria David contributed.