Roger Kao

Roger Kao
Nationality	Taiwanese
Occupation	Corporate executive
Known for	Syntax-Brillian Corporation accounting fraud scheme

Roger Kao (also known as Chao Chun Kao) is a former executive and board member of Taiwan Kolin Co., Ltd. who was charged by the United States Securities and Exchange Commission (SEC) for his role in a multimillion-dollar accounting fraud scheme at Syntax-Brillian Corporation, the maker of Olevia-brand LCD televisions. Kao helped facilitate a circular cash flow scheme that artificially inflated the company's reported revenues by approximately $30.8 million between 2006 and 2008.

Early Life and Career

Roger Kao served as an executive and board member of Taiwan Kolin Co., Ltd., a Taiwanese electronics manufacturer. Kolin was the primary parts supplier and manufacturer for Syntax-Brillian Corporation, an American consumer electronics company based in Tempe, Arizona, that sold high-definition LCD televisions under the Olevia brand name. Kao's position at Kolin placed him at a critical juncture in Syntax-Brillian's supply chain, a role that would later prove central to the fraud.

Syntax-Brillian was formed on November 30, 2005, through a merger of Syntax Inc. and Brillian Corporation. The company traded on Nasdaq under the ticker symbol BRLC and operated a 50,000-square-foot assembly plant in Ontario, California. The company marketed its televisions as "Made in USA" and for a time appeared to be a success story in the competitive flat-panel television market.

Legal Case

The Fraud Scheme

On August 30, 2011, the SEC filed civil charges against five senior figures connected to Syntax-Brillian, including Kao, in the U.S. District Court for the District of Arizona (Case No. 2:11-cv-01712). The other defendants were James Li (also known as Ching Hua Li), the former CEO; Thomas Chow (also known as Man Kit Chow), the chief procurement officer; Christopher Liu (also known as Chi Lei Liu), the former chairman of Kolin; and Wayne A. Pratt, the former CFO.

The SEC alleged that from at least June 2006 through April 2008, Li and Chow developed and executed a circular cash flow scheme designed to make it appear that Syntax-Brillian was generating substantial revenue from television sales in China, when in reality, the vast majority of these sales never occurred. The scheme involved Kolin and a purported customer in Hong Kong called South China House of Technology Consultants Co. Ltd. (SCHOT).

Under the scheme, Li and Chow funneled millions of dollars from Syntax-Brillian to Kolin under the guise of paying various invoices. Kao, in his role as a Kolin executive, then authorized the transmittal of these funds from Kolin to SCHOT, which subsequently transferred the money back to Syntax-Brillian to create the appearance of legitimate sales revenue. This circular movement of funds created a facade of genuine commercial activity where none existed.

Charges

The SEC charged Kao with aiding and abetting violations of Sections 10(b), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Securities Exchange Act of 1934, as well as Exchange Act Rules 10b-5, 13b2-1, and 13b2-2. These provisions relate to securities fraud, false books and records, internal controls failures, and making false statements to auditors.

Outcome

Kao consented to the entry of a final judgment permanently enjoining him from aiding and abetting further violations of federal securities laws. He was ordered to pay a civil penalty of $100,000.

The consequences for other defendants in the case were more severe. Thomas Chow was ordered to pay $48.5 million in 2012. James Li was ordered to pay $11 million for insider trading and fraud. Multiple defendants received permanent injunctions and were barred from serving as officers or directors of public companies.

Syntax-Brillian itself had filed for Chapter 11 bankruptcy protection on July 8, 2008, and was delisted from Nasdaq on July 21, 2008. In May 2009, Emerson Radio Corp. purchased all of the company's assets, including the Olevia brand name. The company's collapse and the subsequent SEC enforcement action underscored the risks of complex international supply chain relationships being exploited for fraudulent purposes.