United Rentals to Pay $14 Million to Settle Financial Fraud Charges

Washington, D.C., Sept. 8, 2008 (LAWFUEL) – The Securities and Exchange Commission today charged one of the world’s largest equipment rental companies, United Rentals, Inc. (URI), with engaging in fraudulent transactions to meet company earnings forecasts and analyst expectations. The SEC also charged the company with a broad range of other improper accounting practices.

Without admitting or denying the charges, URI has agreed to settle the SEC’s enforcement action and pay a $14 million penalty, which the Commission intends to place in a Fair Fund for distribution to affected investors.

“The financial penalty and fraud injunction reflects the seriousness and sophistication of this fraudulent scheme,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “This enforcement action is consistent with the Commission’s commitment to aggressively pursuing financial fraud wrongdoers.”

Fredric D. Firestone, Associate Director in the SEC’s Division of Enforcement, added, “The misconduct is particularly troubling because it was carried out by senior officers of the company, who devised sophisticated accounting transactions in order to meet Wall Street’s earnings expectations.”

According to the SEC’s complaint, filed in the U.S. District Court for the District of Connecticut, URI engaged in a series of fraudulent transactions from late 2000 through 2002. The financial fraud was accomplished primarily through a series of interlocking three-party sale-leaseback transactions orchestrated by URI’s then-Chief Financial Officer Michael Nolan and its then-Vice Chairman and Chief Acquisitions Officer John Milne. Nolan and Milne were previously charged by the SEC for individual wrongdoing.

The SEC alleges that in these transactions URI sold used equipment to a financing company and leased it back for a short period, and then arranged for a third party equipment manufacturer to agree to sell the equipment at the end of the lease period and guarantee the financing company against any losses incurred in the resale of the equipment. URI separately guaranteed the equipment manufacturer against any losses it might incur under the guarantee it had extended to the financing company.

The SEC’s complaint also alleges that in another effort to improve its earnings, URI engaged in a series of fraudulent “trade packages” with suppliers. The company sold blocks of used equipment for amounts in excess of fair value, in exchange for certain undisclosed financial inducements offered to those suppliers.

In addition, the SEC alleges that from 1997 to 2000, during a period of enormous growth through acquisitions, URI engaged in other improper accounting practices involving its valuations of acquired assets, use of acquisition reserves, and accounting for customer relationships as well as improperly accounting for other items that overstated net income, including its estimation and recording of self-insurance reserves, its recognition of equipment rental revenues, and its income tax accounting.

In addition to the financial penalty, URI consented to be permanently enjoined from violating the antifraud, reporting, books and records and internal control provisions of the federal securities laws. The settlement is subject to court approval.

In determining to accept URI’s settlement offer, the Commission considered URI’s cooperation with the Commission and its staff in the investigation leading to this action, and the remedial actions it has taken.

The Commission acknowledges the assistance of the U.S. Attorney’s Office for the District of Connecticut and the New Haven Field Office of the Federal Bureau of Investigation. The SEC’s investigation continues.


US Attorneys Available to Receive Election Complaints – US Elections

MICHAEL J. GARCIA and BENTON J. CAMPBELL, the United
States Attorneys for the Southern and Eastern Districts of New
York, respectively, announced today that special telephone
numbers have been set up to receive complaints of possible
violations of federal election laws relating to the upcoming
general elections in New York City and other counties in their
districts.

The United States Attorneys said that their Offices
will be available to receive complaints at the following numbers
on Tuesday, September 9, 2008:
(212) 637-0840 (for Manhattan, Bronx, Dutchess, Orange,
Putnam, Rockland, Sullivan and Westchester
counties) and
(718) 254-7000 (for Brooklyn, Queens, Staten Island, Nassau
and Suffolk counties)
In addition, complaints of possible violations of
federal election laws may be made directly to the Federal Bureau
of Investigation at (212) 384-1000.

A spokesperson for the United States Attorneys said
that the enforcement of federal laws protecting the rights of all
eligible persons to vote for the candidates of their choice is a
high priority of the Department of Justice.

It is unlawful under federal law to deny or abridge
anyone’s right to vote because of race, color or national origin.
Federal laws also require local election authorities to make
voting accessible to disabled and elderly voters. Voters who
require assistance because of blindness, disability or inability
to read and write have the right to receive such assistance from
a person of their own choosing. In counties with substantial
numbers of non-English speaking voters, federal laws prohibit the
denial or abridgement of a voter’s ability to participate in the
election process in certain languages other than English (i.e.,
Spanish, Chinese, Korean).

In addition, certain activities designed to subvert the
integrity of the election process are federal crimes. It is a
federal crime, for example, to deprive citizens of their right to
fair elections or to conspire to do so. Specific election laws
also make it a crime to bribe or intimidate voters, to cause
ballots to be cast fraudulently in the names of individuals who
did not vote (“ballot stuffing”), to vote more than once, or to
alter or falsely report the vote count. It can also be a federal
offense to challenge qualified voters without cause and in bad
faith or to harass persons seeking to vote for the purpose of
discouraging their vote.

The spokesperson said that the ability of federal law
enforcement authorities to detect and eliminate improper
restrictions on voting rights and to prosecute election fraud
depends to a large extent on the watchfulness and cooperation of
the voters. It is therefore imperative that those who have been
asked to participate in illegal election practices, who have been
the subject of such practices, who have observed such practices,
or who have information bearing on such practices, make that
information known promptly to the FBI or the United States
Attorneys at the telephone numbers listed above.

The United States Attorneys also noted that the
following additional telephone numbers are available on election
day for citizens to call for routine inquiries, such as where to
vote or how late the polls are open, or to register complaints
that may concern violations of New York State election laws:

IN NEW YORK CITY
City Board of Elections
Main Office (212) 487-5300
Bronx (718) 299-9017
Brooklyn (718) 797-8800
Manhattan (212) 886-2100
Queens (718) 730-6730
Staten Island (718) 876-0079
IN COUNTIES OUTSIDE NEW YORK CITY
County Boards of Elections
Dutchess (845) 486-2473
Nassau (516) 571-2411
Orange (845) 291-2444
Putnam (845) 278-6970
Rockland (845) 638-5172
Suffolk (631) 852-4500
Sullivan (845) 794-3000
Westchester (914) 995-5700
Assistant United States Attorney DAVID J. KENNEDY is
responsible for overseeing the handling of complaints of voting
rights abuses and election fraud for the Southern District of New
York.
Assistant United States Attorney MICHAEL J. GOLDBERGER
is responsible for overseeing the handling of complaints of
voting rights abuses and election fraud for the Eastern District
of New York.
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