Former Systemax Director, Miami, Charged in Compensation Scheme
Gilbert Fiorentino, a former director of Systemax Inc. (“Systemax”), a Port Washington, N.Y.-based consumer electronics retailer, is the subject of a Securities and Exchange Commission (SEC) civil action for fraud and associated proposed settlement.
The Commission’s Complaint, filed in the U.S. District Court for the Southern District of Florida, alleges that Gilbert Fiorentino, who in addition to serving on the board was the former chief executive of Systemax’s Technology Products Group in Miami, obtained over $400,000 in extra compensation directly from firms that conducted business with Systemax.
Fiorentino also stole several hundred thousand dollars worth of company merchandise that was used to market Systemax’s products online and in mail order catalogs. Because Fiorentino was one of Systemax’s highest-paid executives, the federal securities laws required the company to disclose all compensation he received each fiscal year as well as his perks and other personal benefits. Since Fiorentino failed to disclose his extra compensation and perks to Systemax or its auditors, the amounts were not reported to shareholders correctly.
Systemax placed Fiorentino on administrative leave in April 2011. After the SEC began investigating the conduct, Fiorentino agreed to resign from all of his positions with Systemax, surrender stock and stock options valued at approximately $9.1 million, and repay his 2010 annual bonus of $480,000.
According to the SEC’s complaint, the misconduct occurred from January 2006 to December 2010. Systemax sells personal computers and other consumer electronics through its websites, retail stores, and direct mail catalogs. Fiorentino arranged the extra compensation as he dealt directly with external service providers, manufacturer representatives, and other entities that conducted business with Systemax. For example, he demanded and received $5,000 to $10,000 monthly from an entity that supplied materials to Systemax’s subsidiaries for use in retail and mail order operations.
The SEC further alleges that through his executive position at Systemax, Fiorentino had access to company merchandise used to market Systemax products in mail order catalogs and online. Fiorentino routinely misappropriated some of this merchandise and failed to disclose it to Systemax and its auditors.
According to the SEC’s complaint, as a result of Fiorentino’s actions, the information that Systemax filed with the SEC and provided to investors materially understated his compensation and omitted his personal financial interest in certain related-party transactions. Fiorentino reviewed and signed each Systemax Form 10-K from fiscal year 2006 to 2010 while knowing that it failed to make the required disclosures. Fiorentino also routinely signed management representation letters to Systemax’s independent auditors stating that he did not know of any fraud or suspected fraud involving Systemax’s management.
Fiorentino has consented to the entry of an injunctive order without admitting or denying the allegations in the Commission’s complaint.
Fort Lauderdale Securities Litigation and Arbitration Attorney
Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.
