ERIE $25M settlement ends Rent-Way fraud case

Three former executives of the company have been sentenced.
ERIE, Pa. (AP) -- A judge formally approved a $25 million settlement between Rent-Way Inc. and shareholders, marking the end of three years of criminal and civil cases stemming from accounting fraud at the nation's second-largest rent-to-own chain.
The settlement, approved Monday by federal judge Sean McLaughlin, comes three days after the last of three former Rent-Way executives was sentenced on federal charges.
"This really does bring it to a close," said William Morgenstern, chief executive officer of the Erie, Pa.-based company. "It puts the final period to a very long book."
Two years ago, shareholders filed suit against the furniture, appliance and computer rental chain and its accounting firm, PriceWaterhouse Coopers, alleging that officers used faulty accounting practices to drive the stock price up.
Company officials blamed a handful of executives working independently for the accounting problems, revealing in October 2000 that improper entries totaling $75 million had been made into its accounting ledger -- a figure later determined to be $98 million over a little more than two years.
The news sent the company's stock tumbling from around $25 per share to $5 per share, sapping 80 percent of its value in one day.
Criminal cases
Rent-Way delayed its 2000 annual report by eight months and trimmed its books by $129 million. Matthew Marini, the company's controller and chief accounting officer, was fired. Jeffrey Conway, the company's former president and chief operating officer, was asked to resign.
Conway, now a consultant for Ruth's Chris Steakhouse, was sentenced to 13 months in federal prison last month for ordering subordinates to doctor reports filed with the Securities and Exchange Commission.
He pleaded guilty in July to one count of conspiracy for his part in misstating Rent-Way's income and earnings per share in quarterly reports in 1999 and 2000, and an annual report in 1999.
Marini pleaded guilty to securities fraud and was sentenced to 3 months in prison last month, while Jeffrey Underwood, former senior vice president, was sentenced Friday to two years of probation and community service after pleading guilty to falsifying books, records and accounts.
Rent-Way's stock closed up 3 cents to $7.98 on the New York Stock Exchange on Monday.