The former managing director and CEO of Sigma Pharmaceuticals Ltd – Elmo De Alwis, and former chief financial officer – Mark Smith, were today sentenced in the Melbourne County Court for charges relating to falsifying Sigma's books and giving false or misleading information to Sigma's directors and auditors.

Mr De Alwis  and Mr Smith were both sentenced to 12 months imprisonment, to be released forthwith on a recognisance of $1000 to be of good behaviour for 42 months and to pay pecuniary penalty to the Commonwealth of $25,000.

In passing sentence his Honour Judge Richard Smith said that the offending was serious in nature and rejected a submission that the offending was technical only. His Honour also stated that, "No desire to reach performance targets can justify…misleading directors and auditors of a company."

De Alwis and Smith were charged following an ASIC investigation in relation to their conduct in accounting for four financial transactions for the purchase of stock between June 2009 and March 2010.

De Alwis and Smith arranged for Sigma to purchase wholesale drugs at inflated prices, and for the amount of the inflated payment to be returned to Sigma and recorded in its books as revenue. In doing so, their conduct resulted in the falsification of Sigma's books regarding these transactions, and they gave false or misleading information to the company's directors and auditors about how the transactions were accounted for.

Their conduct resulted in Sigma overstating its income, profits, and inventory. 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 later made adjustments to its accounts to reverse these overstatements.

ASIC Commissioner Cathie Armour said, 'Senior officers of publicly listed companies are in a position of trust and responsibility, and in this case Messers De Alwis and Smith demonstrated complete disregard for their obligations. The CEO and CFO are responsible for ensuring that the published financial results of listed companies are true and accurate and do not mislead the market. This type of conduct undermines confidence in the integrity of the market'.

The Commonwealth Director of Public Prosecutions prosecuted this matter.

Background

Mr De Alwis and Mr Smith both pleaded guilty to:

• two charges under s1307 of the Corporations Actfor engaging in conduct that resulted in the falsification of Sigma's books; and
• two charges under s1309 of the Corporations Act for giving false or misleading information to Sigma's directors and auditors.

Editor's note 1:

This media release was updated on 30 May 2016 to note that as a result of their convictions, Mr De Alwis and Mr Smith will automatically be disqualified from managing a corporation for a period of five years.