SAN DIEGO (CN) - RF Industries, a fiber optic and coaxial cable company, runs on a culture of corruption bent on enriching executives at shareholders' expense, the company's former controller claims in court.
San Diego-based RF Industries makes complex cable assemblies, fiber optic cables, coaxial connectors and associated products. It reported $36.6 million revenue in fiscal year 2013, had $11.9 million cash on hand, and paid four quarterly dividends of 7 cents a share that year, according to its annual report.
Its former controller Peter Wyndham sued the company on Nov. 21 in Federal Court. The company itself is the only defendant.
Wyndham claims he was fired for reporting to company managers, the board of directors, and the SEC that the company violated the Sarbanes-Oxley Act, used "fraudulent accounting," and committed "fraud against the shareholders."
When he reported these "numerous accounting frauds and SEC violations" to company managers, he was subjected to "ridicule and intimidation," and eventually fired, Wyndham claims.
"As the number of SEC violations and corporate frauds mounted," Wyndham says in the lawsuit, he "began to realize that the individual violations and frauds were part of a much larger and more pervasive culture of accounting and tax fraud that was being orchestrated by the CEO, Howard Hill, and other key executives to enrich themselves to the detriment of RF Industries shareholders."
To do this, Wyndham claims, "internal controls were established in such a way to prevent discovery of the fraudulent activities. Hiring decisions were made to place key people in accounting positions who would assist in covering up the frauds or to place people in key accounting positions who were simply not trained enough to know the difference."
Among the frauds, Wyndham claims, were CFO James Doss lying on SEC reports that he had earned an MBA from San Diego State University. Wyndham claims Doss lied to the SEC about this from 2007 until Wyndham reported it to the SEC in 2012.
After Wyndham blew the whistle on Doss, Wyndham says, Doss kept his job as company president, though Wyndham was put on administrative leave and then fired in November 2012.
During his two years as controller, Wyndham claims, he uncovered:
executive officer embezzlement and expense account fraud;
concealing the departure of a former CFO and her subsequent sexual harassment lawsuit;
manipulating executive bonuses to affect share prices;
understating inventory reserves;
overstating assets and channel-stuffing by sending inflated orders to a client;
concealing related-party transactions that defrauded investors;
and failing to report taxable gains on exercises of stock options.
RF Industries is traded publicly on NASDAQ under the RFIL symbol. Its stock price Monday was $4.41, down more than $10 per share from about a year ago. It traded for about $2.10 to a high of just over $4 during the time Wyndham was the company's controller.
Wyndham seeks lost wages with interest and/or reinstatement, and punitive damages for wrongful firing and emotional distress. He also seeks an injunction against retaliation against company whistleblowers.
He is represented by Conal Doyle of Beverly Hills.
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