contained misrepresentations, investors bought millions of dollars of senior subordinated notes.
68.On April 4, 2005, C&A issued a press release stating that “the Company’s available liquidity (cash and unutilized commitments under revolving credit and account receivables facilities) was approximately $81 million at March 31, 2005, as compared with approximately $86 million at December 31, 2004.” Galante provided the liquidity figures for the press release and Stockman approved the use of those figures in the release.
69.The liquidity figures in the April 4 press release were false. Due to its debt covenants, C&A had approximately $12 million in liquidity on December 31, 2004, rather than $86 million. Similarly, on March 31, 2005, C&A had materially less than the claimed $81 million in liquidity.
70.The $81 million liquidity figure in the April 4 press release was false or misleading for an additional reason. General Electric Capital Corporation (“GECC”) made loans to C&A through an accounts receivable securitization facility. Between January 2005 and April 2005, C&A employees, at Stockman’s direction and under Williams’ supervision, added approximately $120 million in ineligible receivables to the borrowing base under the GECC agreement. C&A used the additional liquidity generated by this scheme to create a false $52 million liquidity cushion. This liquidity cushion constituted most of the $81 million reported in the April 4 press release.
71.Stockman was primarily responsible for the scheme to inflate C&A’s reported liquidity, through the fraudulent use of the GECC accounts receivable