SEC Charges CEO/Director with Sarb-Ox Loan Violations for Unreimbursed Advances that Were Outstanding for 5 to 36 Days and Misleading Independence Assertions
According to the SEC in an order settling an enforcement action, Alan Shortall was CEO and Chairman of Unilife Corporation, a Nasdaq listed issuer. According to the SEC, Shortall arranged for Unilife to make personal payments on his behalf aggregating approximately $340,000 over four years. The advances were outstanding for five to 36 days. According to the SEC, this violated provisions of the Sarbanes-Oxley Act which prohibits public companies from making loans to directors and executive officers, as codified in Section 13(k) of the Exchange Act.
In addition, an unnamed director of Unilife was going default on loans secured by a pledge of Unilife shares. Shortall agreed to arrange for Unilife to cover the loans. As Shortall understood Unilife could not loan money to the director, Shortall told the Chief Accounting Officer the loan was for the benefit of an external consultant. The SEC also found these transactions violated Section 13(k) of the Exchange Act.
The SEC order also describes events in which:
- The director made misleading statements to help Shortall obtain a mortgage.
- Shortall helped the director obtain loans.
- Shortall borrowed money from the director.
The SEC noted that Shortall signed and certified Unilife’s Form 10-K which the SEC found falsely stated the director was independent under applicable Nasdaq rules. The statement was false, according to the SEC, because Shortall and the director assisted each other with financial transactions.
Shortall did not admit or deny the SEC’s finding in the order.