media release (15-170MR)

Former Sigma CEO and CFO plead guilty to falsifying books

Published

The former managing director and chief executive of Sigma Pharmaceuticals Ltd, Elmo De Alwis, and chief financial officer, Mark Smith today pleaded guilty to charges relating to falsifying the company’s books.

The charges follow an ASIC investigation, and relate to the pair’s conduct in accounting for four financial transactions for Sigma between June 2009 and March 2010 which resulted in Sigma overstating its income, profits, and inventory.

Facing the County Court in Melbourne, Mr De Alwis and Mr Smith each pleaded guilty to falsifying Sigma’s books, and indicated that they would each enter pleas of guilty to charges of giving false or misleading information to Sigma’s auditors and board on the next court date.

Between June 2009 and March 2010 Mr De Alwis and Mr Smith were involved in arranging transactions for Sigma to purchase wholesale pharmaceutical drugs at inflated prices. The amount of the inflated payment was then returned to Sigma and recorded in Sigma’s books as revenue.

Mr De Alwis and Mr Smith engaged in conduct that resulted in the falsification of Sigma’s books regarding these transactions, and it is alleged gave false information to Sigma’s auditors and board in relation to how the transactions were being accounted for.

As a result, for the full year ended 31 January 2010, Sigma’s publicly reported income result was overstated by $15,500,616, its inventory value was overstated by $11,313,224, and its profit after tax was overstated by $9,599,000. Sigma subsequently made adjustments to its accounts to reverse these overstatements.

Mr De Alwis’ and Mr Smith’s matters have been adjourned to 17 September 2015 for a plea hearing.

The Commonwealth Director of Public Prosecutions is prosecuting this matter.

Background

Mr De Alwis and Mr Smith each pleaded guilty to two charges under s1307 of the Corporations Act for falsifying Sigma’s books, and indicated they would each plead guilty to two charges under s1309 of the Corporations Act for giving false or misleading information to Sigma’s auditors and board.

The offences under section 1307 of the Corporations Act each carry a maximum penalty of $11,000 or imprisonment for 2 years or both. The offences under s1309 of the Corporations Act each carry a maximum penalty of $22,000 or imprisonment for 5 years, or both.

Editor's note:

On 17 September 2015, Mr De Alwis’ and Mr Smith’s matters were adjourned to 4 and 5 April 2016 for a plea hearing.

Editor's note 2:

On 6 April 2016 the plea hearing for Mr Smith and Mr De Alwis was concluded.

They were arraigned and each pleaded guilty to two charges under s1307, and two charges under s1309, of the Corporations Act 2001.  

Their matters have been adjourned for sentencing on 11 May 2016.

Editor's note 3:

The sentencing of Messers De Alwis and Smith has been adjourned until 26 May 2016.

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