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A story appearing at www.BusinessInsurance.com on May 25, "Brightpoint risk manager found guilty of fraud," contained incorrect information. The following is a corrected version of the story.
NEW YORK--Brightpoint Inc.'s former director of risk management, Timothy Harcharik, was found liable Friday in a New York court of aiding and abetting fraud in a 1998 finite insurance deal between Brightpoint and American International Group Inc.
The civil case, which was heard in a New York federal court, is the first finite risk-related securities case to go to trial, the U.S. Securities and Exchange Commission said in a statement.
AIG in 2003 paid $10 million to settle charges by the SEC over a 1998 finite transaction it retroactively wrote for the Plainfield, Ind.-based mobile telephone distributor.
The SEC had charged that New York-based AIG unit National Union Fire Insurance Co. of Pittsburgh, Pa., provided Plainfield, Ind.-based Brightpoint with an insurance contract that did not involve any actual risk transfer. This contract allowed Brightpoint to claim an insurance receivable in its financial statements, which led to an overstatement of earnings, the SEC charged.
AIG did not admit any wrongdoing as part of the settlement.
Following a four-day trial, a jury on Friday "returned a verdict in favor of the SEC and found Mr. Harcharik liable for aiding and abetting Brightpoint's fraud and other violations of the securities laws," the SEC said. The jury did not find Mr. Harcharik liable for two of five total charges brought against him by the SEC. The charges he was not found liable for were related to SEC rules governing, among other things, securities trading and misrepresentations in certain documents.
"The sanctions to be imposed on Harcharik will be determined by Judge Harold Baer Jr., at a future point," the agency said.
Mark K. Schonfeld, director of the SEC's New York regional office, in the statement said: "I am gratified with this result. Cracking down on the abuse of so-called finite insurance and reinsurance to cook the books of public companies has been a priority for us. This verdict makes clear that such conduct is fraud, plain and simple."