SEC Enforcement Action Against Scott Anixter, Former Chairman Of Anicom, Inc.

SEC NEWS DIGEST
Issue 2004-152 August 9, 2004

On July 29, 2004, the Commission filed an amended complaint in the U.S.
District Court for the Northern District of Illinois that added Scott C.
Anixter, the former Chairman of the Board of Anicom, Inc., as a
defendant to its lawsuit against six top executives and other employees
of the now-defunct company. Anixter, age 55, is a resident of Glencoe,
Illinois.

The Commission's amended complaint alleges that from Jan. 1, 1998
through March 30, 2000, Anixter and the other defendants carried out a
massive financial fraud at Anicom in which they falsely reported
millions of dollars of non-existent sales, including sales to a
fictitious customer, and used other fraudulent techniques to inflate
Anicom's net income by more than $20 million. To conceal the fraud,
certain of the defendants lied to Anicom's outside auditors, lied to the
Audit Committee of Anicom's Board of Directors in an internal
investigation, and withheld information from the Commission's staff.
When aspects of the fraud were eventually revealed to the public,
Anicom's shareholders lost more than $80 million.

The Commission's amended complaint alleges that the fraud had two
distinct aspects. First, Anixter and his co-defendants, President and
Chief Executive Officer Carl E. Putnam, Vice President of Sales Daryl T.
Spinell, Chief Operating Officer John P. Figurelli, and Billing Manager
Renee L. LeVault, improperly recognized numerous sales that inflated
reported revenues and net profits. Additionally, Chief Financial
Officer Donald C. Welchko, Figurelli, LeVault, and defendant Vice
President of Accounting Ronald M. Bandyk, C.P.A., with Anixter and
Putnam's knowledge, caused Anicom in 1999 to, among other things,
improperly recognize more than $11.7 million in sales to a fictitious
customer called SCL Integration Corp. to minimize the effect on income
of writing off earlier improper sales.

Second, Anixter and Welchko improperly manipulated Anicom's expenses to
bring the company's financial results in line with, or at least closer
to, analysts' expectations. To that end, Welchko and Bandyk engaged in
fraud by improperly charging certain expenses to a reserve account and a
restructuring charge, unjustifiably inflating purchase rebates accrued,
and accelerating the recognition of sales between reporting periods. As
a result of the defendants' misconduct, Anicom filed with the Commission
at least nine materially false and misleading periodic reports on Forms
10-Q and 10-K reports between Jan. 1, 1998, and March 30, 2000, that,
among other things, overstated the company's revenues by more than $38
million.

The Commission's amended complaint alleges that the defendants' conduct
violated the antifraud, periodic reporting, record keeping, internal
controls, and lying to the auditors provisions of the federal securities
laws. The Commission requests that the court issue a final judgment of
permanent injunction and other relief, enjoining certain of the
defendants from violating Sections 17(a)(1) and (3) of the Securities
Act of 1933, Sections 10(b), and 13(b)(5) of the Securities Exchange Act
of 1934 and Rules 10b-5, 13b2-1, and 13b2-2 promulgated thereunder, and
aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and
13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-
1, and 13a-13 promulgated thereunder. The Commission seeks civil
monetary penalties from each of the defendants, and disgorgement of ill-
gotten gains from Anixter, Putnam, Welchko, Figurelli, Bandyk, and
Spinell. The Commission also seeks an order permanently barring
Anixter, Putnam, Welchko, Figurelli, Spinell, and Bandyk from acting as
officers and directors of any public company.

The Commission filed its lawsuit on May 6, 2002. Additional information
regarding the Commission's lawsuit can be found in Litigation Release
No. 17504, May 6, 2002. [SEC v. Scott C. Anixter, et al., No. 02-C-3235
(N.D. Ill.) (Marovich, J.)] (LR-18823; 2077)