PHOENIX (April 17, 2009) — A federal grand jury in Phoenix has charged two former executives of auto parts retailer CSK Auto Corp. with 31 counts of conspiracy and related charges in an alleged scheme to manipulate CSK's corporate earnings statements.
Martin G. Fraser, former CSK president and chief operating officer, and Don W. Watson, the company's former chief financial officer, were indicted April 7 by the grand jury on the 31 charges.
Separately on the same day, Gary M. Opper, former CSK director of credits and receivables, was charged with obstruction of justice. Edward W. O'Brien III, former CSK controller, pleaded guilty to obstruction of justice through making false statements and omitting information during an internal investigation of the conspiracy.
According to the indictment, Mr. Fraser and Mr. Watson allegedly conspired between 2001 and 2006 to make CSK's earnings seem larger than they actually were, largely through concealing tens of millions of dollars of uncollectible receivables that should have been written off against earnings. Because of their alleged conspiracy, CSK misstated its receivables and pre-tax income by a total of $53 million in fiscal years 2002, 2003 and 2004, the U.S. Department of Justice said in a press release.
The full list of charges against Mr. Fraser and Mr. Watson include mail fraud, securities fraud, false filings with the U.S. Securities and Exchange Commission, keeping false books and records, and making false statements to the company auditor. Mr. Watson also faces a separate charge of falsely certifying financial reports.
The conspiracy charge alone carries a maximum penalty of five years in prison and a $250,000 fine, the Justice Department said. The other 30 counts each carry maximum prison sentences of 10 to 20 years and maximum fines of $250,000 to $5 million.
CSK, which was purchased by O'Reilly Automotive Inc. in July 2008, was the largest retailer of specialty auto parts and accessories in the Western U.S. and one of the largest such retailers in the country at the time of the alleged conspiracy, operating the Checker, Schucks and Kragen auto parts stores.
A spokesman for O'Reilly declined comment on the case, and officials of the Justice Department could not immediately be reached for comment.