CEO Cooked Books of Education Concern, SEC Says (Corrected)

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By Phyllis Diamond

The former chief executive officer of a Florida-based franchisor of children’s educational programs is facing SEC charges he made misstatements about the company’s finances and his personal financial history.

Creative Learning Corp. and two former CLC officials settled related claims based on their alleged roles in the controversy without admitting or denying wrongdoing ( SEC v. Pappas , M.D. Fla., No. 17-00954, 8/21/17 ).

CLC’s ex-CEO Brian Pappas caused the company to conceal almost $600,000 in fees and commissions to his brother and son-in-law, according to the Securities and Exchange Commission’s complaint, filed Aug. 21 in the U.S. District Court for the Middle District of Florida. Pappas also falsely stated that he had evaluated CLC’s internal controls, and failed to disclose that both he and a former franchising business previously had filed for bankruptcy protection, the SEC said.

CLC’s former chief operating officer Daniel O’Donnell and Michelle Cote, the concern’s founder, settled allegations they tried to manipulate CLC’s stock price to boost its chances of becoming listed on Nasdaq. They agreed to 10-year officer/director and penny stock bars and to pay disgorgement and civil penalties totaling approximately $71,000.

Pappas is contesting the allegations, the SEC said. His attorney couldn’t be identified immediately for comment.

(Third paragraph corrected to reflect amount of fees and commissions.)

To contact the reporter on this story: Phyllis Diamond in Washington at pdiamond@bna.com

To contact the editor responsible for this story: Seth Stern at sstern@bna.com

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