The Securities and Exchange Commission today announced financial fraud charges against four former SMF Energy Corp. officers, alleging that former CEO Richard E. Gathright, former chief financial officer Michael S. Shore, former chief accounting officer Laura P. Messenbaugh, and former senior vice president of sales and investor relations officer Robert W. Beard vastly inflated SMF’s revenues through a fraudulent billing scheme.
The SEC’s action, filed in U.S. District Court for the Southern District of Florida, alleges that SMF overbilled certain mobile fueling customers, including the U.S. Postal Service, by charging for fuel that was not delivered and adding surcharges that the customers’ contracts did not permit. As a result, the SEC alleges that Fort Lauderdale, Florida-based SMF materially overstated its revenues, profit margins, shareholders’ equity and net income, and understated its liabilities in its annual reports for fiscal years 2010 and 2011, its quarterly reports in its fiscal year 2011 and the first half of fiscal year 2012, and other reports filed on Form 8-K over the same time period.
According to the SEC’s complaint, the overbilling began in 2004 as a minor contributor to SMF Energy’s financial performance but later made the difference between the company being profitable and posting net losses. The complaint alleges the four officers participated in the fraudulent scheme and that Gathright, Shore and Messenbaugh overstated SMF’s revenues and net income in SMF’s public filings. According to the complaint, Gathright, of Pompano Beach, Florida; Shore, of Miami, and Messenbaugh, of Plantation, Florida, each reviewed the allegedly fraudulent annual and quarterly reports that Gathright and Shore signed and certified as accurate. Messenbaugh signed the allegedly fraudulent annual reports and Gathright signed the reports filed on Form 8-K that allegedly contained material misrepresentations and omissions.
“Information in a company’s public filings provides the foundation on which investment decisions are made,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “We allege that SMF used fraudulent billing practices to increase its earnings and would have reported losses rather than net profits had it not relied on such practices.”
The SEC’s complaint alleges violations and the aiding and abetting violations of the antifraud provisions, books and records, internal controls, and disclosure and reporting provisions of the federal securities laws. The SEC is seeking disgorgement of allegedly ill-gotten gains, plus prejudgment interest and penalties, an officer and director bar against the four former officers, and permanent injunctive relief.
SEC Miami Regional office staff John T. Houchin, Jonathan M. Grant, and Timothy J. Galdencio conducted the investigation under the supervision of Assistant Regional Director Eric R. Busto. Christopher E. Martin will lead the SEC’s litigation efforts.