One of two former Brightpoint Inc. employees charged this month in an accounting scandal has agreed to plead guilty in return for receiving a prison sentence of no more than 18 months.
John Delaney, 40, former chief accounting officer of the wireless phone wholesaler, could end up spending far less time behind bars. In his nine-page plea agreement filed in federal court in Indianapolis, the U.S. Attorney's Office says it will argue for a lesser sentence.
Delaney on Oct. 13 was charged with securities fraud, a crime punishable by up to 10 years in prison. On the same day, a federal grand jury indicted Timothy Harcharik, Brightpoint's former director of risk management, on an obstruction-of-justice charge. If convicted, he faces up to five years in prison.
The criminal charges stem from a 1999 deal Brightpoint cut with New York-based insurance giant American International Group Inc. that investigators say allowed the Plainfield company to manipulate its financial statements, spreading out $11.9 million in losses that should have been reported in 1998. Investigators say it was a sham transaction, aimed at concealing that losses from shuttering a United Kingdom unit had turned out to be much larger than the company previously told investors.
Both Brightpoint and AIG settled an earlier Securities and Exchange Commission investigation into the arrangement in 2003, with Brightpoint agreeing to pay $450,000 and AIG $10 million. Delaney also settled, paying $100,000; Harcharik is fighting the SEC case in Manhattan federal court.
Harcharik, now 51, served as Brightpoint's director of risk management. According to investigators, he lied under oath to the SEC about various aspects of the AIG deal.
Harcharik, who now lives in California, is represented by a public defender, who did not return calls.
Under Delaney's plea agreement, he vowed to continue cooperating with investigators. The agreement must be approved by Judge Larry McKinney, who would determine the precise sentence.
"John Delaney deeply regrets his own misconduct, but is confident the entire
story will emerge with the ongoing
investigation," said Delaney's attorney, Barnes & Thornburg partner Larry Mackey.
So does that mean more charges will follow? Following government policy, acting U.S. Attorney Timothy Morrison declined to answer the question.
All of which frustrates Brightpoint officials, who've operated for months under a cloud of suspicion they say is unwarranted.
"An unfortunate misunderstanding has arisen from recent statements," C. Joseph Russell, a Bose McKinney & Evans partner representing Brightpoint, told IBJ last week.
"First, it should be clear that Brightpoint cooperated with the government from the very beginning of this investigation. Second, I have been assured that neither Brightpoint nor any current employee is either a subject or a target of any ongoing federal investigation."
Brightpoint's board, led by founder and CEO Robert Laikin, launched a series of moves several years ago to tighten internal controls and corporate governance. In addition, none of the Brightpoint employees identified by the SEC as having a hand in the AIG deal remains with the company.
It dismissed Delaney and Harcharik in early 2002, and a few months later Chief Financial Officer Phil Bounsall left as well, collecting $1 million in severance. He now is executive vice president of WalkerInformation.
Bounsall in 2003 settled with the SEC for $45,000. The SEC said he failed to adequately review the AIG deal but did not accuse him of fraud.
Simon shares swoon
Simon Property Group Inc. will report third-quarter financials Oct. 28. For the first time in a long while, investors won't have reason to be in a giddy mood.
Shares in the nation's largest retail real estate company have retreated since peaking at $80.97 in early August. They were trading late last week at $68.17, down 16 percent from the high.
Longer term, though, Simon shareholders have nothing to quarrel about. Despite the pullback, the stock is up more than 5 percent for the year. Since the start of 2000, it's up more than 200 percent.
Including dividends, the news is even better. The total return since the start of 2000 tops 330 percent.