Former managing director and CEO of Sigma Pharmaceuticals, Elmo De Alwis, along with former CFO Mark Smith, have been sentenced for falsifying Sigma’s books and misleading directors.
De Alwis and Smith were each sentenced to 12 months imprisonment – to be released on a good behaviour bond for 42 months – and fined $25,000 after pleading guilty to two charges of falsifying books and two charges of giving false or misleading information to Sigma’s directors and auditors.
In passing sentence, Judge Richard Smith stated the offending was serious and rejected a submission that the offending was technical only.
“No desire to reach performance targets can justify … misleading directors and auditors of a company,” he said.
De Alwis and Smith were charged following an ASIC investigation in relation to their conduct in accounting for four financial transactions for the purchase of stock between June 2009 and March 2010.
According to ASIC, De Alwis and Smith arranged for Sigma to purchase wholesale drugs at inflated prices, and for the amount of the inflated payment to be returned to Sigma and recorded in its books as revenue.
In doing so, their conduct resulted in the falsification of Sigma’s books regarding these transactions, and they gave false or misleading information to the company’s directors and auditors about how the transactions were accounted for.
As a result, for the full year ending 31 January 2010, Sigma’s publicly reported income result was overstated by $15,500,616, its inventory value was overstated by $11,313,224, and its profit after tax was overstated by $9,599,000.
Sigma later made adjustments to its accounts to reverse these overstatements.
ASIC Commissioner Cathie Armour stressed that senior officers of publicly listed companies are in a position of trust and responsibility.
“This type of conduct undermines confidence in the integrity of the market,” she added.