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The top two officers and a former senior executive of Southfield, Mich.-based Sun Communities Inc. are being sued by federal regulators for accounting fraud that resulted in the manufactured housing maker overstating earnings by $10.9 million between 2000 and 2002, according to the Detroit News.
Sun Communities owns, operates, develops and finances 136 properties in 18 states, including 124 manufactured housing communities and five recreational vehicle communities.
The U.S. Securities and Exchange Commission (SEC) filed charges late Monday (Feb. 27) against Sun President and CEO Gary Shiffman; Chief Financial Officer Jeffrey Jorissen; and former Controller Mary Petrella, in U.S. District Court in Detroit.
According to the newspaper, the SEC charges that Shiffman provided false information about the timing of transactions with investors, that Jorissen initiated and directed false record keeping and reporting and that Petrella falsified records and improperly released funds in a reserve account to bolster earnings.
Petrella was Sun’s controller from 1995 through November 2002 and still works in the firm’s operations division. The SEC charges that actions taken by the three executives hid Sun’s losses related to its investment in SunChamp, a joint venture with Auburn Hills, Mich.-based Champion Enterprises Inc.
Sun has not admitted any wrongdoing and will not restate any financial reports, said spokeswoman Carol Petersen.
Those terms were part of an agreement between Sun and the SEC announced Monday. The company also has stopped certain accounting methods and will hire an independent consultant to evaluate its financial reporting procedures. In return, the SEC will not impose any fine or other penalty against Sun.
But the agency will pursue a civil action against Shiffman, Jorissen and Petrella. The three could not be reached for comment late Monday.
The SEC wants Jorissen to pay back any financial gain he realized from the transactions and pay an undisclosed fine. The lawsuit seeks unspecified monetary fines from Shiffman and Petrella.