In re GENERAL CABLE

UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 79702 / December 29, 2016 
 
ACCOUNTING AND AUDITING ENFORCEMENT 
Release No. 3840 / December 29, 2016 
 
ADMINISTRATIVE PROCEEDING 
File No.  3-17754 
 
 
In the Matter of 
 
GENERAL CABLE 
CORPORATION, 
 
Respondent. 
 
 
 
 
 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 21C OF THE SECURITIES 
EXCHANGE ACT OF 1934, MAKING 
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER 
  
 
I.  
 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
Exchange Act of 1934 (“Exchange Act”), against General Cable Corporation (“GCC” or 
“Respondent”).  
 
II.  
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the findings 
herein, Respondent admits the jurisdiction over it and the subject matter of these proceedings, and 
consents to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 
21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist 
Order (“Order”), as set forth below. 

 
2 
III.  
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that 
Summary 
 
1. This matter concerns improper inventory accounting and disclosure violations by 
GCC, a global manufacturer of copper, aluminum, and fiber optic wire and cable products based in 
Highland Heights, Kentucky. 
2. From 2008 to the second quarter of 2012, GCC materially misstated its financial 
statements due to improper inventory accounting at its Brazil subsidiary that went undetected due 
to the company’s internal accounting controls failures.  During this period, certain Brazilian 
accounting employees manipulated the company’s accounting systems, which GCC executives 
knew were highly manual and presented financial reporting risks, by entering false entries for 
inventory values to cover up missing copper inventory from the subsidiary’s manufacturing plants.  
When the improper accounting was reported to GCC’s then-Rest of World (“ROW”) segment 
Chief Executive Officer and Chief Financial Officer in January 2012, they actively concealed the 
inventory overstatement from GCC’s executive management.  Instead, the ROW CEO and ROW 
CFO overrode internal accounting controls and issued or passed on directives to employees to 
destroy documents about the missing inventory, signed false sub-certifications of financial 
statements, and failed to take corrective action to ensure that the accounting errors did not 
continue. 
3. In October 2012, GCC announced that it had identified these inventory accounting 
issues, and in March 2013, GCC restated its financial statements from 2008 to the second quarter 
of 2012.  During this period, the missing inventory in Brazil caused GCC to materially overstate its 
inventory by $46.7 million and overstate its net income available to common shareholders by 
21.6%, 11.3%, and 29.8% for the annual periods ended December 31, 2011, 2010, and 2009, and 
8.8% and 13.8% for the quarterly periods ended June 30 and March 31, 2012, respectively. 
Respondent 
4. GCC is a publicly traded company headquartered in Highland Heights, Kentucky.  
GCC is a global manufacturer of copper, aluminum, and fiber optic wire and cable products.  
During the relevant period, GCC maintained operations in three segments, North America, Europe 
& Mediterranean (“E&M,” now known as the Europe segment), and ROW (split into the Latin 
America and Asia Pacific segments in 2014).  GCC’s common stock is registered with the 
Commission under Section 12(b) of the Exchange Act, and GCC files annual and quarterly reports 
under Section 13(a) of the Exchange Act and related rules.  GCC’s common stock trades on the 
New York Stock Exchange under the ticker symbol “BGC.” 
                                                 
1
  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 
binding on any other person or entity in these or any other proceedings. 

 
3 
Relevant Entities 
5. General Cable Brasil Indústria e Comércio de Condutores Elétricos Ltda. 
(current name of Phelps Dodge Brasil Ltda., acquired in 2007), and General Cable do Brasil 
Ltda. (“GC  Brasil”) are indirect subsidiaries of GCC in its ROW (from 2007 to 2014) and Latin 
America (from 2014 to present) segments, and manufacture and sell GCC’s products for its 
domestic market.  In this Order GCC’s Brazil operations through these two subsidiaries are 
referred to collectively as “GCC Brazil.” 
 
Facts 
GCC Brazil’s Improper Inventory Accounting 
6. In October 2007, following the acquisition of Phelps Dodge International Corp. 
(“PDIC”), GCC created the ROW reporting segment, with ROW’s management based in Doral, 
Florida.  GCC Brazil, as part of ROW’s Latin America operations, was one of the largest and 
most significant operations that were reported in ROW’s financial statements.  During the 
relevant period, GCC Brazil maintained two manufacturing facilities, Serra and Poços de Caldas 
(“Poços”). 
7. From at least 2008 to mid-2012, GCC Brazil materially understated cost of sales 
and overstated copper inventory balances on its books and records, which were consolidated into 
GCC’s financial statements.  The inventory overstatement, leading to material financial reporting 
errors, was due to both missing inventory and accounting errors within GCC Brazil’s enterprise 
resource planning (“ERP”) system and its implementation.  In covering up the missing inventory, 
certain cost accounting personnel, who controlled entries into GCC Brazil’s general ledger as well 
as controlled the accounting for inventory, manipulated the ERP system to reflect inventory that 
did not exist. 
8. After conducting an internal investigation, GCC determined that the inventory 
accounting errors at GCC Brazil were material and would require a restatement of certain of its 
previously issued financial statements. For the years ended December 31, 2011, 2010, 2009, and 
2008, and for the three months ended March 30, 2012 and six months ended June 29, 2012, cost of 
sales was understated by $17.9 million, $8.3 million, $5.6 million, $7.1 million, $2.7 million and 
$6.2 million, respectively.  As of December 31, 2011, 2010, 2009 and 2008, March 30, 2012 and 
June 29, 2012 inventory balances were overstated by $40.0 million, $27.0 million, $17.4 million, 
$8.7 million, $43.7 million, and $43.5 million, respectively.  In addition, due to accounting errors 
at one of the Brazilian facilities that occurred before GCC’s acquisition of PDIC in 2007, GCC 
also overstated inventory in its allocation of the purchase price among assets acquired, resulting in 
an understatement of goodwill.  The understated goodwill and overstated inventory associated with 
the acquisition of PDIC in the fourth quarter of 2007 was $3.4 million. 
9. The inventory accounting errors at GCC Brazil caused GCC to overstate its net 
income available to common shareholders by 21.6%, 11.3%, and 29.8% for the annual periods 
ended December 31, 2011, 2010, and 2009, and 8.8% and 13.8% for the quarterly periods ended 
June 30 and March 31, 2012, respectively. 

 
4 
10. GCC Brazil’s improper inventory accounting went undetected by GCC for several 
years because its inventory accounting systems were highly manual and decentralized, and lacked 
adequate controls.  As a result, the lapses in the systems were exploited by certain GCC Brazil cost 
accounting personnel.  Although GCC Brazil’s inventory accounting systems were centralized in 
its ERP system, its cost accounting personnel were able to falsify GCC Brazil’s general ledger by 
manually calculating inventory values in a spreadsheet module and then feeding those values into 
the general ledger.  The general ledger, therefore, contained falsely overstated inventory values.  
Those values were not reconciled with GCC Brazil’s actual inventory (e.g., reels of raw copper 
metal and finished goods).  These actions enabled the cost accounting personnel to make improper 
entries in the general ledger without appropriate review by GCC Brazil’s management.  The false 
entries were designed to conceal accounting errors and missing inventory, resulting in overstated 
inventory balances on the general ledger.   
11. The lack of segregation of responsibilities for making and approving manual 
journal entries further enabled the manipulation to occur and go undetected.  Although GCC 
executive management was unaware that inventory accounting for Brazil was overstated during the 
relevant period, it was aware that the ERP system, which was widely used by several countries 
within ROW, was highly manual, unevenly implemented throughout ROW, and was not subject to 
centralized oversight, creating financial reporting risks. 
12. In late 2011, while completing newly required tax documentation for local 
regulators, GCC Brazil’s Controller (“Brazil Controller”) discovered significant inconsistencies 
between GCC Brazil’s general ledger and supporting documentation for intercompany sales.  The 
Brazil Controller, in consultation with GCC Brazil’s CFO (“Brazil CFO”), reviewed intercompany 
sales in 2011 and concluded in December 2011 that GCC Brazil’s inventory was overstated and 
suspected it was due to accounting errors and an inventory theft involving the primary Brazil cost 
accountant. 
13. A number of deficient internal accounting and risk management controls prevented 
GCC Brazil from detecting this scheme for years:  (a) physical controls at Serra to account for or 
protect inventory were inadequate; (b) access to IT systems in GCC Brazil was not effectively 
controlled; (c) GCC Brazil failed to properly reconcile inventory values to the general ledger 
balance; and (d) GCC Brazil lacked proper segregation of duties as cost accounting personnel 
manually made entries to the inventory sub-ledger without further review or verification by other 
personnel. 
ROW Executives Overrode Controls and Concealed the Inventory Errors 
14. From at least January 26, 2012 to September 28, 2012, ROW’s CEO and CFO 
overrode controls and concealed these issues from GCC’s executive management, and internal and 
external auditors, and instructed others at GCC Brazil to do the same, despite evidence that the 
magnitude of the potential accounting errors was increasing.  As a result of their concealment, 
GCC filed its Form 10-K for the fiscal year ended December 31, 2011, and Forms 10-Q the fiscal 
quarters ended March 31, 2012, and June 29, 2012, that included materially false financial 
information. 

 
5 
15. On a video conference call in late January 2012, the Brazil CFO and Brazil 
Controller (collectively “Brazil Finance Managers”) reported to ROW’s CEO and CFO that they 
had conducted an investigation and had found evidence that GCC Brazil’s inventory, valued at 
$103.78 million as of December 31, 2011, was overstated by at least $12 million, a material 
shortfall for Brazil’s financial reporting.  The Brazil Finance Managers further reported that they 
believed the overstatement was due to accounting errors and/or the theft of inventory by GCC 
Brazil cost accounting personnel, which had occurred throughout 2011 and possibly in prior 
periods. 
16. On the video call, following the disclosure by the Brazil Finance Managers, ROW’s 
CEO informed the participants that he would not disclose the accounting errors or potential theft to 
GCC’s executive management and instructed them to keep the matter confidential.  ROW’s CEO 
and CFO failed to take any significant remedial or corrective action to ensure that GCC Brazil’s 
financial statements were accurate or to address the concern that cost accounting personnel had 
circumvented GCC’s internal accounting controls. 
17. From February to September 2012, ROW’s CEO and CFO took affirmative steps to 
mislead or conceal GCC Brazil’s inventory accounting errors from GCC’s executive management, 
and internal and external auditors, including, for example, the following: (a) issuing or supporting 
a directive to destroy all relevant company records concerning the missing inventory; (b) 
submitting to GCC false sub-certifications of ROW’s financial statements for the quarters ended 
December 31, 2011, March 31, 2012, and June 29, 2012, and instructing the Brazil CFO to do the 
same; (c) instructing the Brazil Finance Managers not to disclose the inventory accounting errors to 
members of GCC’s Internal Audit, who were onsite in early 2012; (d) with respect to ROW’s 
CEO, failing to include the accounting errors in monthly reports submitted to GCC executive 
management; and (e) failing, until May 2012, to provide necessary support to investigate the 
inventory overstatement reported by Brazil Finance Managers. 
18. In mid-May 2012, ROW’s CFO eventually authorized a ROW cost accountant 
(located outside Brazil) to assist the Brazil Finance Managers’ ongoing investigation of the 
inventory accounting issues.  In less than two weeks of analysis, the accountant not only 
corroborated the Brazil Finance Managers’ findings, but reported to ROW’s CFO that inventory 
was improperly overstated by a significant magnitude.  The accountant, in this regard, notified 
ROW’s CFO, in both an e-mail and on a videoconference call including the Brazil Finance 
Managers, that the magnitude of the inventory accounting errors was approximately $30 million.   
19. Despite this increasing magnitude of the overstatement and its material impact on 
GCC’s financial statements, ROW’s CFO continued to disregard the mounting evidence and 
merely instructed the cost accountant to reassess and report back in six weeks. 
20. On July 10, 2012, the cost accountant submitted a written report to ROW’s CFO 
confirming that GCC Brazil’s inventory was overstated by $29 million due to significant 
accounting errors and internal control deficiencies.  ROW’s CEO and CFO, however, continued to 
conceal the inventory errors from GCC’s executive management and, on August 3, 2012, GCC 
filed its Form 10-Q for the quarter ended June 30, 2012, which again materially understated costs 
of sales and overstated inventory. 

 
6 
21. Given the decentralized reporting structure of GCC’s ROW segment, over which 
GCC’s executive management had little actual oversight, the Brazil Finance Managers regarded 
ROW’s CEO and CFO as the highest level to whom they could report their concerns, and believed 
that they did not have direct access to GCC executive management.  ROW’s CEO and CFO further 
reinforced this belief by discouraging the country-level financial managers, including the Brazil 
Finance Managers, from reporting issues outside of their direct reporting chain. 
22. In late September 2012, the Brazil CFO informed the ROW CEO and CFO that, 
despite the ROW CEO and CFO’s continued protests, she intended to disclose the accounting 
overstatement to GCC’s executive management and external auditors, who were preparing for the 
upcoming fiscal year audit.  Faced with no other choice, the ROW CEO reported the matter to 
GCC’s executive management, who immediately directed an internal investigation of the inventory 
issues. 
Restatement No. 1 
23. On October 29, 2012, GCC announced that it had identified inventory related 
accounting errors within the ROW segment, and that its previously issued financial statements 
for fiscal years 2009 through 2011, and for the interim periods ended March 31 and June 30, 
2012, should not be relied upon.  On March 1, 2013, GCC, after completing the internal 
investigation, restated its financial statements as follows:  For the annual periods ended 
December 31, 2011, 2010, 2009, and 2008, and for the quarterly periods ended March 30 and 
June 29, 2012, cost of sales was understated by $17.9 million, $8.3 million, $5.6 million, $7.1 
million, $2.7 million and $6.2 million, respectively.  For the same periods above, inventory 
balances were overstated by $40.0 million, $27.0 million, $17.4 million, $8.7 million, $43.7 
million, and $43.5 million, respectively. 
Restatement No. 2 
24. GCC Brazil also failed to implement and maintain sufficient internal accounting 
controls relating to revenue recognition, which ultimately caused GCC to restate its financial 
statements a second time in January 2014.  Following the detection and internal investigation of 
GCC Brazil’s inventory accounting errors, GCC identified inappropriate revenue recognition 
practices with regard to bill and hold sales at GCC Brazil.  Specifically, GCC found evidence that 
revenue recognition criteria under U.S. Generally Accepted Accounting Principles with respect to 
bill and hold sales were not met in a number of instances. 
25. On October 15, 2013, GCC concluded that due to the accounting errors related to 
(i) revenue recognition in connection with historical bill and hold transactions for aerial 
transmission projects in Brazil and (ii) value added tax (“VAT”) assets, GCC’s previously issued 
consolidated financial statements for the fiscal years 2008 through 2012 and the interim periods 
during those years, and the interim financial statements as of and for the three months ended 
March 29, 2013 should no longer be relied upon.  On January 21, 2014, GCC restated its results 
for the relevant quarters and fiscal year-ends. 
 
 

 
7 
Legal Standards and Violations 
26. Under Section 21C(a) of the Exchange Act, 15 U.S.C. § 78u-3(a), if the 
Commission finds that any person is violating, has violated, or is about to violate any provision of 
the Exchange Act, or any rule or regulation thereunder, the Commission may publish its findings 
and enter an order requiring such person, and any other person that is, was, or would be a cause of 
the violation, due to an act or omission the person knew or should have known would contribute to 
such violation, to cease and desist from committing or causing such violation and any future 
violation of the same provision, rule, or regulation. 
27. As a result of the conduct described above, GCC violated Section 13(a) of the 
Exchange Act and Rules 13a-1, 13a-11, and 13a-13 thereunder, which require an issuer to file with 
the Commission accurate annual, current, and quarterly reports.  15 U.S.C. § 78m; 17 C.F.R. §§ 
240.13a-1, 13a-11 & 13a-13.  GCC also violated Exchange Act Rule 12b-20, 17 C.F.R. § 240.12b-
20, which requires an issuer in its periodic reports to add such further material information, if any, 
as may be necessary to make the required statements, in light of the circumstances under which 
they are made, not misleading. 
28. GCC further violated Section 13(b)(2)(A) of the Exchange Act, 15 U.S.C.                
§ 78m(b)(2)(A), under which every issuer which has a class of securities registered pursuant to 
Section 12 of the Exchange Act is required to make and keep books, records, and accounts, which, 
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of 
the issuer. 
29. GCC further violated Section 13(b)(2)(B) of the Exchange Act, 15 U.S.C. § 
78m(b)(2)(B), under which every issuer which has a class of securities registered pursuant to 
Section 12 of the Exchange Act is required to devise and maintain a system of internal accounting 
controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance 
with management’s general or specific authorization; (ii) transactions are recorded as necessary (I) 
to permit preparation of financial statements in conformity with generally accepted accounting 
principles or any other criteria applicable to such statements, and (II) to maintain accountability for 
assets; (iii) access to assets is permitted only in accordance with management’s general or specific 
authorization; and (iv) the recorded accountability for assets is compared with the existing assets at 
reasonable intervals and appropriate action is taken with respect to any differences. 
GCC’s Self-Reporting, Cooperation, and Remedial Efforts 
30. In determining to accept GCC’s Offer, the Commission considered GCC’s self-
reporting, substantial cooperation, and remedial efforts.  GCC promptly self-reported the 
potential inventory accounting errors in October 2012 after it retained outside counsel to conduct 
an internal investigation.  GCC also self-reported other accounting issues as its investigation 
progressed, and regularly updated the staff on the investigation. 
31. GCC further provided complete and timely cooperation with the staff by 
providing detailed presentations on the key findings of the investigation, and promptly producing 
all relevant documents and information (including thousands of documents translated into 
English), chronologies, key document binders, interview downloads, and forensic accounting 

 
8 
analyses.  GCC also made its current or former employees available for interviews by the staff 
upon request, including facilitating certain employees to travel to the United States from abroad 
for interviews. 
32. GCC also undertook extensive remediation.  GCC has terminated or taken 
disciplinary actions against employees who were involved in the accounting issues.  All of 
GCC’s executive management during the relevant time period has been replaced.  GCC has 
restructured its financial reporting to require its regional finance departments to report directly to 
GCC’s CFO and Controller.   
33. Finally, GCC restructured its compliance policies and programs by appointing a 
Chief Compliance Officer who reports directly to GCC’s CEO and Audit Committee.  Under this 
restructuring, GCC has enhanced its training of sales and accounting personnel on compliance 
policies and expectations, implemented regular reviews of accounting adjustments, improved the 
inventory reconciliation process and security procedures, developed a global information 
technology strategy for risk assessment and control for financial reporting, and instituted 
evaluations for compliance performance through performance indicators and audits. 
Undertakings 
34. Respondent has undertaken to cooperate fully with the Commission in any and all 
investigations, litigation, or other proceedings relating to or arising from the matters described in 
this Order.  In connection with such cooperation, Respondent shall: 
1. Produce, without service of a notice or subpoena, any and all non-
privileged documents and other information requested by the Commission staff subject to 
any restrictions under the law of any foreign jurisdiction; 
2. Use its best efforts to cause its current or former officers, employees, and 
directors to be interviewed by Commission staff at such times and places as the staff 
reasonably may direct; 
3. Use its best efforts to cause its current or former officers, employees, and 
directors to appear and testify without service of a notice or subpoena in such 
investigations, depositions, hearings, or trials as may be requested by the Commission 
staff; and 
4. In connection with any testimony of Respondent’s officers, employees, 
and directors to be conducted at deposition, hearing, or trial pursuant to a notice or 
subpoena, Respondent 
a. Agrees that any such notice or subpoena for the appearance and 
testimony of Respondent’s officers, employees, and directors may be served by 
regular or electronic mail on: Christian J. Mixter, Esq., Morgan, Lewis & Bockius 
LLP, 1111 Pennsylvania Avenue, N.W., Washington, DC 20004, 
[email protected], with a copy to Emerson C. Moser, Esq., 
Senior Vice President, General Counsel and Corporate Secretary, General Cable 

 
9 
Corporation, 4 Tesseneer Drive, Highland Heights, KY 41076-9753, 
[email protected];   
b. Agrees that any such notice or subpoena for the appearance and 
testimony of Respondent’s officers, employees, and directors in any action 
pending in a United States District Court may be served, and may require 
testimony, beyond the territorial limits imposed by the Federal Rules of Civil 
Procedure. 
IV.  
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent’s Offer. 
 Accordingly, it is hereby ORDERED that: 
A. Pursuant to Section 21C of the Exchange Act, GCC cease-and-desist from 
committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A), and 
13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. 
B. GCC shall, within 30 days of the date of entry of this Order, pay a civil monetary 
penalty of $6,500,000 to the Commission for transfer to the general fund of the United States 
Treasury, subject to Exchange Act Section 21F(g)(3).   If timely payment of the civil monetary 
penalty is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717. 
C. Payment must be made in one of the following ways: 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request; 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
 Payments by check or money order must be accompanied by a cover letter 
identifying General Cable Corporation as a Respondent in these proceedings, and 
the file number of these proceedings; a copy of the cover letter and check or money 
order must be sent to Gerald W. Hodgkins, Division of Enforcement, Securities and 
Exchange Commission, 100 F Street, N.E., Washington, DC 20549. 

 
10 
D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
treated as penalties paid to the government for all purposes, including all tax purposes.  To 
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
Action, Respondent shall not argue that Respondent is entitled to, nor shall Respondent benefit by, 
offset or reduction of any award of compensatory damages by the amount of any part of 
Respondent’s payment of a civil penalty in this action (“Penalty Offset”).  If the court in any 
Related Investor Action grants such a Penalty Offset, Respondent agrees that Respondent shall, 
within 30 days after entry of a final order granting the Penalty Offset, notify the Commission's 
counsel in this action and pay the amount of the Penalty Offset to the Commission.  Such a 
payment shall not be deemed an additional civil penalty and shall not be deemed to change the 
amount of the civil penalty imposed in this proceeding.  For purposes of this paragraph, a “Related 
Investor Action” means a private damages action brought against Respondent by or on behalf of 
one or more investors based on substantially the same facts as alleged in the Order instituted by the 
Commission in this proceeding. 
 
 By the Commission. 
 
 
 
 Brent J. Fields    
 Secretary 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 79702 / December 29, 2016 

 

ACCOUNTING AND AUDITING ENFORCEMENT 

Release No. 3840 / December 29, 2016 

 

ADMINISTRATIVE PROCEEDING 

File No.  3-17754 

 

 

In the Matter of 

 

GENERAL CABLE 

CORPORATION, 

 

Respondent. 

 

 

 

 

 

 

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTION 21C OF THE SECURITIES 

EXCHANGE ACT OF 1934, MAKING 

FINDINGS, AND IMPOSING A CEASE-

AND-DESIST ORDER 

  

 

I.  

 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 

Exchange Act of 1934 (“Exchange Act”), against General Cable Corporation (“GCC” or 

“Respondent”).  

 

II.  

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, Respondent admits the jurisdiction over it and the subject matter of these proceedings, and 

consents to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 

21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist 

Order (“Order”), as set forth below. 



 2 

III.  

 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that 

Summary 

 

1. This matter concerns improper inventory accounting and disclosure violations by 

GCC, a global manufacturer of copper, aluminum, and fiber optic wire and cable products based in 

Highland Heights, Kentucky. 

2. From 2008 to the second quarter of 2012, GCC materially misstated its financial 

statements due to improper inventory accounting at its Brazil subsidiary that went undetected due 

to the company’s internal accounting controls failures.  During this period, certain Brazilian 

accounting employees manipulated the company’s accounting systems, which GCC executives 

knew were highly manual and presented financial reporting risks, by entering false entries for 

inventory values to cover up missing copper inventory from the subsidiary’s manufacturing plants.  

When the improper accounting was reported to GCC’s then-Rest of World (“ROW”) segment 

Chief Executive Officer and Chief Financial Officer in January 2012, they actively concealed the 

inventory overstatement from GCC’s executive management.  Instead, the ROW CEO and ROW 

CFO overrode internal accounting controls and issued or passed on directives to employees to 

destroy documents about the missing inventory, signed false sub-certifications of financial 

statements, and failed to take corrective action to ensure that the accounting errors did not 

continue. 

3. In October 2012, GCC announced that it had identified these inventory accounting 

issues, and in March 2013, GCC restated its financial statements from 2008 to the second quarter 

of 2012.  During this period, the missing inventory in Brazil caused GCC to materially overstate its 

inventory by $46.7 million and overstate its net income available to common shareholders by 

21.6%, 11.3%, and 29.8% for the annual periods ended December 31, 2011, 2010, and 2009, and 

8.8% and 13.8% for the quarterly periods ended June 30 and March 31, 2012, respectively. 

Respondent 

4. GCC is a publicly traded company headquartered in Highland Heights, Kentucky.  

GCC is a global manufacturer of copper, aluminum, and fiber optic wire and cable products.  

During the relevant period, GCC maintained operations in three segments, North America, Europe 

& Mediterranean (“E&M,” now known as the Europe segment), and ROW (split into the Latin 

America and Asia Pacific segments in 2014).  GCC’s common stock is registered with the 

Commission under Section 12(b) of the Exchange Act, and GCC files annual and quarterly reports 

under Section 13(a) of the Exchange Act and related rules.  GCC’s common stock trades on the 

New York Stock Exchange under the ticker symbol “BGC.” 

                                                 
1
  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 

binding on any other person or entity in these or any other proceedings. 



 3 

Relevant Entities 

5. General Cable Brasil Indústria e Comércio de Condutores Elétricos Ltda. 

(current name of Phelps Dodge Brasil Ltda., acquired in 2007), and General Cable do Brasil 

Ltda. (“GC  Brasil”) are indirect subsidiaries of GCC in its ROW (from 2007 to 2014) and Latin 

America (from 2014 to present) segments, and manufacture and sell GCC’s products for its 

domestic market.  In this Order GCC’s Brazil operations through these two subsidiaries are 

referred to collectively as “GCC Brazil.” 

 

Facts 

GCC Brazil’s Improper Inventory Accounting 

6. In October 2007, following the acquisition of Phelps Dodge International Corp. 

(“PDIC”), GCC created the ROW reporting segment, with ROW’s management based in Doral, 

Florida.  GCC Brazil, as part of ROW’s Latin America operations, was one of the largest and 

most significant operations that were reported in ROW’s financial statements.  During the 

relevant period, GCC Brazil maintained two manufacturing facilities, Serra and Poços de Caldas 

(“Poços”). 

7. From at least 2008 to mid-2012, GCC Brazil materially understated cost of sales 

and overstated copper inventory balances on its books and records, which were consolidated into 

GCC’s financial statements.  The inventory overstatement, leading to material financial reporting 

errors, was due to both missing inventory and accounting errors within GCC Brazil’s enterprise 

resource planning (“ERP”) system and its implementation.  In covering up the missing inventory, 

certain cost accounting personnel, who controlled entries into GCC Brazil’s general ledger as well 

as controlled the accounting for inventory, manipulated the ERP system to reflect inventory that 

did not exist. 

8. After conducting an internal investigation, GCC determined that the inventory 

accounting errors at GCC Brazil were material and would require a restatement of certain of its 

previously issued financial statements. For the years ended December 31, 2011, 2010, 2009, and 

2008, and for the three months ended March 30, 2012 and six months ended June 29, 2012, cost of 

sales was understated by $17.9 million, $8.3 million, $5.6 million, $7.1 million, $2.7 million and 

$6.2 million, respectively.  As of December 31, 2011, 2010, 2009 and 2008, March 30, 2012 and 

June 29, 2012 inventory balances were overstated by $40.0 million, $27.0 million, $17.4 million, 

$8.7 million, $43.7 million, and $43.5 million, respectively.  In addition, due to accounting errors 

at one of the Brazilian facilities that occurred before GCC’s acquisition of PDIC in 2007, GCC 

also overstated inventory in its allocation of the purchase price among assets acquired, resulting in 

an understatement of goodwill.  The understated goodwill and overstated inventory associated with 

the acquisition of PDIC in the fourth quarter of 2007 was $3.4 million. 

9. The inventory accounting errors at GCC Brazil caused GCC to overstate its net 

income available to common shareholders by 21.6%, 11.3%, and 29.8% for the annual periods 

ended December 31, 2011, 2010, and 2009, and 8.8% and 13.8% for the quarterly periods ended 

June 30 and March 31, 2012, respectively. 



 4 

10. GCC Brazil’s improper inventory accounting went undetected by GCC for several 

years because its inventory accounting systems were highly manual and decentralized, and lacked 

adequate controls.  As a result, the lapses in the systems were exploited by certain GCC Brazil cost 

accounting personnel.  Although GCC Brazil’s inventory accounting systems were centralized in 

its ERP system, its cost accounting personnel were able to falsify GCC Brazil’s general ledger by 

manually calculating inventory values in a spreadsheet module and then feeding those values into 

the general ledger.  The general ledger, therefore, contained falsely overstated inventory values.  

Those values were not reconciled with GCC Brazil’s actual inventory (e.g., reels of raw copper 

metal and finished goods).  These actions enabled the cost accounting personnel to make improper 

entries in the general ledger without appropriate review by GCC Brazil’s management.  The false 

entries were designed to conceal accounting errors and missing inventory, resulting in overstated 

inventory balances on the general ledger.   

11. The lack of segregation of responsibilities for making and approving manual 

journal entries further enabled the manipulation to occur and go undetected.  Although GCC 

executive management was unaware that inventory accounting for Brazil was overstated during the 

relevant period, it was aware that the ERP system, which was widely used by several countries 

within ROW, was highly manual, unevenly implemented throughout ROW, and was not subject to 

centralized oversight, creating financial reporting risks. 

12. In late 2011, while completing newly required tax documentation for local 

regulators, GCC Brazil’s Controller (“Brazil Controller”) discovered significant inconsistencies 

between GCC Brazil’s general ledger and supporting documentation for intercompany sales.  The 

Brazil Controller, in consultation with GCC Brazil’s CFO (“Brazil CFO”), reviewed intercompany 

sales in 2011 and concluded in December 2011 that GCC Brazil’s inventory was overstated and 

suspected it was due to accounting errors and an inventory theft involving the primary Brazil cost 

accountant. 

13. A number of deficient internal accounting and risk management controls prevented 

GCC Brazil from detecting this scheme for years:  (a) physical controls at Serra to account for or 

protect inventory were inadequate; (b) access to IT systems in GCC Brazil was not effectively 

controlled; (c) GCC Brazil failed to properly reconcile inventory values to the general ledger 

balance; and (d) GCC Brazil lacked proper segregation of duties as cost accounting personnel 

manually made entries to the inventory sub-ledger without further review or verification by other 

personnel. 

ROW Executives Overrode Controls and Concealed the Inventory Errors 

14. From at least January 26, 2012 to September 28, 2012, ROW’s CEO and CFO 

overrode controls and concealed these issues from GCC’s executive management, and internal and 

external auditors, and instructed others at GCC Brazil to do the same, despite evidence that the 

magnitude of the potential accounting errors was increasing.  As a result of their concealment, 

GCC filed its Form 10-K for the fiscal year ended December 31, 2011, and Forms 10-Q the fiscal 

quarters ended March 31, 2012, and June 29, 2012, that included materially false financial 

information. 



 5 

15. On a video conference call in late January 2012, the Brazil CFO and Brazil 

Controller (collectively “Brazil Finance Managers”) reported to ROW’s CEO and CFO that they 

had conducted an investigation and had found evidence that GCC Brazil’s inventory, valued at 

$103.78 million as of December 31, 2011, was overstated by at least $12 million, a material 

shortfall for Brazil’s financial reporting.  The Brazil Finance Managers further reported that they 

believed the overstatement was due to accounting errors and/or the theft of inventory by GCC 

Brazil cost accounting personnel, which had occurred throughout 2011 and possibly in prior 

periods. 

16. On the video call, following the disclosure by the Brazil Finance Managers, ROW’s 

CEO informed the participants that he would not disclose the accounting errors or potential theft to 

GCC’s executive management and instructed them to keep the matter confidential.  ROW’s CEO 

and CFO failed to take any significant remedial or corrective action to ensure that GCC Brazil’s 

financial statements were accurate or to address the concern that cost accounting personnel had 

circumvented GCC’s internal accounting controls. 

17. From February to September 2012, ROW’s CEO and CFO took affirmative steps to 

mislead or conceal GCC Brazil’s inventory accounting errors from GCC’s executive management, 

and internal and external auditors, including, for example, the following: (a) issuing or supporting 

a directive to destroy all relevant company records concerning the missing inventory; (b) 

submitting to GCC false sub-certifications of ROW’s financial statements for the quarters ended 

December 31, 2011, March 31, 2012, and June 29, 2012, and instructing the Brazil CFO to do the 

same; (c) instructing the Brazil Finance Managers not to disclose the inventory accounting errors to 

members of GCC’s Internal Audit, who were onsite in early 2012; (d) with respect to ROW’s 

CEO, failing to include the accounting errors in monthly reports submitted to GCC executive 

management; and (e) failing, until May 2012, to provide necessary support to investigate the 

inventory overstatement reported by Brazil Finance Managers. 

18. In mid-May 2012, ROW’s CFO eventually authorized a ROW cost accountant 

(located outside Brazil) to assist the Brazil Finance Managers’ ongoing investigation of the 

inventory accounting issues.  In less than two weeks of analysis, the accountant not only 

corroborated the Brazil Finance Managers’ findings, but reported to ROW’s CFO that inventory 

was improperly overstated by a significant magnitude.  The accountant, in this regard, notified 

ROW’s CFO, in both an e-mail and on a videoconference call including the Brazil Finance 

Managers, that the magnitude of the inventory accounting errors was approximately $30 million.   

19. Despite this increasing magnitude of the overstatement and its material impact on 

GCC’s financial statements, ROW’s CFO continued to disregard the mounting evidence and 

merely instructed the cost accountant to reassess and report back in six weeks. 

20. On July 10, 2012, the cost accountant submitted a written report to ROW’s CFO 

confirming that GCC Brazil’s inventory was overstated by $29 million due to significant 

accounting errors and internal control deficiencies.  ROW’s CEO and CFO, however, continued to 

conceal the inventory errors from GCC’s executive management and, on August 3, 2012, GCC 

filed its Form 10-Q for the quarter ended June 30, 2012, which again materially understated costs 

of sales and overstated inventory. 



 6 

21. Given the decentralized reporting structure of GCC’s ROW segment, over which 

GCC’s executive management had little actual oversight, the Brazil Finance Managers regarded 

ROW’s CEO and CFO as the highest level to whom they could report their concerns, and believed 

that they did not have direct access to GCC executive management.  ROW’s CEO and CFO further 

reinforced this belief by discouraging the country-level financial managers, including the Brazil 

Finance Managers, from reporting issues outside of their direct reporting chain. 

22. In late September 2012, the Brazil CFO informed the ROW CEO and CFO that, 

despite the ROW CEO and CFO’s continued protests, she intended to disclose the accounting 

overstatement to GCC’s executive management and external auditors, who were preparing for the 

upcoming fiscal year audit.  Faced with no other choice, the ROW CEO reported the matter to 

GCC’s executive management, who immediately directed an internal investigation of the inventory 

issues. 

Restatement No. 1 

23. On October 29, 2012, GCC announced that it had identified inventory related 

accounting errors within the ROW segment, and that its previously issued financial statements 

for fiscal years 2009 through 2011, and for the interim periods ended March 31 and June 30, 

2012, should not be relied upon.  On March 1, 2013, GCC, after completing the internal 

investigation, restated its financial statements as follows:  For the annual periods ended 

December 31, 2011, 2010, 2009, and 2008, and for the quarterly periods ended March 30 and 

June 29, 2012, cost of sales was understated by $17.9 million, $8.3 million, $5.6 million, $7.1 

million, $2.7 million and $6.2 million, respectively.  For the same periods above, inventory 

balances were overstated by $40.0 million, $27.0 million, $17.4 million, $8.7 million, $43.7 

million, and $43.5 million, respectively. 

Restatement No. 2 

24. GCC Brazil also failed to implement and maintain sufficient internal accounting 

controls relating to revenue recognition, which ultimately caused GCC to restate its financial 

statements a second time in January 2014.  Following the detection and internal investigation of 

GCC Brazil’s inventory accounting errors, GCC identified inappropriate revenue recognition 

practices with regard to bill and hold sales at GCC Brazil.  Specifically, GCC found evidence that 

revenue recognition criteria under U.S. Generally Accepted Accounting Principles with respect to 

bill and hold sales were not met in a number of instances. 

25. On October 15, 2013, GCC concluded that due to the accounting errors related to 

(i) revenue recognition in connection with historical bill and hold transactions for aerial 

transmission projects in Brazil and (ii) value added tax (“VAT”) assets, GCC’s previously issued 

consolidated financial statements for the fiscal years 2008 through 2012 and the interim periods 

during those years, and the interim financial statements as of and for the three months ended 

March 29, 2013 should no longer be relied upon.  On January 21, 2014, GCC restated its results 

for the relevant quarters and fiscal year-ends. 

 

 



 7 

Legal Standards and Violations 

26. Under Section 21C(a) of the Exchange Act, 15 U.S.C. § 78u-3(a), if the 

Commission finds that any person is violating, has violated, or is about to violate any provision of 

the Exchange Act, or any rule or regulation thereunder, the Commission may publish its findings 

and enter an order requiring such person, and any other person that is, was, or would be a cause of 

the violation, due to an act or omission the person knew or should have known would contribute to 

such violation, to cease and desist from committing or causing such violation and any future 

violation of the same provision, rule, or regulation. 

27. As a result of the conduct described above, GCC violated Section 13(a) of the 

Exchange Act and Rules 13a-1, 13a-11, and 13a-13 thereunder, which require an issuer to file with 

the Commission accurate annual, current, and quarterly reports.  15 U.S.C. § 78m; 17 C.F.R. §§ 

240.13a-1, 13a-11 & 13a-13.  GCC also violated Exchange Act Rule 12b-20, 17 C.F.R. § 240.12b-

20, which requires an issuer in its periodic reports to add such further material information, if any, 

as may be necessary to make the required statements, in light of the circumstances under which 

they are made, not misleading. 

28. GCC further violated Section 13(b)(2)(A) of the Exchange Act, 15 U.S.C.                

§ 78m(b)(2)(A), under which every issuer which has a class of securities registered pursuant to 

Section 12 of the Exchange Act is required to make and keep books, records, and accounts, which, 

in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of 

the issuer. 

29. GCC further violated Section 13(b)(2)(B) of the Exchange Act, 15 U.S.C. § 

78m(b)(2)(B), under which every issuer which has a class of securities registered pursuant to 

Section 12 of the Exchange Act is required to devise and maintain a system of internal accounting 

controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance 

with management’s general or specific authorization; (ii) transactions are recorded as necessary (I) 

to permit preparation of financial statements in conformity with generally accepted accounting 

principles or any other criteria applicable to such statements, and (II) to maintain accountability for 

assets; (iii) access to assets is permitted only in accordance with management’s general or specific 

authorization; and (iv) the recorded accountability for assets is compared with the existing assets at 

reasonable intervals and appropriate action is taken with respect to any differences. 

GCC’s Self-Reporting, Cooperation, and Remedial Efforts 

30. In determining to accept GCC’s Offer, the Commission considered GCC’s self-

reporting, substantial cooperation, and remedial efforts.  GCC promptly self-reported the 

potential inventory accounting errors in October 2012 after it retained outside counsel to conduct 

an internal investigation.  GCC also self-reported other accounting issues as its investigation 

progressed, and regularly updated the staff on the investigation. 

31. GCC further provided complete and timely cooperation with the staff by 

providing detailed presentations on the key findings of the investigation, and promptly producing 

all relevant documents and information (including thousands of documents translated into 

English), chronologies, key document binders, interview downloads, and forensic accounting 



 8 

analyses.  GCC also made its current or former employees available for interviews by the staff 

upon request, including facilitating certain employees to travel to the United States from abroad 

for interviews. 

32. GCC also undertook extensive remediation.  GCC has terminated or taken 

disciplinary actions against employees who were involved in the accounting issues.  All of 

GCC’s executive management during the relevant time period has been replaced.  GCC has 

restructured its financial reporting to require its regional finance departments to report directly to 

GCC’s CFO and Controller.   

33. Finally, GCC restructured its compliance policies and programs by appointing a 

Chief Compliance Officer who reports directly to GCC’s CEO and Audit Committee.  Under this 

restructuring, GCC has enhanced its training of sales and accounting personnel on compliance 

policies and expectations, implemented regular reviews of accounting adjustments, improved the 

inventory reconciliation process and security procedures, developed a global information 

technology strategy for risk assessment and control for financial reporting, and instituted 

evaluations for compliance performance through performance indicators and audits. 

Undertakings 

34. Respondent has undertaken to cooperate fully with the Commission in any and all 

investigations, litigation, or other proceedings relating to or arising from the matters described in 

this Order.  In connection with such cooperation, Respondent shall: 

1. Produce, without service of a notice or subpoena, any and all non-

privileged documents and other information requested by the Commission staff subject to 

any restrictions under the law of any foreign jurisdiction; 

2. Use its best efforts to cause its current or former officers, employees, and 

directors to be interviewed by Commission staff at such times and places as the staff 

reasonably may direct; 

3. Use its best efforts to cause its current or former officers, employees, and 

directors to appear and testify without service of a notice or subpoena in such 

investigations, depositions, hearings, or trials as may be requested by the Commission 

staff; and 

4. In connection with any testimony of Respondent’s officers, employees, 

and directors to be conducted at deposition, hearing, or trial pursuant to a notice or 

subpoena, Respondent 

a. Agrees that any such notice or subpoena for the appearance and 

testimony of Respondent’s officers, employees, and directors may be served by 

regular or electronic mail on: Christian J. Mixter, Esq., Morgan, Lewis & Bockius 

LLP, 1111 Pennsylvania Avenue, N.W., Washington, DC 20004, 

[email protected], with a copy to Emerson C. Moser, Esq., 

Senior Vice President, General Counsel and Corporate Secretary, General Cable 



 9 

Corporation, 4 Tesseneer Drive, Highland Heights, KY 41076-9753, 

[email protected];   

b. Agrees that any such notice or subpoena for the appearance and 

testimony of Respondent’s officers, employees, and directors in any action 

pending in a United States District Court may be served, and may require 

testimony, beyond the territorial limits imposed by the Federal Rules of Civil 

Procedure. 

IV.  
 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent’s Offer. 

 Accordingly, it is hereby ORDERED that: 

A. Pursuant to Section 21C of the Exchange Act, GCC cease-and-desist from 

committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A), and 

13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. 

B. GCC shall, within 30 days of the date of entry of this Order, pay a civil monetary 

penalty of $6,500,000 to the Commission for transfer to the general fund of the United States 

Treasury, subject to Exchange Act Section 21F(g)(3).   If timely payment of the civil monetary 

penalty is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717. 

C. Payment must be made in one of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request; 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

 Payments by check or money order must be accompanied by a cover letter 

identifying General Cable Corporation as a Respondent in these proceedings, and 

the file number of these proceedings; a copy of the cover letter and check or money 

order must be sent to Gerald W. Hodgkins, Division of Enforcement, Securities and 

Exchange Commission, 100 F Street, N.E., Washington, DC 20549. 



 10 

D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes.  To 

preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 

Action, Respondent shall not argue that Respondent is entitled to, nor shall Respondent benefit by, 

offset or reduction of any award of compensatory damages by the amount of any part of 

Respondent’s payment of a civil penalty in this action (“Penalty Offset”).  If the court in any 

Related Investor Action grants such a Penalty Offset, Respondent agrees that Respondent shall, 

within 30 days after entry of a final order granting the Penalty Offset, notify the Commission's 

counsel in this action and pay the amount of the Penalty Offset to the Commission.  Such a 

payment shall not be deemed an additional civil penalty and shall not be deemed to change the 

amount of the civil penalty imposed in this proceeding.  For purposes of this paragraph, a “Related 

Investor Action” means a private damages action brought against Respondent by or on behalf of 

one or more investors based on substantially the same facts as alleged in the Order instituted by the 

Commission in this proceeding. 

 

 By the Commission. 

 

 

 

 Brent J. Fields    

 Secretary