A federal jury in a civil case concluded last Friday that a former Brightpoint executive violated U.S. securities laws by helping a colleague create a finite reinsurance scheme to conceal millions of dollars in losses by the Indiana cell phone distributor.
The jury in U.S. District Court in Manhattan agreed that Timothy Harcharik, the company’s director of risk management from June 1997 until February 2002, helped John Delaney, its former chief accounting officer, pull off the scam at the Plainfield, Ind., company.
The jury declined to agree with the government’s claim that Harcharik violated securities laws on his own.
U.S. District Judge Harold Baer Jr. said he will announce the penalty Harcharik faces at a June 14 hearing.
Government lawyer David Stoelting told the jury the case was about “deceit and deception” after Brightpoint realized its losses from the closing of an office in the United Kingdom would be higher than the $18 million the company had promised investors it would cost in 1998.
He said Harcharik and Delaney teamed up with American International Group Inc. to obtain a phony insurance policy to cover up $11.9 million in losses by making it appear that the losses were covered by insurance.
Harcharik, representing himself at trial, told the jury there was “no conspiracy, collusion or complicity” and that Delaney acted alone in using aggressive accounting techniques that got him in trouble.
“I am sorry ladies and gentlemen. I am not the murderer. I wasn’t an accomplice to the murder. I wasn’t even at the scene,” he said.
Delaney, the only person criminally charged in the case, pleaded guilty to criminal securities fraud in a plea deal reached in October 2005. He served several months of home confinement and paid $100,000 to the SEC.
AIG paid a $10 million penalty while Brightpoint paid a $450,000 penalty.
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