Exhibit 10.1
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 34623 / September 1, 1994
ADMINISTRATIVE PROCEEDING
File No. 3-8461
________________________________
:
In the Matter of : ORDER INSTITUTING PUBLIC
: ADMINISTRATIVE PROCEEDINGS
CONCORD CAMERA CORP., : PURSUANT TO SECTION 21C OF THE
: SECURITIES EXCHANGE ACT OF
Respondent. : 1934 AND FINDINGS AND ORDER OF
_______________________________: THE COMMISSION
I.
THE COMMISSION'S INSTITUTION OF
PUBLIC ADMINISTRATIVE PROCEEDINGS
The Commission deems it appropriate and in the public interest to
institute public administrative proceedings pursuant to Section 21C of the
Securities and Exchange Act of 1934 ("Exchange Act") against Concord Camera
Corp. ("Concord" or "Respondent") to determine whether Concord violated Sections
13(a), 13(b)(2)(A), and 14(a) of the Exchange Act and Rules 12b-20, 13a-1,
14a-3, and 14a-9 thereunder.
Accordingly, IT IS HEREBY ORDERED that public administrative
proceedings pursuant to Section 21C be, and hereby are, instituted against
Concord.
II.
THE COMMISSION'S ACCEPTANCE OF
RESPONDENT'S OFFER OF SETTLEMENT
In anticipation of the Commission's institution of these public
administrative proceedings, Concord has submitted an offer of settlement which
the Commission has determined to accept. Solely for the purpose of these and any
other proceedings brought by or on behalf of the Commission or to which the
Commission is a party, the Respondent consents to the issuance of this Order
Instituting Public Administrative Proceedings Pursuant to Section 21C of the
Securities Exchange Act of 1934 and Findings and Order of the Commission
("Order"), without admitting or denying the matters set forth herein, and
consents to the entry of the Findings and Order of the Commission set forth
below.
III.
The Commission makes the following findings:
A. RESPONDENT
Concord Camera Corp. is a New Jersey corporation headquartered in
Avenel, New Jersey that manufactures and distributes cameras. Concord's common
stock is registered with the Commission pursuant to Section 12(b) of the
Exchange Act and is listed on the National Association of Securities Dealers
Automated Quotation system.
B. RELEVANT PERSONS
1. Jack C. Benun was the chairman and chief executive officer, and
remains a principal shareholder, of Concord.
2. Dialbright Company, Ltd. ("Dialbright"), now known as Concord
Camera Hong Kong Limited, is a limited Hong Kong company and a wholly owned
subsidiary of Concord.
C. SUMMARY
This matter involves the misappropriation by Concord's former chairman
of $150,000 of company funds and Concord's misrepresentations concerning the
disposition of those funds.
In May 1990, Concord's then-chairman, Benun, obtained $150,000 from
Concord by having Concord's subsidiary, Dialbright, issue a $150,000 check to a
new employee. This employee endorsed the check and returned it to Benun, who
arranged to have the proceeds sent back to himself. In its Form 10-K for the
fiscal year ended June 30, 1990 and in its proxy statement filed on October 26,
1990, Concord inaccurately reported that the $150,000 had been paid as an
incentive bonus to a newly hired employee, and did not disclose that Benun had
received the $150,000 himself.
D. FACTS
1. Benun's Misappropration of $150,000 from Concord
In May 1990, Concord's then-chairman, Benun, instructed Dialbright to
issue a $150,000 check to a newly hired employee under the pretense that he had
agreed to pay that amount as an incentive bonus to the employee for joining
Dialbright. Within three days of having received the check, the employee
endorsed and returned it to Benun. Benun thereafter delivered the endorsed check
to a longtime friend who did not know the payee. At Benun's instruction, this
friend deposited the endorsed check into his bank account and wire-transferred
the proceeds to a bank account specified by Benun. That transferee bank account
was held by another of Benun's longtime friends; this second friend previously
had agreed to receive Benun's funds into his account and to write checks back to
Benun from that account. Pursuant to this prior agreement, the transferee issued
five checks over the next month to Benun and Benun's wife; these checks totalled
$144,500. Benun and his wife deposited the checks into their own bank accounts.
Benun did not disclose this transaction to Concord.
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2. Concord's Filings with the Commission
At a board meeting held in September 1990, Concord's board ratified
Benun's issuance of the purported $150,000 incentive bonus to the new Dialbright
employee. Two days after the meeting, the Company filed its Form 10-K for the
fiscal year ended June 30, 1990. One month later, Concord filed its proxy
statement. In both filings, Concord inaccurately stated that it had paid a
$150,000 incentive bonus to a new employee and did not disclose that Benun had
received the $150,000 from Concord.
3. Concord's Internal Investigation
In August 1990, while reviewing Concord's and Dialbright's books,
Concord's Chief Financial Officer discovered that Benun might have used
Dialbright's newly hired employee as part of a scheme to misappropriate $150,000
of company funds. In February 1991, Concord's former Chief Financial Officer
commenced a wrongful discharge against Concord and Benun alleging that Benun had
fired him in late 1990 in retaliation for his discovery of the $150,000
misappropriation. Shortly thereafter, Concord created an ad hoc committee to
investigate these allegations and to determine the impact the lawsuit might have
on Concord. Those persons involved in the transaction but not employed by
Concord did not make themselves available to be interviewed. Benun and the
Dialbright employee provided different accounts about why the new Dialbright
employee had paid over the $150,000 to a third party. In particular, Benun,
while denying receipt of the $150,000, provided the ad hoc committee with
inconsistent accounts about why the newly hired Dialbright employee transferred
the $150,000 to Benun's friend.
Despite Benun's materially inconsistent stories about the new
employee's transfer of the $150,000 to a third party, the Committee concluded
that the allegations of Benun's misconduct had not been substantiated. Concord's
board approved the Committee's report and conclusions.
In the fall of 1993, the Company learned that witnesses who had been
unavailable for interview by the ad hoc committee had provided testimony to the
Commission inconsistent with Benun's denial that he had received the $150,000.
Concord thereafter appointed a new ad hoc committee to re-evaluate the earlier
report and conclusions. On July 14, 1994, the company announced that its board
of directors had received and adopted a report of the ad hoc committee, and,
based on the report, dismissed Benun as chairman and chief executive officer of
the company.
E. VIOLATIONS
1. Concord's Violation of Section 13(a) of the Exchange Act and
Rules 12b-20 and 13a-1 thereunder
Section 13(a) of the Exchange Act required issuers registered under
Section 12 of the Exchange Act to file complete, accurate, and timely current,
annual, and quarterly reports as required by the Commission. The purpose of
Section 13(a) and Rule 13a-1 thereunder is to compel registrants to provide
investors with important information concerning the operation and financial
condition of each registrant.
Concord's Form 10-K for 1990 inaccurately stated that it had paid a
$150,000 incentive bonus to a new employee. This statement was materially false
and misleading because Benun had misappropriated those funds for his own
personal use. Concord's Form 10-K did not disclose, as required by Item 404 of
Regulation S-K, that Benun had received the $150,000. By filing a Form 10-K
that contained these material misstatements and omissions, Concord violated
Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder.
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2. Concord's Violation of Section 13(b)(2)(A) of the Exchange Act
Section 13(b)(2)(A) of the Exchange Act requires registered companies
to "make and keep books, records, and accounts, which, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the issuer." Concord's books, records, and accounts were inaccurate because they
erroneously reflected the payment of a $150,000 incentive bonus to a newly hired
Dialbright employee. Concord therefore violated Section 13(b)(2)(A) of the
Exchange Act.
3. Concord's Violation of Section 14(a) of the Exchange Act and
Rules 12b-20, 14a-3, and 14a-9 thereunder
Section 14(a) of the Exchange Act prohibits any person from soliciting
or permitting the use of his name to solicit, without complying with the
appropriate rules and regulations, "any proxy or consent or authorization in
respect of any security (other than an exempted security) registered pursuant to
section 12 of this title." Rule 14a-3(a) requires that proxy statements contain
the information specified in Schedule 14A. Rule 14a-9 proscribes material
misstatements in Schedule 14A filings. Concord's proxy statement failed to
disclose its $150,000 transaction with its chairman and chief executive officer,
Benun, during the fiscal year ended June 30, 1990. Additionally, Concord's proxy
statement inaccurately stated that Concord had paid a $150,000 incentive bonus
to a new employee. By filing an inaccurate and incomplete proxy statement,
Concord violated Section 14(a) of the Exchange Act and Rules 12b-20, 14a-3, and
14a-9 thereunder.
IV.
ORDER
Accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the
Exchange Act, that Concord Camera Corp. permanently cease and desist from
committing any violation and any future violation of Sections 13(a),
13(b)(2)(A), and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 14a-3, and
14a-9 thereunder.
By the Commission.
/s/ Jonathan G. Katz
--------------------------------
Jonathan G. Katz
Secretary
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SERVICE LIST
Rule 23 of the Commission's Rules of Practice provides that all
amendments to moving papers, all answers, all motions or applications made in
the course of a proceeding (unless made orally at a hearing), all proposed
findings and conclusions, all petitions for review of any initial decision, and
all briefs shall be filed with the Commission and shall be served on all other
parties to the proceeding including the interested Division or Office of the
Commission.
The attached Order Instituting Public Administrative Proceedings
Pursuant to Section 21C of the Securities Exchange Act of 1934 and Findings and
Order of the Commission has been served upon the following parties and other
persons entitled to receive notice:
Honorable Brenda P. Murray
Chief Administrative Law Judge
Securities and Exchange Commission
450 Fifth Street, N.W., Mail Stop 7-7
Washington, DC 20549
Jerry A. Isenberg, Esq.
Securities and Exchange Commission
Division of Enforcement
450 Fifth Street, N.W., Mail Stop 4-3B
Washington, DC 20549
Ira B. Lampert
Chief Executive Officer
Concord Camera Corp.
35 Mileed Way
Avenel, NJ 07001
William J. Schwartz, Esq.
Kronish, Lieb, Weiner & Hellman
1114 Avenue of the Americas
New York, NY 10036-7798