Former Power Solutions CEO found not guilty of federal securities fraud charges for allegedly inflating revenue
A federal judge Monday found former Power Solutions International CEO Gary Winemaster not guilty in a securities fraud case alleging he inflated revenue by $25 million at the suburban Chicago engine manufacturer.
The 2019 indictment alleged Winemaster conspired with two other executives to defraud shareholders by recording sales that hadn’t been completed or agreed to by customers to meet revenue projections between 2014 and 2016. Winemaster, 63, of Mundelein, co-founded Wood Dale-based Power Solutions with his father in 1985 and was the publicly traded company’s largest shareholder.
“Today’s decision is an important vindication for our client, who acted in good faith with the best interests of PSI shareholders at all times,” Sean Berkowitz, a Chicago attorney representing Winemaster, said in an emailed statement Monday.
Craig Davis, the company’s former vice president of sales, and James Needham, its former general manager, were also found not guilty in Monday’s ruling. Both were previously terminated by the company.
A spokesman for Power Solutions International did not respond to a request for comment.
The federal criminal indictment charged Winemaster, Davis and Needham with one count of securities fraud and 10 counts of wire fraud. Winemaster was also charged with two counts of making false statements to an auditor and one count of failing to certify financial reports.
In his ruling Monday, U.S. District Judge Robert Gettleman found the defendants not guilty on all counts.
A related Securities and Exchange Commission complaint against the three defendants was put on hold by a Chicago federal judge in March, pending the outcome of the criminal case.
The SEC complaint, also filed in 2019, detailed an alleged scheme to inflate quarterly revenue by pressuring salespeople to get customers to place orders for products they did not need and push customers to take delivery of already ordered products sooner than desired.
In September 2020, Power Solutions International agreed to pay a $1.7 million civil penalty to the SEC and entered into a non-prosecution agreement with the Justice Department to settle investigations into the company’s “past revenue recognition practices” related to “individuals no longer employed by the company,” according to a news release at the time.
Winemaster and his brother, who was also employed by Power Solutions International, owned a majority of the company’s stock between 2014 and 2016, according to the SEC settlement.
Power Solutions International traded on the NASDAQ under the symbol PSIX from May 2013 through April 2017, when trading was suspended amid an SEC investigation and financial disclosures of accounting misstatements filed by the company. The stock was subsequently delisted by the NASDAQ and now trades on the over-the-counter market.
