NEW YORK - Sunbeam Corp. said the Justice Department is investigating former Chief Executive Officer Albert J. Dunlap's management of the company, as the largest U.S. maker of small appliances revised its bankruptcy recovery plan.
The U.S. attorney's office in Manhattan is investigating events at Sunbeam from 1996 through 1998 while Dunlap was chief executive and Russell A. Kersh was chief financial officer, the company said in a bankruptcy court filing late Friday.
Boca Raton, Fla.-based Sunbeam said the U.S. attorney hasn't told it the specific direction of the investigation. The company said in the bankruptcy filing that it "has no reason to believe" that it is the target.
Dunlap last week agreed to pay $500,000 to settle Securities and Exchange Commission charges that he defrauded investors by inflating sales figures. Kersh agreed to pay $200,000. The SEC said Sunbeam used accounting reserves to widen its reported 1996 loss and inflate 1997 income, contributing "to the false picture of a rapid turnaround" in Sunbeam's financial performance.
"The U.S. attorney's investigation focuses on the actions of former management and we don't anticipate it will negatively impact our ability to reorganize by year's end," said George A. Davis, Sunbeam's bankruptcy lawyer.
The recovery plan would give Sunbeam's secured lenders -- Morgan Stanley, Wachovia Corp. and Bank of America Corp. - all of the shares of the reorganized company. Bondholders owed $862.4 million would get stock options that might have value depending on Sunbeam's financial performance. Existing Sunbeam shareholders would get nothing.
Sunbeam's suppliers would be fully paid under a separate reorganization plan filed for the company's operating units.
Sunbeam filed for Chapter 11 bankruptcy protection in February 2001, citing $3.2 billion in debt, much of it linked to its acquisitions of Coleman Co., First Alert Inc. and Signature Brands USA Inc. for $2.6 billion in 1998.
The company fired Dunlap and Kersh in 1998. The men didn't admit or deny SEC accusations that they helped Sunbeam inflate profits.
Dunlap was nicknamed "Chainsaw Al" after firing thousands of workers to revive various companies. The SEC said he orchestrated schemes to inflate Sunbeam's earnings to make the company's stock more attractive to buyers and boost his financial gains.
Last month, Dunlap also agreed to pay $15 million to settle a shareholder lawsuit.
Sunbeam shares, which traded as high as $53 in 1998, fell 2.5 cents to 6 cents yesterday.