Tom Shine Charged With JFF Fraud

Two more executives were swept up the Just For Feet fraud case.Tom Shine, former president of now-defunct Logo Athletic., and currently SVP/sports and entertainment marketing worldwide for Reebok, was charged in a criminal information unsealed today with conspiracy to submit false statements to JFF auditors and to falsify JFF books and records. Logo Athletic filed for bankruptcy in 2000, and its assets were purchased by Reebok in 2001.

In addition, Steven Davis, the former JFF director of advertising, was also charged in a one-count criminal information with making false statements to FBI agents in connection with the federal government's investigation of JFF. On February 2, Davis resigned as SVP/marketing of GSI Commerce. He has agreed to assist GSI in a consulting capacity during a transition period. GSI is currently engaged in a search to find a permanent replacement for the position.

According to the criminal information, in or around February 1999 and continuing through on or about April 23, 1999, Deloitte & Touche performed its annual audit of JFF's financial statements for the fiscal year ending Jan. 30, 1999. As part of the audit process involving JFF's accounts receivable, Deloitte & Touche requested certain vendors to provide written, independent confirmation of the amounts they owed JFF. This was done in the form of an "audit confirmation letter." The criminal information alleges that during the course of JFF's annual audit, in order to cover an additional $700,000 in fictitious accounts receivable purportedly due to JFF from Logo Athletic as of January 30, 1999, a JFF EVP requested that Shine, on behalf of Logo Athletic, sign an audit confirmation letter confirming to Deloitte & Touche that Logo Athletic actually owed JFF approximately $700,000 "for advertising that ran or merchandise sold prior to January 30, 1999."

Shine, allegedly knowing that the information contained in the audit confirmation letter was false, and that Logo Athletic did not, in fact, owe JFF approximately $700,000, signed it and sent it to Deloitte & Touche. Subsequently, Deloitte & Touche included the false financial information when preparing JFF's annual financial reports for public filing with the SEC. As a result, JFF's earnings for the fiscal year ending January 30, 1999, as stated in its annual audited financial statement and SEC filings, were overstated by at least approximately $700,000, thereby defrauding the shareholders of JFF.

Davis was accused of lying to agents investigating the company.

Davis, 33, of Collegeville, PA, and Shine, 58, of Carmel, IN, have agreed to plead guilty to the respective charges and cooperate with the federal government's ongoing investigation into JFF's finances. Hearings on their guilty pleas will be scheduled at a later date. Each charge against Davis and Shine carry a maximum penalty of five years in prison and a fine of $250,000.

Said US Attorney Alice Martin: "Audit confirmation letters are sent by independent auditing firms in order to validate information which a corporate client is supplying. The intensional falsification of such letters undermines the auditing effort, and helps to perpetrate fraud on investors. Our investigation into JFF's financial records continues."

Carmen Adams, Special Agent in Charge of the Birmingham Field Office, Federal Bureau of Investigation stated, "These charges represent the continuation of a concerted effort to hold those accountable who perpetrate a fraud against Corporate America. This is a top priority for the FBI as illustrated by the fact that nationwide, there are over 150 Corporate Fraud cases under investigation, 16 of which involve losses exceeding $1 billion dollars. Over 2,500 cases involve securities and commodities fraud. Hopefully, the Just for Feet investigation will send a message that regardless of the sophistication of the techniques utilized to deceive investors, Corporate Fraud will be exposed, aggressively investigated, and prosecuted."

Four people previously agreed to plead guilty in the case, including former Just For Feet president Adam Gilburne. Others include Timothy McCool, former national sales director of Adidas America; Steven G. Dodge, former vice president of U.S. sales for Converse Inc.; and Jonathan G. Epstein, former president and CEO of Fila USA.