ST. PAUL, Minn. (AFX) - Federal prosecutors snared on Tuesday what is believed to be their first conviction under a fraud law requiring corporate chiefs to swear to the accuracy of their financial results.
Prosecutors accused Joseph P. Micatrotto, 54, former chief executive officer of restaurant chain Buca Inc., of getting a vendor to pay him $65,000 so he could pay off a debt from a failed restaurant. Authorities have alleged the vendor got the money back by inflating one of its bills to Buca.
Prosecutors charged Micatrotto, 54, with wire fraud because he failed to disclose the $65,000 payment on Buca's 10K filing with the Securities and Exchange Commission.
Sarbanes-Oxley, enacted during a 2002 wave of corporate scandals, stiffened penalties for corporate fraud and required CEOs and chief financial officers to personally certify in writing the accuracy of company financial statements.
'The message we want to send is that financial certification requirements mean what they say, and if you're a CEO or a CFO and you violate that, expect to be prosecuted for that,' said Assistant U.S. Attorney Hank Shea.
Former Healthsouth Corp. CEO Richard Scrushy had been the first person charged with violating Sarbanes-Oxley, but he was acquitted in June 2005.
Federal and state authorities have made a series of allegations about questionable financial dealings at Buca under Micatrotto, who was fired by the company's board in May 2004.
The SEC had accused Micatrotto of civil securities fraud, which he agreed to settle by paying a $500,000 fine.
The SEC said Micatrotto had the company buy an Italian villa in his name and then improperly reimbursed him for remodeling his homes in California, Las Vegas and Minneapolis, the groom's dinner at his son's wedding, airline tickets and dog kenneling. The compensation was not disclosed to shareholders as an expense for the company, the SEC said.
Micatrotto's attorney, Jon Hopeman, said Micatrotto repaid some $600,000 to the company in 2004, as soon as they alleged that he had received money improperly.
Former Buca chief financial officer Greg Gadel and John Motschenbacher, who held several positions at Buca, are both expected to plead guilty later this week, the U.S. Attorney's Office said.
The complaint against them alleges that between 2001 and 2004, they used more than $54,000 of Buca's money to pay for 'adult entertainment' on business trips. The spending included a $19,017 charge -- including a $5,000 tip -- on Gadel's credit card at a strip club, according to the charges.
To pay the charges, the complaint alleges that Gadel had Buca give him $30,000, purportedly to cover costs for a business conference.
The complaint said Motschenbacher received $25,000 in company money for 'consulting services,' $10,000 in cash, and personal use of a Chevrolet Tahoe SUV that Buca paid for by way of an inflated invoice from a vendor.
Buca operates 104 mid-scale family-style Italian restaurants under the name Buca di Beppo and Vinny T's in 28 states. Directors installed new executives after the allegations surfaced, and they have been trying to revive the chain, which lost $32.1 million last year.
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