Skin guru CFO gives unwelcome lift to financial statements
The Securities and Exchange Commission has charged the former chief financial officer of a Seattle-area skin care retailer with fraudulently boosting earnings by reporting sales of anti-aging products promoted through Home Shopping Network infomercials while the products still sat unsold in the company's warehouse. The agency also separately settled charges against the company and began administrative proceedings against the company's outside auditors for professional misconduct.
"ICTV's auditors turned a blind eye to the company's financial irregularities and failed to fulfill their role in investor protection," said Marc Fagel, director of the SEC's San Francisco regional office in a prepared statement.
The SEC alleges that Karl Redekopp, the former CFO of International Commercial Television Inc. (ICTV), turned millions of dollars of quarterly losses into profits by falsely accounting for ICTV's sales of the Derma Wand, a skin care appliance that purports to reduce wrinkles and improve skin appearance. Redekopp fraudulently recognized revenue before the Home Shopping Network had actually sold or delivered the product to viewers. He also improperly recognized revenue before a free trial period offered by the company had expired, and failed to reverse revenue from products that had been returned. Redekopp's misconduct caused the company to falsely report millions of dollars in excess revenue in 2007 and 2008.
The SEC has begun administrative proceedings against ICTV's former auditing firm, Dohan & Company CPA., of Miami.