John Milne, former president and chief financial officer for United Rentals, Greenwich, Conn., pleaded guilty in federal court on Oct. 13 to one count of conspiracy to falsify the books and records of United Rentals during the time he served as that company’s CFO.
According to court documents and statements made in court, from December 2002 through his termination in August 2005, Milne served as the president and CFO of United Rentals. In pleading guilty, Milne admitted that, in 2003, he and others conspired to falsify United Rentals’ books and records, including recording falsely inflated gains, with respect to the nature of certain payments made to settle obligations incurred as a result of minor sale leaseback (MSLB) transactions entered into by United Rentals. Specifically, on or about Dec. 31, 2002, Milne executed a contract on behalf of United Rentals with Terex, Westport, Conn., relating to the rental company’s obligations under a remarketing agreement that it had with Terex. In the contract, United Rentals agreed to make a payment to Terex to cover losses incurred by Terex in connection with one of the MSLBs. In January 2003, United Rentals wired a payment of $8,777,172 to Terex. In March 2003, United Rentals paid Terex $4,030,328 to reconcile amounts owed to Terex on an MSLB with another manufacturer that Terex had acquired. The check requisition for this second payment falsely noted that the payment was for the purchase of equipment.
Sentencing is scheduled for Feb. 11, 2010, at which time Milne faces a maximum prison term of five years and a fine of up to $250,000. As part of a plea agreement, the government and the defendant have recommended a 27-month prison sentence.
In order to resolve a separate civil action brought by the U.S. Securities and Exchange Commission (SEC), Milne has agreed to disgorge $6.25 million.
Milne was the second United Rentals officer and the third CFO charged in connection with this case. In December 2007, the SEC filed settled financial fraud charges against Michael Nolan, another former CFO of United Rentals, and charged Joseph Apuzzo, a former CFO of Terex, with aiding and abetting the fraudulent scheme.
The SEC notified United Rentals in August 2004 that the company was being investigated for certain accounting practices. Milne was fired from the company in August 2005 for failing to cooperate with the company’s internal investigation. In early 2006, the company announced several changes to its internal accounting controls and restated earnings from the fourth quarter of 2000 through 2002.
In September 2008, United Rentals reached a final settlement with the SEC, paying a civil penalty of $14 million without admitting or denying the allegations in the SEC’s complaint and ending the government’s investigation of the rental company.