Former Centennial Technologies CEO indicted for securities fraud
BOSTON (AP) _ The former chief executive of Centennial Technologies Inc. has been indicted by a federal grand jury for allegedly faking sales of a non-existent product to create paper profits.
Emanuel Pinez, 58, was fired by Centennial on Feb. 10 and then arrested Feb. 14 on a criminal complaint for insider trading. The Israeli citizen remains in jail because a federal judge ruled he posed a serious risk of fleeing the country.
Centennial, based in Billerica, Mass., makes personal computer cards and computer parts.
It was the top performer of any company listed on the New York Stock Exchange last year, with its stock skyrocketing 450 percent.
The indictment Wednesday accused Pinez of creating a fictional product, booking $2.4 million in phony sales and then financing those phony sales with his own money. Those actions created a bottom line that misled both stockholders and the federal Securities and Exchange Commission, the indictments charged.
The grand jury also indicted Pinez for allegedly buying and selling options on the company’s stock in such a way to ensure he would profit once the shares fell. U.S. Attorney Donald Stern said Pinez performed this insider trading ``when the scheme threatened to unravel.″
``The net effect was to create false revenue and profit figures for Centennial,″ Stern said.
If convicted, Pinez faces up to 10 years in prison and a $1 million fine on each of the five counts.
According to the indictments, Pinez instructed a Centennial manager in February 1996 to list a new personal-computer card in the inventory system called ``Flash 98.″ He then allegedly instructed the manager to list the product with a per-unit cost of about 10 cents and a per-unit price of $500.
``In fact, as ... Pinez well knew, Centennial did not manufacture or have for sale a real product called `Flash 98,‴ the indictment said.
During the next 10 months, Centennial issued 11 invoices for more than $2 million in sales of Flash 98 to BBC Corp. of Merrimack, N.H. All the sales were included in the company’s general ledger and in its consolidated financial statements, according to the indictment.
Between July 1996 and January 1997, Pinez transferred more than $1 million of his own money to a company called St. Jude Management Corp. St. Jude Management then paid Centennial about $1.5 million on behalf of BBC for the Flash 98 invoices, the indictment alleged.
In effect, Pinez used his own money to make it appear that the sales were legitimate, the indictment said. He then concealed that fact to company employees and auditors.
Pinez also financed three more bogus sales totaling about $371,000 in December 1995, the indictment said.
A spokeswoman for Stern said the investigation is continuing.
Also, chief financial officer James Murphy, who claims he blew the whistle on Pinez, has said the company asked him to resign and was trying to blame him for part of the alleged fraud. Murphy has refused to step down.