The Justice Department is investigating financial practices at Sunbeam Corp. during the controversial reign of former chief executive Albert J. Dunlap, the appliance maker has disclosed.
The U.S. attorney in Manhattan “is conducting an investigation into events that occurred” from 1996 to 1998 — during the tenure of Dunlap and former chief financial officer Russell A. Kersh, according to documents Sunbeam filed with a bankruptcy court Friday.
The probe, first reported by the New York Times, comes just days after Dunlap and Kersh reached a settlement with the Securities and Exchange Commission in a civil fraud case. The men paid a total of $700,000 in fines and agreed never again to serve as officers of a publicly traded company. Neither Dunlap nor Kersh admitted wrongdoing as part of the agreement.
The SEC had accused the executives of misleading shareholders about the Boca Raton, Fla., company’s finances by using reserve accounts to pad Sunbeam’s books.
Dunlap and Kersh were forced out by Sunbeam’s board of directors in June 1998 amid allegations they had concealed facts about improper sales and accounting practices. Sunbeam eventually restated its financial results for 1996, 1997 and the first three months of 1998 before filing for bankruptcy protection in early 2001.
Sunbeam’s lawyers said they lack details on the scope of the Justice investigation but they have “no reason to believe” the company itself is the target of the probe, according to court documents.
A spokeswoman for Sunbeam said the company would not comment on the investigation. Spokesmen for the Justice Department and for the U.S. attorney in New York declined comment yesterday.
“Neither Mr. Dunlap nor I have been contacted by the Justice Department or advised that he is a witness, subject or target of any investigation,” Frank C. Razzano, an attorney for Dunlap, said in an interview.
Jeffrey Tew, Kersh’s attorney, said Kersh “is emphatic that he never violated any of the criminal laws the U.S. attorney might be looking into.”
Word of the Justice Department investigation once again thrusts Dunlap, a hard-charging executive known as “Chainsaw Al” for his frequent staff purges in the 1990s, back onto center stage. Dunlap has been a Florida retiree for the past four years, his attorney said.
Renewed interest in Sunbeam may stem from the Bush administration’s recent crackdown on corporate wrongdoers after scandals at Enron Corp. and WorldCom Inc., legal experts said.
The House Energy and Commerce Committee requested information about accounting problems at Sunbeam and a dozen other companies in July. Sunbeam said it is cooperating with authorities.
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