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Two Former Top Executives of the American Italian Pasta Company Sentenced to Prison for Conspiracy to Fraudulently Overstate Earnings and Deceive Investors

U.S. Attorney’s Office October 15, 2009
  • Western District of Missouri (816) 426-3122

KANSAS CITY, MO—Matt J. Whitworth, United States Attorney for the Western District of Missouri, announced that two former top executives of the American Italian Pasta Company (AIPC) were sentenced in federal court today for their roles in a conspiracy to fraudulently overstate earnings and deceive investors.

Timothy S. Webster, 47, of Mission Hills, Kansas, the former President and CEO of AIPC, and Warren B. Schmigdall, 59, of Oakbrook Terrace, Illinois, AIPC's former CFO, were sentenced in separate appearances before U.S. District Judge Greg Kays. Webster was sentenced to 18 months in federal prison without parole. Schmidgall was sentenced to 13 months in federal prison without parole.

In sentencing Webster and Schmigdall to prison, Judge Kays found that Webster organized and led the fraud scheme while Schmigdall managed and supervised the execution of the scheme.

“Accounting fraud by corporate executives deprives investors of transparent markets and imperils our nation’s economic strength,” Whitworth said. “Executives are under enormous pressure to hit their earnings targets. But law enforcement will continue to protect the investing public by holding corporate officers responsible when they falsify their financial statements.”

Webster and Schmidgall each waived their right to an indictment and pleaded guilty to separate felony informations on September 15, 2008, to their role in a conspiracy to fraudulently inflate the earnings AIPC reported to the SEC and the investing public in order to conceal the true financial condition of AIPC between May 2002 and December 2004.

Webster and Schmidgall both admitted to knowingly and intentionally scheming and conspiring with other members of the corporate management of AIPC to deprive holders of AIPC stock and securities of the intangible right to their honest services. They concealed AIPC’s true financial condition by submitting to the Securities and Exchange Commission (SEC) materially false reports on AIPC’s financial condition. Today’s sentencings bring to an end the culmination of a lengthy investigation into accounting and other improprieties at AIPC. The investigation focused on allegations of wide-ranging accounting fraud at AIPC that adversely and materially affected its stock price and financial statements for Fiscal Years 2002 through 2004, and alleged material misrepresentations made by AIPC to the United States Department of Commerce in connection with its antidumping program.

On September 15, 2008, AIPC entered into an agreement accepting responsibility for the conduct of certain officers, executives and employees. AIPC acknowledged that the company filed multiple materially false and misleading financial reports with the SEC, and acknowledged that the company made other materially false statements in connection with the Department of Commerce’s antidumping program. In addition, AIPC agreed to pay a fine of $7.5 million and continue its cooperation with the Department of Justice and other government agencies over the two-year period of the agreement. The fine was paid in full by AIPC on October 28, 2008.

This case was prosecuted by Assistant U.S. Attorneys Jess Michaelsen and Gene Porter. It was investigated by the Federal Bureau of Investigation, Financial Analyst Scott Hamann of the U.S. Attorney’s Office, and U.S. Immigration and Customs Enforcement.

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