CompUSA 2014 Annual Report Download - page 22

Although the Company does not expect, based on currently available information, that the outcome in any of these matters, individually or
collectively, will have a material adverse effect on its financial condition or results of operations, the ultimate outcome is inherently
unpredictable. Therefore, judgments could be rendered or settlements entered, that could adversely affect the Company’
s operating results or
cash flows in a particular period. The Company routinely assesses all of its litigation and threatened litigation as to the probability of ultimately
incurring a liability, and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable and
estimable. In this regard, the Company establishes accrual estimates for its various lawsuits, claims, investigations and proceedings when it is
probable that an asset has been impaired or a liability incurred at the date of the financial statements and the loss can be reasonably estimated. At
December 31, 2014 the Company has established accruals for certain of its various lawsuits, claims, investigations and proceedings based upon
estimates of the most likely outcome in a range of loss or the minimum amounts in a range of loss if no amount within a range is a more likely
estimate. The Company does not believe that at December 31, 2014 any reasonably possible losses in excess of the amounts accrued would be
material to the financial statements.
Following the previously reported independent investigation of Gilbert Fiorentino and Carl Fiorentino by our Audit Committee in 2011 (in
response to a whistleblower report) for a variety of improper acts, the subsequent termination of their employment and the entering into by
Gilbert Fiorentino of a settlement agreement with the Securities and Exchange Commission, on November 20, 2014 the United States Attorney’
s
Office (“USAO”)
for the Southern District of Florida announced that Gilbert Fiorentino and Carl Fiorentino had been charged with mail fraud,
wire fraud and money laundering in connection with a scheme to defraud TigerDirect and Systemax. Specifically, the charges set forth a scheme
to obtain kickbacks and other benefits, and to conceal this illicit income from the IRS, all while Gilbert Fiorentino and Carl Fiorentino were
employed as senior executives at the Company’
s North American Technology Products business. On December 2, 2014, the United States
Attorney’
s Office announced that Gilbert Fiorentino and Carl Fiorentino had pled guilty to various charges, and on March 3, 2015, Gilbert
Fiorentino and Carl Fiorentino were sentenced to sixty and eighty months’
imprisonment, respectively. Following completion of their
sentences, each is to be placed on supervised release for a period of thirty-
six months. The Court also set a restitution hearing for April 10, 2015
to determine the amount of restitution Gilbert Fiorentino and Carl Fiorentino are obligated to pay the Company.
As previously disclosed in a Form 8-
K filed on January 30, 2015, on January 27, 2015, the senior financial officer of the Company's North
American Technology Products segment testified before a federal grand jury in the Southern District of Florida pursuant to a subpoena. The
USAO has not advised the Company as to the nature or scope of the grand jury proceeding. Further, the Company's Audit Committee, with the
assistance of independent outside counsel, is cooperating with a current investigation by the USAO into allegations arising from the Fiorentino
investigation regarding possible executive officer conflicts of interest and conduct related to internal controls and books and records. The
Company's independent accountants have also received a grand jury subpoena to appear and submit documents in that regard. The Company
does not currently believe these matters have had or will have a material effect on the Company's previously reported consolidated financial
statements. However, it is not possible at this time to predict when the current investigation will be completed; what subject(s) will be
investigated; what actions, if any, may be taken by the government as a result of its investigation; or whether any of these matters will have a
material adverse impact on the Company.
Not applicable.
19
Table of Contents
Item 4.
Mine Safety Disclosures.