Source: https://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db5
Timestamp: 2018-01-20 18:05:55
Document Index: 611700630

Matched Legal Cases: ['§ 7243', '§ 7202', '§ 78', '§ 78', '§ 7202', '§ 77', '§ 78', '§ 240', '§ 77', '§ 78', '§ 240', '§210', '§ 7243', '§ 7243', '§ 7243', '§ 7243', 'arty 895', '§ 7243']

SEC Complaint against Maynard L. Jenkins | SEC v. Maynard L. Jenkins | Doug Cornelius - JDSupra
SEC Complaint against Maynard L. Jenkins
The SEC's enforcement action charges Maynard L. Jenkins of Scottsdale, Ariz., with violations of Section 304 of the Sarbanes-Oxley Act of 2002. It is the first action seeking reimbursement under Section 304 from an individual who is not alleged to have otherwise violated the securities laws. Section 304 deprives corporate executives of money that they earned while their companies were misleading investors.
According to the SEC's complaint, Jenkins made $2,091,020 in bonuses and $2,018,893 in company stock sales that should have been reimbursed to CSK pursuant to Section 304.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 1 of 17 DONALD W. SEARLES, California Bar No. 135705 E-mail: searlesd@sec.gov LORRAINE B. ECHAVARRIA, California Bar No. 191860E-mail: echavarrial@sec.gov ROBERT H. CONRRAD, California Bar No. 199498 E-mail: conrradr@sec.gov C. DABNEY O’RIORDAN, California Bar No. 205158 E-mail: oriordand@sec.gov Attorneys for Plaintiff Securities and Exchange Commission Rosalind R. Tyson, Regional Director Michele Wein Layne, Associate Regional Director 5670 Wilshire Boulevard, 11th Floor Los Angeles, California 90036-3648 Telephone: (323) 965-3998 Facsimile: (323) 965-3908 UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA SECURITIES AND EXCHANGE COMMISSION, Plaintiff, vs. MAYNARD L. JENKINS, Defendant. Case No. COMPLAINT FOR VIOLATIONS OF SECTION 304 OF THE SARBANESOXLEY ACT OF 2002 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 1 of 17 W. SEARLES, California Bar No. 135705 searlesd@B. ECHAVARRIA, California Bar No. 191860 California Bar No. 199498 O’RIORDAN, California Bar No. 205158 STATES DISTRICT COURT OF ARIZONA EXCHANGE FOR VIOLATIONS OF 304 OF THE SARBANES-OXLEY ACT OF 2002 L. JENKINS, Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 2 of 17 Plaintiff Securities and Exchange Commission (the “Commission”) alleges as follows: SUMMARY 1. By this action, the Commission seeks an order from this Court, pursuant to Section 304 of the Sarbanes-Oxley Act, requiring Maynard L. Jenkins, former chairman and chief executive officer of CSK Auto Corporation (“CSK”), to reimburse CSK for all of his bonuses and other incentive-based and equity-based compensation, and all of his profits realized from his sale of CSK stock, during the 12-month period following the issuance of CSK’s financial statements contained in its annual reports for fiscal years 2002, 2003 and 2004, all of which were required to be restated, not once, but twice, as a result of CSK’s fraudulent conduct. 2. During a substantial portion of Jenkins’ decade-long tenure as chairman and chief executive officer of CSK, CSK was engaged in a pervasive accounting fraud, which involved many of its most senior officers, that resulted in CSK filing fraudulent financial statements in its annual reports for fiscal years 2002, 2003 and 2004, all of which Jenkins signed. 3. During the period at issue, CSK was one of the largest specialty retailers of automotive parts and accessories in the United States. As a retailer of automotive products, CSK purchased products from vendors that manufacture automotive parts and accessories. From at least fiscal years 2002 through 2004, a significant portion of CSK’s income was derived from allowances it received from its vendors. Vendor allowances are used to provide retailers, such as CSK, with financial support to market the vendor’s products. In general, CSK accounted for vendor allowances by reducing its costs of goods sold. Thus, the more vendor allowances CSK earned, the lower its costs of goods sold, resulting in greater reported pre-tax income. During the fiscal years at issue, CSK’s accounting of its ///1 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 2 of 17 Securities from Oxley Act, requiring officer (“CSK”), all of his bonuses based compensation, and all of his profits the issuance statements 2004, all not once, but twice, a result of CSK’s a of Jenkins’ decade-tenure CSK, CSK was engaged fraudulent financial statements its annual years the at in the United States. of CSK’s income was derived allowances received Vendor allowances are CSK, general, the years Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 3 of 17 vendor allowances were vital to CSK’s financial results, and served to increase its reported pre-tax income by tens of millions of dollars each fiscal year. 4. During fiscal years 2002, 2003, and 2004, CSK knew that there were millions of dollars of uncollectible vendor allowance receivables recognized in its financial statements. Rather than write off the uncollectible receivables, as required by Generally Accepted Accounting Principles (“GAAP”), CSK engaged in a scheme to hide the uncollectible receivables through various accounting tricks. In addition, during fiscal year 2003, CSK over-recognized millions of dollars of vendor allowances. 5. If CSK had written off the uncollectible vendor allowances, it would have increased the company’s expenses and decreased its income. Because CSK concealed its uncollectible vendor allowances, CSK’s required periodic reports filed with the Commission failed to comply with financial reporting requirements under the securities laws, misled the public about the company’s financial performance, and materially overstated its pre-tax income as follows: (a) by at least 47%, or $11 million, for fiscal year 2002; (b) by at least $34 million, thereby falsely reporting pre-tax income instead of an actual loss, for fiscal year 2003; and (c) by at least 65%, or $21 million, for fiscal year 2004. 6. As a result of CSK’s fraudulent conduct and material noncompliance with its financial reporting requirements under the securities laws it was required to prepare not one, but two accounting restatements. CSK filed its first restatement as part of its Form 10-K annual report for fiscal year 2004 (the “First Restatement”), which Jenkins signed. As part of the First Restatement, CSK reduced its previously recognized vendor allowances for fiscal years 2002, 2003, and the first three quarters of fiscal year 2004, but failed to properly account for, and write-off all known, uncollectible vendor allowance receivables. The First Restatement also falsely attributed the vendor allowance adjustments to mere ///2 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 3 of 17 financial results, and served of years of dollars of uncollectible vendor allowance receivables the uncollectible receivables, CSK engaged uncollectible In addition, during fiscal year 2003, CSK over-recognized millions of had off the uncollectible vendor allowances, would decreased its income. its the Commission failed to comply with financial reporting requirements laws, misled public company’s materially its pre-tax income as follows: million, year thereby instead 21 million, year non compliance reporting requirements not one, but two accounting restatements. CSK filed part of its Restatement”), Jenkins As part of the First Restatement, of all known, uncollectible vendor allowance receivables. The Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 4 of 17 errors in estimates and bookkeeping mistakes rather than to CSK’s fraudulent conduct. 7. After additional accounting irregularities came to light, CSK announced on March 27, 2006, that it was conducting a special investigation relating to, among other things, vendor allowance accounting irregularities. On May 1, 2007, CSK filed its Form 10-K for fiscal year 2005 restating, for the second time, its financial statements for 2002, 2003, and 2004 due, in part, to the fraudulent scheme relating to CSK’s failure to write off uncollectible vendor allowances (the “Second Restatement”). Jenkins signed the Form 10-K for fiscal year 2005. 8. During the 12-month periods following the issuance of CSK’s 2002, 2003, and 2004 Forms 10-K (i.e., from May 5, 2003 to May 2, 2005) Jenkins received over $2 million in compensation from CSK in the form of bonuses and other incentive-based and equity-based compensation. During that same period, Jenkins also realized over $2 million in profits from the sale of CSK securities. 9. Jenkins is required by Section 304 of the Sarbanes-Oxley Act of 2002, 15 U.S.C. § 7243 (the “Act”), to reimburse CSK his bonuses and other incentive-based and equity-based compensation as well as the profits he realized from his sale of CSK securities during the relevant period. To date, Jenkins has not complied, and has refused to comply, with the reimbursement requirements of Section 304. JURISDICTION AND VENUE 10. This Court has jurisdiction over this action pursuant to Section 3(b) of the Act, 15 U.S.C. § 7202(b), and Sections 21(d), 21(e), and 27 of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d), 78u(e) & 78aa. 11. Venue is proper in this district pursuant to Section 27 of the Exchange Act, 15 U.S.C. § 78aa, because Jenkins resides within this district and certain of the transactions, acts, practices and courses of conduct constituting 3 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 4 of 17 bookkeeping rather than to CSK’s accounting came CSK allowance accounting irregularities. its Form 10-K for fiscal year 2005 restating, for the statements relating to CSK’s uncollectible vendor Restatement”). the Form 10-K the issuance Forms 10-K compensation in the form of bonuses compensation. realized over $2 million the Oxley Act to reimburse CSK his bonuses based well To date, Jenkins to comply, AND VENUE S.C. § 7202(b), and Act 15 S.78aa. Jenkins resides within of conduct constituting Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 5 of 17 violations of the federal securities laws alleged in this Complaint occurred within this district. THE DEFENDANT 12. Maynard L. Jenkins, age 66, is a resident of Scottsdale, Arizona and served as CSK’s chief executive officer and chairman of the board from January 1997 until his retirement in August 2007. RELATED PARTIES 13. CSK was a Delaware corporation with its principal executive offices in Phoenix, Arizona. CSK became a publicly traded company in March 1999, and its common stock was registered with the Commission pursuant to Section 12(b) of the Exchange Act and listed on the New York Stock Exchange. As of January 30, 2005, it operated 1,134 stores in nineteen states under three brand names: Checker Auto Parts, Schucks Auto Supply, and Kragen Auto Parts. In 2008, after the conduct at issue, CSK became a wholly-owned subsidiary of O’Reilly Automotive, Inc. 14. Based on the underlying fraudulent conduct summarized herein, on May 26, 2009, the Commission instituted settled cease-and-desist proceedings against CSK that found that CSK, which neither admitted nor denied the Commission’s findings, had violated Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a), and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, 15 U.S.C. §§ 78j(b), 78m(a), 78m(b)(2)(A) & 78m(b)(2)(B), and Rules 10b-5, 12b-20, and 13a-1 thereunder, 17 C.F.R. §§ 240.10b-5, 240.12b-20 & 240.13a-1. Among other things, the Commission ordered CSK to cease and desist from committing or causing any violations and any future violations of those provisions. 15. Martin G. Fraser was CSK’s chief operating officer and president from 2000 until September 2006, when he resigned at CSK’s request. On March 12, 2009, the Commission filed its first amended complaint in the District of 4 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 5 of 17 in this Complaint within DEFENDANT L. Jenkins, age 66, is a resident of Scottsdale, as CSK’s chief until PARTIES CSK became traded 1999, New January operated stores nineteen states Auto Kragen Auto issue, CSK became a wholly-owned subsidiary of O’Reilly underlying instituted settled cease-had Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(Act, 78j(78m(b)(2)(B), and 240.13a-Among other things, the Commission ordered CSK to cease G. Fraser was CSK’s chief operating officer and president September at CSK’s Commission filed complaint Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 6 of 17 Arizona against Fraser, alleging, among other things, that by participating in the underlying fraudulent conduct summarized herein, Fraser had violated Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a), and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, 15 U.S.C. §§ 78j(b), 78m(a), 78m(b)(2)(A) & 78m(b)(2)(B), and Rules 10b-5, 12b-20, and 13a-1 thereunder, 17 C.F.R. §§ 240.10b-5, 240.12b-20 & 240.13a-1. SEC v Fraser, et al, CV 090443PHX-GMS. In addition, based on the underlying fraudulent conduct, the U.S. Department of Justice named Fraser as a defendant in a 31-count indictment, filed on April 7, 2009, in the District of Arizona. United States v. Fraser, et al., CR 09372 PHX SRB LOA. 16. Don W. Watson was CSK’s chief financial officer, senior vice president, and treasurer from January 1998 to September 2005. Watson served as CSK’s chief administrative officer and senior vice president from September 2005 to his termination in October 2006. Watson is also named as a defendant in the Commission’s March 12 action and in the Department of Justice’s indictment. 17. Edward W. O’Brien was CSK’s controller and vice president from March 2003 until his termination in September 2006. O’Brien is also named as a defendant in the Commission’s March 12 action. On April 7, 2009, O’Brien pled guilty to obstruction of justice, in connection with the investigation conducted by the U.S. Department of Justice of the underlying fraudulent conduct. 18. Gary M. Opper was CSK’s director of credit and receivables, reporting to O’Brien, from March 17, 2003 until he was terminated in September 2006. Opper is also named as a defendant in the Commission’s March 12 action. On April 15, 2009, Opper pled guilty to obstruction of justice, in connection with the investigation conducted by the U.S. Department of Justice. /////////5 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 6 of 17 things, by conduct summarized 1933, S.§ a), and B) of the Exchange S.& 78m(b)(2)(B), and Rules 10b-5, 12b-20, and 13a-1 thereunder, 20 & 090443 PHX-In addition, based on the underlying fraudulent conduct, as a defendant in a 31-count indictment, filed 7, 2009, the of Arizona. United States v. Fraser, et al., CR 09 372 Watson was CSK’s chief financial officer, senior vice Watson served administrative officer and senior vice president from September October 2006. Watson is also named as W. O’Brien was CSK’s controller and vice president from in September O’Brien is also named as in Commission’s 7, 2009, O’Brien pled to obstruction justice, in connection with the investigation conducted M. Opper was CSK’s director of credit and receivables, from March 17, 2003 until he was terminated in September Opper is also in the Commission’s 15, 2009, to obstruction of justice, in connection with Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 7 of 17 BACKGROUND: CSK’S “LET’S WORK TOGETHER” PROGRAM 19. Although CSK had various vendor allowance programs, its largest was its “Let’s Work Together” program (“LWT”). Typically, LWT agreements covered a one-year period, which CSK referred to as the “program year.” Although the LWT agreements varied, CSK generally earned LWT allowances at a set dollar amount, as a percentage of the amount CSK spent to purchase the vendor’s product, or as a certain number of cents per item CSK purchased from the vendor. 20. CSK recognized LWT allowances ratably, on a monthly basis, based on its estimate of the total allowances it expected to earn for the entire program year. In theory, CSK’s estimate was based on the LWT agreements and CSK’s expected purchases from its vendors. As CSK recognized LWT allowances for a given program year, it increased the LWT account receivable for that program year. Each LWT program year had its own account receivable. As CSK collected LWT allowances for a particular program year, GAAP required that CSK reduce the outstanding receivable for that same LWT program year. SUMMARY OF CSK’S FRAUDULENT SCHEME I. The Fraudulent Scheme To Avoid Vendor Allowance Write Offs. 21. During fiscal years 2002, 2003, and 2004, CSK was unable to collect all of the vendor allowances it had recognized. As a result, large accounts receivable built up for each LWT program year. 22. GAAP required that CSK write off the uncollectible LWT accounts receivable. Specifically, under Statement of Financial Accounting Standards No. 5 (“SFAS No. 5”), Accounting for Contingencies, Paragraph 8, an estimated loss from a loss contingency shall be accrued by a charge to income if: (a) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired at the date of the financial statements; and (b) the amount of the loss can be reasonably estimated. SFAS No. 5, Paragraph 3 defines 6 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 7 of 17 CSK’S “LET’S WORK TOGETHER” PROGRAM CSK had Together” program (“LWT”). Typically, LWT agreements year period, which the “agreements allowances ratably, on a monthly basis, based In theory, CSK’s estimate was based agreements purchases from its vendors. As LWT program year allowances a program required LWT OF CSK’S FRAUDULENT SCHEME Scheme To Avoid Vendor Allowance Write Offs. years As a result, large accounts off the uncollectible LWT accounts under Statement Standards 5”), Accounting for Contingencies, Paragraph 8, an estimated by a charge to income if: (a) information issuance statements had been impaired at the date of the financial estimated. Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 8 of 17 “probable” to mean that the future event or events are likely to occur. SFAS No. 5, Paragraph 4 states that examples of loss contingencies include collectibility of receivables. A write-off of the uncollectible LWT allowance receivables would have increased CSK’s expenses during the fiscal year the write off was made, resulting in a decrease in pre-tax income. 23. Instead of writing off CSK’s uncollectible LWT accounts receivable and taking the requisite reduction to pre-tax income, CSK concealed its uncollectible LWT accounts receivable by: (a) applying millions of dollars of LWT allowances earned and collected for later LWT program years to prior LWT program year accounts receivable (referred to within CSK as “filling the bucket”); and (b) incorrectly accounting for millions of dollars of LWT allowances it paid back to vendors. Through this scheme, CSK avoided writing off tens of millions of dollars in uncollectible LWT receivables, which it had previously recognized. 24. CSK “filled the bucket” by taking LWT allowances collected for later program years and applying them to reduce an earlier LWT program year’s account receivable. Specifically, CSK: (a) made baseless journal entries reducing the account receivable for a prior LWT program year with an offsetting increase to the account receivable for a later LWT program year; and (b) applied LWT allowance collections for a later LWT program year to an earlier program year’s LWT account receivable. 25. CSK also failed to write off LWT allowances it had over-collected for prior LWT program years and ultimately paid back to its vendors. Instead of writing off amounts CSK paid back, which would have reduced its pre-tax income, CSK increased a later LWT program year’s account receivable, making it appear that it had collected an older account receivable when all CSK had done was move the outstanding receivable balance to a more recent year. This accounting treatment was contrary to GAAP because, by paying an amount back to a vendor ///7 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 8 of 17 to mean are likely to occur. 4 states that examples of loss contingencies include collectibility write-off of the uncollectible LWT allowance receivables would CSK’s during the fiscal a CSK’s uncollectible LWT accounts receivable accounts (a) applying millions of dollars of allowances collected for later LWT to prior receivable (referred to within CSK as “filling of dollars of LWT allowances it paid CSK writing LWT receivables, which it had previously recognized. filled the bucket” by taking LWT allowances collected for applying an earlier LWT CSK: (a) made baseless for prior an increase receivable for a later LWT (b) applied LWT program year account LWT allowances it had over-collected LWT program years paid back Instead off amounts CSK paid back, which would have reduced appear had to more recent year. because, Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 9 of 17 for a prior LWT program year, CSK acknowledged its uncollectibility and should have written off the amount. A. Fiscal Year 2002 26. During its 2002 fiscal year, CSK failed to write off approximately $11 million of uncollectible vendor allowances it had recognized in previous years, most significantly as part of the 2001 LWT program year. Instead of writing off the uncollectible vendor allowances, CSK: (a) made improper journal entries moving approximately $6 million of collections for the 2002 LWT program to the 2001 LWT account receivable; (b) misapplied paybacks of approximately $3 million to the 2002 LWT receivable; and (c) reached an agreement whereby a vendor agreed to accept an invalid $2 million debit memo for the 2001 LWT program year in exchange for CSK not collecting $2 million in allowances earned as part of the 2002 and 2003 LWT program years. As a result, in its Form 10-K filed on May 5, 2003, CSK materially overstated its pre-tax income by approximately $11 million, or 47%. At the time of that filing, CSK knew, or was reckless in not knowing, that it had failed to write off uncollectible vendor allowances and over recognized allowances, and that, as a result, CSK’s financial statements were materially misstated. B. Fiscal Year 2003 27. During its 2003 fiscal year, CSK failed to write off approximately $24 million in uncollectible vendor allowances recognized during previous LWT program years, primarily as part of the 2002 LWT program year. Moreover, CSK improperly and prematurely recognized $6 million in vendor allowances and improperly recognized an additional $4 million of LWT allowances. As a result, in its Form 10-K filed on April 15, 2004, CSK overstated its 2003 pre-tax income by approximately $34 million, turning its actual pre-tax loss of approximately $18 million into purported pre-tax income of $16 million. At the time of that filing, CSK knew, or was reckless in not knowing, that it had failed to write off ///8 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 9 of 17 program year, acknowledged and should Fiscal Year 2002 off approximately $11 of uncollectible vendor allowances it had recognized in previous years, as program Instead writing off the of collections for the 2002 LWT program to the 2001 LWT of approximately 3 million receivable; and (c) reached an agreement a agreed debit memo for the 2001 LWT program year in exchange CSK in allowances earned 2003 LWT on May 5, 2003, CSK materially its pre-tax income by approximately $11 million, At the time of CSK knew, or was had off vendor allowances and over recognized allowances, and that, as statements Fiscal Year 2003 off approximately $24 in uncollectible vendor allowances recognized primarily of 2002 LWT in vendor allowances of LWT allowances. As a result, in on April 15, 2004, CSK overstated its 2003 pre-turning its actual pre-tax loss $18 into purported pre-tax income of $16 million. At the time of that filing, in not knowing, Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 10 of 17 uncollectible vendor allowances and over recognized allowances, and that, as a result, CSK’s financial statements were materially misstated. 28. During fiscal year 2003, CSK hid approximately $24 million in uncollectible vendor allowance receivables. First, CSK applied about $10 million in 2003 LWT program year collections to the 2002 LWT program year receivable. Second, CSK failed to write off approximately $5 million in vendor allowances CSK had over-collected during prior LWT program years but had to pay back during fiscal year 2003. Third, CSK made a baseless journal entry decreasing the 2002 LWT receivable by $9 million and increasing the 2003 LWT receivable by the same amount, which reduced the 2002 LWT receivable to zero. 29. During the fourth quarter of 2003, CSK prematurely recognized approximately $6 million in additional vendor allowances. CSK did this by having vendors sign agreements making it appear that CSK had earned additional LWT allowances during 2003, when, in fact, those allowances would be earned, if at all, based on purchases made during 2004. 30. At the end of fiscal 2003, CSK obtained approximately $4 million of additional warranty allowances from two vendors. At that same time, CSK had a warranty deficit of approximately $13 million, which represented returns from customers covered by warranties in excess of the warranty accrual recorded by CSK. Under GAAP, a warranty deficit should be written off unless additional warranty allowances are obtained to cover the deficit. However, instead of applying the $4 million of additional warranty allowances to offset a portion of its warranty deficit balance, CSK improperly recognized those warranty allowances as additional LWT allowances. C. Fiscal Year 2004 31. During fiscal year 2004, CSK failed to write off known, uncollectible vendor allowances totaling approximately $21 million. Specifically, CSK: (a) applied approximately $11 million in 2004 LWT program year 9 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 10 of 17 vendor allowances and over recognized allowances, and that, as statements year in program year program year CSK $in vendor allowances program years but had year Third, CSK made a baseless entry decreasing and increasing receivable amount, which the 2002 LWT in additional vendor allowances. CSK did this by allowances 2003, when, fact, those during of At that same had approximately $13 million, which represented returns Under GAAP, a warranty deficit should be written off unless additional obtained to cover the deficit. of additional warranty allowances to offset a of its balance, recognized those Fiscal Year 2004 year off known, Specifically, (a) applied approximately $11 million in 2004 LWT program year Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 11 of 17 collections to the 2003 LWT account receivable; (b) increased the 2004 LWT receivable by approximately $4 million to avoid writing off amounts CSK paid back to vendors for the 2003 and 2002 LWT program years; and (c) moved approximately $6 million via baseless journal entries to the 2003 LWT receivable from other vendor allowance receivables in other time periods. As a result, in its Form 10-K filed on May 2, 2005, CSK overstated pre-tax income for fiscal year 2004 by approximately 65%, or $21 million. At the time of that filing, CSK knew, or was reckless in not knowing, that it had failed to write off uncollectible vendor allowances and that, as a result, the company’s financial statements were materially misstated. II. As A Result Of Its Fraud, CSK’s Forms 10-K For Fiscal Years 2002, 2003, And 2004 Were In Material Non-Compliance With Financial Reporting Requirements Under The Securities Laws. 32. As required by Section 13(a) of the Exchange Act and Rule 13a-1 thereunder, CSK filed annual reports on Forms 10-K for fiscal years 2002, 2003, and 2004. Jenkins signed each of those annual reports and their accompanying Sarbanes-Oxley certifications. 33. The notes to the financial statements included with CSK’s Forms 10K for fiscal years 2002, 2003, and 2004 falsely stated that “[s]pecific accounts are written off against the allowance when management determines the account is uncollectible.” CSK did not write off known, uncollectible vendor allowance receivables, but rather engaged in a scheme to avoid and hide such write offs, as follows: ///////////////10 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 11 of 17 account 2004 LWT to avoid writing off amounts CSK paid via baseless in time on May 2, 2005, CSK overstated At the time of that filing, CSK knew, in not knowing, failed vendor result, company’s Of Its Fraud, CSK’s Forms 10-K For Fiscal Years 2002, 2003, 2004 In Material Non-Compliance With Financial Reporting Under The Securities Laws. years Jenkins Oxley financial included with 10 K fiscal years 2002, accounts off against the allowance when management CSK did not write off known, uncollectible vendor allowance to avoid write Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 12 of 17 In all, CSKmateriallyunderstated its costs of goods soldduring fiscal years2002 through2004 as follows: FY Concealed Receivables From Prior Years Over RecognizedAllowances /Other Uncollectible Receivables Total UnsupportedJournal Entries MisappliedDebit Memos MisappliedPaybacks 2002 $6 M --$3 M $2 M $11 M 2003 $9 M $10 M $5 M $10 M $34 M 2004 $6 M $11 M $4 M --$21 M 34. CSK’s Forms 10-K for fiscal years 2002, 2003 and 2004 overstated CSK’s pre-tax income by approximately $11 million (or 47%), $34 million (thereby reporting pre-tax income instead of a pre-tax loss) and about $21 million (or 65%), respectively. When CSK filed those Forms 10-K, CSK knew, or was reckless in not knowing, that the company’s financial statements contained therein was materially misstated. 35. As set forth above, the financial statements in those annual reports failed to comply with GAAP, namely, EITF No. 02-16 and FAS No. 5. Regulation S-X states that financial statements filed with the Commission that are not prepared in accordance with GAAP are presumed to be inaccurate and misleading. 17 C.F.R. §210.4-01(a)(1). By virtue of its conduct alleged above, CSK violated the anti-fraud provisions of the securities laws, namely, Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; the reporting requirements of the securities laws, namely, Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder; the books and records provisions of the securities laws, namely, Section 13(b)(2)(A) of the Exchange Act; and the internal controls provisions of the securities laws, namely, Section 13(b)(2)(B) of the Exchange Act. 11 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 12 of 17 CSK materially Recognized understated Allowances sold during years 2002 through 2004 Unsupported Misapplied Journal Debit Misapplied Paybacks for fiscal years 2002, 2003 and 2004 (or 47%), $34 million about $21 million When CSK filed those Forms CSK knew, or was statements statements GAAP, namely, EITF No. 02-16 and FAS No. 5. filed are presumed 17 C.F.By virtue of its conduct alleged above, of the securities and 20 and Section 13(b)(2)(Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 13 of 17 III. CSK Was Required to Prepare Two Accounting Restatements. 36. As set forth above, CSK, filed annual reports in its Forms 10-K for fiscal years 2002, 2003 and 2004 that failed to comply with GAAP and the financial reporting requirements under the securities laws. 37. Due to CSK’s material non-compliance with financial reporting requirements under the securities laws, which were the result of CSK’s fraudulent conduct as set forth above, CSK was required by GAAP and the federal securities laws to prepare an accounting restatement. Specifically, an accounting restatement was required by, among other things, (a) Paragraph 13 of Accounting Principles Board (“APB”) Opinion No. 20, Accounting Changes, which states that “[e]rrors in financial statements result from mathematical mistakes, mistakes in the application of accounting principles, or oversight or misuse of facts that existed at the time the financial statements were presented;” (b) Paragraph 36 of APB Opinion No. 20 which states that the correction of such errors “should be reported as a prior period adjustment;” and (c) paragraph 18 of APB Opinion No. 9, Reporting the Results of Operations, which states that “when comparative statements are presented, prior period adjustments should be made of the amounts of net income (and the components thereof) and retained earnings balances (as well as of other affected balances) for all of the periods reported therein, to reflect the retroactive application of these prior period adjustments.” In addition, Paragraph 25 of Statement of Financial Accounting Standards 154, Accounting Changes and Error Corrections, a replacement of APB Opinion 20 and FASB Statement 3, states that “[a]ny error in the financial statements of a prior period discovered subsequent to their issuance should be reported as a prior period adjustment by restating the prior period financial statements.” 38. In fact, CSK issued two restatements in connection with its vendor allowance accounting. CSK’s Form 10-K for fiscal year 2004 included CSK’s First Restatement, which partially restated CSK’s vendor allowances recognized 12 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 13 of 17 Required to Prepare Two Accounting Restatements. in 10-K and 2004 that failed to comply requirements reporting securities laws, which the result of CSK’s forth accounting restatement. required by, 13 of Accounting Opinion No. 20, Accounting Changes, which states e]rrors in financial statements mathematical mistakes, statements No. 20 which states a prior period adjustment;” (18 of APB presented, prior and the and retained earnings balances prior 25 of of Financial Accounting and Error Corrections, a replacement of APB that “[a]a prior in Form 10-K for fiscal year 2004 included CSK’s restated Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 14 of 17 during prior years. CSK partially restated its vendor allowances because it could not collect all of the 2003 LWT receivable. In addition, CSK restated for vendor allowances paid back during fiscal year 2003 that CSK failed to properly write off during the 2003 fiscal year. CSK’s First Restatement regarding vendor allowances resulted in CSK adjusting its costs of sales upward and its pre-tax income downward, for the first three quarters of 2004, and the 2003, 2002, and 2001 fiscal years by $1.9 million, $7.1 million, $9.0 million, and $0.5 million, respectively. 39. CSK’s First Restatement, however, failed to: (a) write off all known, uncollectible vendor allowance receivables; (b) disclose the full extent of CSK’s efforts to hide the uncollectible receivables from its independent auditors; and (c) disclose CSK’s over recognition of vendor allowances during fiscal 2003. It also falsely attributed the vendor allowance restatement to mere “errors in estimation in earlier periods” and “vendor allowances recorded in improper periods” due to “imprecise estimates, bookkeeping errors and recording allowances in the incorrect periods.” CSK knew, or was reckless in not knowing, about the false disclosures and misstatements contained in its First Restatement. 40. CSK issued its First Restatement as part of its annual report for fiscal year 2004. Thereafter, CSK’s internal audit department, which in the wake of the First Restatement scrutinized CSK’s vendor allowances more carefully, discovered additional irregularities that led to a special investigation, which CSK publicly announced on March 27, 2006. On September 28, 2006, CSK announced, among other things, that: (a) it had substantially completed its special investigation; (b) it no longer employed Watson, its former chief financial officer, and Fraser, its former chief operating officer and president; and (c) that Jenkins would soon be retiring and would assist CSK in its search for a new CEO. As a result of its special investigation, CSK terminated the employment of O’Brien, its controller, and Opper, its director of credits and receivables. ///13 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 14 of 17 CSK partially restated its vendor allowances because receivable. In addition, CSK restated for vendor during fiscal 2003 that CSK failed to properly CSK’s First Restatement costs the three quarters 2004, and million, $9.0 million, and $0.5 million, respectively. however, failed to: write the full receivables its independent also to “CSK knew, or was reckless about part of audit investigation, announced On September other things, no officer, its and for new CEO. employment of credits and Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 15 of 17 41. On May 1, 2007, CSK filed a second restatement for fiscal years 2002, 2003, and 2004, as part of its Form 10-K for fiscal year 2005, which Jenkins signed (the “Second Restatement”). The Second Restatement disclosed, among other things, that: (a) CSK had identified “accounting errors and irregularities” that materially impacted vendor allowance receivables; (b) there were “numerous instances of improperly supported journal entries recorded to the general ledger accounts, override of Company policies and procedures, absence of appropriately designed policies and procedures, misapplication of GAAP and other ineffective controls”; (c) the “errors and irregularities were primarily the result of actions directed by certain personnel and an ineffective control environment”; and (d) the “recording of improper accounting entries was directed by certain personnel.” IV. Jenkins Received Bonuses And Profits From The Sale Of CSK Stock. 42. During the 12-month periods following CSK’s filing of its fraudulent Forms 10-K for fiscal years 2002, 2003, and 2004 (i.e., from May 5, 2003 to May 2, 2006) Jenkins received bonuses and other incentive-based and equity-based compensation from CSK. During the 12-month periods following CSK’s filing of its fraudulent, and subsequently restated, 2002 and 2003 annual reports, Jenkins received bonuses of approximately $825,413 and $1,265,607, respectively, totaling approximately $2,091,020. In addition, during the 12-month periods following CSK’s filing of its annual reports for its 2002 and 2004 fiscal years, Jenkins realized profits of approximately $2,018,893 from the sale of CSK stock. Jenkins has never reimbursed CSK for any portion of his bonuses and other incentive-based and equity-based compensation, or his stock sale profits. CLAIM FOR RELIEF FAILURE TO REIMBURSE Violations of Section 304(a) of the Act 43. The Commission realleges and incorporates by reference ¶¶ 1 through 42 above. 14 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 15 of 17 a second as part of its Form 10-K The Second Restatement identified irregularities” entries and of procedures, misapplication of GAAP c) the errors the result of actions an ineffective control improper accounting entries Jenkins Received Bonuses And Profits From The Sale Of CSK Stock. CSK’s filing of its years (from 2, 2006) Jenkins received bonuses based compensation from CSK. of its fraudulent, and subsequently restated, 2002 and of addition, during the 12-month CSK’s filing of its annual reports for its 2002 and 2004 fiscal realized profits Jenkins has of his bonuses FOR RELIEF TO REIMBURSE of Section 304(a) of the Act Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 16 of 17 44. CSK, by engaging in the conduct described above, filed Forms 10-K for fiscal years 2002, 2003, and 2004 that were in material non-compliance with financial reporting requirements under the securities laws. 45. CSK’s material non-compliance with its financial reporting requirements under the securities laws was the result of its misconduct that was designed to inflate its income fraudulently by prematurely recognizing vendor allowances and failing to write off known, uncollectible vendor allowances in violation of GAAP. 46. Due to CSK’s material non-compliance with its financial reporting requirements under securities laws, and as a result of its misconduct, CSK was required to prepare an accounting restatement for fiscal years 2002, 2003 and 2004. 47. The Commission has not exempted Jenkins, pursuant to Section 304(b) of the Act, 15 U.S.C. § 7243(b), from the application of Section 304(a) of the Act, 15 U.S.C. § 7243(a). 48. By engaging in the conduct described above, Jenkins violated, and unless ordered to comply will continue to violate, Section 304(a) of the Act, 15 U.S.C. § 7243(a). PRAYER FOR RELIEF WHEREFORE, the Commission respectfully requests that the Court: I. Issue findings of fact and conclusions of law that Jenkins committed the alleged violations. II. Issue a judgment, in a form consistent with Fed. R. Civ. P. 65(d), ordering Jenkins to reimburse CSK for his bonuses and other incentive-based and equity-based compensation, and profits from CSK stock sales, pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, 15 U.S.C. § 7243. 15 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 16 of 17 filed years were in requirements reporting to inflate failing known, uncollectible vendor allowances of GAAP. reporting a result of ordered to comply will FOR RELIEF requests judgment, in form with his bonuses compensation, and profits Oxley Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db51 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 1 Filed 07/22/2009 Page 17 of 17 III. Retain jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that may be entered, or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court. IV. Grant such other and further relief as this Court may determine to be just and necessary. DATED: July 22, 2009 Respectfully submitted, s/Robert H. Conrrad ROBERT H. CONRRAD Attorney for PlaintiffSecurities and Exchange Commission 16 Case 2:09-cv-01510-JWS Document 1 Filed 07/22/2009 Page 17 of 17 this action accordance Rules of Civil orders additional relief within the jurisdiction of this Court. necessary. July 22, 2009 Robert Conrrad Plaintiff Securities Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db5JS (Rev. 12/07) CIVIL COVER SHEETDocument 1-2 Filed 07/22/2009 Page 1 of 2 The JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as providedby local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiating the civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.) I. (a) PLAINTIFFS (b) County of Residence of First Listed Plaintiff (EXCEPT IN U.S. PLAINTIFF CASES) (c) Attorney’s (Firm Name, Address, and Telephone Number)Securities and Exchange Commission Donald W. Searles and/or Robert H. Conrrad (323) 965-3998 SEC, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, CA 90036 DEFENDANTS County of Residence of First Listed Defendant (IN U.S. PLAINTIFF CASES ONLY) NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE LAND INVOLVED. Attorneys (If Known) Maynard L. Jenkins Maricopa John W. Spiegel (213) 683-9100 Munger Tolles & Olson LLP 355 S. Grand Avenue, 35th Floor, Los Angeles, CA 90071 II. BASIS OF JURISDICTION (Place an “X” in One Box Only) 1 U.S. Government 3 Federal QuestionPlaintiff (U.S. Government Not a Party) 2 U.S. Government 4 Diversity Defendant (Indicate Citizenship of Parties in Item III) III. CITIZENSHIP OF PRINCIPAL PARTIES(Place an “X” in One Box for Plaintiff (For Diversity Cases Only) and One Box for Defendant) PTF DEF PTF DEF Citizen of This State 1 1 Incorporated or Principal Place 4 4 of Business In This State Citizen of Another State 2 2 Incorporated and Principal Place 5 5 of Business In Another State Citizen or Subject of a 3 3 Foreign Nation 6 6 Foreign Country IV. NATURE OF SUIT (Place an “X” in One Box Only) CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTES 110 Insurance PERSONAL INJURY PERSONAL INJURY 610 Agriculture 422 Appeal 28 USC 400 State Reapportionment 120 Marine 310 Airplane 362 Personal Injury 620 Other 423 Withdrawal 410 Antitrust 130 315 Airplane Product Med. Malpractice 625 Drug Related Seizure 28 USC 157 430 Banks and Banking 140 Negotiable Instrument Liability 365 Personal Injury of Property 21 USC 881 450 Commerce 150 Recovery of Overpayment 320 Assault, Product Liability 630 Liquor Laws PROPERTY RIGHTS 460 Deportation & Enforcement of Judgment Slander 368 Asbestos Personal 640 R.820 Copyrights 470 Racketeer Influenced and 151 Medicare 330 Federal Employers’ Injury Product 650 Airline Regs. 830 Patent Corrupt Organizations 152 Recovery Liability Liability 660 Occupational 840 Trademark 480 Consumer Credit Student Loans 340 Marine PERSONAL PROPERTY Safety/Health 490 Cable/Sat TV (Excl. Veterans) 345 Marine Product 370 Other Fraud 690 Other 810 Selective Service 153 Recovery of Overpayment Liability 371 Truth in Lending LABOR SOCIAL SECURITY 850 Securities/Commodities/of Veteran’s Benefits 350 Motor Vehicle 380 Other Personal 710 Fair Labor Standards 861 HIA (1395ff) Exchange 160 Stockholders’ 355 Motor Vehicle Property Damage Act 862 Black Lung 923) 875 Customer Challenge 190 Other Contract Product Liability 385 Property Damage 720 Labor/Mgmt. Relations 863 DIWC/DIWW (405(12 USC 3410 195 Contract Liability 360 Other Personal Product Liability 730 Labor/Mgmt.Reporting 864 SSID 890 Other Statutory Actions 196 Franchise Injury & Disclosure Act 865 RSI (405(891 Agricultural Acts REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS 740 Railway FEDERAL TAX SUITS 892 Economic Stabilization Act 210 Land Condemnation 441 Voting 510 Motions to Vacate 790 Other 870 Taxes 893 Environmental Matters 220 Foreclosure 442 Employment Sentence 791 Empl. Ret. or Defendant) 894 Energy Allocation Act 230 Rent Lease Ejectment 443 Housing/Habeas Corpus: Security Act 871 IRS—Third Party 895 Freedom of Information 240 Torts to Accommodations 530 General 26 USC 7609 Act 245 Tort Product Liability 444 Welfare 535 Death Penalty IMMIGRATION 900Appeal of Fee Determination 290 All Other Real Property 445 Amer. 540 Mandamus Other 462 Naturalization Under Equal Access Employment 550 Civil Rights 463 Habeas Corpus to Justice 446 Amer. 555 Prison Condition Alien Detainee 950 Constitutionality of Other 465 Other State Statutes 440 Other Civil Rights Actions V. ORIGIN (Place an “X” in One Box Only) Appeal to District Transferred from Judge from 1 Original2 Removed from 3 Remanded from 4 Reinstated 5 6 Multidistrict 7another district Magistrate Proceeding State Court Appellate Court Reopened Litigation (specify) Judgment Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity):Section 304 of Sarbanes-Oxley Act of 2002, 15 U.S.C. § 7243 VI. CAUSE OF ACTION Brief description of cause: Action to compel reimbursement pursuant to Section 304 of Sarbanes-Oxley Act VII. REQUESTED IN CHECK IF THIS IS A CLASS ACTION DEMAND $ CHECK YES only if demanded in complaint: COMPLAINT: JURY DEMAND: Yes NoUNDER F.R.C.P. 23 ✔ Susan R. BoltonVIII. RELATED CASE(S) 372-PHX-SRB (See instructions): IF ANY G. Murray Snow NUMBER CV 09-443-PHX-GMS DATE SIGNATURE OF ATTORNEY OF RECORD 07/22/2009 /s/Robert H. Conrrad FOR OFFICE USE ONLY RECEIPT # AMOUNT APPLYING IFP JUDGE MAG. JUDGE Case 2:09-cv-01510-JWS Document 1-2 Filed 07/22/2009 Page 1 of 2 ?JS 44 44 civil the information and required by law, provided by This form, approved by the Judicial Conference of the United States of the Clerk of Court for purpose of initiating docket sheet. PLAINTIFFS County of Residence of First Listed Plaintiff IN LAND CONDEMNATION CASES, USE THE OF Attorney’s (Firm Name, Address, and Telephone Number) (If Known) BASIS an “X” CITIZENSHIP OF PRINCIPAL PARTIES(Place an “X” in One Box for Plaintiff Cases ? 1 U.S. Government ? 3 Federal Question DEF DEF Plaintiff ? ? 1 Incorporated or Principal Place ? 4 ? 4 ? 2 U.S. Government ? 4 Diversity ? ? Incorporated and Principal Place ? 5 ? 5 in Item III) ? ? Foreign Nation ? 6 ? 6 NATURE OF SUIT (Place an “X” in One Box Only) ? 110 Insurance ? 610 Agriculture ? 422 Appeal 28 USC 158 ? ? 120 Marine ? 310 Airplane ? Injury ? 620 Other Food & Drug ? 423 Withdrawal ? ? 130 Miller Act ? 315 Airplane Product ? 625 Drug Related Seizure ? ? 140 Negotiable Instrument ? 365 Personal Injury of ? ? 150 Recovery of Overpayment ? 320 Assault, Libel & Liability ? 630 Liquor Laws ? ? 368 Asbestos Personal ? 640 R.R. & Truck ? 820 Copyrights ? ? 151 Medicare Act ? 330 Federal Employers’ ? 650 Airline Regs. ? 830 Patent ? 152 Recovery of Defaulted ? 660 Occupational ? 840 Trademark ? ? 340 Marine ? ? 345 Marine Product ? 370 Other Fraud ? 690 Other ? ? 153 Recovery of Overpayment ? 371 Truth in Lending ? ? 350 Motor Vehicle ? 380 Other Personal ? 710 Fair Labor Standards ? 861 HIA (1395ff) ? 160 Stockholders’ Suits ? 355 Motor Vehicle ? 862 Black Lung (923) ? ? 190 Other Contract Liability ? 385 Property Damage ? 720 Labor/Mgmt. Relations ? 863 DIWC/DIWW (405(g)) ? 195 Contract Product Liability ? 360 Other Personal Liability ? 730 Labor/Mgmt.Reporting ? 864 SSID Title XVI ? ? 196 Franchise ? 865 RSI (405(g)) ? ? 740 Railway Labor Act ? ? 210 Land Condemnation ? 441 Voting ? 510 Motions to Vacate ? 790 Other Labor Litigation ? 870 Taxes (U.S. Plaintiff ? Environmental ? 220 Foreclosure ? 442 Employment ? 791 Empl. Ret. Inc. ? Allocation ? 230 Rent Lease & Ejectment ? 443 Housing/? 871 IRS—Third Party ? of ? 240 Torts to Land ? 530 General ? 245 Tort Product Liability ? 444 Welfare ? 535 Death Penalty ? ? 290 All Other Real Property ? 445 Amer. w/Disabilities ? 540 Mandamus & Other ? 462 Naturalization Application ? 550 Civil Rights ? 463 Habeas Corpus to ? 446 Amer. w/Disabilities ? 555 Prison Condition ? ? 465 Other Immigration ? 440 Other Civil Rights Statutes an “X” ? Original ? 2 Removed from ? 3 Remanded from ? 4 Reinstated or ? 5 ? 6 Multidistrict ? 7 U.Civil under which you are filing (Do not cite jurisdictional diversity): CAUSE OF ACTION Brief dSeescctriiopnti o3n0 4o fo cf aSuasreb:anes-REQUESTED ? CHECK IF THIS IS A CLASS ACTION demanded ? Yes ? No RELATED CASE(S) Judge Susan R. Bolton CR 09-372-PHX-SRB JUDGE DOCKET NUMBER CV 09-443-PHX-GMS Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db5Document 1-2 Filed 07/22/2009 Page 2 of 2 JS 44 Reverse (Rev. 12/07) INSTRUCTIONS FOR ATTORNEYS COMPLETING CIVIL COVER SHEET FORM JS 44 Authority For Civil Cover Sheet The JS 44 civil cover sheet and the information contained herein neither replaces nor supplements the filings and service of pleading or other papers as required by law, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiating the civil docket sheet. Consequently, a civil cover sheet is submitted to the Clerk of Court for each civil complaint filed. The attorney filing a case should complete the form as follows: I. (a) Plaintiffs-Defendants. Enter names (last, first, middle initial) of plaintiff and defendant. If the plaintiff or defendant is a government agency, use only the full name or standard abbreviations. If the plaintiff or defendant is an official within a government agency, identify first the agency and then the official, giving both name and title. (b) County of Residence. For each civil case filed, except U.S. plaintiff cases, enter the name of the county where the first listed plaintiff resides at the time of filing. In U.S. plaintiff cases, enter the name of the county in which the first listed defendant resides at the time of filing. (NOTE: In land condemnation cases, the county of residence of the “defendant” is the location of the tract of land involved.) (c) Attorneys. Enter the firm name, address, telephone number, and attorney of record. If there are several attorneys, list them on an attachment, noting in this section “(see attachment)”. II. Jurisdiction. The basis of jurisdiction is set forth under Rule 8(a), F.R.C.P., which requires that jurisdictions be shown in pleadings. Place an “X” in one of the boxes. If there is more than one basis of jurisdiction, precedence is given in the order shown below. United States plaintiff. (1) Jurisdiction based on 28 U.S.C. 1345 and 1348. Suits by agencies and officers of the United States are included here. United States defendant. (2) When the plaintiff is suing the United States, its officers or agencies, place an “X” in this box. Federal question. (3) This refers to suits under 28 U.S.C. 1331, where jurisdiction arises under the Constitution of the United States, an amendment to the Constitution, an act of Congress or a treaty of the United States. In cases where the U.S. is a party, the U.S. plaintiff or defendant code takes precedence, and box 1 or 2 should be marked. Diversity of citizenship. (4) This refers to suits under 28 U.S.C. 1332, where parties are citizens of different states. When Box 4 is checked, the citizenship of the different parties must be checked. (See Section III below; federal question actions take precedence over diversity cases.) III. Residence (citizenship) of Principal Parties. This section of the JS 44 is to be completed if diversity of citizenship was indicated above. Mark this section for each principal party. IV. Nature of Suit. Place an “X” in the appropriate box. If the nature of suit cannot be determined, be sure the cause of action, in Section VI below, is sufficient to enable the deputy clerk or the statistical clerks in the Administrative Office to determine the nature of suit. If the cause fits more than one nature of suit, select the most definitive. V. Origin. Place an “X” in one of the seven boxes. Original Proceedings. (1) Cases which originate in the United States district courts. Removed from State Court. (2) Proceedings initiated in state courts may be removed to the district courts under Title 28 U.S.C., Section 1441. When the petition for removal is granted, check this box. Remanded from Appellate Court. (3) Check this box for cases remanded to the district court for further action. Use the date of remand as the filing date. Reinstated or Reopened. (4) Check this box for cases reinstated or reopened in the district court. Use the reopening date as the filing date. Transferred from Another District. (5) For cases transferred under Title 28 U.S.C. Section 1404(a). Do not use this for within district transfers or multidistrict litigation transfers. Multidistrict Litigation. (6) Check this box when a multidistrict case is transferred into the district under authority of Title 28 U.S.C. Section 1407. When this box is checked, do not check (5) above. Appeal to District Judge from Magistrate Judgment. (7) Check this box for an appeal from a magistrate judge’s decision. VI. Cause of Action. Report the civil statute directly related to the cause of action and give a brief description of the cause. Do not cite jurisdictional statutes unless diversity. Example: U.S. Civil Statute: 47 USC 553 Brief Description: Unauthorized reception of cable service VII. Requested in Complaint. Class Action. Place an “X” in this box if you are filing a class action under Rule 23, F.R.Cv.P. Demand. In this space enter the dollar amount (in thousands of dollars) being demanded or indicate other demand such as a preliminary injunction. Jury Demand. Check the appropriate box to indicate whether or not a jury is being demanded. VIII. Related Cases. This section of the JS 44 is used to reference related pending cases if any. If there are related pending cases, insert the docket numbers and the corresponding judge names for such cases. Date and Attorney Signature. Date and sign the civil cover sheet. Case 2:09-cv-01510-JWS Document 1-2 Filed 07/22/2009 Page 2 of 2 COVER SHEET FORM JS Cover Sheet civil information replaces and pleading or other papers This form, approved by the Judicial Conference of the United States in September the docket sheet. Consequently, cover the Clerk of Court for civil The attorney filing a case should Defendants. Enter names (last, first, middle initial) of plaintiff and defendant. If the plaintiff or defendant is a government agency, abbreviations. If plaintiff official identify then the official, giving case cases, first resides In U.S. plaintiff cases, enter the name the the listed defendant time of (NOTE: In land condemnation cases, of “location Enter the firm name, address, telephone If there are several them on an see The basis of jurisdiction is set forth under Rule 8(a), F.R.C.P., which requires an “If there is more than precedence plaintiff. based Suits by agencies the United States defendant. is suing place an “X” refers suits under 28 U.S.1331, where arises under the Constitution of the United States, an amendment an Congress States. In cases or defendant code takes precedence, of citizenship. (4) This refers to suits under 28 U.S.C. 1332, where parties states. When 4 is checked, parties (See below; federal question actions take precedence cases.) of Principal Parties. This section of the JS 44 is to be of Suit. Place an “X” in the appropriate box. If the nature of suit cannot be determined, be of action, in Section VI below, is sufficient deputy clerk statistical to determine the nature If the cause fits more than one Place an “X” in one of the seven boxes. Proceedings. (1) Cases States to the district under Title 1441. from (3) Check this box for cases Use the date remand date. cases in the district Use filing from transferred under Title 28 U.S.C. Section 1404(a). Do not use this for within or multidistrict transfers. Litigation. (6) Check this box when a multidistrict case is transferred into the under 28 U.S.Judge (7) Check this box for an appeal a Report the statute related of action and give a brief description of the cause. Do not cite jurisdictional diversity. Statute: Unauthorized reception cable Requested in Complaint. Class Action. Place an “X” in this box if you are filing a class action under Rule 23, F.R.In this space thousands such as a preliminary injunction. Check the is being demanded. Related Cases. This section of the JS 44 is used to reference related pending cases if any. If there are related pending cases, insert the docket numbers names such cases. Signature. Date and sign the civil cover sheet. Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db5Document 1-3 Filed 07/22/2009 Page 1 of 2 440 (Rev. 8/01) Summons in a Civil Action UNITED STATES DISTRICT COURT District of SUMMONS IN A CIVIL CASE Name and address of Defendant) ARE HEREBY SUMMONED and required to serve on PLAINTIFF’S ATTORNEY (name and address) to the complaint which on you with within days after service this summons exclusive of the day of service. If judgment be taken in the complaint. on the parties to this action must be filed Court within a reasonable period of time after service. CLERK DATE (By) DEPUTY CLERK Case 2:09-cv-01510-JWS Document 1-3 Filed 07/22/2009 Page 1 of 2 OAO 440 (Rev. 8/01) Summons in a Civil Action STATES DISTRICT COURT CASE V. CASE TO: (Name and address of Defendant) YOU ARE HEREBY SUMMONED and required to serve on PLAINTIFF’S ATTORNEY (name and address) an answer to the complaint which is served on you with this summons, within of this summons on you, exclusive of the day of service. If you fail to do so, judgment by default will be taken against you for the relief demanded in the complaint. Any answer that you serve on the parties to this action must be filed with the Clerk of this a reasonable Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db5 Arizona SECURITIES AND EXCHANGE COMMISSION MAYNARD L. JENKINS 20 Donald W. Searles and/or Robert H. Conrrad Securities and Exchange Commission 5670 Wilshire Boulevard, 11th Floor Los Angeles, California 90036Document 1-3 Filed 07/22/2009 Page 2 of 2 440 (Rev. 8/01) Summons in a Civil Action the Summons and complaint was made by me(1) DATE NAME OF SERVER (PRINT) box below to Served personally upon the defendant. Place where served: Left copies thereof at the defendant’s dwelling house or usual place of abode with a person of suitable age discretion then residing therein. Name of person with whom the summons and complaint were left: G Returned unexecuted: Other (specify): OF SERVICE FEES TRAVEL SERVICES TOTAL OF SERVER of of America the foregoing information contained in the Return of Service and Statement of Service Fees is true and correct. Signature of Server (1) As to who may serve a summons see Rule 4 of the Federal Rules of Civil Procedure. Case 2:09-cv-01510-JWS Document 1-3 Filed 07/22/2009 Page 2 of 2 OAO 440 (Rev. 8/01) Summons in a Civil Action RETURN OF SERVICE Service of the Summons and complaint was made by me(1) NAME OF SERVER (PRINT) TITLE Check one box below to indicate appropriate method of service G Served personally upon the defendant. Place where served: G Left copies thereof at the defendant’s dwelling house or usual place of abode with a person of suitable age and complaint Returned unexecuted: G Other (specify): STATEMENT OF SERVICE FEES DECLARATION OF SERVER I declare under penalty of perjury under the laws of the United States of America that the foregoing information Service and Fees Executed on Date Address of Server to who may serve a summons Procedure. Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fc3c3c46-b2b7-4872-8bfe-4f9e7f359db5