Group Accuses U.S. Justice Official of Securities Fraud
Published on Thursday, August 15, 2002 by Reuters
Group Accuses U.S. Justice Official of Securities Fraud

DALLAS - The U.S. Justice Department official in charge of cracking down on corporate corruption was sued on Wednesday for alleged securities fraud.

Legal watchdog group Judicial Watch said it filed a suit in federal court in San Francisco charging Deputy Attorney General Larry Thompson of conducting misleading accounting practices and insider trading when he was on the board of Providian Financial Corp .

Other directors of the San Francisco-based credit card issuer were also named in the complaint.

"The Providian scandal points to the current Washington culture where politicians, business leaders, accounting firms and lawyers are all in bed with each other," Larry Klayman, Judicial Watch's chairman, told a press conference.

The suit said that Thompson was a board member and chairman of Providian's audit and compliance committee from 1997 until he was named to his new job in the Bush administration in May 2001.

The complaint alleges that Thompson and other directors knew that Providian's financial condition was deteriorating, and they adopted a fraudulent scheme to delay recognition of losses from the second quarter of 2001 into the third quarter of 2001.

The alleged scheme allowed Providian's stock prices to become artificially inflated. Before the financial problems became public, and the company's shares fell, the suit alleges that Thompson and other sold off the stock they had acquired by exercising stock options.

Klayman claims Thompson sold up to $5 million of stock.

An official with Thompson's office was not immediately available for comment.

Officials at Providian also were not immediately available for comment.

Klayman said the suit was filed on behalf of Robert Lake, a Texas resident and a shareholder of Providian, who is seeking unspecified compensatory damages and over $75,000 in punitive and exemplary damages.

Washington-based Judicial Watch is an eight-year-old legal foundation that has filed a number of highly publicized lawsuits against government officials.

Described by Klayman as "fiercely nonpartisan but conservative," the group's targets have included former President Bill Clinton, Hillary Rodham Clinton, Janet Reno, the White House, the State Department, the Pentagon, the FBI and the CIA.

Not all the suits have been successful, but they have earned Klayman a reputation for bringing sensitive documents to public view and for aggressive promotion in the media.

The group recently sued Vice President Dick Cheney and Halliburton Co.,the oil services company he once ran, alleging they defrauded shareholders by overstating company revenues.

Providian shares were off 1.28 percent, or 6 cents, to $4.63 in early afternoon trading on the New York Stock Exchange.

Copyright 2002 Reuters Ltd