Saxon Industries Inc. today announced that it has sold its business products division, the centerpiece of a scandal that rocked the New York-based company paper products and office machine company.
Last month, the Securities and Exchange Commission filed a civil suit against the company and three former executives alleging an elaborate computer fraud scheme amounting to $75 million. The SEC said that the fraud began in 1968 and continued after the company filed for bankruptcy protection last April.
The company, under new managment, has settled with the SEC without admitting or denying the allegations and is attempting to reorganize financially under Chapter 11 of the bankrupcty act. The SEC case is still pending against the three former executives: Stanley Lurie, who was chairman, president and chief executive officer, Alfred Horowitz, vice president, finance, and Arthur Monteil, business products division vice president, finance.
New allegations about Saxon are contained in a preliminary report filed recently by a special examiner appointed by the bankruptcy trustee handling the Saxon case.
The 91-page report by attorney Arthur J. England Jr. is based on an investigation carried out by his Miami law firm, Steel Hector & Davis. It contains allegations of widespread fraud involving numerous low level employes, culminating in a marathon effort to shred documents after the company filed for bankruptcy protection.
England concentrated his probe on Saxon's business products division in Miami Lakes, Fla., which produced photocopiers. His investigative report charges that the company exaggerated inventories by $67 million in that division by phony computer listings.
England's report and a preliminary 1981 audit indicates that the SEC estimates of a $75 million fraud were understated.
England concluded that the alleged fraud was concentrated in the finance group of the copier division. "The finance group at Miami Lakes was completely autonomous, answering to no one but Lurie and Horowitz," England said in his report.
Lurie, 61, was a tireless worker, England said in his report. Often he would run the company day-to-day affairs from its headquarters in New York, then at the end of the day fly down to Miami where he and members of the finance group would work from midnight until 5 a.m., the report said.
According to England's report, it was during those early morning hours and on weekends that "the computerized general ledger was falsified to show diminished expenses, inflated sales and inflated profits."
No one outside the group was ever permitted to see year-end financial statements or balance sheets, England charged.
"Executives at [the copier division] could see from monthly profit and loss statements that the division was doing poorly . . . but they would consistently be surprised when published, consolidated yearly financial statements showed a profit," says England. He says the confused employes assumed the profits were generated by some other division of the company.