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Former Friedman's CEO indicted

March 12, 2007

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New York—Federal prosecutors in New York City have charged Bradley Stinn, the former chief executive officer of Friedman's Jewelers and Crescent Jewelers, in connection with an alleged accounting-fraud scheme that prosecutors say occurred while he served as CEO of the chains.

A federal indictment unsealed Friday in the United States District Court of the Eastern District of New York in Brooklyn, N.Y., charges Stinn with one count of conspiracy to commit securities fraud, mail fraud and wire fraud; one count of securities fraud; two counts of false U.S. Securities and Exchange Commission (SEC) filings; one count of mail fraud; and one count of certification of a false financial report, according to court papers.

"Stinn and his [unnamed] co-conspirators engaged in a scheme to defraud investors by, among other things, falsifying Friedman's accounting data and misrepresenting Friedman's financial condition in public statement and reports," the indictment alleges.

The mail-fraud charges stem from allegedly false SEC filings relating to Friedman's Class A common stock that were sent by mail via an interstate carrier, the indictment says.

The government began investigating financial irregularities in 2003, a probe which prosecutors say prompted the resignation of Stinn and Friedman's former chief financial officer, as well as Friedman's announcement that it would restate the previously filed financial statements for fiscal years 2000-2002 and for the first three quarters of fiscal year 2003. Stinn resigned in December 2003.

In exchange for an agreement by prosecutors not to charge the companies, Friedman's and Crescent agreed to forfeit $3 million, cooperate fully with the government's investigation and adopt significant corporate reforms to prevent recurrence of the fraud. The Savannah, Ga.-based chain, which had been experiencing financial problems, exited Chapter 11 bankruptcy in late 2005.

Stinn appeared in court on March 9, and he has an arraignment scheduled for this Thursday, although his attorney David Shapiro says he has filed for a change of venue, which would move the case to San Francisco.

Shapiro says that Stinn lives and works in San Francisco, and all of the alleged events took place there, so it makes sense to have the trial there.

"Brad is innocent," Shapiro says. "He is going to defend himself at trial."
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Business | Corporate Crime | Corporate Ethics | Corporate Fraud | Crime

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