ATLANTA (CN) - The SEC accused a former executive vice president of Carter's, a children's clothier, of fraud and inside trading. The SEC claims Joseph Elles dumped his own shares for a profit of $4.7 million before his fraud was discovered.
The 29-page federal complaint claims that "Elles fraudulently manipulate the amount of discounts Carter's granted Kohl Corporation ('Kohl's'), its largest wholesale customer, in order to induce Kohl's to purchase greater quantities of Carter's products."
The discounts are known in the trade as accommodations. The SEC claims Elles also got Kohl's to agree to defer taking the accommodations until later quarters, and told his assistant to create false accommodation tracking sheets for Carter's accountants, and signed off on quarterly memos to Carter's CFO, "underreporting the magnitude of outstanding accommodations granted to Kohl's," even though Elles knew that this was illegal.
"During the course of his misconduct, between May 2005 and March 2009, Elles exercised options and sold 200,814 shares of Carter's stock, for a profit before tax of approximately $4,739,862," the complaint states.
The SEC seeks disgorgement and penalties and wants Elles barred from acting as officer or director of any issuer of securities registered with the SEC.
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