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Former NorthWestern subsidiary CFO ordered to pay $20,000 under SEC lawsuit
By Caroline Salls
Pittsburgh, March 5 - A former chief financial officer of NorthWestern Corp.'s former Expanets, Inc. subsidiary must pay a $20,000 civil penalty under a Securities and Exchange Commission lawsuit ruling that also issued a permanent injunction against various securities law violations, according to an SEC news release.
The SEC said its complaint against former Expanets CFO Richard E. Fresia alleged that Fresia participated in concealing the company's ongoing operational problems and poor financial performance during the second and third quarters of 2002.
The complaint also alleged that Fresia knew that Expanets improperly accounted for accounts receivable and adjustments to customers' bills, causing 90% and 109% overstatements of NorthWestern's reported income from continuing operations in the second and third quarters of 2002, respectively.
In addition, the complaint alleged that Fresia participated in NorthWestern's failure to disclose the nature of Expanets' reported income during the second and third quarters of 2002, including the magnitude of Expanets' reserve reductions and its receipt of unusual non-compete payments.
According to the release, the complaint alleged that Fresia's conduct helped facilitate more than $800 million in securities offerings by NorthWestern in September and October 2002, including raising $87.5 million in an equity offering that provided NorthWestern with badly needed operating capital.
The securities law injunction covers Section 13(b)(5) of the Securities Exchange Act of 1934 and Rule 13b2-1 under that act.
Fresia was also permanently enjoined from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder.
NorthWestern, a Sioux Falls, S.D., provider of electricity and natural gas, emerged from Chapter 11 on Nov. 1, 2004.
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