The federal investigation into a former employee of a Columbia company continues, even as the Securities and Exchange Commission announced this week it had reached a settlement with a former CFO.
Elaine M. Brown, former CFO of satellite manufacturer Integral Systems, agreed to pay $25,000 to settle charges that she helped conceal from investors that another employee at the company was a securities fraud felon. Integral was bought last year by San Diego security and technology business Kratos Defense & Security Solutions in a cash and stock deal valued at $241 million and remains a subsidiary of Kratos.
Neither Brown nor Kratos officials could be reached for comment this week.
The case against Gary A. Prince, the former Integral employee in question, continues, SEC officials said in a statement. Prince directed Integral’s mergers and acquisitions program and others as a “de facto officer,” and then-CEO and Chairman Steven R. Chamberlain was “careful not to give Prince a title that would raise questions about his status as an officer, fearing that Prince’s criminal background would have to be disclosed to investors,” according to SEC documents.
Chamberlain also was charged in the case in 2009, but those charges were dismissed in 2010 after his death. In 2006, Chamberlain was convicted of felony sex offenses involving a minor and resigned.
Chamberlain hired Prince as a part-time consultant upon forming Integral in 1982, and Prince also was CFO of another public company, Financial News Network. In 1995, Prince pleaded guilty to conspiracy to commit securities and bank fraud and to making false statements to the SEC about improperly recognizing revenue while CFO of Financial News Network.
In 1997, Prince was sentenced to two months in prison, two months of home detention and two years of probation. The SEC also permanently denied Prince from appearing before the commission as an accountant.
After Prince served his prison term in 1998, Chamberlain rehired Prince as a de facto officer, allowing him to participate in policy-setting meetings with senior officers, according to the SEC. Prince directed mergers and acquisitions, oversaw contracts, gave presentations to the board of directors and trained CFOs who succeeded him, the SEC charged.
Prince was among the five highest-paid employees of Integral in 1999, 2000, 2001, 2004 and 2005, but that was not disclosed in Integral annual reports and proxy statements, according to the SEC. In 2007, Integral fired Prince after placing him on paid leave a few months before.
The SEC sought to permanently bar Brown, who was Integral’s CFO from 1997 until 2007, from serving as an officer or director of a public company. But U.S. District Judge Gladys Kessler ruled in a Washington, D.C., federal court against the SEC’s motion in July.
“The SEC has failed to demonstrate that there is a reasonable likelihood that Brown will engage in future violations of the securities laws,” Kessler said in her ruling. “The SEC never questioned the integrity of Integral’s financials, Brown’s principal area of responsibility as CFO, nor did it allege any investor losses or personal gain by Brown.”
Brown does not currently work for a public company and has no legal obligations to the SEC, Kessler said.