Karlheinz Redekopp and International Commercial Television, Inc.

U.S. Securities and Exchange Commission

LITIGATION RELEASE NO. 21622 / August 9, 2010

Securities and Exchange Commission v. Karlheinz Redekopp, Case No. 3:10-cv-05557 (W.D. Wash filed Aug. 9, 2010)

Securities and Exchange Commission v. International Commercial Television, Inc., Case No. 3:10-cv-05555 (W.D. Wash. filed Aug. 9, 2010)

SEC CHARGES SEATTLE-AREA COMPANY AND FORMER CFO WITH PHONY ACCOUNTING OF INFOMERCIAL SALES

The Securities and Exchange Commission today charged the former chief financial officer of a Seattle-area skin care retailer with fraudulently boosting earnings by reporting sales of anti-aging products promoted through Home Shopping Network infomercials while the products still sat unsold in the company's warehouse.  The agency also separately settled charges against the company and began administrative proceedings against the company's outside auditors for professional misconduct.  

The SEC alleges that Karl Redekopp, the former CFO of International Commercial Television Inc. (ICTV), turned millions of dollars of quarterly losses into profits by falsely accounting for ICTV's sales of the Derma Wand, a skin care appliance that purports to reduce wrinkles and improve skin appearance. Redekopp fraudulently recognized revenue before the Home Shopping Network had actually sold or delivered the product to viewers. He also improperly recognized revenue before a free trial period offered by the company had expired, and failed to reverse revenue from products that had been returned. Redekopp's misconduct caused the company to falsely report millions of dollars in excess revenue in 2007 and 2008.

The SEC's complaint against Redekopp, filed in federal district court in Tacoma, Wash., alleges that Redekopp recorded "sales" of products that had not been shipped or that the customer was not obligated to pay for. Redekopp's fraudulent accounting resulted in ICTV adjusting net sales by more than $3.7 million over a five-quarter period in 2007 and 2008, negating all originally reported net income for those periods to restated net losses. For example, for year-end 2007 alone, ICTV restated its originally reported net income of $1.5 million to a net loss of $1.1 million after correcting the fraudulent reporting.

The SEC's complaint charges Redekopp, who lives in Vancouver, B.C., with violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13a-14, and 13b2-1 thereunder, and aiding and abetting the violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. The SEC seeks a permanent injunction, a financial penalty, and an order barring him from serving as an officer or director of a public company.

In a separate complaint, the SEC charged ICTV for its misleading financial statements. Without admitting or denying the allegations, ICTV agreed to settle the charges by consenting to a final judgment permanently enjoining the company from future violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder.

See Also: SEC Complaints v. International Commercial Television and Karl Redekopp