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SEC sacks Fran Tarkenton
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September 28, 1999: 6:21 p.m. ET
Hall of Fame QB pays $154,187 penalty without admitting guilt to fraud charges
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NEW YORK (CNNfn) - Football Hall of Fame quarterback Fran Tarkenton and 10 of his ex-business associates have agreed to pay $472,000 in civil penalties to settle Securities and Exchange Commission fraud charges.
The 11 did not admit guilt in settling the case, which was announced Tuesday. The former software company, KnowlegeWare Inc., was charged with stating income for the company more than triple the actual amount for the fiscal year ending June 30, 1994, its last year as an independent company. Tarkenton served as chairman and chief executive of the company.
The problem came to light in August 1994, during a proposed purchase of the company by Sterling Software Inc. (SSW), which had offered stock worth $8.75 a share for KnowledgeWare on July 31. When the accounting irregularities became known, Sterling backed out of the deal but renegotiated a purchase a month later for $4.85 a share, or $74.4 million. Sterling set 20 percent of that purchase price aside to pay shareholder suits and legal expenses, and the company saw no additional costs from KnowlegeWare's problems, according to company filings.
Tarkenton, who played from 1961 to 1978 with the Minnesota Vikings and New York Giants, followed his football career by working as a business consultant and infomercial pitchman. He worked at KnowledgeWare from 1986 until its sale in 1994.
Despite the company's problems, Tarkenton served nearly three years as a member of the board of Sterling. He is now a member of the board of directors of fast food chain Blimpie's International Inc., which describes him in its proxy as "a business consultant and a public speaker and the chairman and founder of the Fran Tarkenton Small Business NETwork and Global Compass, an e-commerce Internet company."
While neither Tarkenton nor his attorney were available for comment Tuesday, his attorney released a statement stressing there was no admission or denial of guilt in the settlement.
"Mr. Tarkenton is pleased to have this matter resolved," said the statement. "The events in question took place five or six years ago … and he has long since moved on with his life and to other business ventures."
Other SEC enforcement actions announced Tuesday included cases against officials with two suburban Chicago auto lenders, Mercury Finance Company, now known as MFN Financial Corp. (MFNNQ), and First Merchants Acceptance Corp., which has ceased operations.
Both companies served customers with poor credit and the SEC charges the two fraudulently hid bad loans in 1995 and 1996 and thus overstated income. Both companies have since filed for bankruptcy court protections.
The case against Mercury Finance names Lawrence Borowiak, the accounting manager, as the only company official charged in the fraud. Neither Borowiak nor a company official returned calls seeking comment.
The charges against First Merchants charge Mitchell C. Kahn, the president and chief executive, as well as the vice president of strategic planning and the chief information officer. Kahn's attorney did not return phone call seeking comment on the case. The SEC charges it overstated net income by $76.7 million, or 729 percent for 1996. The SEC announced settlement with two lower level former employees of the company as well. The company had been publicly traded until July 1997.
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