ADIDAS EXECUTIVE TIMOTHY R. MCCOOL AGREES TO PLEAD GUILTY
TO CONSPIRACY TO MAKE FALSE STATEMENTS AND TO FALSIFY THE BOOKS
AND RECORDS OF JUST FOR FEET

WASHINGTON, D.C. - Deputy Attorney General Larry Thompson, Acting Assistant Attorney General Christopher Wray of the Criminal Division and U.S. Attorney Alice Martin of the Northern District of Alabama announced today that Timothy R. McCool, Director of Apparel Sales for adidas America, has agreed to plead guilty to conspiracy to submit false statements to the auditors of Just For Feet, Inc. (JFF) and to falsify the books and records of JFF, in violation of 18 U.S.C. Section 371.

McCool, 45, of Portland, Oregon, was charged in a one-count criminal information filed today in the U.S. District Court in Birmingham, Alabama. McCool has agreed to plead guilty to the charge and cooperate with the federal government’s ongoing investigation into JFF’s finances. At all times relevant to the offense to which he has agreed to plead guilty, McCool was the national Director of Sales for adidas, responsible for attaining adidas’ sales goals throughout the United States as well as setting sales and marketing strategies with various national retailers such as Just for Feet.

A hearing on McCool’s plea will be scheduled at a later date.

Just for Feet, Inc., was a publicly traded corporation with headquarters in Shelby County, Alabama. The company was founded in 1977 with a single store in Birmingham. By 1999 it had grown to be the second largest athletic shoe retailer in the United States, with locations in 30 states and annual sales of approximately $775 million. The company filed for bankruptcy in 1999.

According to the criminal information, in or around February 1999 and continuing through on or about April 23, 1999, Deloitte & Touche performed its annual audit of JFF’s financial statements for the fiscal year ending Jan. 30, 1999. As part of the audit process involving JFF’s accounts receivable, Deloitte & Touche requested certain vendors to provide written, independent confirmation of the amounts they owed JFF. This was done in the form of an “audit confirmation letter.”

The criminal information alleges that during the course of JFF’s annual audit, an executive vice-president of JFF caused the company’s accounting department to record a total of approximately $2.2 million in accounts receivable allegedly due to JFF from adidas as of Jan. 30, 1999. This had the result of causing JFF’s income to be overstated by approximately $2.2 million. In fact, according to the information, adidas owed JFF no more than approximately $40,000 as of Jan. 30, 1999.

According to the charges, the executive vice president sent McCool an audit confirmation letter, requesting that McCool, on behalf of adidas, confirm to Deloitte & Touche that adidas actually owed JFF $2.2 million “for advertising that ran or merchandise sold prior to January 30, 1999.” McCool, knowing that the information contained in the audit confirmation letter was false, signed it and sent it to Deloitte & Touche. Subsequently, Deloitte & Touche included the false financial information when preparing JFF’s annual financial reports for public filing with the Securities and Exchange Commission. As a result, JFF’s earnings for the fiscal year ending Jan. 30, 1999, as stated in its annual audited financial statement and SEC filings, were overstated by at least approximately $2.2 million, thereby defrauding the shareholders of JFF.

“As today’s plea demonstrates, the Department of Justice is committed to prosecuting not only corporate insiders engaged in corporate fraud, but those outside the corporation who assist with such fraudulent schemes,” said Deputy Attorney General Larry Thompson, the head of President Bush’s Corporate Fraud Task Force. “Furthermore, the transmission of any false financial information, whether disseminated to a corporation’s auditors, its investors or to investigators, will not be tolerated.”

“While there may be pressure to ‘assist’ a big retail client, executives must recognize that signing a false audit confirmation letter and sending it to the independent auditor puts them squarely into a conspiracy to commit corporate fraud,” said U. S. Attorney Alice H. Martin. “This type of activity will be prosecuted.”

The conspiracy charge carries a maximum penalty of five years in prison and a fine of $250,000.

The JFF investigation remains active and ongoing. In April 2003, former JFF president, Adam Gilburne was charged with, and pleaded guilty to, conspiracy to commit wire and securities fraud.

The investigation is being conducted by the FBI-Birmingham Field Office, with assistance from the SEC, Atlanta District-Enforcement Division. The prosecution is being handled jointly by the United States Attorney’s Office and the Fraud Section of the Criminal Division of the Department of Justice in Washington, D.C. The prosecution is being overseen by the President’s Corporate Fraud Task Force, headed by Deputy Attorney General Larry Thompson.

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