John Milne, former vice chairman, president and chief financial officer of United Rentals was indicted April 4 by a federal grand jury for conspiracy, securities fraud, insider trading and making false filings with the Securities and Exchange Commission. Federal prosecutors say Milne used insider information when he sold 850,000 shares of United Rentals stock and made more than $22 million.
The SEC complaint alleges that from 2000 through 2002, Milne engaged in a series of fraudulent transactions to meet United Rentals’ earning forecasts and analyst expectations. The complaint claims that Milne and former United CFO Michael Nolan carried out the fraud through a series of interlocking three-party transactions, structured as “minor sale-leasebacks” to allow United Rentals to recognize revenue prematurely and inflate profits generated from the sales. The SEC claims United “materially overstated its financial results in its Forms 10 K for fiscal years 2000 and 2001, and its Forms 10-Q for the periods ended June 30, 2001 and March 31, 2002,” as well as other public releases.
Milne is charged with three counts of securities fraud, one count of insider trading, and three counts of making false statements to the SEC. If convicted on all charges, Milne could face up to 75 years in prison and a fine of up to $13.25 million. The government also wants Milne to forfeit more than $17 million, representing his proceeds.
The SEC separately charged Milne with financial fraud.
United Rentals fired Milne in 2005 “for cause” because he would not respond to questions related to an SEC inquiry into the matter.
Nolan pleaded guilty in December to making false filings with the SEC and faces up to 10 years in prison and a $22 million fine. Nolan will have to pay restitution of about $1 million.
A former executive of United Waste, Milne co-founded United Rentals along with former CEO Brad Jacobs and others in 1997. His first major role with the company was as chief acquisitions officer, later becoming CFO, president and vice chairman. After leaving United Rentals in 2005, Milne founded Unified Growth Partners, a Greenwich, Conn.-based private equity firm. In 2007 Milne led a Pittsburgh acquisition group that acquired Pittsburgh Brewing Co., makers of Iron City, Augustiner and other beers, out of bankruptcy.
According to a statement issued by a New York public relations firm representing Milne, the executive “categorically denies” the allegations against him.