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ASHEVILLE, N.C. -- Ingles Markets, Inc. here said yesterday it has reached a settlement agreement with the Securities and Exchange Commission (SEC) over accounting fraud charges. Ingles did not admit or deny the SEC's allegations, but consented to the entry of injunctions against future violations of certain provisions of federal securities laws.
The SEC alleged in its complaint that Ingles' former officer and director, Anthony Federico, now deceased, provided false information to the company's accounting department in 2002 and 2003.
The SEC alleged that Federico negotiated refundable, upfront payments with vendors worth millions of dollars at or after the end of certain quarters and drafted forms to make it look like the money was nonrefundable and for past performance.
According to the SEC, the alleged misconduct accounted for more than half of the pretax income reported in quarterly reports filed in May 20002 and February 2003.
The commission alleged that Federico was able to do this in large part because Ingles had no meaningful controls over the recognition of income from upfront vendor payments during the relevant period.
Ingles restated its financial statements in February 2005 to correct these and other accounting errors, and implemented internal controls to properly account for upfront vendor payments.
Robert P. Ingle, Ingles' c.e.o., said in a statement, "We are very pleased to finally put this matter behind us, without the payment of a penalty, and are now able to completely focus our efforts on the company's future. We believe that this resolution attests to our cooperation with the SEC, as well as our recent efforts to improve our internal control environment."
Ingles Markets has operations in six southeastern states.