The former president of Alcore Inc., Edward Kiley, pleaded guilty Sept. 6 in a Baltimore federal court to insider trading and overstating revenue by $2.7 million in financial reports to the Securities and Exchange Commission.
Kiley and another Alcore executive were charged with falsifying earnings reports in 1999 for Alcore, which at the time was part of aerospace composites manufacturer Advanced Technical Products Inc. Alcore makes structural honeycomb core.
Prosecutors said the financial fraud was substantial - it allowed ATP to report a profit when it was actually losing money. When the scheme unraveled after federal agents raided Alcore in early 2000, ATP was forced to restate earnings, its stock price plummeted and merger discussions collapsed.
In the plea agreement in U.S. District Court in Baltimore, Kiley said he regretted his actions at Edgewood, Md.-based Alcore.
``I fully and unequivocally accept responsibility for my criminal conduct,'' Kiley wrote, according to a news release from U.S. Attorney Thomas DiBiagio in Maryland. ``My judgment was poor and my decisions were cowardly.
``My actions not only have hurt my family and those who supported Alcore, but they have deeply hurt those employees at Alcore who were most loyal to me,'' Kiley wrote. ``I could not be more sorry and ashamed.''
Kiley could face five years in prison and a $250,000 fine for filing false statements, and 10 years and a $1 million fine for insider trading. According to SEC documents filed in connection with the case, Kiley sold 3,000 shares of ATP at artificially inflated prices. The Baltimore Sun reported that he made $33,000 from the stock sale.
ATP, based in Roswell, Ga., said in SEC filings that it fired Kiley in March 2000. The firm sold the Alcore unit in June 2001, and General Dynamics now owns ATP.
Another former Alcore executive, Chief Financial Officer Richard Orzechowski, already has pleaded guilty to making false statements to the SEC. Sentencing is pending for both men.
A third Alcore official, former controller Katrina Krug, was disciplined by the SEC.
Two former ATP executives, James Carter and Garrett Dominy, also were chastised by the SEC in June for not taking corrective action ``in the face of several red flags suggesting a failure of internal controls and possible accounting irregularities at Alcore.'' No charges have been brought against them.