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PairGain may pay fine
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September 2, 1999: 11:47 a.m. ET
Firm could pay $1.4M for accounting violations stemming from trading losses
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NEW YORK (CNNfn) - Telecom equipment maker PairGain Technologies Inc. announced a tentative deal Thursday to plead guilty to federal charges of accounting improprieties and pay a $1.4 million fine stemming from its losses in dealings with the defunct Capital Insight brokerage.
PairGain (PAIR), of Tustin, Calif., said it would agree to plead guilty "to willfully failing to set up adequate internal accounting controls" so that its financial records would accurately reflect the nature and value of its investments with the collapsed brokerage and its head, former bond trader Jay Goldinger, in 1995.
Under the deal, the company would pay $1 million in fines plus $400,000 to repay the U.S. attorney's office in Los Angeles for the costs of its investigation.
A company spokesperson declined to elaborate.
Goldinger's trades centered on Treasury-bond futures and options and led to losses of about $100 million for its clients. PairGain lost $16 million from its investments with Goldinger, the Wall Street Journal reported Thursday.
In addition to the anticipated plea by the company, Charles Strauch, PairGain's chairman and former CEO, and Charles McBrayer, its current chief financial officer, tentatively have agreed to settle related civil allegations with the Securities and Exchange Commission by paying a $25,000 fine each, the newspaper said, citing people familiar with the matter.
There was no immediate response to a message left at PairGain's headquarters by CNNfn.com.
But a source familiar with the case said that a final agreement between PairGain and federal officials is expected to be announced "in the near future."
An unidentified person familiar with the negotiations also told the newspaper that the SEC, the Justice Department and the U.S. Commodities Futures Trading Commission are expected in the next few weeks to announce a settlement with Goldinger that may include criminal charges, various civil allegations and call for more than $90 million in restitution. The former financial adviser has been cooperating with federal investigators.
In a statement Thursday, PairGain said the settlement isn't expected to affect its business operations, but it would be pleased to have the matter behind it.
"We can now concentrate all of our energies and resources on building the business and maximizing shareholder value," a PairGain spokesperson said in a statement announcing the tentative arrangement.
In May, the futures broker Refco Inc., which handled many of Goldinger's trades, agreed to pay a total of $8 million to settle allegations it improperly executed orders of customers.
PairGain shares slipped 1/8 to 10 Thursday morning.
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PairGain
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