diff --git a/raw/aaer/2007/AAER-2532.txt b/raw/aaer/2007/AAER-2532.txt new file mode 100644 index 0000000000000000000000000000000000000000..90f33c8155be71ea88455653f844af483351ec75 --- /dev/null +++ b/raw/aaer/2007/AAER-2532.txt @@ -0,0 +1,1393 @@ + + + + + + + + + + + + + + + + SEC.gov | Lawrence B. Evans, David L. McQuillin, and Lisa W. Zappala + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/500366","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Evans, David L. McQuillin, and Lisa W. Zappala + + + + + + + + + + + + Lawrence B. Evans, David L. McQuillin, and Lisa W. Zappala + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 19960 / January 8, 2007 + + Accounting and Auditing Enforcement Release No. 2532 / January 8, 2007 + + SEC v. Lawrence B. Evans, David L. McQuillin, and Lisa W. Zappala , Civil Action No. 07-CV-10027-JLT (D. Mass) + + SEC Charges Former CEO, CFO and Chairman of Aspen Technology, Inc. With Accounting Fraud + + + + The Commission today filed a civil injunctive action against three former officers of Aspen Technology, Inc., a Cambridge, Massachusetts software company. In the suit, filed in United States District Court for the District of Massachusetts, the Commission alleged that former CEO David L. McQuillin of Sudbury, Massachusetts, former CFO Lisa W. Zappala of Needham, Massachusetts, and Lawrence B. Evans of Cambridge, Massachusetts, Aspen's founder and former Chairman of the Board of Directors, engaged in a fraudulent revenue recognition scheme, causing Aspen to report inflated revenue on at least six software transactions during fiscal years 1999 through 2002. + + According to the Commission's Complaint, the three defendants engaged in a scheme to inflate revenue reported in Aspen's publicly-filed financial statements and in press releases. The Complaint alleges that the three defendants caused Aspen to recognize revenue during the relevant period despite knowing that Aspen was prohibited from doing so under Generally Accepted Accounting Principles (also known as "GAAP") because contracts were not signed within the appropriate quarter and/or the earnings process was incomplete due to contingency arrangements which changed the terms of the customers' payment commitments under the contracts. On November 24, 2004, Aspen announced that it would file a restatement of its financial statements for the periods involved and that its board of directors had requested and obtained McQuillin's resignation. Thereafter, on March 15, 2005, Aspen filed with the Commission a restated Form 10-K for its fiscal years ended June 30, 2000 through June 30, 2004. The Complaint alleges that, as a result of the fraudulent scheme, Aspen overstated license revenue for its fiscal year ended June 30, 2000 by 5.5% and for the fiscal year ended June 30, 2001 by 9.3%. The Complaint further alleges that, as a result of prematurely recognized revenue from those earlier periods, license revenue for the fiscal years ended June 30, 2002, 2003, and 2004 was understated by 1.8%, 13.9%, and 4.0% respectively. + + The Complaint alleges that the defendants violated Section 17(a) of the Securities Act of 1933 (Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The Complaint also alleges that the defendants violated Exchange Act Section 13(b)(5) and Exchange Act Rules 13b2-1 and 13b2-2. The Complaint further alleges that the defendants aided and abetted Aspen's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Complaint also alleges that the defendants aided and abetted Aspen's violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 13a-11 and 13a-13. In its Complaint, the Commission seeks injunctive relief, disgorgement, civil penalties and orders barring the defendants from serving as officers or directors of any public company. + + In addition, today the United States Attorney's Office for the Southern District of New York filed related criminal charges against David McQuillin. + + The Commission acknowledges the assistance and cooperation in this investigation of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation. 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Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Suzanne Brown + + + + + + + + + + + + Suzanne Brown + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 19961 / January 8, 2007 + + Accounting and Auditing Enforcement Release No. 2536 / January 8, 2007 + + SEC v. Suzanne Brown , Civil Action No. 07-0038 (CKK) (D.D.C.) (January 8, 2007) + + SEC Settles Financial Fraud Action Against Former Controller of U.S. Foodservice + + + + The Securities and Exchange Commission today filed a settled civil action against Suzanne Brown, alleging that she and others at U.S. Foodservice, Inc. ("USF"), a subsidiary of Royal Ahold (Koninklijke Ahold N.V.) ("Ahold"), engaged in a large-scale fraud that, for fiscal years 2001 and 2002, materially overstated income by approximately $700 million in Commission filings and other public announcements. Brown's illegal acts and failures to act occurred when Brown was USF's Corporate Controller. + + The Commission's complaint alleges that, at the instruction of USF executives who supervised her, Brown directed that materially overstated promotional allowance entries be recorded in the books and records of USF. The complaint alleges that these entries did not reflect the company's actual operating performance; instead, they were determined solely by what USF required to make its budgeted earnings. The complaint also alleges that Brown knew, or was reckless in not knowing, that the entries improperly inflated operating income reported on USF's financial statements, which were consolidated into Ahold's Commission filings and other public statements. + + According to the complaint, Brown made or directed others to make entries in USF's books and records that she knew, or was reckless in not knowing, were false, without basis in fact, and did not comply with Generally Accepted Accounting Principles. The complaint alleges that these entries included releases of reserves and accruals to make up for earnings shortfalls. Finally, the complaint alleges that Brown provided Ahold's independent auditors with false and/or misleading information in connection with their reviews and audit of USF's financial statements. + + Brown has agreed to settle the Commission's action, without admitting or denying the allegations in the complaint, by consenting to a judgment permanently enjoining her from violating Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5 and 13b2-1 thereunder and from aiding and abetting any violation of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13b2-2 thereunder. The judgment also orders Brown to pay a civil penalty of $100,000 and imposes a five-year officer and director bar. + + Brown has also consented to the issuance of an Order Instituting Administrative Proceedings Pursuant to Rule 102(E) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions, which suspends her from appearing or practicing before the Commission as an accountant for a period of no less than five years. + + The Commission's investigation is continuing. The Commission acknowledges the assistance and cooperation of the Office of the United States Attorney for the Southern District of New York and the New York Office of the Federal Bureau of Investigation. + + For additional information on related actions, see Litigation Release No. 19721 (June 7, 2006), Administrative Release No. 34-53326 (February 16, 2006), Litigation Release No. 19454 (November 2, 2005), Litigation Release No. 19034 (January 13, 2005), Litigation Release No. 18929 (October 13, 2004), and Litigation Release No. 18797 (July 27, 2004). + + + + + SEC Complaint in this matter + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2537.txt b/raw/aaer/2007/AAER-2537.txt new file mode 100644 index 0000000000000000000000000000000000000000..2f092da4d431e37da3fa8f7a24d9e6c083a6ff54 --- /dev/null +++ b/raw/aaer/2007/AAER-2537.txt @@ -0,0 +1,1383 @@ + + + + + + + + + + + + + + + + SEC.gov | Jacob (“Kobi”) Alexander, David Kreinberg, and William F. Sorin + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/500386","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Sorin + + + + + + + + + + + + Jacob (“Kobi”) Alexander, David Kreinberg, and William F. Sorin + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 19964 / January 10, 2007 + + Accounting and Auditing Release No. 2537 / January 10, 2007 + + Securities and Exchange Commission v. Jacob ("Kobi") Alexander, David Kreinberg, and William F. Sorin , United States District Court for the Eastern District of New York, Civil Action No. CV-063844 (GJ) (E.D.N.Y. August 9, 2006) + + SEC Settles Options Backdating Case Against William F. Sorin, Former General Counsel of Comverse Technology, Inc.; Relief Includes Officer-and-Director Bar and Over $3 Million in Civil Penalties, Disgorgement, and Prejudgment Interest + + The Securities and Exchange Commission today settled civil charges against William F. Sorin (Sorin), the former General Counsel of Comverse Technology, Inc., and a defendant in the Commission's August 2006 enforcement action against three former Comverse executives arising from an alleged scheme to backdate stock option grants. + + The Commission charged Sorin and two other former Comverse executives on Aug. 9, 2006, with, among other things, engaging over many years in a fraudulent scheme to grant undisclosed in-the-money options to themselves and to others by backdating stock option grants to coincide with historically low closing prices of Comverse common stock. Among other things, the Commission's complaint alleges that Sorin created company records that falsely indicated that Comverse's compensation committee had approved a grant of stock options on a date when, in reality, no such corporate action took place. The complaint also alleges that Sorin created false company records that facilitated a similar backdating scheme at Ulticom, Inc., another public company that is a majority-owned subsidiary of Comverse. + + Without admitting or denying the allegations of the Commission's Complaint, Sorin consented to the entry of a final judgment permanently enjoining him from violating and/or aiding and abetting violations of the antifraud, reporting, record-keeping, internal controls, false statements to auditors, and securities ownership-reporting provisions of the federal securities laws. Specifically, the proposed final judgment would permanently enjoin Sorin from violating Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(b)(5), 14(a), and 16(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1, 13b2-2, 14a-9, and 16a-3 thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. + + Sorin consented to the entry of an order permanently prohibiting him from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act. Pursuant to the order, Sorin is required to pay $1,670,915.03 in disgorgement, of which $1,007,201.58 represents the "in-the-money" benefit from exercises of backdated option grants. In addition, Sorin will pay $817,509.07 in prejudgment interest thereon, and a $600,000 civil penalty, for a total of $3,088,424.10. The settlement is subject to the approval of the United States District Court for the Eastern District of New York. + + As part of the settlement, and following the entry of the proposed final judgment, Sorin, without admitting or denying the Commission's findings, consented to the entry of an administrative order, pursuant to Rule 102(e)(3) of the Commission's Rules of Practice, suspending him from appearing or practicing before the Commission as an attorney. + + In a separate matter filed in the United States District Court for the Eastern District of New York on Nov. 2, 2006, Sorin pleaded guilty to one criminal count of conspiracy to commit securities fraud, mail fraud, and wire fraud. The plea was the result of an agreement between Sorin and the United States Attorney's Office for the Eastern District of New York. + + The Commission's investigation in this matter is continuing. + + For further information, see Litigation Release Nos. 19796 (August 9, 2006) and 19878 (October 24, 2006). + + + + + + + SEC Complaint in this matter --> + +   + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2538.pdf b/raw/aaer/2007/AAER-2538.pdf new file mode 100644 index 0000000000000000000000000000000000000000..9402363af9615005a1de13cbadbb761e504e38f5 Binary files /dev/null and b/raw/aaer/2007/AAER-2538.pdf differ diff --git a/raw/aaer/2007/AAER-2538.txt b/raw/aaer/2007/AAER-2538.txt new file mode 100644 index 0000000000000000000000000000000000000000..9cb70aa40d13582fd52e1df76f21ed4c2c2ceab2 --- /dev/null +++ b/raw/aaer/2007/AAER-2538.txt @@ -0,0 +1,98 @@ + +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55077 / January 10, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2538 / January 10, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-11374 + +In the Matter of +Stuart A. Nussbaum, CPA + +: +: +: +: +: +: +ORDER GRANTING APPLICATION FOR +REINSTATEMENT TO APPEAR AND PRACTICE +BEFORE THE COMMISSION AS AN ACCOUNTANT + +On January 15, 2004, Stuart A. Nussbaum ("Nussbaum") was suspended from appearing +or practicing as an accountant before the Commission as a result of settled public administrative +proceedings instituted by the Commission against Nussbaum pursuant to Rule 102(e) of the +Commission's Rules of Practice. +1 Nussbaum consented to the entry of the January 15, 2004 +order without admitting or denying the findings therein. This order is issued in response to +Nussbaum’s application for reinstatement to practice before the Commission as an accountant. + +During the years 1997 and 1998, Nussbaum was employed as a senior manager at Weiser +LLP (“Weiser”). During these two years, Nussbaum participated as the manager on Weiser’s +surprise inspections of the Sagam Capital Management Corporation (“Sagam Corp.”). As the +manager of these surprise inspections, the Commission alleged that Nussbaum engaged in +instances of highly unreasonable conduct by failing to conduct them in accordance with the +Investment Advisers Act of 1940 (“Advisers Act”) Rule 206(4)-2(a)(5). This conduct caused +and aided and abetted Sagam Corp.’s violations of Section 206(4) of the Advisers Act and +constituted improper professional conduct. + +Nussbaum has met all of the conditions set forth in his suspension order and, in his +capacity as an independent accountant, has stated that he will comply with all requirements of +the Commission and the Public Company Accounting Oversight Board, including, but not +limited to all requirements relating to registration, inspections, concurring partner reviews and + + +1 See Accounting and Auditing Enforcement Release No. 1943 dated January 15, 2004. Nussbaum was permitted, +pursuant to the order, to apply for reinstatement after one year upon making certain showings. +quality control standards. In his capacity as a preparer or reviewer, or as a person responsible for +the preparation or review, of financial statements of a public company to be filed with the +Commission, Nussbaum attests that he will undertake to have his work reviewed by the +independent audit committee of any company for which he works, or in some other manner +acceptable to the Commission, while practicing before the Commission in this capacity. + +Rule 102(e)(5) of the Commission’s Rules of Practice governs applications for +reinstatement, and provides that the Commission may reinstate the privilege to appear and +practice before the Commission “for good cause shown.” +2 This “good cause” determination is +necessarily highly fact specific. + + On the basis of the information supplied, representations made, and undertakings agreed +to by Nussbaum, it appears that he has complied with the terms of the January 15, 2004 order +denying him the privilege of appearing or practicing before the Commission as an accountant, +that no information has come to the attention of the Commission relating to his character, +integrity, professional conduct or qualifications to practice before the Commission that would be +a basis for adverse action against him pursuant to Rule 102(e) of the Commission's Rules of +Practice, and that Nussbaum, by undertaking to have his work reviewed by the independent audit +committee of any company for which he works, or in some other manner acceptable to the +Commission, in his practice before the Commission as a preparer or reviewer of financial +statements required to be filed with the Commission, and that Nussbaum, by undertaking to +comply with all requirements of the Commission and the Public Company Accounting Oversight +Board, including, but not limited to, all requirements relating to registration, inspections, +concurring partner reviews and quality control standards, in his practice before the Commission +as an independent accountant has shown good cause for reinstatement. Therefore, it is +accordingly, + +ORDERED pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice that +Stuart A. Nussbaum, CPA is hereby reinstated to appear and practice before the Commission as +an accountant. + +By the Commission. + + + + +Nancy M. Morris +Secretary + + + +2 Rule 102(e)(5)(i) provides: + +“An application for reinstatement of a person permanently suspended or disqualified under paragraph (e)(1) or (e)(3) +of this section may be made at any time, and the applicant may, in the Commission’s discretion, be afforded a +hearing; however, the suspension or disqualification shall continue unless and until the applicant has been reinstated +by the Commission for good cause shown.” 17 C.F.R. § 201.102(e)(5)(i). \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2539.txt b/raw/aaer/2007/AAER-2539.txt new file mode 100644 index 0000000000000000000000000000000000000000..dd2c8f481093eaf28772ddd92dd62fd74b61da4b --- /dev/null +++ b/raw/aaer/2007/AAER-2539.txt @@ -0,0 +1,49 @@ + + +______________________________ +UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55094 / January 12, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2539 / January 12, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12534 +: +In the Matter of : + : ORDER OF SUSPENSION PURSUANT +CHARLES R. EISENSTEIN, : TO RULE 102(e)(2) OF THE +: COMMISSION’S RULES OF PRACTICE +Respondent. : +______________________________: +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate to issue +an order of forthwith suspension of Charles R. Eisenstein (“Eisenstein”), pursuant to Rule +102(e)(2) of the Commission’s Rules of Practice [17 C.F.R. §200.102(e)(2)].1 +II. +The Commission finds that: +1. Eisenstein, age 56 of Brooklyn, New York, is not, nor has he ever been at any time +relevant to this proceeding, a certified public accountant (“CPA”) licensed to practice in any +jurisdiction or before the Commission.2 +2. On August 12, 2002, Eisenstein pled guilty to one count of securities fraud in +1 Rule 102(e)(2) provides in pertinent part: Any . . . person who has been convicted of a felony or a +misdemeanor involving moral turpitude shall be forthwith suspended from appearing or practicing before the +Commission.” +2 In an audit report filed with a Form 8-K with the Commission, Eisenstein falsely represented that he was a +CPA and that he had audited the financial statements of the public company. +violation of Title 15 of the United States Code, Sections 78j(b) and 78ff before the United +States District Court for the Southern District of New York, in United States v. Charles +Eisenstein, Crim. Information No. 1:02-CR-905. On March 10, 2003, a judgment in the +criminal case was entered against Eisenstein, he was sentenced to 2 years probation and +ordered to pay fines in the amount of $2,500. +III. +In view of the foregoing, the Commission finds that Eisenstein has been convicted of a +felony within the meaning of Rule 102(e)(2) of the Commission’s Rules of Practice. +Accordingly, IT IS ORDERED, that Eisenstein is forthwith suspended from appearing or +practicing before the Commission pursuant to Rule 102(e)(2) of the Commission’s Rules of +Practice. +By the Commission. +Nancy M. Morris +Secretary +2 diff --git a/raw/aaer/2007/AAER-2540.txt b/raw/aaer/2007/AAER-2540.txt new file mode 100644 index 0000000000000000000000000000000000000000..88b794c4c310aad8e2ef3073def40c50d5cf8f99 --- /dev/null +++ b/raw/aaer/2007/AAER-2540.txt @@ -0,0 +1,194 @@ +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55097 / January 12, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2540 / January 12, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12535 +In the Matter of : ORDER INSTITUTING CEASE-AND- +Lattice Semiconductor Corp. +: +: +: +: +DESIST PROCEEDINGS, MAKING +FINDINGS, AND IMPOSING A +CEASE-AND-DESIST ORDER +PURSUANT TO SECTION 21C OF +Respondent. : +: +THE SECURITIES EXCHANGE ACT +OF 1934 +: +: +: +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 Lattice Semiconductor Corp. +(“Lattice” 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, except as to the Commission’s jurisdiction over it and the subject matter of these +proceedings, which are admitted, Respondent consents to the entry of this Order Instituting +Cease-and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order +Pursuant to Section 21C of the Securities Exchange Act of 1934 (“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds that: +SUMMARY +This is a financial reporting case in which inadequate internal controls caused Oregon- +based Lattice Semiconductor Corp. to file inaccurate Forms 10-Q for the second and third +quarters of 2003. By failing to segregate duties concerning the creation and entry of journal +entries into the general ledger and failing to modernize and integrate its accounting system, +Lattice contributed to the former controller’s ability to enter unsupported journal entries totaling +$5.5 million and to conceal such entries for seven months from senior management and Lattice’s +auditor. These unsupported entries led Lattice to restate its financial statements for the first three +quarters of 2003 in April 20041, reducing previously reported revenue by $10.6 million (an +approximate 6% decrease) and increasing previously reported loss by $8.9 million (an +approximate 13% increase). As a result, Lattice violated the reporting, books and records, and +internal controls provisions of the Exchange Act. +A. RESPONDENT +Lattice Semiconductor Corp., a Delaware corporation headquartered in Hillsboro, +Oregon, designs, manufactures, and sells semiconductor products. Lattice’s stock is registered +under Section 12(g) of the Exchange Act and trades on the Nasdaq National Market. +B. FACTS +1. Lattice’s Business and Deferred Revenue Accounting +Lattice manufactures semiconductor products and sells them to end users directly and +through distributors. Sales to distributors account for nearly half of Lattice’s revenue. Lattice +delays revenue recognition on sales to distributors until the distributors report product resale to +Lattice. Lattice uses deferred income accounting to reflect the anticipated revenue and +corresponding costs for its products shipped to distributors but not yet sold to end users. For +example, when Lattice ships a product to a distributor, it records in its general ledger the list +price as a credit to deferred revenue and the cost of the product as a debit to deferred cost. +Deferred income is the balance sheet liability account reflecting deferred revenue less deferred +cost. +2. The Cross-Check of the Deferred Revenue Account in the General +Ledger +At the close of each quarter, the former controller2 performed an account reconciliation to +cross-check the accuracy of Lattice’s estimate of deferred revenue as reflected in its general +ledger. This account reconciliation was based on the carrying value of the Lattice inventory +sitting on distributors’ shelves and provided an estimate of the minimum deferred revenue +balance required to reflect sales of this inventory. Lattice’s accounting policies provided that if +there was no material discrepancy between the account reconciliation estimate of deferred +revenue and the estimate of deferred revenue reflected in Lattice’s general ledger, the general +ledger was accurate and the books could be closed for the quarter. +1 Although Lattice restated its financial statements for the first quarter of 2003, that first +quarter restatement is not addressed in this Order. +2 The Commission instituted settled Administrative and Cease-and-Desist Proceedings +against the former controller, Ronald Lee Hoyt, CPA, on September 30, 2005, in which Hoyt +agreed not to practice before the Commission for three years. +2 + +3. The Discrepancies and Unsupported Journal Entries +(a) The Second Quarter 2003 Discrepancy of $1.3 Million and the +Unsupported Journal Entries to Reconcile the Discrepancy +In July 2003, the former controller performed his usual reconciliation of the deferred +revenue account in connection with his preparation of quarterly financial statements. The +reconciliation showed that the estimate of deferred revenue was $1.3 million higher than the +deferred revenue balance on the general ledger, indicating an understatement of Lattice’s +deferred revenue and that Lattice had prematurely recognized revenue. Exploiting weaknesses in +Lattice’s internal controls, the former controller then wrote and caused the entry of two +unsupported journal entries totaling $1.3 million to offset the imbalance between the estimate of +deferred revenue derived from the account reconciliation and the estimate of deferred revenue in +the general ledger. These journal entries consisted primarily of credits (increases) to deferred +revenue and debits (reductions) to accrued accounts payable instead of debits (reductions) to +revenue. After making the unsupported journal entries, the former controller closed the books +for the quarter. As a result, Lattice recognized revenue prematurely. +(b) The Third Quarter Discrepancy of $5.5 Million and the +Unsupported Journal Entries to Reconcile the Discrepancy +At the end of the third quarter, the former controller again performed his customary +reconciliation to cross-check the amount of deferred revenue recorded in the general ledger. +This time, the discrepancy was $5.5 million. The former controller, again exploiting weaknesses +in the company’s internal controls, then wrote and caused the entry of several unsupported +journal entries, totaling $5.5 million (inclusive of the $1.3 million of unsupported journal entries +from the second quarter), to offset the imbalance and close the books for the quarter. +The use of unsupported journal entries in the second and third quarters of 2003 +contributed to Lattice’s recognition of revenue contrary to Generally Accepted Accounting +Principles (GAAP). Statement of Financial Accounting Concepts No. 5, “Recognition and +Measurement in Financial Statements of Business Enterprises” (CON 5), provides that “revenues +are considered to be earned when the entity has substantially accomplished what it must do to be +entitled to the benefits represented by the revenue.” CON 5 Para. 83. Accounting Research +Bulletin No. 43 (ARB 43) provides that “Profit is deemed to be realized when a sale in the +ordinary course of business is effected . . .” ARB 43 Chapter 1.A.1. +4. Lattice’s Internal Investigation and Restatement +On January 12, 2004, the former controller disclosed to Lattice’s former VP of finance 3 +the second and third quarter general ledger imbalances of $1.3 and $5.5 million, respectively. +When Lattice learned about the unsupported journal entries, it relieved the former controller of +responsibility for journal entries and the general ledger and began an internal investigation. The +audit committee subsequently hired independent outside counsel to investigate. As described +more fully below, the investigations identified material internal controls weaknesses and resulted +in changes to the method of estimating deferred revenue and restatements of all 2003 Forms +10-Q on April 19, 2004. The restatements reduced previously reported revenue by $10.6 million +(an approximate 6% decrease) and increased previously reported net loss by $8.9 million (an +approximate 13% increase). +3 The former VP of Finance terminated employment with Lattice in August 2005. +3 + + +5. Lattice’s Internal Controls Weaknesses +In the relevant period, Lattice had two material weaknesses in the design and operation of +its internal controls: failure to segregate duties concerning journal entries and failure to recognize +that its method of calculating deferred revenue had become inaccurate over time. +With respect to Lattice’s failure to segregate duties, Lattice’s accounting practices +enabled the former controller to have sole review and approval of all journal entries and gave +him access to the general ledger. The lack of segregation allowed the former controller to make +the unsupported journal entries without review. Lattice’s dependence on the former controller +was such that, although it terminated him in March 2004, it hired him three days later as a +consultant to assist with the quarterly filing. +At least a year before the former controller’s misconduct, Lattice’s auditor orally notified +Lattice’s former VP of finance that the lack of segregation of duties for journal entries and +general ledger reconciliation was an internal controls weakness. However, no changes to +Lattice’s controls were made. +The second material control weakness related to Lattice’s failure to integrate its +accounting system. In particular, Lattice’s accounting system failed to recognize that a +percentage used in its account reconciliation methodology to estimate deferred revenue had +become inaccurate over time because the accounting system had not been properly integrated to +precisely determine the effects of sales discounts. During the relevant period, Lattice had not +been collecting as large a percentage of cash from its distributors as it had historically, and +Lattice’s finance staff did not have adequate systems or personnel to account for the effects of +this change. The failure to recognize the drop in percentage of cash collected also caused +Lattice to overstate the amount of previously deferred revenue taken into income. +C. VIOLATIONS +1. Reporting Violations: Section 13(a) of the Exchange Act and Rule +13a-13 Thereunder +Section 13(a) of the Exchange Act and Rule 13a-13 thereunder require issuers with +securities registered under Section 12 of the Exchange Act, such as Lattice, to file quarterly +reports with the Commission and to keep this information current. The obligation to file such +reports embodies the requirement that they be true and correct. See, e.g., SEC v. Savoy Indus., +Inc., 587 F.2d 1149, 1165 (D.C. Cir. 1978). Lattice violated these provisions by filing materially +inaccurate Forms 10-Q for the second and third quarters of 2003. +2. Record-Keeping Violation: Section 13(b)(2)(A) of the Exchange Act +Section 13(b)(2)(A) of the Exchange Act requires Section 12 registrants to make and +keep books, records, and accounts that accurately and fairly reflect the transactions and +dispositions of their assets. Lattice’s books and records inaccurately reflected the transactions +and disposition of assets for the second and third quarters of 2003, in violation of Section +13(b)(2)(A). +4 + +3. Internal Control Violation: Section 13(b)(2)(B) of the Exchange Act +Section 13(b)(2)(B) requires issuers with securities registered under Section 12 of the +Exchange Act to devise and maintain a system of internal accounting controls sufficient to +reasonably assure, among other things, that transactions are recorded as necessary to permit +preparation of financial statements in conformity with GAAP. +Lattice had two primary areas of material weakness in the design and operation of +internal controls: segregation of duties and failure to update its estimate methodology. These +material weaknesses contributed to the former controller’s ability to make and conceal the +unsupported journal entries. Lattice therefore violated Section 13(b)(2)(B) of the Exchange Act. +D. REMEDIAL EFFORTS +In determining to accept the Offer, the Commission considered Lattice’s cooperation and +remedial actions. +IV. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Lattice’s Offer. +Accordingly, it is hereby ORDERED that Respondent Lattice 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 Rule 13a-13 thereunder. +By the Commission. +Nancy M. Morris +Secretary +5 diff --git a/raw/aaer/2007/AAER-2546.txt b/raw/aaer/2007/AAER-2546.txt new file mode 100644 index 0000000000000000000000000000000000000000..5cb4c867263b549a5a224edff5949c8e7ccb5396 --- /dev/null +++ b/raw/aaer/2007/AAER-2546.txt @@ -0,0 +1,1375 @@ + + + + + + + + + + + + + + + + SEC.gov | Edward A. 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Kiley, et al. + + + + + + + + + + + + Edward A. Kiley, et al. + + + + + + + + + + + + + + + + + + + Corrected + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 19977 / January 23, 2007 + + Accounting and Auditing Enforcement Release No. 2546 / January 23, 2007 + + Securities and Exchange Commission v. Edward A. Kiley, et al. , Civil Action No. L-01-2146 (USDC D. Md.) + + On January 22, 2007, Judge Benson Everett Legg of the United States District Court for the District of Maryland entered final judgments by consent against the two defendants in the Commission's case: Edward A. Kiley, 55, of Bel Air, Maryland and Richard N. Orzechowski, 66, of Trafford, Pennsylvania. + + The final judgments permanently enjoin Kiley and Orzechowski from future violations of Sections 10(b) and 13(b)(5) of the Exchange Act, and Exchange Act Rules 10b-5, 13b2-1, and 13b2-2. In addition, Kiley is also enjoined from any future violation of Section 17(a) of the Securities Act. Finally, the Court imposed officer and director bars against Kiley and Orzechowski pursuant to Exchange Act Section 21(d)(2). Kiley and Orzechowski neither admitted nor denied the allegations in the Commission's complaint. + + Kiley consented to a final judgment that orders him to pay $25,531 in disgorgement of his stock trading profits and $12,903.73 in prejudgment interest but that waives payment in excess of $25,000 and does not impose a civil penalty based on Kiley's financial condition. Orzechowski consented to a final judgment that orders him to pay a $20,000 civil penalty. + + On July 23, 2001, the Commission charged Kiley, the former CEO of Alcore, Inc.-a subsidiary of Advanced Technical Products (ATP)-and Orzechowski, the former CFO of Alcore, with securities fraud and falsification of books and records. According to the SEC's complaint, this action arose out of the defendants' roles in misleading auditors and knowingly falsifying Alcore's books and records as well as Kiley's sales of ATP stock during the period of the ongoing fraud. See Litigation Release No. 17074 . + + + + + + + SEC Complaint in this matter --> + +   + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2549.pdf b/raw/aaer/2007/AAER-2549.pdf new file mode 100644 index 0000000000000000000000000000000000000000..4bfb6f7a90b076b5dc24d6443314e7f5e6877f74 Binary files /dev/null and b/raw/aaer/2007/AAER-2549.pdf differ diff --git a/raw/aaer/2007/AAER-2549.txt b/raw/aaer/2007/AAER-2549.txt new file mode 100644 index 0000000000000000000000000000000000000000..6feb8f744b2ed987b40e8e5bb5780f2c6500d643 --- /dev/null +++ b/raw/aaer/2007/AAER-2549.txt @@ -0,0 +1,142 @@ +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55199 / January 30, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2549 / January 30, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12552 + + : + : + : + In the Matter of : ORDER INSTITUTING + : A D M I N I S T R A T I V E P R O C E E D I N G S + WILLIAM F. SORIN, ESQ., : P URSUANT TO RULE 102(e) OF THE + : C O M M I S S I O N ’ S R U L E S O F + Respondent. : PRACTICE, MAKING FINDINGS, AND + : IMPOSING REMEDIAL SANCTIONS + : +____________________________________ : + + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate and in the +public interest that public administrative proceedings be, and hereby are, instituted against William +F. Sorin, Esq. (“Respondent” or “Sorin”) pursuant to Rule 102(e)(3)(i) of the Commission’s Rules +of Practice.1 + +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 + +1 Rule 102(e)(3)(i) provides, in relevant part, that: + + The Commission, with due regard to the public interest and without preliminary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . attorney . . . who has +been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal securities laws or of the rules and regulations +thereunder. +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, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Section III.4 below, which are admitted, Respondent +consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) +of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions +(“Order”), as set forth below. + +III. + + On the basis of this Order and Responde nt’s Offer, the Commission finds that: + + 1. Sorin, 58, a resident of New York, New York, is an attorney who served as General +Counsel and then Senior General Counsel of Comverse Technology, Inc. (“CTI”) from October +1984 until his resignation on May 1, 2006. He also was Corporate Secretary and a Director of CTI +during this time. Additionally, Sorin was a Director of Ulticom, Inc. (“Ulticom”) and served on +Ulticom’s Compensation Committee from 2000 to June 2004. Sorin reviewed and signed each of +CTI’s annual reports on Form 10-K since at least 1991 and he reviewed each of CTI’s quarterly +reports on Form 10-Q during that time period. He drafted and reviewed all CTI’s proxy statements +and stock option plans during the relevant period. + +2. CTI was, at all relevant times, a New York corporation, the subsidiaries of which +provided software, systems and related services for multimedia communication and information +processing applications. CTI was headquartered in Woodbury, New York, throughout most of the +relevant period and currently maintains office space and/or operations facilities in Manhattan and +Long Island, New York; its subsidiaries had operating facilities in Wakefield, Massachusetts; Tel +Aviv, Israel and various other locations within the United States, Europe, Asia, South America, +Africa and Canada. Prior to July 31, 2006, CTI’s common stock was registered with the +Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 (“Exchange Act”) +and traded on the NASDAQ National Market System under the symbol “CMVT.” It is now +registered under Section 12(b) and continues to trade on the NASDAQ National Market System. +CTI’s fiscal year ends on January 31. Prior to 1998, CTI’s fiscal year ended on December 31. + + 3. Ulticom is a New Jersey corporation based in Mount Laurel, New Jersey, that +provides service enabling signaling software for fixed, mobile and Internet communications. Prior +to July 31, 2006, Ulticom’s common stock was registered with the Commission pursuant +to Section 12(g) of the Exchange Act and traded on the NASDAQ National Market System under +the symbol “ULCM.” It is now registered under Section 12(b) and continues to trade on the +NASDAQ National Market System. Prior to going public in 2000, Ulticom was a wholly-owned +subsidiary of CTI. Ulticom is currently a majority-owned subsidiary of CTI. Ulticom’s fiscal year +ends on January 31. + + 4. On January 29, 2007, a fi nal judgment was entered against Sorin, permanently +enjoining him from violating Section 17(a) of the Securities Act of 1933 (“Securities Act”), +Sections 10(b), 13(b)(5), 14(a), and 16(a) of the Exchange Act, and Exchange Act Rules 10b-5, +13b2-1, 13b2-2, 14a-9, and 16a-3, and for aiding and abetting violations of Sections 13(a), + 2 +13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, and +13a-13, in the civil action entitled Securities and Exchange Commission v. Jacob “Kobi” +Alexander et. al, Civil Action Number 1:06-CV-03844-NGG-RER, in the United States District +Court for the Eastern District of New York. Sorin was also prohibited from acting as an officer or +director of any issuer that has a class of securities registered pursuant to Section 12 of the +Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act, and +was ordered to pay $2,488,424.10 in disgorgement, which includes prejudgment interest, and a +$600,000 civil penalty. + +5. The Commission’s Co mplaint alleges, among other things, that beginning no later +than 1991, and continuing through 2001, Sorin engaged in a fraudulent scheme with CTI’s former +Chairman and Chief Executive Officer, and from at least 1998 with CTI’s former Chief Financial +Officer, to grant undisclosed, in-the-money options to themselves and others, by backdating stock +option grants to coincide with historically low annual and quarterly closing prices for CTI’s stock. +Sorin then created company records that falsely indicated that CTI’s Remuneration and Stock +Option Committee (the “Compensation Committee”) had actually acted on that date to make the +options grant, when, in reality, no corporate action took place on the selected backdated date. +According to the Complaint, Sorin’s fraudulent misconduct caused CTI, between fiscal year 1991 +and fiscal year 2005, (i) to file materially false and misleading financial statements that materially +understated its compensation expenses and materially overstated its quarterly and annual net +income and earnings per share, and (ii) to make disclosures in its periodic filings and proxy +statements that falsely portrayed CTI’s options as having been granted at exercise prices equal to +the fair market value of CTI’s common stock on the date of the grant. According to the +Complaint, Sorin also misled CTI’s outside auditors in an attempt to hide the scheme. The +Complaint alleges that Sorin, and others, failed to file all required Commission Forms 3 and 4 to +disclose his option-related activity and also filed Forms 3 and 4 that contained false or misleading +statements with regard to the options’ expirations dates (based on backdated grant dates) and the +exercise prices. Beginning in 2000, the Complaint alleges that Sorin participated in a similar +backdating scheme at Ulticom, a publicly-traded company whose stock was majority-owned by +CTI, which resulted in Ulticom making materially false and misleading financial statements, and +materially false and misleading disclosures regarding option grants, in its filings with the +Commission. + 3 +IV. + + In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent Sorin’s Offer. + + Accordingly, it is hereby ORDERED, effective immediately, that: + + Sorin is suspended from appearing or practic ing before the Commission as an attorney. + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y + 4 \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2550.txt b/raw/aaer/2007/AAER-2550.txt new file mode 100644 index 0000000000000000000000000000000000000000..9540af306054e23db532a03026b6956153751ba4 --- /dev/null +++ b/raw/aaer/2007/AAER-2550.txt @@ -0,0 +1,1401 @@ + + + + + + + + + + + + + + + + SEC.gov | RenaissanceRe Holdings Ltd. + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/500511","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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RenaissanceRe Holdings Ltd. , 07 CV 865 (S.D.N.Y.) + + Reinsurer Settles Accounting Fraud Case Involving Sham Reinsurance Transaction + + + + Washington, D.C., February 6, 2007 - The Securities and Exchange Commission filed settled securities fraud charges in the United States District Court for the Southern District of New York against RenaissanceRe Holdings Ltd. (RenRe), a property catastrophe reinsurance company. In its complaint, the Commission alleges that RenRe created a sham reinsurance transaction that had no economic substance and no purpose other than to smooth and defer over $26 million of its earnings from 2001 to 2002 and 2003. In effect, the transaction enabled RenRe to create a "cookie jar" into which it put excess revenue in one good year, to be pulled out in a future year to increase income. + + In settling the Commission's charges, RenRe agreed to an injunction, to retain an independent consultant, and to pay a $15 million civil penalty, among other things. + + In September 2006, the Commission charged RenRe's former chairman and chief executive officer, James N. Stanard, RenRe's former controller, Martin J. Merritt, and a former senior vice president of RenRe's principal reinsurance subsidiary, Michael W. Cash. Those charges remain pending in federal court in Manhattan. + + According to the Commission's complaint, RenRe concocted a sham transaction to smooth its earnings. RenRe used two seemingly unrelated contracts that were, in fact, intertwined to conceal what was in reality simply a round trip of cash. In the first contract, RenRe purported to assign $50 million of receivables at a discount to Inter-Ocean Reinsurance Company, Ltd. in exchange for $30 million in cash, for a net transfer to Inter-Ocean of $20 million. RenRe recorded income of $30 million upon executing the assignment agreement. The remaining $20 million of its $50 million assignment became part of a "bank" or "cookie jar" that RenRe used in later periods to bolster income. + + The second contract was a purported reinsurance agreement with Inter-Ocean that was, in fact, a vehicle to refund to RenRe the $20 million transferred under the assignment agreement plus the purported insurance premium paid under the reinsurance agreement. This reinsurance agreement was also a sham. Not only was RenRe certain to meet the conditions for coverage; it also would receive back all of the money paid to Inter-Ocean under the agreements plus investment income earned on the money in the interim, less transactional fees and costs. + + RenRe accounted for the sham transaction as if it involved a real reinsurance contract that transferred risk from RenRe to Inter-Ocean when in fact, the complaint alleges, certain of RenRe's senior officers knew that this was not true. RenRe's former controller and former chief executive officer also misrepresented or omitted certain key facts about the transaction to RenRe's auditors. As a result of RenRe's accounting treatment for this transaction, RenRe materially understated income in 2001 and materially overstated income in 2002, at which time it made a "claim" under the "reinsurance" agreement. It then received as apparent reinsurance proceeds the funds it had paid to Inter-Ocean and that Inter-Ocean had held in a trust for RenRe's benefit. + + In a Feb. 22, 2005 press release, RenRe announced that it would restate its financial statements for the years ended Dec. 31, 2001, 2002 and 2003. On March 31, 2005, RenRe filed its Form 10-K for the year ended Dec. 31, 2004, which contained restated financial statements for those years. RenRe's former chief executive officer signed and certified the 2004 Form 10-K. However, both the press release and the Form 10-K attributed the restatement of the Inter-Ocean transaction to accounting "errors" due to "the timing of the recognition of Inter-Ocean reinsurance recoverables." These statements were misleading. In fact, the transaction contained no real reinsurance and the company's restated financial statements accounted for the transaction as if it had never occurred. In short, the entire transaction was a sham, and the company both failed to disclose that fact and misrepresented the reasons for the restatement. + + The Commission's complaint charges RenRe with securities fraud in violation of Section 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5(a), (b), and (c) of the Securities Exchange Act of 1934, and with violating the reporting, books-and-records, and internal controls provisions of Exchange Act Sections 13(a) and 13(b)(2) and Rules 12b-20, 13a-1, 13a-13, and 13b2-1. Without admitting or denying the allegations in the Commission's complaint, RenRe has consented to a judgment requiring it to pay a civil penalty of $15 million and nominal disgorgement of $1 and permanently enjoining it from future violations of the federal securities laws. RenRe has also consented to undertakings that, among other things, require it to retain an independent consultant to review the design and implementation of the prior review conducted by independent counsel and the additional procedures performed by the company's auditors and make recommendations concerning the adequacy of RenRe's internal controls, audit department, and compliance function. + + The corporate penalty in this case was negotiated before the Commission issued its statement Concerning Financial Penalties ( http://www.sec.gov/news/press/2006-4.htm ). The Commission has therefore elected not to apply that Statement to this corporate penalty. + + + + + SEC Complaint in this matter + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Patel et al. , Civil Action No. 1:07-CV-39 (D.N.H.) + + On February 9, 2007 the Securities and Exchange Commission filed a civil fraud action against ten former officers and employees of Enterasys Networks, Inc. According to the Commission's complaint, from March 2000 through December 2001, the former officers and employees directly participated in a company-wide scheme to fraudulently inflate revenues at Enterasys and its former parent company, Cabletron Systems, Inc. and thereby convince the market that Enterasys was a viable independent company with consistently strong revenue growth. The defendants named in the complaint are: Robert Barber, Hor Chong (David) Boey, Lawrence Collins, Robert Gagalis, Eric Jaeger, Bruce Kay, David Kirkpatrick, Piyush Patel, Jerry Shanahan, and Michael Skubisz. + + According to the Commission's complaint, filed in the U.S. District of New Hampshire, the defendants participated in improperly recognizing revenue from numerous sales transactions, many of which involved undisclosed side agreements in which the purchaser was granted full return or exchange rights, or payment for the product was contingent upon the purchaser's resale of the product or a future investment by Enterasys. The Complaint further alleges that the defendants misrepresented information to, or concealed information from, the company's outside auditor. + + Based on the foregoing, the Complaint alleges that the defendants violated or aided and abetted the violation of Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 13b2-1, and 13b2-2 thereunder. The Complaint also alleges that defendants Collins, Gagalis, Kay, Kirkpatrick, Patel, and Skubisz aided and abetted the violation of Section 13(b)(2)(B) of the Exchange Act. The Complaint seeks permanent injunctions, disgorgement and civil money penalties against each defendant, and officer and director bars against defendants Boey, Gagalis, Jaeger, Kay, Kirkpatrick, Patel, Shanahan, and Skubisz. + + Related Actions +In a related criminal case, U.S. v. Barber et al., Criminal No. 04-126 (D.N.H.), Barber, Boey, Gagalis and Kay were found guilty of multiple counts of securities fraud and other related charges. Shanahan was acquitted on one count, and a mistrial was declared on the remaining charges. + + ### + + + + + + + SEC Complaint in this matter + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Ryan Ashley Brant , United States District Court for the Southern District of New York, Civil Action No. 1:07-CV-1075 (DLC) (S.D.N.Y. February 14, 2007) + + SEC Settles Options Backdating Case Against Ryan Ashley Brant, Former Chief Executive Officer and Chairman of the Board of Take-Two Interactive Software, Inc.; Relief Includes Injunction, Officer-and-Director Bar and Over $6 Million in Civil Penalties, Disgorgement, and Prejudgment Interest + + + + The Securities and Exchange Commission ("Commission") today simultaneously filed and settled civil charges against Ryan Ashley Brant ("Brant"), formerly the Chief Executive Officer and Chairman of the Board of video and computer game publisher and distributor Take-Two Interactive Software, Inc. ("Take-Two"), alleging that during a seven year period, Brant enriched himself and others by granting undisclosed, "in the money" stock options to himself and to other Take-Two officers and employees. + + The Complaint alleges that from 1997 through September 2003, Brant, with the participation and knowledge of senior executives and others at Take-Two, looked back and picked grant dates for the Company's incentive stock options that coincided with dates of historically low annual and quarterly closing prices for Take-Two's common stock, resulting in grants of "in-the-money" options. Brant and others at Take-Two referred to this practice as "pick-a-date" option granting. According to the Complaint, Brant granted options to himself and others at Take-Two without complying with Take Two's stock option plans and, in virtually all instances, without the Board or a Committee thereof approving the grant dates or exercise prices. The Complaint alleges that at Brant's direction, Take-Two officers and employees prepared documents falsely indicating that the option grants had been made on earlier dates when Take-Two's stock price had closed lower. From 1997 to September 2003, Brant awarded himself ten backdated option grants, representing a total of approximately 2.1 million shares of Take Two common stock. Brant exercised all those options before resigning from Take Two on October 16, 2006. + + The Complaint alleges that because of the undisclosed backdating scheme, Take Two filed with the Commission quarterly and annual reports, proxy statements and registration statements that Brant knew, or was reckless in not knowing, contained materially false and misleading statements concerning the true grant dates and proper exercise prices of stock options, and which misled investors to believe that stock options were granted in accordance with the terms of the applicable stock option plans. According to the Complaint, Take-Two materially understated its compensation expenses and materially overstated its quarterly and annual pre-tax earnings and earnings per share in its financial statements. Take-Two has announced that it must restate historical financial results for multiple years in order to record additional non-cash charges for option-related compensation expenses. + + Without admitting or denying the allegations of the Commission's Complaint, Brant consented to the entry of an order: (1) permanently enjoining him from violating Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(b)(5), 14(a), and 16(a) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rules 10b-5, 13b2-1, 14a-9, and 16a-3, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20, 13a 1, and 13a 13; (2) permanently barring him from acting as an officer or director; and (3) requiring him to disgorge ill-gotten gains of $4,118,093 with $1,143,513 in prejudgment interest thereon, and to pay a $1,000,000 civil penalty. The settlement is subject to the approval of the United States District Court for the Southern District of New York. + + Brant previously settled with the Commission for his alleged role in a massive financial fraud at Take Two in 2000 and 2001. On June 9, 2005, the Commission filed and simultaneously settled civil charges against Take-Two, Brant and other members of senior management in connection with an alleged $60 million video game parking scheme. SEC v. Take-Two Interactive Software, Inc., et al., Civil Action No. 1:05 CV 5443 (DLC) (S.D.N.Y. 2005) (filed June 9, 2005), Litigation Release No. 19260. In that action, Brant was permanently enjoined from violating and/or aiding and abetting violations of the antifraud, reporting, record-keeping, and internal controls provisions of the federal securities laws; barred from serving as an officer or director of any public company for five years; and ordered to pay disgorgement of $2,490,408, prejudgment interest of approximately $613,000, and a civil penalty of $500,000. + + Separately, the New York County District Attorney's Office today announced that Brant has pled guilty to felony criminal charges of Falsifying Business Records in the First Degree and agreed to pay $1 million in lieu of fines and forfeiture, which will be distributed to state and local New York authorities. + + The Commission's investigation is continuing. + + + + + SEC Complaint in this matter + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Olesnyckyj + + + + + + + + + + + + Myron F. Olesnyckyj + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20004 / February 15, 2007 + + Accounting and Auditing Release No. 2558 / February 15, 2007 + + SEC v. Myron F. Olesnyckyj , United States District Court for the Southern District of New York, Civil Action No. 07 CV 1176 (HB) (S.D.N.Y. February 15, 2007) + + SEC Charges Former General Counsel of Monster Worldwide, Inc. for Role in Options Backdating Scheme + + + + The Securities and Exchange Commission ("Commission") today announced the filing of a civil action in federal district court in New York, New York against Myron F. Olesnyckyj, the former general counsel of Monster Worldwide, Inc. The Commission charged Olesnyckyj with securities fraud for participating in a multi-year scheme to secretly backdate stock options granted to thousands of Monster officers, directors and employees. + + The complaint alleges that, from 1997 through 2003, Olesnyckyj backdated stock options grants to coincide with the dates of low closing prices for the Company's common stock, resulting in grants of in-the-money options to numerous individuals. When making grants of options, certain officers and employees at Monster would select a low closing stock price at which they wanted to grant stock options. Olesnyckyj, or others acting at his direction, then prepared backdated documentation for Monster's Compensation Committee containing the grant date that reflected the low closing price for Monster's common stock. Olesnyckyj then caused Monster to misrepresent in its periodic filings and proxy statements that all stock options were granted at the fair market value of the stock on the date of the award, when that was simply not the case. In fact, by backdating the options, Monster granted undisclosed compensation to its employees, failed to recognize compensation expenses, and overstated its net income by $340 million from 1997 through 2005. Olesnyckyj, 45 and a resident of New Providence, New Jersey, personally profited by receiving backdated options. + + The complaint further alleges that Olesnyckyj misled Monster's outside auditors in an attempt to hide the backdating scheme by providing documentation to them that misrepresented the grant date of the stock option awards. + + The complaint charges Olesnyckyj with violations of the antifraud provisions of the federal securities laws and with violating or aiding and abetting the violation of reporting requirements. The Commission is seeking permanent injunctive relief, disgorgement of ill-gotten gains, civil monetary penalties, and an officer and director bar. + + The Commission acknowledges the assistance of the United States Attorney's Office for the Southern District of New York and the United States Postal Inspection Service, which conducted their own separate, parallel investigation resulting in distinct criminal charges. + + The Commission's investigation in this matter is continuing. + + + + + SEC Complaint in this matter + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2560.pdf b/raw/aaer/2007/AAER-2560.pdf new file mode 100644 index 0000000000000000000000000000000000000000..c0ea55ec87f98c8fc045b6883e34c199299a16e6 Binary files /dev/null and b/raw/aaer/2007/AAER-2560.pdf differ diff --git a/raw/aaer/2007/AAER-2560.txt b/raw/aaer/2007/AAER-2560.txt new file mode 100644 index 0000000000000000000000000000000000000000..06dd3309f2c4c58346ad091f6f28674cf77f30cf --- /dev/null +++ b/raw/aaer/2007/AAER-2560.txt @@ -0,0 +1,143 @@ + UNITED STATES OF AMERICA + before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55310 / February 16, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2560 / February 16, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12569 + + + +In the Matter of + +RICHARD A. CAUSEY, CPA, + +Respondent. +: +: +: +: +: +: +: +: +: +: + + +ORDER INSTITUTING +ADMINISTRATIVE PROCEEDINGS +PURSUANT TO RULE 102(e) OF THE +COMMISSION’S RULES OF +PRACTICE, MAKING FINDINGS, AND +IMPOSING REMEDIAL SANCTIONS + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate and in the +public interest that public administrative proceedings be, and hereby are, instituted against Richard +A. Causey (“Respondent” or “Causey”) pursuant to Rule 102(e)(3)(i) of the Commission’s Rules +of Practice.1 + +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 + +1 Rule 102(e)(3)(i) provides, in relevant part, that: + + The Commission, with due regard to the public interest and without preliminary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has +been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal securities laws or of the rules and regulations +thereunder. + 2 +herein, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Section III.3 below, which are admitted, Respondent +consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) +of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions +(“Order”), as set forth below. + +III. + + On the basis of this Order and Respondent’s Offer, the Co mmission finds that: + + 1. Causey, age 47, of The Woodlands, Te xas, joined Enron Corp. in 1991. In +1998, Causey became Chief Accounting Officer of Enron and retained that position until he left +Enron in 2002. At all relevant times, Causey was a certified public accountant licensed to practice +in the State of Texas. Causey signed Enron’s annual reports on Form 10-K and its quarterly reports +on Form 10-Q filed with the Commission. + + 2. Enron was, at all relevant times, an Oregon corporation with its principal +place of business in Houston, Texas. Until its bankruptcy filing in December 2001, Enron was the +seventh largest corporation in the United States based on reported revenue. In the previous ten +years, Enron had evolved from a regional natural gas provider to a commodity trader of natural gas, +electricity, and other physical commodities with retail operations in energy and other products. At +all relevant times, the common stock of Enron was registered with the Commission pursuant to +Section 12(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and traded on the New +York Stock Exchange. + + 3. On January 22, 2004, the Commission filed a complaint against Causey in +Securities and Exchange Commission v. Richard A. Causey, Civil Action No. H-04-0284 (S.D. +Tex.). The Commission filed its second amended complaint against Causey on July 8, 2004. On +February 8, 2007, the court entered its Final Judgment against Causey, which, among other things, +permanently enjoined Causey, by consent, from violating, and aiding and abetting the violation of, +Sections 10(b) and 13(b)(5) of the Exchange Act and Exchange Act Rules 10b-5, 13b2-1 and +13b2-2, and from aiding and abetting the violation of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) +of the Exchange Act and Exchange Act Rules 12b-20, 13a-1 and 13a-13. The court also prohibited +Causey from acting as an officer or director of any issuer of securities that has a class of securities +registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to +Section 15(d) of such Act. + + 4. The Commission’s comp laint alleged that Causey, along with others, +engaged in a wide-ranging scheme to manipulate Enron’s publicly-reported earnings through a +variety of devices designed to produce materially false and misleading financial results. As alleged, +Causey and others fraudulently manipulated Enron’s merchant asset portfolio; improperly used +“off-balance-sheet” special purpose entities (SPEs); manipulated Enron’s “business segment +reporting” to conceal losses at Enron’s retail energy business, Enron Energy Services (EES); +manipulated expenses to conceal losses at Enron’s broadband unit, Enron Broadband Services +(EBS); and manipulated reserves in Enron’s wholesale energy trading business to conceal earnings + 3 +volatility and losses. The complaint also alleged that Causey and others made false and misleading +statements concerning Enron’s financial results and the performance of its businesses, and that these +misrepresentations were reflected in Enron’s public filings with the Commission. + + 5. On December 28, 2005 , in a parallel criminal proceeding brought in the +United States District Court for the Southern District of Texas, captioned United States v. Richard +A. Causey, CR-H-04-25(S-2), Causey pleaded guilty to one count of violating 15 U.S.C. §§ 78j(b) +and 78ff, a felony that carries a ten-year maximum sentence, by knowingly and willfully conspiring +to commit securities fraud. Under the plea agreement, Causey will forfeit $1.25 million, relinquish +any claim he may have to deferred compensation in the Enron bankruptcy,2 and cooperate with the +ongoing investigation being conducted by the Commission and Task Force.3 + +IV. + + In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent Causey’s Offer. + + Accordingly, it is hereby ORDERED, effective immediately, that Causey is suspended +from appearing or practicing before the Commission as an accountant. + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y + +2 In return for Causey relinquishing any claim he may have to deferred compensation, the Task +Force will credit him with giving up $250,000. This number approximates the value of Causey’s +claim to deferred compensation from his work at Enron. Thus, with Causey’s forfeiture of $1.25 +million in other assets, the Task Force is crediting Causey with giving up a total of $1.5 million. + +3 On November 15, 2006, Causey was sentenced to 66 months in prison. Pursuant to the plea +agreement, Causey’s potential sentence ranged from 60-84 months, subject to the Court’s +ultimate discretion. \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2563.txt b/raw/aaer/2007/AAER-2563.txt new file mode 100644 index 0000000000000000000000000000000000000000..180b264976d7e420001051edefe20a5e5bc42fe7 --- /dev/null +++ b/raw/aaer/2007/AAER-2563.txt @@ -0,0 +1,1378 @@ + + + + + + + + + + + + + + + + SEC.gov | Bennett Environmental, Inc., John A. Bennett, Robert P.G. Griffiths and Richard L. 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Bennett, Robert P.G. Griffiths and Richard L. Stern + + + + + + + + + + + + Bennett Environmental, Inc., John A. Bennett, Robert P.G. Griffiths and Richard L. Stern + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20009 / February 21, 2007 + + Accounting and Auditing Enforcement Release No. 2563 / February 21, 2007 + + SEC v. Bennett Environmental, Inc., John A. Bennett, Robert P.G. Griffiths and Richard L. Stern , Civil Action No. 06-Civ-14294 (S.D.N.Y.) + + SEC Settles with Former CFO Richard Stern for his Role in Bennett Environmental, Inc.'s False and Misleading Disclosures + + + + On February 9, 2007, the Securities and Exchange Commission settled fraud charges against Richard L. Stern, the former CFO of Bennett Environmental, Inc. (BEI), for his role in the repeated dissemination of false and misleading information about a Superfund soil remediation contract awarded to BEI in 2003. + + The Commission's complaint, filed December 8, 2006, alleges that between June 2003 and April 2004, Stern, former CEO John Bennett and former VP of North American Sales Robert Griffiths together caused BEI to issue press releases and make SEC filings that misrepresented and exaggerated a contract that it extolled as "the largest in the Company's history" with a value of "$200 million [Canadian]." In reality, the contract had a guaranteed value of less than $250,000, was later cancelled by the Army Corps of Engineers, reinstated on a limited basis, and then re-solicited under materially different terms. The complaint alleges that, during the relevant time period, Stern and the other defendants failed to inform the public about material changes to the contract, failed to correct prior false statements, and continued to misrepresent that the contract was in full force and effect and worth C$200 million. The true facts did not come to light until July 2004, when a new CEO took over BEI and corrected the prior false statements. + + Without admitting or denying the Commission's allegations , Stern has consented to the entry of a final judgment permanently enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5 and 13a-14 thereunder, and aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-16 thereunder. Stern also agreed to pay a $75,000 civil penalty and to be barred from acting as an officer or director of a public company for five years. + + The SEC staff acknowledges the assistance of the Ontario Securities Commission, the Environmental Protection Agency's Office of the Inspector General and the Army Corps of Engineers in the investigation of the facts leading to this action. + + + + + + SEC Complaint in this matter +--> + + +  + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Davis + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/500661","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Kopsky and Ronald W. Davis + + + + + + + + + + + + Matthew E. Kopsky and Ronald W. Davis + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20019 / February 26, 2007 + + Accounting and Auditing Enforcement Release No. 2565 / February 26, 2007 + + SEC v. Matthew E. Kopsky and Ronald W. Davis , United States District Court for the Eastern District of Missouri, Civil Action No. 4:07-cv-00379 (E.D. Mo. February 26, 2007) + + SEC Charges Former Officer of Engineered Support Systems, Inc. and His Broker with Insider Trading + + + + On February 26, 2007, the Securities and Exchange Commission filed civil injunctive actions against Ronald W. Davis, the former President of Business Development of Engineered Support Systems, Inc., and his friend and former broker, Matthew E. Kopsky, for insider trading in the securities of Engineered Support Systems. According to the complaint, in each of its first three quarterly earnings announcements of 2003, the Engineered Support Systems announced earnings that beat analysts' estimates and raised its earnings guidance above analysts' estimates, resulting in more than a 10% increase in the stock price on the day of each announcement. The complaint alleges that Davis tipped Kopsky before each announcement. Kopsky purchased Engineered Support securities for himself, family members, and/or his clients. According to the complaint, Kopsky earned an aggregate profit of $276,259, including $107,062 for himself and his wife, and $169,197 for his clients. + + The complaint alleges that Davis received material, nonpublic information about the company's earnings announcements before its public release and provided this information to Kopsky. According to the complaint, Davis provided Kopsky with material, nonpublic information in an email shortly before the company's first quarter earnings announcement in 2003. Furthermore, the complaint alleges that in each quarter Kopsky purchased Engineered Support securities shortly after phone calls from Davis. In the third quarter of 2003, when the company most significantly outperformed market expectations, Kopsky purchased Engineered Support call options for the first time and invested more than 90% of his IRA in company stock, according to the complaint. The complaint alleges that by buying options just prior to Engineered Support's third quarter announcement, Kopsky and his wife earned a return of 132% on their investment. + + The Commission's complaint alleges that Davis and Kopsky violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission is seeking permanent injunctions, disgorgement of ill-gotten gains, including prejudgment interest, and civil penalties from each defendant. + + + + + SEC Complaint in this matter + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Charles Michael Martin , Case No. 1:07CV0434 (D.D.C.) (filed March 6, 2007) + + SEC Sues Former Senior Monsanto Manager Charles Martin for Authorizing a Bribe of $50,000 + + Martin Agrees to Pay a Penalty of $30,000 + + On March 6, 2007, the Commission filed a settled complaint against Charles Martin ("Martin"), the former Government Affairs Director for Asia for Monsanto Company ("Monsanto"), a global producer of technology-based solutions and agricultural products. In its complaint, the Commission alleged that in 2002, Martin authorized and directed an Indonesian consulting firm ("Consulting Firm") to pay a bribe of $50,000 to a senior Indonesian Ministry of Environment official ("the Senior Environment Official"). The complaint alleged that the illegal payment was made to influence the Senior Environment Official to repeal language in a decree that was unfavorable to Monsanto's business in Indonesia. + + The complaint further alleged that to generate the funds to make the illegal $50,000 payment and to conceal the unlawful activity, Martin directed the Consulting Firm to create a set of invoices to falsely bill Monsanto in an amount sufficient to cover the illegal payment. Martin subsequently approved the false invoices for payment by Monsanto, and took steps to ensure that Monsanto paid the false invoices, thereby causing Monsanto's books and records to be falsified and circumventing Monsanto's system of internal accounting controls. Even though Martin's scheme was carried out pursuant to his instructions and the $50,000 payment was made to the Senior Environment Official, the unfavorable decree remained in place. + + Without admitting or denying the Commission's allegations, Martin consented to the entry of a final judgment permanently enjoining him from violating and/or aiding and abetting violations of the anti-bribery, books and records, and internal control provisions of the Foreign Corrupt Practices Act (Sections 30A, 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Securities Exchange Act of 1934 and Exchange Act Rule 13b2-1). Martin also agreed to pay a civil penalty of $30,000. + + Based, in part, on these allegations, the Commission previously filed a settled enforcement action and instituted settled administrative proceedings against Monsanto. [SEC v. Monsanto Co., Case No. 1:05CV00014 (D.D.C. January 6, 2005); Monsanto Company, No. 3-11789, Exchange Act Rel. No. 19023 (January 6, 2005)]. + The Commission acknowledges the assistance of the United States Department of Justice. + + + + + SEC Complaint in this matter + + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2573.txt b/raw/aaer/2007/AAER-2573.txt new file mode 100644 index 0000000000000000000000000000000000000000..44e72ef3abcdeda6ae25b56df19977337f2910d4 --- /dev/null +++ b/raw/aaer/2007/AAER-2573.txt @@ -0,0 +1,400 @@ + + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55416 / March 7, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2573 / March 7, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12585 +In the Matter of +NORTHWESTERN +CORPORATION, +Respondent. +ORDER INSTITUTING CEASE-AND- +DESIST PROCEEDINGS, MAKING +FINDINGS AND IMPOSING A CEASE- +AND-DESIST ORDER PURSUANT TO +SECTION 21C OF THE SECURITIES +EXCHANGE ACT OF 1934 +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate that public +cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the +Securities Exchange Act of 1934 (“Exchange Act”) against NorthWestern Corporation +(“NorthWestern” 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, except as to the Commission’s jurisdiction over it and the subject matter of these +proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease- +and-Desist Proceedings, Making Findings and Imposing a Cease-and-Desist Order Pursuant to +Section 21C of the Securities Exchange Act of 1934 (“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds1 that: +Summary +During the first three quarters of 2002, NorthWestern filed quarterly and current reports +with the Commission that materially misstated NorthWestern’s financial position and +misrepresented or did not disclose required information about its non-utility businesses, Expanets, +Inc. (“Expanets”) and Blue Dot Services, Inc. (“Blue Dot”). In its filings, after the effect of taxes, +NorthWestern overstated its income from continuing operations for the first three quarters of 2002 +by approximately 176%, 618%, and 109%, respectively, due to the company’s improper accounting +for accounts receivable, adjustments to customers’ bills, and allocation of losses to minority +interests. NorthWestern also misrepresented or did not disclose, among other things, the effects of +significant problems with Expanets’ new information technology system, the material impact of +Expanets’ reserve reductions and its receipt of non-compete payments on Expanets’ income, large +intercompany advances NorthWestern made to support Expanets and Blue Dot, and the timing of +anticipated payments from the sale of certain utility assets. Through its financial misstatements, +misrepresentations, and omissions, NorthWestern obscured the continuing poor performance of its +subsidiaries at a time when it was publicly relying on these subsidiaries’ operations to strengthen its +financial condition. +Respondent +1. NorthWestern, a Delaware corporation with its principal executive offices in Sioux +Falls, South Dakota, operates a regulated utility business in South Dakota, Nebraska, and Montana. +During the period of conduct discussed herein, NorthWestern consolidated the financial results of +two non-utility entities, Expanets and Blue Dot. NorthWestern’s common stock was registered +with the Commission under Section 12(b) of the Exchange Act and traded on the New York Stock +Exchange until it was delisted shortly before NorthWestern declared bankruptcy in September +2003. In November 2004, NorthWestern emerged from bankruptcy. Its common stock is now +registered with the Commission pursuant to Section 12(b) of the Exchange Act and trades on the +NASDAQ Global Select Market. +Other Relevant Entities +2. Expanets, formerly headquartered in Englewood, Colorado, was formed by +NorthWestern in 1997 and provided networked telecommunications equipment and services to +medium-sized businesses nationwide. NorthWestern wrote off substantially all of its investment in +Expanets during the fourth quarter of 2002 as disclosed in the company’s 2002 Form 10-K and +announced its intention to sell Expanets in April 2003. In the second quarter of 2003, Expanets’ +1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding +on any other person or entity in this or any other proceeding. +2 + +operations were discontinued, and in May 2004, Expanets (n/k/a Netexit) filed for Chapter 11 +bankruptcy protection. Proceeds from the sale of Expanets’ assets were distributed in bankruptcy. +3. Blue Dot, formerly headquartered in Sunrise, Florida, and Sioux Falls, South +Dakota, was formed by NorthWestern in 1997 and provided heating, ventilation and air +conditioning (“HVAC”) services nationwide. NorthWestern wrote off substantially all of its +investment in Blue Dot during the fourth quarter of 2002 as disclosed in the company’s 2002 Form +10-K and announced its intention to sell Blue Dot in April 2003. In the second quarter of 2003, +Blue Dot’s operations were discontinued, and NorthWestern thereafter sold or closed each of Blue +Dot’s HVAC businesses. +Background +4. For more than seventy years, NorthWestern operated a public utility business, +providing electricity and natural gas to customers in South Dakota and Nebraska. In the late +1990s, NorthWestern formed Expanets and Blue Dot (the “non-utility businesses”) to diversify into +the telecommunications and HVAC sectors. NorthWestern’s business plan was to acquire small +telecommunications and HVAC companies and make them more profitable through central +management, national branding and other economies of scale. +5. From 1998 through the end of 2001, Expanets acquired twenty-six small +telecommunications companies and a sales division of a large competitor. From 1997 through the +end of 2001, Blue Dot acquired over ninety different HVAC and plumbing companies. By the end +of 2001, NorthWestern had invested hundreds of millions of dollars in Expanets and Blue Dot to +make these acquisitions and build those subsidiaries’ central management. However, Expanets and +Blue Dot incurred losses during most years and posted only small profits in other years. Because +of their performance, Expanets and Blue Dot required investments of substantial amounts of cash +by NorthWestern. +6. In February 2002, NorthWestern effectively quadrupled its utility customer base by +acquiring Montana Power Company (“Montana Power”) for approximately $1.1 billion. +NorthWestern originally financed its acquisition of Montana Power by utilizing, among other +things, a $720 million acquisition loan. In March 2002, as part of a debt offering to retire the +acquisition loan, NorthWestern issued $720 million in the form of senior notes. +7. The magnitude of NorthWestern’s increased debt as a result of the Montana Power +acquisition threatened the company’s credit ratings. As a result, NorthWestern announced its +intention to conduct an equity offering during 2002 to raise approximately $200 million to pay +down its debt and improve its debt/equity ratios. +8. NorthWestern recognized that improvement in the performance of both Expanets +and Blue Dot was critical to its planned equity offering. NorthWestern made public statements that +both Expanets and Blue Dot would achieve 2002 targeted earnings and begin providing cash to the +NorthWestern consolidated entity in 2002. +3 + +9. NorthWestern conducted its equity offering during the third quarter of 2002, and +raised approximately $87 million. Also during the third quarter of 2002, NorthWestern completed +its registration and exchange of new notes for $720 million of debt it incurred to purchase Montana +Power. +10. In December 2002, NorthWestern disclosed that significant operational problems at +Expanets and Blue Dot would materially impact the company’s consolidated year-end financial +results. In April 2003, NorthWestern filed its 2002 Form 10-K and simultaneously restated each of +its Forms 10-Q for the first three quarters of 2002. NorthWestern’s restated Forms 10-Q corrected +material misstatements of previously reported financial results relating to Expanets and Blue Dot, +and disclosed various operational difficulties these subsidiaries experienced throughout 2002. +NorthWestern’s 2002 Form 10-K further disclosed that the company did not anticipate recovering +its past investments of hundreds of millions of dollars in Expanets and Blue Dot, and that neither +entity would generate cash flows in sufficient amounts to provide meaningful contributions to +service NorthWestern’s debt load. NorthWestern’s liquidity situation continued to deteriorate until +the company filed for bankruptcy in September 2003. NorthWestern stock, which had traded for +more than $20 per share in early 2002, was trading for less than a dollar by the time NorthWestern +filed bankruptcy. +Problems Relating to Expanets’ Computer System +Functionality of the EXPERT System +11. During 2000 and 2001, Expanets developed an information technology system, called +the “EXPERT” system, to serve as a platform for virtually all of its operations, including sales, +inventory, project management, billing, collections and financial statement preparation. Because +of its planned scope and impact across operations, the functionality of the EXPERT system was +critical to Expanets. +12. However, following its implementation in November 2001, the EXPERT system was +unable to perform many of the basic tasks for which it had been designed. For example, for +approximately a month after it was implemented, EXPERT could not generate any customer bills. +From January through May 2002, many customer bills EXPERT generated were incomplete and +inaccurate. Until approximately September 2002, the EXPERT system also could not properly +apply cash collected to customer accounts or track the aging of accounts receivable balances. +These problems materially affected Expanets’ results from operations throughout 2002. +13. NorthWestern’s Forms 10-Q for the first and second quarters of 2002 and associated +press releases attached to Forms 8-K mischaracterized EXPERT’s billing activities as “fully +operational” or “operational” and failed to adequately disclose the magnitude of the system’s +problems and the material impact of those problems on Expanets’ operations. In its Form 10-Q for +the third quarter of 2002, NorthWestern disclosed that EXPERT had encountered some problems, +particularly as to billings and collections, but did not disclose the extent to which these system +problems had impacted Expanets’ operations. NorthWestern did not fully and adequately disclose +the severity of the problems with the EXPERT system and the impact of those problems on +4 + +Expanets’ operations until April 2003 when it filed its 2002 Form 10-K and restated its Forms 10- +Q for the first three quarters of 2002. +Aged Accounts Receivable +14. In anticipation that some customer accounts might prove uncollectible, Expanets +maintained a “bad debt” reserve, which had the effect of reducing Expanets’ operating income. +Prior to its implementation of EXPERT, Expanets calculated its bad debt reserve based on the age +of uncollected receivables outstanding in a given period. However, during the first and second +quarters of 2002, the EXPERT system could not properly apply cash collected from customers to +their accounts or accurately track the aging of Expanets’ accounts receivable. As a result, rather +than considering the age of all of its receivables, Expanets estimated its bad debt reserve based on +the percentage of revenue that had typically resulted in uncollectible accounts receivable. +15. Expanets’ bad debt reserve in 2002 was inadequate. As an initial matter, Expanets +did not make appropriate adjustments for known aged receivables that pre-dated implementation of +the EXPERT system. +16. Expanets also failed to increase its bad debt reserve despite the markedly increased +difficulties with collections that resulted from the EXPERT system’s problems. For example, +since EXPERT could not apply cash collected to the proper accounts, Expanets could not +determine from which customers to seek payment, causing uncollected receivables to age further. +17. Beginning in the third quarter of 2002, for the first time, the EXPERT system was able +to generate accurate accounts receivable aging reports. These reports demonstrated that Expanets’ +uncollectible accounts receivable exceeded its existing bad debt reserve by tens of millions of +dollars. Despite such data, Expanets did not increase its bad debt reserve or directly write off +uncollectible accounts receivable. +18. In its first and second quarter Forms 10-Q, NorthWestern did not disclose +information indicating that a loss as a result of its uncollectible accounts receivable was probable +or reasonably possible. In its third quarter Form 10-Q, NorthWestern disclosed that the EXPERT +system’s problems might lead to an increase in Expanets’ bad debt reserve. However, this +disclosure was inadequate since NorthWestern knew at that time that Expanets’ bad debt reserve +was materially insufficient. +19. In December 2002, NorthWestern announced that it anticipated that Expanets would +take substantial charges in the fourth quarter relating to Expanets’ uncollectible accounts +receivable. In April 2003, NorthWestern restated its Forms 10-Q for the first three quarters of +2002 and increased Expanets’ bad debt reserve for each of these periods by approximately $5.2 +million, $5.1 million, and $6.3 million, respectively. +20. As a result of its improper accounting for uncollectible accounts receivable, +NorthWestern overstated its income from continuing operations by approximately 16%, 19%, and +39% for the first three quarters of 2002, respectively, as reported in its Forms 10-Q and press +5 + +releases attached to Forms 8-K. Moreover, in its segment reporting for Expanets, NorthWestern +understated Expanets’ operating loss by approximately 66% for the first quarter of 2002, and +overstated Expanets’ operating income by approximately 86% and 270%, respectively, for the +second and third quarters of 2002. +Adjustments to Customer Bills +21. As a result of the inaccurate customer bills generated by the EXPERT system, +Expanets issued partial credits to affected customers. Expanets recorded these credits as “billing +adjustments,” which reduced both its revenue and income in the current period. Since Expanets +credited customer accounts in periods after it initially recognized revenue from a transaction, +Expanets maintained a “billing adjustment reserve” for anticipated credits to customer accounts. +Expanets calculated its billing adjustment reserve based on the revenue it billed, its actual billing +adjustments during the reporting period, and its evaluation of the aggregate accuracy of its +customer bills. +22. Because EXPERT generated a significant number of inaccurate and incomplete +customer bills in the first quarter of 2002, Expanets’ billing adjustments in the first quarter of 2002 +surpassed projected levels of approximately $2 million per month and reached more than $3 +million for March 2002. During the first quarter of 2002, Expanets also internally forecasted that +EXPERT’s billing accuracy problems would continue for several months. Still, Expanets +increased its billing adjustment reserve by a net of only approximately $1.5 million in the first +quarter of 2002. +23. As EXPERT billings problems persisted during the second quarter of 2002, +Expanets’ billing adjustments significantly exceeded originally-projected levels and reached +approximately $6 million for the month of June 2002. Expanets estimated that its billing +adjustments would be $13 million higher than it had originally forecasted for the remainder of the +year. However, Expanets did not increase its billing adjustment reserve to comport with these +internal forecasts. Instead, Expanets reduced its billing adjustment reserve by $2.3 million during +the second quarter, thereby increasing its operating income by the same amount. +24. For the third quarter of 2002, Expanets’ billing adjustments totaled more than $22 +million, which again significantly exceeded its original and revised projections. Expanets further +estimated that, due to a planned correction of a certain category of customer bills, its billing +adjustments for the fourth quarter would exceed its revised estimates by an additional $3.4 million. +However, Expanets again did not increase its billing adjustment reserve. Instead, it reduced this +reserve by $4 million during the third quarter, which increased Expanets’ operating income by the +same amount. +25. In December 2002, NorthWestern announced that it anticipated that Expanets would +take substantial charges in the fourth quarter relating to Expanets’ billing adjustments. In its April +2003 restatements for the first three quarters of 2002, NorthWestern acknowledged that it had +understated its billing adjustment reserve in each of these quarters, and as a result, the company +6 + +reduced reported revenues and income by approximately $18.3 million, $10.1 million, and $5.4 +million, respectively. +26. As a result of its improper accounting for billing adjustments, NorthWestern +overstated its income from continuing operations by approximately 98%, 46%, and 31% for the +first three quarters of 2002, respectively, as reported in its Forms 10-Q and press releases attached +to Forms 8-K. In its segment reporting for Expanets, NorthWestern understated Expanets’ +operating loss by approximately 87% for the first quarter of 2002, and overstated Expanets’ +operating income by approximately 1094% and 164%, respectively, for the second and third +quarters of 2002. NorthWestern also did not disclose in any of its filings for the first three quarters +of 2002 that losses resulting from billing adjustments were probable or reasonably possible. +The Quality of Expanets’ Income +Reserve Reductions +27. During the first three quarters of 2002, Expanets reduced amounts it had recorded in +at least fourteen of the reserve accounts it maintained on its balance sheet, including the billing +adjustments reserve account discussed above. These reductions materially increased Expanets’ +and NorthWestern’s income. +28. In the first quarter of 2002, $2.6 million of Expanets’ income was derived from +reserve reductions. This amount reduced by approximately 50% Expanets’ reported segment +operating loss of approximately $2.7 million and represented approximately 7% of NorthWestern’s +reported income from continuing operations for that quarter. +29. In the second quarter of 2002, $8.8 million of Expanets’ income was derived from +reserve reductions. This amount represented approximately 80% of Expanets’ reported segment +operating income of $11 million and approximately 27% of NorthWestern’s income from +continuing operations for that quarter. +30. In the third quarter of 2002, $27 million of Expanets’ income was derived from +reserve reductions. With this income, Expanets was able to report $8.7 million of operating +income rather than a substantial operating loss. In addition, with this income, NorthWestern was +able to report $14.6 million of income from continuing operations for that quarter rather than an +operating loss. +31. NorthWestern’s Forms 10-Q for the first three quarters of 2002 did not disclose the +material impact that these reserve reductions had on the reported results of operations of +Expanets and NorthWestern during these periods. NorthWestern did not disclose the material +impact of these reserve reductions until April 2003 when it restated its Forms 10-Q for the first +three quarters of 2002. +7 + +Unusual Transactions +32. In conjunction with Expanets’ acquisition of certain assets of a competitor, Expanets +agreed that, in exchange for payments from the competitor, Expanets would not solicit specific +business of the competitor’s customers. Expanets’ competitor was obligated to make these “non- +compete” type of payments to Expanets until March 2005. These payments were not characteristic +of Expanets’ regular operations and therefore represented unusual transactions. +33. In the first quarter of 2002, NorthWestern reported in its segment disclosures that +Expanets had an operating loss of approximately $2.7 million. Approximately $9.3 million of +Expanets’ income came from the non-compete payments. The $9.3 million also represented +approximately 25% of NorthWestern’s consolidated income from continuing operations for the +quarter. +34. In the second quarter of 2002, NorthWestern reported in its segment disclosures that +Expanets had operating income of approximately $11 million. Approximately $10 million of +Expanets’ income came from the non-compete payments. The $10 million also represented +approximately 31% of NorthWestern’s consolidated income from continuing operations for the +quarter. +35. In the third quarter of 2002, NorthWestern reported in its segment disclosures that +Expanets had operating income of approximately $8.7 million. Approximately $15.3 million of +Expanets’ income came from the non-compete payments. The $15.3 million also represented +approximately 68% of NorthWestern’s consolidated income from continuing operations for the +quarter. +36. NorthWestern’s Forms 10-Q for the first three quarters of 2002 did not disclose +Expanets’ receipt of these unusual non-compete payments and their material effects on Expanets’ +and NorthWestern’s income. NorthWestern did not disclose the existence of these non-compete +payments or their effect until it filed its 2002 Form 10-K and restated its 2002 Forms 10-Q in April +2003. +NorthWestern’s Intercompany Advances to Expanets and Blue Dot +37. EXPERT’s inability to generate any customer bills in late 2001 and early 2002 and +other billing problems that followed caused Expanets’ cash flow from operations during the first +quarter of 2002 to be a deficit of approximately $68.7 million. As a result, NorthWestern provided +Expanets with significant intercompany advances during the first quarter of 2002 to enable +Expanets to pay operating and other expenses, including a scheduled amount on a third-party credit +facility. By the end of the first quarter of 2002, NorthWestern’s intercompany advances to +Expanets totaled $63.3 million. +38. During the second quarter of 2002, EXPERT’s continuing billing and collections +problems caused Expanets’ cash collections to lag significantly behind expected levels. +NorthWestern therefore provided Expanets with additional intercompany advances of +8 + +approximately $50 million to help Expanets pay operating expenses and another scheduled amount +on a third-party credit facility. By the end of the second quarter, NorthWestern’s intercompany +advances to Expanets totaled $113.4 million. +39. Similarly, during the first quarter of 2002, NorthWestern provided Blue Dot with +approximately $21 million in intercompany advances so that Blue Dot could pay off a large credit +facility and operating expenses when due. NorthWestern’s outstanding intercompany advances to +Blue Dot totaled approximately $37.1 million at the end of the first quarter of 2002. +40. In the second quarter of 2002, Blue Dot paid back some of the cash advanced by +NorthWestern with proceeds from a one-time sale and leaseback transaction. Nevertheless, +NorthWestern’s outstanding intercompany advances to Blue Dot still totaled approximately $22.8 +million at the end of that quarter. +41. NorthWestern’s intercompany advances to Expanets and Blue Dot demonstrated that +these businesses were continuing to require further investments from the parent company, rather +than providing cash to the consolidated entity. NorthWestern’s need to advance funds to Expanets +and Blue Dot was information that was necessary to understand NorthWestern’s financial +condition and was reasonably likely to impact NorthWestern’s liquidity. +42. NorthWestern’s Form 10-Q for the first quarter of 2002 did not disclose +NorthWestern’s intercompany advances to Expanets or Blue Dot, or the significance of those +advances. NorthWestern disclosed in its Form 10-Q for the second quarter of 2002 that it made +intercompany advances to Expanets. However, NorthWestern still did not disclose its +intercompany advances to Blue Dot or any information about the significance of the intercompany +advances to either subsidiary. NorthWestern did not disclose the existence and amount of its +intercompany advances until September 2002. +Allocation of Losses to Blue Dot Minority Interests +43. When Blue Dot acquired other businesses, it paid the former owners in part with Blue +Dot common stock. As a result of these transactions, the former owners held minority interests in +Blue Dot. NorthWestern allocated a portion of Blue Dot’s losses to these minority interests, which +had the effect of increasing NorthWestern’s consolidated income from continuing operations. This +accounting treatment was proper only to the extent that the losses applicable to the Blue Dot +minority interest did not exceed the minority interest in the equity capital of Blue Dot. +44. Before it filed its financial statements for the second quarter of 2002, NorthWestern +received a third-party appraisal of Blue Dot for the purpose of assessing Blue Dot’s enterprise +value. Based on the total value of the Blue Dot entity as reflected in the appraisal, Blue Dot’s +common stock was worthless. +45. Despite this information, in its financial statements for the second quarter of 2002, +NorthWestern allocated $8.1 million of Blue Dot’s losses to minority interests based on stock +issued for acquisitions Blue Dot made that quarter. In addition, NorthWestern failed to disclose in +9 + +its second quarter Form 10-Q the material effects of the decrease in value of Blue Dot common +stock, or any uncertainties about NorthWestern’s ability to allocate losses to Blue Dot minority +interests. +46. Because of its improper allocation of losses to minority interests, NorthWestern +reported income from continuing operations of approximately $20.9 million rather than $12.8 +million, an overstatement of approximately 63%, in its Form 10-Q for the second quarter of 2002 +and a press release attached to a Form 8-K. NorthWestern reversed its allocation of losses to Blue +Dot’s minority interests when it restated its second quarter 2002 Form 10-Q in April 2003. +The Colstrip Utility Asset Sale +47. In February 2002, when NorthWestern purchased Montana Power, NorthWestern +became the successor-in-interest to a contract for the sale of certain assets known as the “Colstrip” +transmission assets (“Colstrip assets”). The contract called for a payment of approximately $97 +million to NorthWestern upon the satisfaction of certain conditions. During the second quarter of +2002, NorthWestern announced that it expected to collect the proceeds from the sale of the Colstrip +assets by June or July 2002. +48. Throughout 2002, the sale of the Colstrip assets was significant to NorthWestern +because it would have generated significant cash for the company and enhanced its liquidity +position. Accordingly, analysts and rating agencies tracked the status of the sale. +49. Between May and July 2002, the other party to the Colstrip assets sale contract +repeatedly informed NorthWestern that it would not close the sale until the parties were able to +resolve other claims. On August 5, 2002, NorthWestern filed but did not serve a complaint against +this party in a Montana State court. +50. NorthWestern’s Form 10-Q for the second quarter of 2002 did not disclose the +Colstrip asset sale dispute and its potential impact on NorthWestern’s financial condition, +including its impact on NorthWestern’s liquidity. On September 4, 2002, NorthWestern served its +complaint on the other party to the Colstrip sale and subsequently disclosed the existence of its +lawsuit in its third quarter Form 10-Q. In May 2005, NorthWestern settled the lawsuit by agreeing +to retain the Colstrip assets in exchange for, among other things, a $9 million payment from the +other party. +Violations +51. Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-11, and +13a-13 require issuers to make and keep accurate books, records, and accounts, to file quarterly +and current reports with the Commission, and to keep reported information current and not +misleading. As a result of the conduct described above, NorthWestern violated Sections 13(a) and +13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-11, and 13a-13 thereunder. +10 + +52. Section 13(b)(2)(B) of the Exchange Act requires issuers to devise and maintain a +system of internal accounting controls sufficient to provide reasonable assurances that transactions +are recorded as necessary to permit preparation of financial statements in accordance with +generally accepted accounting principles. As a result of the conduct described above, +NorthWestern violated Section 13(b)(2)(B) of the Exchange Act. +IV. +In determining to accept the Offer, the Commission considered remedial acts +promptly undertaken by Respondent and cooperation afforded the Commission staff. +V. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondent NorthWestern’s Offer. +Accordingly, it is hereby ORDERED that Respondent 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-11, and 13a-13 thereunder. + By the Commission. + N ancy M. Morris + S ecretary +11 diff --git a/raw/aaer/2007/AAER-2574.pdf b/raw/aaer/2007/AAER-2574.pdf new file mode 100644 index 0000000000000000000000000000000000000000..c22a9cda38aef91c5b71f7f483bf90d8bc4ee4da Binary files /dev/null and b/raw/aaer/2007/AAER-2574.pdf differ diff --git a/raw/aaer/2007/AAER-2574.txt b/raw/aaer/2007/AAER-2574.txt new file mode 100644 index 0000000000000000000000000000000000000000..7c78344a416931c6df9eee9c408be6137fcc3eb6 --- /dev/null +++ b/raw/aaer/2007/AAER-2574.txt @@ -0,0 +1,94 @@ + UNITED STATES OF AMERICA + before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55432 / March 9, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2574 / March 9, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12587 +: +: +: +In the Matter of : ORDER INSTITUTING ADMINISTRATIVE +: PROCEEDINGS PURSUANT TO RULE +STEVEN J. : 102(e) OF THE COMMISSION’S RULES OF +LANDMANN : PRACTICE, MAKING FINDINGS, AND +: IMPOSING REMEDIAL SANCTIONS +Respondent. : +: +____________________________________ : +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate and in the +public interest that public administrative proceedings be, and hereby are, instituted against Steven +J. Landmann (“Respondent” or “Landmann”) pursuant to Rule 102(e)(3)(i) of the Commission’s +Rules of Practice.1 +1 Rule 102(e)(3)(i) provides, in relevant part, that: +The Commission, with due regard to the public interest and without preliminary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has +been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal securities laws or of the rules and regulations +thereunder. +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, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Section III ¶ 3 below, which are admitted, Respondent +consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) +of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions +(“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds that: +1. Landmann, age 47, is and has been a holder of a certificate of public +accountancy in the State of Missouri. He served as Controller of Engineered Support Systems, Inc. +(“ESSI”) from 1998 until January 2006. +2. ESSI was, at all relevant times, a Missouri corporation with its principal +place of business in St. Louis, Missouri. ESSI was engaged in the business of manufacturing +electronics and equipment, and providing systems integration services for the United States and +foreign militaries. At all relevant times, ESSI’s common stock was registered with the Commission +pursuant to Section 12(g) of the Securities Exchange Act of 1934 (“Exchange Act”), and was traded +on the NASDAQ NMS. +3. On February 6, 2007, the Commission filed a complaint against Landmann +in SEC v. Landmann (Civil Action No. 4:07-cv-00271-CAS). On February 12, 2007, the court +entered an order, by consent, permanently enjoining Landmann from future violations of Section +17(a) of the Securities Act of 1933, Sections 10(b), 13(b)(5), and 14(a) of the Exchange Act and +Rules 10b-5, 13b2-1, 13b2-2, and 14a-9 thereunder, and aiding and abetting violations of Sections +13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 +thereunder. Landmann was also ordered to pay $518,972.50 in disgorgement of ill-gotten gains +from his sales of stock while participating in the fraud, and $108,099 in prejudgment interest; and a +$259,486 civil money penalty. +4. The Commission’s complaint alleged, among other things, that Landmann, +at the direction of others, engaged in a fraudulent scheme which resulted in ESSI filing materially +false and misleading statements and/or materially misstated financial statements in the company’s +annual re ports on For m 10-K for t he fi scal ye ars ended October 31, 1997 through 2002, in +quarterly re ports on For m 10- Q fil ed duri ng fiscal years 1997 through 2002, and in proxy +statements filed from 1997 through 2003. The Complaint alleged that Landmann, at the direction +of others, backdated ESSI stock options to coincide with low points in the closing market price for +ESSI common stock, resulting in approximately $20 million of ill-gotten benefits to ESSI insiders +2 + +through grants of disguised “in-the- money” options. The Complaint als o alleged that, in two +instances when ESSI’s stock price fell after options were awarded, Landmann, at the direction of +others, cancelled those options and reissued them with a new backdated grant date and price. The +Complaint further alleged that Landmann, at the direction of others, issued stoc k options to non- +employee directors beyond what the directors were authorized to receive under ESSI’s stock option +plans. None of these practices were disclosed in Commission filings. The Complaint alleged that +these undisc losed pra ctices cause d ESSI to ma ke f alse and m isleading statements relating to +ESSI’s stock options in filings with the Commission, including the false statement that the options +were granted with an exercise price equal to the closing price of ESSI’s common stock on the date +the options were a warded. The Complaint alleges that Landmann prepared portions of fi nancial +statements filed with t he Commission that mat erially understated ESSI’s compensation expense +and materially overstated its income in its financial statements filed with the Commission. +IV. +In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent Landmann’s Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +Landmann is suspended from appearing or practicing before the Commission as an +accountant. + By the Commission. + N ancy M. Morris + S ecretary +3 diff --git a/raw/aaer/2007/AAER-2575.txt b/raw/aaer/2007/AAER-2575.txt new file mode 100644 index 0000000000000000000000000000000000000000..54ceace6cbfadfac37c01320770f3193298d6aa2 --- /dev/null +++ b/raw/aaer/2007/AAER-2575.txt @@ -0,0 +1,126 @@ + UNITED STATES OF AMERICA + before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55434 / March 9, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2575 / March 9, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12589 +: +: +: +In the Matter of : ORDER INSTITUTING ADMINISTRATIVE +: PROCEEDINGS PURSUANT TO RULE +C. BURT DUREN (CPA), : 102(e) OF THE COMMISSION’S RULES OF +: PRACTICE, MAKING FINDINGS, AND +Respondent. : IMPOSING REMEDIAL SANCTIONS +: +: +____________________________________ : +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate and in the +public interest that public administrative proceedings be, and hereby are, instituted against C. Burt +Duren (“Respondent” or “Duren”) pursuant to Rule 102(e)(3)(i) of the Commission’s Rules of +Practice.1 +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 +1 Rule 102(e)(3)(i) provides, in relevant part, that: +The Commission, with due regard to the public interest and without preliminary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has +been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal securities laws or of the rules and regulations +thereunder. +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, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Section III, 3 below, which are admitted, Respondent +consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) +of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions +(“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds that: +1. Duren, 46, was employed as Vice President of Finance and Treasurer for One Price +Clothing Stores, Inc. (“One Price”) until October 2003, when he was appointed as CFO of the +company. Duren was terminated from that position in December 2003. Duren is and has been a +certified public accountant licensed to practice in the State of South Carolina. +2. One Price is a Delaware corporation headquartered in Duncan, South Carolina. +Before filing for bankruptcy in February 2004, One Price operated a chain of discount retail +clothing stores. One Price’s common stock is registered with the Commission pursuant to Section +12(g) of the Securities Exchange Act of 1934 (“Exchange Act”). During the relevant period, One +Price’s common stock was listed on the NASDAQ National Market until January 2003, and was +then listed on the NASDAQ Small Cap Market from January 2003 until June 2003 after which +One Price’s shares were quoted on the Pink Sheets quotation service. On February 9, 2004, One +Price filed a voluntary Chapter 11 bankruptcy petition in the Southern District of New York. +3. On March 1, 2007, a final judgment was entered against Duren, +permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933 +(“Securities Act”), Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13a-14, +13b2-1 and 13b2-2 thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A) +and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder, in the civil +action entitled Securities and Exchange Commission v. Leonard M. Snyder, et al., Civil Action +Number 7-05-2471-RBH, in the United States District Court for the District of South Carolina. +Duren was also ordered to pay a $35,000 civil money penalty and barred from serving as the +officer or director of a public company for five years. +4. The Commission’s complaint alleged, among other things, that in order to increase +One Price’s allowable borrowings and avoid default under its credit facility, Duren and others +caused One Price to falsely report as inventory merchandise that was ordered but never shipped +to the company. The complaint also alleged that this false reporting of in-transit inventory was a +default under the terms of One Price’s credit facility. The complaint further alleged that based +upon the artificially inflated inventory levels reported to its lender, One Price misrepresented that +it was in continual compliance with the credit facility in its Form 10-K filed with the +Commission for the fiscal year ended February 1, 2003, and Forms 10-Q for the quarters ended +May 3, August 2 and November 1, 2003, when in fact One Price was in default under the terms +2 + +of the credit facility during each of those periods. Additionally, the complaint alleged that One +Price included the falsely inflated levels of inventory in its general ledger and thus reported false +and inflated levels of inventory in the interim financial statements One Price filed with the +Commission on Forms 10-Q for the quarters ended May 3, August 2 and November 1, 2003. +IV. +In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent Duren’s Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +A. Duren is suspended from appearing or practicing before the Commission as an +accountant. +B. After three years from the date of this order, Respondent may request that the +Commission consider his reinstatement by submitting an application (attention: Office of the +Chief Accountant) to resume appearing or practicing before the Commission as: +1. a preparer or reviewer, or a person responsible for the preparation or +review, of any public company’s financial statements that are filed with the Commission. Such +an application must satisfy the Commission that Respondent’s work in his practice before the +Commission will be reviewed either by the independent audit committee of the public company +for which he works or in some other acceptable manner, as long as he practices before the +Commission in this capacity; and/or +2. an independent accountant. Such an application must satisfy the +Commission that: +(a) Respondent, or the public accounting firm with which he is +associated, is registered with the Public Company Accounting Oversight Board (“Board”) in +accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; +(b) Respondent, or the registered public accounting firm with which he +is associated, has been inspected by the Board and that inspection did not identify any criticisms +of or potential defects in the respondent’s or the firm’s quality control system that would indicate +that the respondent will not receive appropriate supervision. + (c) Respondent has resolved all disciplinary issues with the Board, and +has complied with all terms and conditions of any sanctions imposed by the Board (other than +reinstatement by the Commission); and +(d) Respondent acknowledges his responsibility, as long as +Respondent appears or practices before the Commission as an independent accountant, to +comply with all requirements of the Commission and the Board, including, but not limited to, all +3 + +requirements relating to registration, inspections, concurring partner reviews and quality control +standards. +C. The Commission will consider an application by Respondent to resume +appearing or practicing before the Commission provided that his state CPA license is +current and he has resolved all other disciplinary issues with the applicable state boards of +accountancy. However, if state licensure is dependent on reinstatement by the +Commission, the Commission will consider an application on its other merits. The +Commission’s review may include consideration of, in addition to the matters referenced +above, any other matters relating to Respondent’s character, integrity, professional conduct, +or qualifications to appear or practice before the Commission. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2577.txt b/raw/aaer/2007/AAER-2577.txt new file mode 100644 index 0000000000000000000000000000000000000000..10f97f332498cc101d2d75b56b94b008095d1785 --- /dev/null +++ b/raw/aaer/2007/AAER-2577.txt @@ -0,0 +1,1416 @@ + + + + + + + + + + + + + + + + SEC.gov | Franklyn A. Caine, Edward S. Pliner, and James E. 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Caine, Edward S. Pliner, and James E. Gray + + + + + + + + + + + + Franklyn A. Caine, Edward S. Pliner, and James E. Gray + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20041 / March 15, 2007 + + Accounting and Auditing Enforcement Release No. 2577 / March 15, 2007 + + SEC v. Franklyn A. Caine , Civil Action No. 07-CV-00494 (GK) (D.D.C. filed March 15, 2007) + + SEC v. Edward S. Pliner , Civil Action No. 07-CV-00495 (GK) (D.D.C. filed March 15, 2007) + + SEC v. James E. Gray , Civil Action No. 07-CV-00496 (GK) (D.D.C. filed March 15, 2007) + + SEC Settles with Former Raytheon Officers for Improper Disclosure and Accounting Practices + + Former CFO, Controller, and Subsidiary CFO Agree To Pay Over $1.5 Million in Disgorgement and Penalties + + + + The Securities and Exchange Commission announced today that it has instituted settled enforcement proceedings against three former financial officers of Raytheon Company and one of its subsidiaries. The SEC charged that they were each involved in or aware of certain improper accounting practices that operated as a fraud by failing to adequately and accurately disclose the deteriorating financial results and business of Raytheon's commercial aircraft manufacturing subsidiary. The SEC also charged that each officer was involved in or aware of certain false and misleading disclosures in Raytheon's periodic reports. + + Named in the SEC's enforcement actions were Franklyn A. Caine, the former CFO of Raytheon, Edward S. Pliner, Raytheon's former Controller and former lead auditor, and James E. Gray, the former CFO of Raytheon Aircraft Company (RAC). Without admitting or denying the SEC's allegations or findings, Caine, Pliner, and Gray agreed to pay more than $1.5 million combined to settle the Commission's charges. + + According to the allegations in SEC's complaints filed today in the U.S. District Court for the District of Columbia: + + Between 1997 and 1999, Raytheon improperly recognized revenue on RAC's sale of unfinished aircraft through "bill and hold" sales transactions that did not comply with Generally Accepted Accounting Principles. These practices resulted in material overstatements of RAC's reported annual net sales revenue and operating income in 1997 and 1998, enabling both RAC and Raytheon to meet certain internal and external earnings targets. According to the SEC, Gray was personally involved in these premature revenue recognition practices, and Pliner was aware of them as the company's lead outside auditor.   + + Between 1997 and 2001, there were certain improper disclosure and accounting practices at Raytheon related to RAC's commuter aircraft business, including the failure to adequately disclose in the company's periodic reports material risks, trends, and uncertainties associated with the deterioration of that business line. These practices resulted in the failure to recognize between $67 million and $240 million in losses that were inherent in a planned "soft landing" of the commuter aircraft line at year-end 2000, which would have reduced Raytheon's 2000 profit before taxes by 8 to 27 percent. These losses were instead improperly taken during the third quarter of 2001, when Raytheon recorded a $693 million charge related to its commuter assets after September 11, 2001. Given the charge that should have been taken at year-end 2000, Raytheon's third quarter 2001 commuter loss provision was overstated by 10 to 53 percent. According to the SEC, as the company's CFO, Caine was personally involved in and aware of these practices throughout 2000 and 2001. In addition, as Raytheon's lead auditor between 1997 and 1999, and as the company's Controller in 2000 and 2001, Pliner was aware of and later personally involved in these improper practices. + In an Administrative Order issued today, the SEC found that, during 2000 and 2001, Caine violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and caused Raytheon's violations of Sections 13(a) and 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, and Exchange Act Rules 12b-20, 13a-1, 13a-13, and 13b2-1. Caine was ordered to cease and desist from committing or causing the violations charged as well as any future violations of these provisions. Caine also consented to the entry of a final judgment in the related civil action for the purposes of awarding civil monetary penalties and disgorgement. As part of the settlement, Caine consented to pay $706,072 in disgorgement of certain past bonus amounts plus pre-judgment interest, and a $125,000 civil penalty. + + In addition, Pliner consented to the entry of a court order, which permanently enjoins him from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act and from aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Exchange Act Rules 12b-20, 13a-1, 13a-13, and 13b2-1. Pliner was ordered to pay $415,042 in disgorgement of certain past bonus amounts plus pre-judgment interest, and a $150,000 civil penalty. Pliner also consented to the entry of a Commission order that will suspend him, based on entry of the injunction in the related civil action, from appearing and practicing before the Commission as an accountant for three years pursuant to Rule 102(e)(3) of the Commission's Rules of Practice. + + Finally, Gray consented to the entry of a court order, which permanently enjoins him from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act and from aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Exchange Act Rules 12b-20, 13a-1, 13a-13, and 13b2-1. Gray was also ordered to pay disgorgement of certain past bonus amounts and pre-judgment interest in the total amount of $105,753. + + For additional information concerning this matter, see Litigation Release No. LR-19747 (June 28, 2006) and Administrative Proceeding Release No. 33-8715 (June 28, 2006). + + + + + SEC Complaints in this matter: Franklyn A. Caine Edward S. Pliner James E. Gray + + +  + + + + + + + + + + + Resources + + + + + Complaint: Franklyn A. Caine + + + + + Complaint: Edward S. Pliner + + + + + Complaint: James E. Gray + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2580.txt b/raw/aaer/2007/AAER-2580.txt new file mode 100644 index 0000000000000000000000000000000000000000..2460a378683099e6532ec48dcd3ca9b841187354 --- /dev/null +++ b/raw/aaer/2007/AAER-2580.txt @@ -0,0 +1,456 @@ + +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION + + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55523 / March 26, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2580 / March 26, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12600 + + + +In the Matter of + +ERNST & YOUNG LLP, + +Respondent. + + +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE- +AND-DESIST PROCEEDINGS +PURSUANT TO SECTION 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS + + + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative and cease-and-desist proceedings be, and hereby are, instituted against Ernst & +Young LLP (“Respondent” or “E&Y”) pursuant to Section 21C of the Securities Exchange Act of +1934 (“Exchange Act”) and Rule 102(e)(1)(ii) of the Commission’s Rules of Practice.1 + +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, except as to the Commission’s jurisdiction over E&Y and the subject matter of these +proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Public + +1 Rule 102(e)(1)(ii) provides, in pertinent part, that: + +The Commission may censure a person . . . who is found by the Commission . . . to have engaged +in unethical or improper professional conduct. + + 2 + +Administrative and Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities +Exchange Act of 1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, +and Imposing Remedial Sanctions (“Order”), as set forth below. + +III. + + On the basis of this Order and Res pondent’s Offer, the Commission finds2 that: + +A. SUMMARY + +This action concerns violations of auditor independence standards by E&Y. During 2001, +E&Y, through one of its National Office partners, compromised its professional independence by +assisting one client, American International Group, Inc. (“AIG”), in its development and marketing +of an accounting-driven financial product and then advising an audit client, The PNC Financial +Services Group, Inc. (“PNC”), on the accounting treatment for a version of that product in PNC’s +financial statements, without E&Y performing a m eaningful analysis of the accounting separate +from the analysis that the National Office partner had performed.3 + + The accounting-driven financia l product purported to enable a company to transfer volatile +financial assets to a special pu rpose entity (“SPE”) and thereby to remove th ose assets from the +company’s financial statements. AIG sold three such products to PNC in 2001, and as a result, PNC +improperly excluded certain assets from its consolidated financial statements. E&Y advised PNC +on the accounting for each transaction. In January 2002, PNC announced that it would restate its +financial statements for the second and thir d quarters of 2001, and revised its previously +announced financial results for the fourth quarter and year-end of 2001, to include the previously +excluded assets. + +Through the National Office partner, E&Y advised PNC, in connection with E&Y’s work as +PNC’s auditor, on the appropriateness of the ac counting treatment of th e SPE product that the +National Office partner had assisted AIG to develop and market. Accordingly, as a result of the +actions of the National Office partner, E&Y compromised its auditor independence required by +generally accepted auditing standards (“GAAS”) and Regulation S-X of the Commission’s rules +and regulations. Additionally, the reporting provisions of the federal secu rities laws require that +quarterly financial statements be reviewed by an independent accountant. Because E&Y was not + +2 The findings herein are made pursuant to Res pondent's Offer of Settlement and are not binding on +any other person or entity in this or any other proceeding. + +3 The Commission previously brought settled proceedings against PNC, AIG, Thomas F. Garbe, and +Michael S. Joseph, the National Office partner, related to their roles in these matters. PNC Financial +Services Group, Inc., Securities Act Release No. 8112, Securities Exchange Act Release No. 46225, +Accounting and Auditing Enforcement Release No. 1597 (July 18, 2002); SEC v. American International +Group, Inc., No. 1:04CV02070 (GK) (D.D.C. judgment entered Dec. 7, 2004); In the Matter of Thomas F. +Garbe, Securities Exchange Act Release No. 54906, Accounting and Auditing Enforcement Release No. +2522, Administrative Proceeding No. 3-12501 (Dec. 11, 2006); In the Matter of Michael S. Joseph, CPA, +Securities Act Release No. 8759, Securities Exchange Act Release No. 54907, Accounting and Auditing +Enforcement Release No. 2523, Administrative Proceeding No. 3-12502 (Dec. 11, 2006). + 3 + +independent in its review of PNC’s financial statements for the second and third quarters of 2001, +E&Y was a cause of PNC’s violations of the reporting provisions. + +B. RESPONDENT + + Ernst & Young LLP is a national accounting firm with its headquarters in New York, +New York. At all relevant times, E&Y provided auditing services to PNC. Specifically, E&Y was +responsible for, among other things, the audit of PNC’s consolidated financial statements, interim +reviews of quarterly financial statements, and reviews and consultations pertaining to filings with +the SEC. While serving as auditor for and advisor to PNC, E&Y also was employed as an advisor +to AIG with responsibility for assisting AIG in addressing generally accepted accounting principles +(“GAAP”) compliance issues during the design stage of an SPE product, a version of which was +used in transactions between AIG and PNC. + +C. OTHER RELEVANT ENTITIES + + American International Group, Inc. is a Delaware corporation with its principal place +of business in New York, New York. Through its subsidiaries, AIG is engaged in a broad range +of insurance-related and asset management activities in the United States and abroad. + + The PNC Financial Services Group, Inc. is a Pennsylvania corporation with its +principal place of business in Pittsburgh, Pennsylvania. PNC is a bank holding company that is +regulated by the Board of Governors of the Federal Reserve System and the Federal Reserve +Bank of Cleveland (together the “Federal Reserve”) and has a national bank subsidiary that is +regulated by the Comptroller of the Currency. + +D. FACTS + +1. Development and Marketing of C-GAITS Product + + In early 2001, AIG engaged on e of E&Y’s National Office partners to assist it in +developing an accounting–driven financial product, known as a Contributed Guaranteed +Alternative Investment Trust Security (“C-GAITS”). The C-GAITS product purported to enable a +public company to reduce the earnings impact of troubled or other potentially volatile financial +assets by transferring those assets from the public company’s balance sheet to an SPE established +by AIG. Under the C-GAITS structure, the SPE was to be consolidated onto AIG’s balance sheet. + + The National Office partner i ssued reports to AIG pursuant to Statement on Auditing +Standards No. 50, Reports on the Application of Accounting Principles (“SAS 50 letters”)4, over + +4 A “SAS 50” letter is a report issued by an accounting firm that provides guidance to a non-audit +client. A SAS 50 letter could relate to the type of opinion that may be rendered on a specific entity’s +financial statements, the application of accounting principles to specific proposed or completed +transactions, or the application of accounting principles to hypothetical transactions. These letters +frequently were used for marketing purposes by non-audit clients. SAS No. 50 was amended in June +2002 by Statement on Auditing Standards No. 97, Amendment to Statement on Auditing Standards No. + 4 + +E&Y’s firm signature, representing that the favorable nonconsolidation accounting treatment for +the SPE established in a hypothetical C-GAITS transaction was an appropriate application of +GAAP. As intended, AIG used the E&Y SAS 50 letters to promote the C-GAITS product. AIG +also relied extensively on the E&Y National Office partner’s accounting advice as it attempted to +sell the product. For example, AIG referred to E&Y’s accounting advice in its marketing materials +and referred potential buyers directly to the E&Y National Office partner to answer accounting- +related questions. The National Office partner reviewed and edited term sheets for at least two +proposed C-GAITS deals. On several occasions, the National Office partner also participated in +conference calls with AIG when AIG marketed the C-GAITS product to potential purchasers. + + From March 2001 through Ja nuary 2002, AIG marketed the C-GAITS product to several +public companies, with the assistance of the National Office partner. Despite its marketing effort, +AIG ultimately closed only the three C-GAITS transactions with PNC. These transactions were +referred to respectively as “PAGIC I,” “PAGIC II,” and “PAGIC III” (and collectively as the +“PAGIC transactions”). + +2. PNC’s Second Quarter 2001 + +Around the beginning of June 2001, AIG marketed the C-GAITS product to PNC using a +SAS 50 letter written by the National Office partner that addressed the accounting for a C-GAITS +structure. Throughout its negotiations with AIG that month, PNC management consulted +frequently with the E&Y audit engagement team, which, in turn, consulted with the National +Office partner, to determine the accounting treatment for the transaction that PNC was +contemplating. In fact, when PNC began considering PAGIC I, PNC senior management +contacted the E&Y coordinating partner for the PNC audit account and requested formal written +guidance on the accounting treatment for the transaction. The coordinating partner assigned the +technical partner on the engagement to prepare a guidance letter. That partner then contacted the +National Office partner, with the knowledge of PNC. +The National Office partner provided an existing SAS 50 letter to the technical partner +for use as a template for the PNC guidance letter. The National Office partner thereafter +reviewed drafts of the guidance letter and discussed accounting issues related to the PAGIC I +transaction with the technical partner. + +Without performing a meaningful analysis, the E&Y engagement team incorporated +virtually verbatim into the guidance letter the accounting analysis and conclusions that the +National Office partner had included in the SAS 50 letter.5 The National Office partner reviewed +and approved the guidance letter before it was issued to PNC. The guidance letter was issued over +the E&Y firm signature and stated that it was E&Y’s view that PNC’s nonconsolidation of the SPE + +50, Reports on the Application of Accounting Principles. Accountants are now prohibited from providing +a report on accounting principles concerning hypothetical transactions. + +5 Each guidance letter for each of the three PAGIC transactions included a factual description of +the particular transaction for which the guidance letter was written and a discussion of accounting issues. +The factual descriptions in the letters differed, but the discussion of the accounting issues was largely +identical to the corresponding discussion in the SAS 50 letter. + 5 +conformed with GAAP. On June 28, 2001, AIG and PNC closed the first of the three PAGIC +transactions. + +E&Y performed a review of PNC’s financial statements for the second quarter of 2001. +E&Y, however, did not perform any separate analysis of PNC’s accounting for the PAGIC I +transaction in the course of that review. In evaluating the accounting for the transaction, E&Y +instead incorporated and relied on the National Office partner’s analysis, including the written +guidance letter issued to PNC, which mirrored the SAS 50 letters provided to AIG. E&Y's +conclusion on the appropriateness of PNC's accounting was largely based on work performed by +the National Office partner for AIG during the design of the product. + + On August 14, 2001, PNC filed its Form 10-Q for the second quarter of 2001 with the +Commission. The Form 10-Q included the second quarter financial statements that E&Y had +reviewed. In those financial statements, PNC excluded from its balance sheet the assets it +transferred to the SPE in the PAGIC I transaction. The financial statements reflected that PNC had +$374 million in nonperforming loan assets and $16 million in other nonperforming assets. These +figures did not include $84 million in nonperforming loan assets among the $257 million of loan +assets that PNC had transferred to the SPE. PNC’s second quarter Form 10-Q did not provide any +disclosure concerning the PAGIC I transaction. + + 3. PNC’s Third Quarter 2001 + + E&Y continued to assist AIG in its efforts to market the C-GAITS product. In September +2001, the National Office partner accompanied an AIG marketing team to assist in AIG’s +marketing of the C-GAITS product to another public company. Also in September 2001, E&Y +advised PNC on the accounting for the PAGIC II transaction, which closed on September 27, +2001. PNC again relied on the National Office partner’s advice in connection with its evaluation +of the applicable accounting. Once again, E&Y provided PNC with a written guidance letter +stating that it was E&Y’s view that nonconsolidation was the appropriate accounting treatment for +PAGIC II. As before, E&Y incorporated virtually verbatim into the guidance letter the accounting +analysis and conclusions that the National Office partner had included in the SAS 50 letter. The +National Office partner once again reviewed and approved the guidance letter before it was issued +to PNC. + + E&Y performed a review of PNC’s financial statements for the third quarter of 2001. E&Y +again, however, did not perform any separate analysis of PNC’s accounting for the PAGIC II +transaction in the course of that review. In evaluating the accounting for the transaction, E&Y +incorporated and relied on the National Office partner’s analysis, as reflected in the accounting +guidance letter. + +On November 14, 2001, PNC filed its Form 10-Q for the third quarter of 2001 with the +Commission. The Form 10-Q included the third quarter financial statements that E&Y had +reviewed. In those financial statements, PNC excluded from its balance sheet the assets it had +transferred to the SPEs in the two PAGIC transactions. The financial statements reflected that +PNC had $361 million in nonperforming loan assets and $13 million in other nonperforming +assets. These figures did not include a total of $207 million in nonperforming assets among the + 6 +$592 million of loan assets that PNC had transferred to the SPEs in the first two PAGIC +transactions. PNC’s third quarter Form 10-Q did not provide any disclosure concerning the two +PAGIC transactions into which PNC had entered. + +4. PNC’s Fourth Quarter 2001 +Throughout October and November 2001, the National Office partner continued to assist in +AIG’s marketing efforts and on November 29, 2001, the National Office partner issued another +SAS 50 letter for AIG’s negotiations with yet another public company. Also at about the same +time, the National Office partner conferred with another E&Y audit client regarding a potential C- +GAITS transaction with AIG. +On October 23, 2001, the Federal Reserve sent a letter to PNC expressing concern about +PNC’s accounting for the assets transferred in PAGIC I. E&Y, including the National Office +partner, reviewed and commented on PNC’s proposed responses to the Federal Reserve, which +defended PNC’s accounting. During the same October-to-November period, the National Office +partner, through E&Y’s engagement team, advised PNC on the accounting treatment for a third +PAGIC transaction, which closed on November 29, 2001. Again, E&Y provided PNC +management with a written guidance letter stating that it was E&Y’s view that nonconsolidation +was the appropriate accounting treatment for PAGIC III. As before, E&Y incorporated virtually +verbatim into the PNC guidance letter the accounting analysis and conclusions that the National +Office partner had included in the SAS 50 letter. The National Office partner reviewed and +approved the guidance letter before it was issued to PNC. +Also in November 2001, another of E&Y’s banking audit clients discussed with the Federal +Reserve the accounting for a C-GAITS transaction that it was contemplating. On or about +December 4, 2001, the Federal Reserve informed E&Y’s client of its view that the proposed +accounting was not in conformity with GAAP. When consulted by AIG, the National Office +partner helped AIG defend the proposed accounting for the transaction. +On January 11, 2002, the Federal Reserve directed PNC to consolidate the three PAGIC +transactions in its bank holding company regulatory reports for 2001. Thereafter, on January 29, +2002, PNC announced that it would reverse the accounting for all three PAGIC transactions, +restate its financial statements for the second and third quarters of 2001, and revise its previously +announced fourth quarter and full-year 2001 financial results. The change in accounting and +restatement resulted in a $155 million charge to PNC’s earnings and a $0.53 per share drop +(equivalent to 38%) in PNC’s previously reported earnings per share for 2001. + +For its work on the SAS 50 letters, the accounting guidance given to PNC, and the interim +reviews and work related to the restatements of PNC’s financial statements, E&Y billed AIG and +PNC $1,196,700. + + + + +E. LEGAL ANALYSIS + + 7 + +1. Applicable Professional Standards + +Standards relating to the independence of public accounting firms are contained in GAAS +and Rule 2-01(b) of Regulation S-X. Throughout the relevant time, GAAS required that “[i]n all +matters relating to the assignment, an independence in mental attitude is to be maintained by the +auditor or auditors.”6 This requirement is necessary because of the importance in having the public +maintain confidence in the independence of auditors.7 Auditors, accordingly, are required not only +to be independent in fact but also to avoid the appearance of a lack of independence.8 + +Rule 2-01(b) of Regulation S-X, in pertinent part, provides as follows: + +The Commission will not recognize an accountant as independent, with respect to an audit +client, if the accountant is not, or a reasonable investor with knowledge of all relevant facts +and circumstances would conclude that the accountant is not, capable of exercising +objective and impartial judgment on all issues encompassed within the accountant’s +engagement. In determining whether an accountant is independent, the Commission will +consider all relevant circumstances, including all relationships between the accountant and +the audit client, and not just those relating to reports filed with the Commission.9 + +2. E&Y Violated Independence Standards + +As discussed above, the National Office partner was intimately involved in the +development of AIG’s C-GAITS product and assisted in AIG’s efforts to market that product. +The National Office partner provided advice on the structure, prepared four SAS 50 letters that +AIG used in marketing the product, participated in conference calls with potential purchasers of +the product and, on at least one occasion, accompanied an AIG marketing team to assist in AIG’s +marketing of the C-GAITS product to a potential customer. The National Office partner charged +AIG for his services. As a result of the activities of the National Office partner, E&Y was +invested both financially and reputationally in the success of the C-GAITS product and therefore +had a conflict of interest when it evaluated the accounting for that product for its audit client +PNC.10 +E&Y’s engagement team relied upon the National Office partner’s advice and analysis of +the accounting for the PAGIC transactions, both when drafting and issuing the guidance letters to + +6 Codification of Statements on Auditing Standards, Statement on Auditing Standards No. 1, § +150.02 (Am. Inst. of Certified Pub. Accountants 1972). + +7 See id. § 220.03. + +8 Id. + +9 17 CFR § 210.2-01(b). + +10 In determining whether an accountant is independent, the Commission “looks in the first instance +to whether a relationship or the provision of a service: creates a mutual or conflicting interest between the +accountant and the audit client: [or] places the accountant in the position of auditing his or her own +work….” 17 CFR § 210.2-01 prelim. note. + 8 + +PNC and during E&Y’s interim reviews of PNC’s Form 10-Qs. E&Y’s engagement team did +not perform a meaningful analysis when issuing the accounting guidance letters to PNC and did +not perform any separate analysis in the course of the interim reviews, but instead relied on the +National Office partner’s accounting analysis. Because of the role that the National Office +partner had played in AIG’s development and marketing of the C-GAITS product and because of +the role the National Office partner also played in evaluating and advising PNC on the PAGIC +transactions in connection with E&Y’s audit work for PNC, a reasonable investor with +knowledge of all relevant facts and circumstances would conclude that E&Y was not impartial +and lacked the requisite independence in the performance of its functions as PNC's auditor. + +The departures from GAAS and failure to comply with Rule 2-01 of Regulation S-X +described above constitute improper professional conduct within the meaning of Rule 102(e)(1)(ii). +Regarding accountants, the term “improper professional conduct” is defined by Rule 102(e)(1)(iv) to +include a “single instance of highly unreasonable conduct that results in a violation of applicable +professional standards in circumstances in which an accountant knows, or should know, that +heightened scrutiny is warranted” or “repeated instances of unreasonable conduct, each resulting in a +violation of applicable professional standards, that indicate a lack of competence to practice before +the Commission.”11 E&Y’s conduct in this matter represents improper professional conduct under +either standard. At a minimum, as described above, E&Y engaged in multiple instances of +unreasonable conduct resulting in independence violations. In addition, inasmuch as a reasonable +investor would have concluded that E&Y, through the National Office partner, was operating on +both sides of several transactions which led to auditor independence violations, E&Y engaged in +highly unreasonable conduct under circumstances in which it knew or should have known warranted +heightened scrutiny. As the Commission has stated, “Because of the importance of an accountant’s +independence to the integrity of the financial reporting system, the Commission has concluded that +circumstances that raise questions about an accountant’s independence always merit heightened +scrutiny.”12 + +3. E&Y Caused PNC to Vi olate Reporting Provisions + + As a result of its violation of the independence standards, E&Y also caused PNC to violate +reporting provisions of the federal securities laws. Section 13(a) of the Exchange Act requires +issuers of registered securities to file periodic reports with the Commission containing information +prescribed by Commission rules and regulations. Exchange Act Rule 13a-13 requires the filing of +quarterly reports on Form 10-Q, and Exchange Act Rule 12b-20 requires that, in addition to the +information required by Commission rules to be included in periodic reports, such further material +information as may be necessary to make the required statements not misleading also must be +included. Periodic reports must be complete and accurate. Rule 10-01(d) of Regulation S-X +requires that interim financial statements included in quarterly reports must be reviewed by an +independent public accountant prior to filing. +13 Because E&Y was not independent, PNC failed to + +11 17 CFR § 201.102(e)(1)(iv). + +12 Amendment to Rule 102(e) of the Commission’s Rules of Practice, Securities Act +Release No. 7593, at 1I.C. (October 19, 1998) (emphasis added). + +13 17 CFR § 210.10-01(d). + 9 + +comply with Rule 10-01(d) of Regulation S-X and consequently violated Section 13(a) of the +Exchange Act and Exchange Act Rules 12b-20 and 13a-13. + + By its conduct described above, E&Y caused PNC’s violations of Section 13(a) of the +Exchange Act and Exchange Act Rules 12b-20 and 13a-13 thereunder. + +F. REMEDIAL ACTIONS BY E&Y + + In determining to accept the Offer, the Comm ission considered the remedial steps taken by +E&Y. Since the conduct discussed in this Order, E&Y has significantly revised its independence +policies and procedures. E&Y has also set forth new procedures that specifically address potential +conflicts of interest that may arise when providing accounting advice to investment bankers and +financial intermediaries. + +G. FINDINGS + + A. Based on the foregoing, the Commissi on finds that E&Y engaged in improper +professional conduct pursuant to Rule 102(e)(1)(ii) of the Commission’s Rules of Practice. + + B. Based on the foregoing, the Commissi on finds that E&Y was a cause of PNC’s +violations of Section 13(a) of the Exchange Act and Exchange Act Rules 12b-20 and13a-13. + +IV. + + In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondent E&Y’s Offer. + + Accordingly, it is hereby ORDERED, effective immediately, that: + + A. E&Y hereby is censured; and + + + + + + + + + + + +B. E&Y shall, within ten da ys of the entry of this Order, pay disgorgement of +$1,196,700 and interest of $390,470.42, totaling $1,587,170.42, to the victim restitution fund +established pursuant to paragraph 7 of the Deferred Prosecution Agreement between PNC ICLC + + + 10 +Corp. and the United States Department of Justice, Criminal Division, Fraud Section signed on +June 2, 2003, together with a cover letter identifying Ernst & Young LLP as the Respondent in +these proceedings, identifying the file number of these proceedings, and specifying that the +payment is being made pursuant to this Order. E&Y shall simultaneously transmit a photocopy of +the cover letter and the document by which payment is made to Thomas D. Silverstein, Esq., +Division of Enforcement, Securities and Exchange Commission, 100 F Street, N.E., Washington, +D.C. 20549. + + + By the Commission. + + + + N a n c y M . M o r r i s + Secretary \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2582.txt b/raw/aaer/2007/AAER-2582.txt new file mode 100644 index 0000000000000000000000000000000000000000..d79cfeef355632bb6a52391b173393640860e665 --- /dev/null +++ b/raw/aaer/2007/AAER-2582.txt @@ -0,0 +1,1382 @@ + + + + + + + + + + + + + + + + SEC.gov | Conrad M. Black, F. 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Black, F. David Radler and Hollinger Inc. + + + + + + + + + + + + Conrad M. Black, F. David Radler and Hollinger Inc. + + + + + + + + + + + + + + + + + + + CORRECTED + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20043 / March 16, 2007 + + Accounting and Auditing Enforcement Release No. 2582 / March 16, 2007 + + U.S. Securities and Exchange Commission v. Conrad M. Black, F. David Radler and Hollinger Inc. , Civil Action No. 04C7377 (N.D. Ill. 2004) + + The Securities and Exchange Commission announced that on March 16, 2007, it settled its enforcement action against F. David Radler, the former Deputy Chairman and COO of Hollinger International, Inc., pending in the U.S. District Court, Northern District of Illinois. Under the terms of the settlement, Radler is + + ordered to pay approximately $23.7 million in disgorgement and prejudgment interest; + ordered to pay a $5 million civil penalty; + barred from serving as an officer or director of a public company; and + enjoined from violations of the antifraud, proxy, books and records, reporting, and internal control provisions of the federal securities laws. + On Nov. 15, 2004, the Commission filed its action against Radler, Conrad M. Black, Hollinger International's former Chairman and CEO, and Hollinger, Inc., Hollinger International's controlling shareholder, alleging that from approximately 1999 through 2003, the defendants engaged in a fraudulent and deceptive scheme to divert cash and assets from Hollinger International, Inc., through a series of related party transactions. + + The Commission's complaint alleges, among other things, that Black and Radler diverted to themselves, other corporate insiders and Hollinger, Inc. approximately $85 million of the proceeds from Hollinger International's sale of newspaper publications through purported "non-competition" payments. The complaint also alleges that Black and Radler orchestrated the sale of certain of Hollinger International's newspaper publications at below-market prices to another privately-held company owned and controlled by Black and Radler, including the sale of one publication for $1.00. The complaint further alleges that in order to perpetrate their fraudulent scheme, Black and Radler misled Hollinger International's Audit Committee and Board of Directors concerning the related party transactions and also misrepresented and omitted to state material facts regarding these transactions in Hollinger International's filings with the Commission and during shareholder meetings. + + Rader, without admitting or denying the allegations in the complaint, has consented to the entry of a final judgment which permanently enjoins him from violations of Sections 10(b), 13(b)(5) and 14(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1, 14a-3 and 14a-9 hereunder, and, as a control person, Sections 13(a) and 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 hereunder. The Final Judgment also bars Radler from acting as an officer and director of a public company and orders Rader to pay a total of $23,695,227 in disgorgement and prejudgment interest and a $5,000,000 civil penalty. The $28,695,227 shall be distributed to The Sun-Times Media Group, Inc., formerly known as Hollinger International, Inc., pursuant to the Fair Funds provisions of Section 308 of the Sarbanes-Oxley Act of 2002. The settlement is subject to approval of U.S. District Judge William T. 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Olesnyckyj + + + + + + + + + + + + Myron F. Olesnyckyj + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20056 / March 27, 2007 + + Accounting and Auditing Release No. 2583 / March 27, 2007 + + SEC v. Myron F. Olesnyckyj , United States District Court for the Southern District of New York, Civil Action No. 07 CV 1176 (HB) (S.D.N.Y.) + + + + The Securities and Exchange Commission ("Commission") today announced that it has settled its enforcement action against Myron F. Olesnyckyj, the former general counsel of Monster Worldwide, Inc. On March 26, 2007, the Honorable Howard Baer of the United States District Court for the Southern District of New York entered a final judgment that permanently enjoined Olesnyckyj from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(b)(5) and 14(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1, 13b2-2 and 14a-9 thereunder, and from aiding and abetting 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. In addition, the judgment permanently enjoined Olesnyckyj from acting as an officer or director of a public company. Olesnyckyj, without admitting or denying the allegations in the complaint, consented to the entry of this final judgment. In a parallel criminal action, Olesnyckyj pleaded guilty to one count of securities fraud and one count of conspiracy to commit securities fraud and has agreed to pay a forfeiture of $381,000. Olesnyckyj has not yet been sentenced in the criminal action. + + On February 15, 2007, the Commission filed its action against Olesnyckyj. The complaint alleged that, from 1997 through 2003, Olesnyckyj backdated stock options grants to coincide with the dates of low closing prices for the Company's common stock, resulting in grants of in-the-money options to numerous individuals. When making grants of options, certain officers and employees at Monster would select a low closing stock price at which they wanted to grant stock options. Olesnyckyj, or others acting at his direction, then prepared backdated documentation for Monster's Compensation Committee containing the grant date that reflected the low closing price for Monster's common stock. Olesnyckyj then caused Monster to misrepresent in its periodic filings and proxy statements that all stock options were granted at the fair market value of the stock on the date of the award, when that was simply not the case. In fact, by backdating the options, Monster granted undisclosed compensation to its employees, failed to recognize compensation expenses, and overstated its net income by $340 million from 1997 through 2005. Olesnyckyj personally profited by receiving backdated options. The complaint further alleged that Olesnyckyj misled Monster's outside auditors in an attempt to hide the backdating scheme by providing documentation to them that misrepresented the grant date of the stock option awards. + + + + + + SEC Complaint in this matter +--> + + +  + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Rogers + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/500851","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Mintz and Rex R. Rogers + + + + + + + + + + + + Jordan H. Mintz and Rex R. Rogers + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20058 / March 28, 2007 + + Accounting and Auditing Enforcement Release No. 2584 / March 28, 2007 + + SEC v. Jordan H. Mintz and Rex R. Rogers , Civil Action No. 07-1027 (SDTX) (March 28, 2007) + + SEC Charges Two Former Enron In-House Lawyers With Securities Fraud And Related Violations + + + + On March 28, 2007, the Securities and Exchange Commission charged two former in-house attorneys of Enron Corp., Jordan H. Mintz, a former Enron Vice President and General Counsel of Enron's Global Finance group (EGF) and Rex R. Rogers, a former Enron Vice President and Associate General Counsel, in connection with a fraudulent scheme to make material misrepresentations in, and to omit material disclosures from, Enron's public filings. The Commission's complaint charges Mintz and Rogers with violating the antifraud and other provisions of the federal securities laws, and aiding and abetting Enron's violations of the antifraud and periodic reporting provisions. In addition, the complaint charges Mintz with violating the books and records and lying to auditors provisions, and Rogers with aiding and abetting violations of the insider stock sale reporting provision by Enron's then Chairman, Kenneth Lay. Mintz, as General Counsel of EGF, was responsible for managing the related party disclosures in Enron's 2000 Proxy Statement (incorporated in its 2000 Form 10-K) and second quarter 2001 Form 10-Q, and closing a fraudulent related party transaction while knowingly or recklessly disregarding that the transaction was in fulfillment of a secret oral side agreement. Rogers, as Enron's top securities lawyer, was responsible for the timing and content of all Enron's SEC filings, including Enron's 2000 Proxy Statement, second quarter 2001 Form 10-Q and relevant 2001 Form 4 filings. + + The Commission's complaint alleges the following: In 1999, Enron sold an interest in a troubled power project in Cuiaba, Brazil to a related party called LJM1, a partnership controlled by Enron's then Chief Financial Officer, Andrew Fastow, to deconsolidate the project (to take the asset off of its balance sheet) and recognize related earnings. (Fastow also controlled a second related party, a partnership called LJM2.) In conformity with relevant accounting rules, deconsolidation and earnings recognition were not appropriate because the seller (Enron) did not transfer to the buyer (LJM1) the usual risks and rewards of ownership, in that the sale included an oral side agreement that LJM1 would not lose money. The oral side agreement was neither memorialized in the deal documents nor disclosed to Enron's auditor. In 2001, Enron bought back LJM1's Cuiaba interest in satisfaction of the oral side agreement. Under the terms of the buyback, Enron paid LJM1 a profit despite the fact that LJM1's investment had decreased in value. The complaint alleges that Mintz knew, or was reckless in not knowing, of the oral side agreement and knowingly or recklessly directed the documenting and closing of the buyback in fulfillment of the oral side agreement. + + The complaint further alleges that Mintz knowingly or recklessly failed to disclose Enron's buyback of LJM1's Cuiaba interest as a "currently proposed" transaction in Enron's 2000 Proxy Statement (filed March 27, 2001), when he knew of, and was responsible for, the execution of the buyback agreement on March 28, 2001, the day after Enron's 2000 Proxy Statement was filed. The complaint also alleges that Mintz and Rogers knowingly or recklessly failed to disclose in Enron's 2000 Proxy Statement the monetary amount of Fastow's earnings from LJM1 and LJM2 (more than $18 million), including management fees and distributions, resulting from Enron-LJM transactions. According to the complaint, Mintz and Rogers further knowingly or recklessly made a materially false and/or misleading statement in Enron's second quarter 2001 Form 10-Q (filed August 14, 2001) when stating in that filing that Fastow sold his interests in the LJM partnerships and those partnerships were no longer related parties to Enron. Mintz and Rogers knew, or were reckless in not knowing, that this statement was materially false and/or misleading because (a) the Cuiaba repurchase was pending (it closed on August 15, 2001, the day after the Form 10-Q was filed), (b) the Cuiaba repurchase was negotiated and agreed to while Fastow controlled LJM1, and (c) Enron continued to provide the LJM partnerships with the use of Enron employees, facilities and equipment during the third and fourth quarters of 2001. The complaint further alleges that Rogers knowingly or recklessly failed to disclose in Enron's 2000 Proxy Statement that during 2000, Lay sold $16 million of Enron stock to Enron to repay Lay's Enron line of credit. According to the complaint, Rogers also knowingly or recklessly authorized Lay and others to fail to disclose in Lay's 2001 monthly SEC Form 4 filings that during 2001, Lay sold an additional $70 million of Enron stock to Enron to repay his Enron line of credit. + + The complaint also alleges that Mintz directly or indirectly made, or caused to be made, materially false and/or misleading representations to Enron's auditor concerning Enron's second quarter 2001 Form 10-Q. The complaint alleges that Mintz reviewed and approved misrepresentations to be made to Enron's auditor so the auditor would sign off on the statement in the Form 10-Q that Fastow sold his interests in the LJM partnerships and those partnerships were no longer related parties to Enron. The specific misrepresentations were that there were no unfulfilled obligations, commitments, contingencies or special arrangements between Enron and the LJM entities related to the sale of Fastow's LJM interests, and there were no pending transactions between the LJM entities and Enron for which the terms were negotiated and agreed to prior to the effective date of the sale of Fastow's LJM interests. Mintz knew, or was reckless in not knowing, that these representations were materially false and/or misleading because, among other reasons, Mintz knew (a) from documenting and closing the Cuiaba buyback, that the Cuiaba buyback had been pending since, and its terms were negotiated and agreed to, in March 2001, and (b) the LJM entities continued to have a commitment or special arrangement with Enron whereby the LJM entities used Enron employees, equipment and facilities to conduct LJM business during the third and fourth quarters of 2001. + + According to the complaint, by engaging in this conduct, Mintz and Rogers violated Section 17(a) of the Securities Act of 1933, Sections 10(b) and 14(a) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rules 10b-5 and 14a-9. In addition, the complaint alleges that Mintz violated Exchange Act Section 13(b)(5) and Exchange Act Rules 13b2-1 and 13b2-2, and aided and abetted Enron's violations of Exchange Act Section 13(b)(2)(A). The complaint further alleges that through their conduct, Mintz and Rogers also aided and abetted violations of Exchange Act Sections 10(b), 13(a) and 14(a) and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-13 and 14a-9. According to the complaint, Rogers also aided and abetted Lay's violations of Exchange Act Section 16(a) and Exchange Act Rules 16a-2 and 16a-3. + + The complaint seeks permanent injunctions, disgorgement with prejudgment interest and civil money penalties from both defendants, as well as orders barring them from serving as an officer or director of a publicly-traded company. + + The Commission's investigation is continuing. + + Details concerning the fraudulent Cuiaba transaction, which has been the subject of other civil actions brought by the Commission against other former Enron employees, are at: http://www.sec.gov/litigation/litreleases/2006/lr19865.htm and http://www.sec.gov/litigation/litreleases/lr18543.htm + + + + + SEC Complaint in this matter + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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David McQuillin (United States District Court for the Southern District of New York Information No. 1:07-cr-00017-LMM - filed January 8, 2007) + + Securities and Exchange Commission v. Lawrence B. Evans, et al. , (United States District Court for the District of Massachusetts, Civil Action No. 07-10027-JLT - filed January 8, 2007) + + Former Aspen CEO Pleads Guilty to Securities Fraud + + + + The Securities and Exchange Commission ("Commission") announced today that on March 26, 2007, David McQuillin, the former chief executive of Aspen Technology, Inc., a Cambridge-based software company, pleaded guilty to one count each of conspiracy and securities fraud in connection with charges brought by the United States Attorney's Office for the Southern District of New York. + + On January 8, 2007, the Commission filed a civil injunctive action against McQuillin and others, alleging that they engaged in a scheme to inflate revenue reported in Aspen's publicly-filed financial statements and in press releases. McQuillin's guilty plea relates to the same conduct alleged in the Commission's civil enforcement action. In particular, the Information to which McQuillin pleaded guilty charged that in July 2001, McQuillin signed a software license agreement with a Russian Oil Company and then (a) backdated it to June 2001 so that the revenue could be recognized in Aspen's fiscal year ending June 30, 2001, and (b) provided the Oil Company with a written side agreement that allowed the Oil Company to cancel some or all of the sales contract. The Information further charged that in August 2001, McQuillin and other senior Aspen officers falsely represented to Aspen's outside auditor that the Oil Company sales agreement was not subject to any side agreements. + + McQuillin is scheduled to be sentenced on July 11, 2007. + + The Commission's civil enforcement action is pending in United States District Court in Massachusetts. + + For further information, please see: Litigation Release No. 19960 (January 8, 2007). + + + + + + SEC Complaint in this matter +--> + + +  + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2587.pdf b/raw/aaer/2007/AAER-2587.pdf new file mode 100644 index 0000000000000000000000000000000000000000..7b9e5e36019225efefb4425b95788f7dc45d455a Binary files /dev/null and b/raw/aaer/2007/AAER-2587.pdf differ diff --git a/raw/aaer/2007/AAER-2587.txt b/raw/aaer/2007/AAER-2587.txt new file mode 100644 index 0000000000000000000000000000000000000000..0de3ff911e77a430ec46a2b4c51779052bbd989f --- /dev/null +++ b/raw/aaer/2007/AAER-2587.txt @@ -0,0 +1,209 @@ + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55554 / March 29, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2587 / March 29, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12603 + +In the Matter of + +AMBER SCHATZ, CPA, + +Respondent. + + + +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE PROCEEDINGS +PURSUANT TO RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS + + + + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative proceedings be, and hereby are, instituted against Amber Schatz, CPA +(“Respondent” or “Schatz”) pursuant to Rule 102(e)(1)(ii) of the Commission’s Rules of Practice. +1 + +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, except as to the Commission’s jurisdiction over her and the subject matter of these +proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Public +Administrative Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, +Making Findings, and Imposing Remedial Sanctions (“Order”), as set forth below. + + +1 Rule 102(e)(1)(ii) provides, in pertinent part, that: + + The Commission may . . . deny, temporarily or permanently, the privilege of appearing or practicing before +it . . . to any person who is found . . . to have engaged in unethical or improper professional conduct. + +III. + + On the basis of this Order and Res pondent’s Offer, the Commission finds2 that: + +A. SUMMARY + + While employed by the aud iting firm PricewaterhouseCoopers (“PwC”), Texas-licensed +CPA Amber Schatz served as a senior associate on PwC’s audit teams that conducted the +independent audits of the 1998 and 1999 financial statements of Patterson-UTI, Inc. (“Patterson- +UTI”). During the 1999 audit, Schatz received a $40,500 personal loan from Patterson-UTI’s chief +financial officer (“CFO”) at the time. As a result of receiving the loan, which Schatz concealed +from PwC, Schatz engaged in improper professional conduct by failing to maintain strict +independence from the audit client as required under generally accepted auditing standards +(“GAAS”). + +B. RESPONDENT + + Amber Schatz, a Texas-licensed CPA, was employed by PwC from 1996 through 2002. +Schatz participated in PwC’s audits of the 1998 and 1999 financial statements of Patterson-UTI, a +public company based in Snyder, Texas. Currently, she is not employed. + +C. FACTS + +1. Schatz was a member of the PwC team that audited Patterson-UTI’s financial +statements for the fiscal years 1998 and 1999. During the 1999 audit, she served as a PwC senior +associate, conducting audit work at Patterson-UTI’s offices. As a senior associate, her duties +included, among other things, working with other PwC staff in planning the audit process, +reviewing certain audit work papers of subordinate associates, and participating in the testing of +Patterson-UTI’s accounting controls. + + 2. During the 1999 audit, Jonathan D. Nelson, Patterson-UTI’s CFO at the time, gave +Schatz a $40,500 personal check dated December 16, 1999. The check reflected the notation +“loan” in the memo block. Schatz did not execute a formal note, but ultimately paid off the loan in +April 2005 after completing 59 monthly installments of $850 each, which included annual interest +of 9%. Nelson resigned from Patterson-UTI in October 2005. +3 + +2 The findings herein are made pursuant to Resp ondent’s Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. + +3 On November 16, 2005, the United States District Court for the Northern District of Texas, Lubbock Division, +entered orders freezing Nelson’s assets and granting other relief in a Commission lawsuit against him. The +Commission alleged that he embezzled more than $69 million from Patterson-UTI and defrauded investors by, among +other things, falsifying Patterson-UTI’s financial statements and Commission filings over five years. SEC v. Jonathan +D. Nelson (Defendant), XIT Land & Energy, Inc., Chisum Travel Center, Ltd., Z8 Properties, Ltd., Three Stars +Aviation, LLC, and Chisum Coach, Ltd. (Defendants Solely for Purposes of Equitable Relief), Case No. 5-05CV0266- +C. (N.D. Tex., Lubbock Division, filed November 16, 2005). On October 10, 2006, Nelson was sentenced to 25 years +in prison by the same court in a related criminal case brought by the United States Attorney for the Northern District of +Texas. Neither case named Schatz or alleged misconduct against her. + + 2 + 3. On May 15, 2000, Schatz signed an independence-certification letter to PwC that +falsely stated that she had not received any loans from any Patterson-UTI officers during the 1999 +audit work. + + 4. At the time of the events describe d above, the applicable Commission auditor- +independence rule, Regulation S-X, Section 210.2-01, stated, in pertinent part: + + b. The Commission will not recognize any certified public accountant +or public accountant as independent who is not in fact independent . . . . + + c. In determining whether an accountant may in fact be not +independent with respect to a partic ular person, the Co mmission will give +appropriate consideration to all relevant circumstances, including evidence +bearing on all relationships between the accountant and that person or any +affiliate thereof, and will not confine itself to the relationships existing in +connection with the filing of reports with the Commission. +4 + + 5. GAAS requires auditors to maintain stri ct independence from their audit clients. +Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public +Accountants (“AICPA”), states, in pertinent part, that a “member in public practice shall be +independent in the performance of professional services.” Interpretation 101-1 of AICPA Rule +101 provides, among other things, that independence shall be considered impaired if, during the +period of the professional engagement, a member “had any loan to or from the client [or] any +officer or director of the client.” + + 6. Rule 102(e)(1)(ii) of the Commission’s Ru les of Practice provides, in pertinent part, +that the Commission may deny, temporarily or permanently, the privilege of appearing or +practicing before it in any way to any person who is found by the Commission after notice and +opportunity for hearing in the matter to have engaged in improper professional conduct. + +D. FINDINGS + +Based on the foregoing, the Commission finds that Schatz engaged in improper +professional conduct within the meaning of Rule 102(e)(1)(ii) of the Commission’s Rules of +Practice. + + +4 The current Regulation S-X, Rule 2-01(c)(1)(ii), explicitly prohibits loans or debtor/creditor relationships +between auditors and audit clients. This rule became effective May 7, 2001, however, after the events that form the +basis of this Order. + 3 +IV. + + In view of the foregoing, the Commission d eems it appropriate to impose the sanctions +agreed to in Respondent Schatz’s Offer. + + Accordingly, it is hereby ORDE RED, effective immediately, that: + + A. Schatz is denied the privilege of appe aring or practicing before the Commission as +an accountant. + + B. After one year from th e date of this order, Respondent may request that the +Commission consider her reinstatement by submitting an application (attention: Office of the +Chief Accountant) to resume appearing or practicing before the Commission as: + + 1. a preparer or reviewer, or a person responsible for the preparation or +review, of any public company’s financial statements that are filed with the Commission. Such +an application must satisfy the Commission that Respondent’s work in her practice before the +Commission will be reviewed either by the independent audit committee of the public company +for which he/she works or in some other acceptable manner, as long as she practices before the +Commission in this capacity; and/or + + 2. an independent accountant. Such an application must satisfy the +Commission that: + + (a) Respondent, or the public accounting firm with which she is +associated, is registered with the Public Company Accounting Oversight Board (“Board”) in +accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; + + (b) Respondent, or the registered public accounting firm with which +she is associated, has been inspected by the Board and that inspection did not identify any +criticisms of or potential defects in the respondent’s or the firm’s quality control system that +would indicate that the respondent will not receive appropriate supervision. + + (c) Respondent has resolved all di sciplinary issues with the Board, and +has complied with all terms and conditions of any sanctions imposed by the Board (other than +reinstatement by the Commission); and + + (d) Respondent acknowledges her responsibility, as long as +Respondent appears or practices before the Commission as an independent accountant, to +comply with all requirements of the Commission and the Board, including, but not limited to, all +requirements relating to registration, inspections, concurring partner reviews and quality control +standards. + +C. The Commission will consider an app lication by Respondent to resume appearing +or practicing before the Commission provided that her state CPA license is current and that she +has resolved all other disciplinary issues with the applicable state boards of accountancy. + 4 +However, if state licensure is dependent on reinstatement by the Commission, the Commission +will consider an application on its other merits. The Commission’s review may include +consideration of, in addition to the matters referenced above, any other matters relating to +Respondent’s character, integrity, professional conduct, or qualifications to appear or practice +before the Commission. + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y + 5 \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2588.txt b/raw/aaer/2007/AAER-2588.txt new file mode 100644 index 0000000000000000000000000000000000000000..bf7334bbcb880a162b92e5d9547e0524785e2f08 --- /dev/null +++ b/raw/aaer/2007/AAER-2588.txt @@ -0,0 +1,266 @@ + + + + + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55556 / March 29, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2588 / March 29, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12604 + + +In the Matter of + +ATLAS AIR WORLDWIDE +HOLDINGS, INC., + + + Respondent. + + + + +ORDER INSTITUTING CEASE-AND-DESIST +PROCEEDINGS, MAKING FINDINGS, AND +IMPOSING A CEASE-AND-DESIST ORDER +PURSUANT TO SECTION 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 + + +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 Atlas Air Worldwide Holdings, Inc. (“Atlas” 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, except as to the Commission’s jurisdiction over it and the subject matter of these +proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease- + 2 +and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order Pursuant to +Section 21C of the Securities Exchange Act of 1934 (“Order”), as set forth below. + +III. + + On the basis of this Order and Responde nt’s Offer, the Commission finds that: + +RESPONDENT + +1. Atlas is a Delaware corporation engaged in the business of providing air cargo and +related services to commercial airlines and others. Since 2000, Atlas’s principal executive offices +have been located in Purchase, New York. Atlas’s common stock has been publicly traded on the +Nasdaq Global Select Market since May 31, 2006, and has been registered with the Commission +pursuant to Section 12(b) of the Exchange Act since July 31, 2006. Atlas’s common stock was +previously registered with the Commission pursuant to Section 12(b) of the Exchange Act and was +traded on the New York Stock Exchange until September 9, 2003, when the Exchange suspended +trading in the stock. Atlas’s stock was delisted from the Exchange, and was also deregistered +under Section 12(b), as of November 28, 2003 due to Atlas’s failure to file current audited +financial statements and related factors. From November 28, 2003 through July 31, 2006, Atlas’s +common stock was, however, registered with the Commission under Section 12(g) of the +Exchange Act. On January 30, 2004, Atlas filed a petition under Chapter 11 of the Bankruptcy +Code. For the fiscal year ended December 31, 2003, Atlas reported a net loss of $100.9 million on +revenue of $1.38 billion. On July 27, 2004, Atlas’s then outstanding common stock was cancelled +and new common stock was issued to Atlas’s general unsecured creditors pursuant to the +reorganization plan. From September 9, 2003 through May 30, 2006, Atlas stock traded in the +over-the-counter market and was quoted in the Pink Sheets. + +FACTS + +2. As described below, Atlas violated the financial reporting, recordkeeping and +internal control provisions of Section 13 of the Exchange Act and related Rules due to its failure to +report accurately its financial results, maintain requisite accounting records and implement +adequate internal accounting controls.1 The relevant facts are as follows: + +1 Section 13(a) of the Exchange Act requires issuers whose securities are registered with +the Commission under the Exchange Act to file periodic reports with the Commission containing +such information as the Commission prescribes by rule, and the information contained in such +reports is required to be materially accurate. Exchange Act Rule 13a-1 requires registrants to file +annual reports on Form 10-K, and Rule 13a-13 requires issuers to file quarterly reports on Form +10-Q. Rule 12b-20 provides that these reports must contain, in addition to disclosures expressly +required by the pertinent statutes and rules, such other information as is necessary to ensure that +the statements made in the report are not, under the circumstances, materially misleading. +Section 13(b)(2)(A) requires registrants to make and keep books, records and accounts which, in +reasonable detail, accurately and fairly reflect transactions and dispositions of assets. Section +13(b)(2)(B) requires registrants to devise and maintain a system of internal accounting controls + 3 +Overview + + a. On October 16, 2002, Atla s issued a press release disclosing that there were +material inaccuracies in some of the financial results it had previously reported and that, as a result, +(i) a restatement of certain prior financial statements was required; and (ii) its financial statements +for the fiscal years ended December 31, 2000 (“FY 2000”) and 2001 (“FY 2001”) would be re- +audited. Atlas’s financial statements for FY 2000 and FY 2001 and certain interim periods were +materially inaccurate because Atlas, among other things, understated the expenses it incurred +during those periods for aircraft maintenance, excess and obsolete inventory, and doubtful accounts +receivable and overstated the value of its aircraft fleet. + + b. On December 12, 20 03, Atlas filed a current report on Form 8-K in which +Atlas disclosed that as a result of the adjustments needed to correct previously reported financial +statements, Atlas’s retained earnings as of December 31, 2001 decreased from the $185.1 million it +had previously reported to an accumulated deficit of $180.2 million. Atlas further disclosed that +adjustments were also required to correct financial results that Atlas had previously reported for the +quarters ended March 31, 2002 and June 30, 2002. Atlas was unable, however, to issue restated +financial statements for FY 2001 and FY 2000 or any other prior period, because Atlas lacked the +accounting records needed to re-audit those periods and to determine the specific prior period or +periods in which adjustments were needed. + + c. Atlas’s failure to report accurate ly its financial results for FY 2000, FY +2001 and the first two quarters of 2002 and its inability to restate its financial results in those +periods had three principal causes. First, numerous accounting records that Atlas was required to +maintain were never created or were discarded. Second, Atlas did not devise and implement an +adequate system of internal accounting controls. Third, Atlas did not account for an impairment of +the value of its aircraft fleet and expenses associated with aircraft maintenance, excess and obsolete +inventory and uncollectible accounts receivable in accordance with GAAP. As a result, the annual +and quarterly reports that Atlas filed during this period were materially false and misleading.2 + + +sufficient to provide reasonable assurances that transactions are recorded as necessary to permit +preparation of financial statements in accordance with generally accepted accounting principles +(“GAAP”) and to maintain accountability for assets. No showing of scienter is required to prove +violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20, 13a-1 and 13a- +13 thereunder. + +2 The periodic reports at is sue were filed before the effective date of the certification +requirements imposed on principal executive and financial officers of public companies by the +Sarbanes-Oxley Act. Those provisions took effect on August 29, 2002 and require the officers to +personally certify, among other things, that each periodic report filed thereafter is accurate in all +material respects and that the officers have established adequate internal controls, evaluated the +effectiveness of those controls during the relevant period and disclosed in the report and to the +board of directors their conclusions about the effectiveness of, and any significant deficiencies +in, the design and operation of the controls. + 4 +Impairment Of Aircraft Assets + + d. In its Form 10-Q for the second quarter of FY 2001, Atlas stated that as a +result of the global economic slowdown, it had removed six aircraft from its operating fleet and +designated them for sale. Atlas recorded a charge of $54.1 million that quarter to account for the +impairment in the value of those six aircraft. In the fourth quarter of FY 2001, Atlas recorded an +additional $44.9 million impairment charge on those same aircraft, purportedly due to a further +decline in global economic conditions and the adverse impact of the events of September 11, 2001 +on the air cargo industry. Nevertheless, Atlas did not properly consider at that time, in accordance +with GAAP, whether the rest of the aircraft and related equipment in its fleet were also impaired. +According to the Form 8-K it filed on December 12, 2003, Atlas lacked sufficient documentation +at the time it filed the Form 8-K to determine whether management had given any consideration to +whether the entire fleet was impaired as of December 31, 2001. As disclosed in the Form 8-K, the +information that was available at the time that Atlas filed its Form 10-K for FY 2001 demonstrated +that the value of Atlas’s entire fleet of aircraft was, in fact, impaired as of December 31, 2001. By +failing to recognize the impairment in the value of its entire fleet, Atlas understated its impairment +loss as of December 31, 2001 by at least $281.4 million. + +Aircraft Maintenance Expenses + + e. Atlas understated its aircraft ma intenance expenses during the relevant +period for two principal reasons. First, Atlas improperly capitalized and deferred certain repair +costs that should have been recognized as expenses in the period in which they were incurred. +Second, Atlas improperly calculated the expense incurred under so-called “power by the hour” +agreements for long-term engine maintenance services. Specifically, Atlas employed a modified +accrual accounting method to recognize its engine maintenance expenses that did not conform to +GAAP and that did not properly take into account costs which increased in the later years of the +maintenance contracts as the aircraft aged. In addition, the maintenance expense reserves that +Atlas established under its modified accrual method were improperly reduced, as Atlas used some +of those reserves to record expenses unrelated to aircraft maintenance. Moreover, Atlas failed to +maintain records supporting its accounting for aircraft maintenance expenses. For example, Atlas +did not maintain supporting documentation for scores of general ledger entries to engine +maintenance reserve accounts that offset expenses unrelated to maintenance. Atlas also lacked +procedures to prevent or even detect posting errors of this type, as accounting department staff +were permitted to post journal entries without any supporting documentation and without first +obtaining or recording management’s authorization. As a result of these deficiencies, Atlas +understated its maintenance expenses as of December 31, 2001 by a cumulative amount of at least +$115.4 million. +3 + +3 The amounts of this misstatement and those presented below in sub-paragraphs 2.f and +2.g are cumulative and reflect the aggregate impact on multiple prior reporting periods because, +as noted above, Atlas’s serious internal control and recordkeeping deficiencies render it unable to +quantify the impact of these errors on specific annual and quarterly reporting periods. The +cumulative amounts thus reflect the total estimated impact of these errors throughout 2000, 2001 +and any prior affected periods. + 5 +Excess And Obsolete Inventory + + f. Atlas’s inventory was overvalued during the relevant period because Atlas +did not properly account for the cost and reduced value of excess and obsolete inventory until the +latter part of 2002. Atlas failed to maintain documents accurately reflecting the acquisition, age, +average cost and usage of its inventory and lacked adequate systems and procedures for tracking +and valuing inventory. For example, the purchase price was recorded haphazardly, if at all, and +records documenting the cost, such as invoices, were often missing. Atlas’s recordkeeping and +internal control deficiencies prevented Atlas from determining when inventory became excess or +obsolete. Atlas’s inventory consisted largely of spare parts for its aircraft. Under GAAP, the cost +of these spare parts, while they are in active use, may be depreciated gradually over the expected +useful life of the aircraft for which they were acquired. When spare parts become obsolete, such as +when the FAA prohibits their further use, GAAP requires that the cost of the parts must be fully +expensed at that time and their value written down to scrap. Atlas failed to do so. When spare +parts remain on the shelf for a certain time without being used (e.g. 18 months), they are then +considered to be excess rather than active inventory and, under GAAP, must be written down to +the lower of their cost or market value. Atlas failed to do so. In fact, Atlas had no procedure at all +for determining when parts would be regarded as excess inventory for accounting purposes until +the latter part of 2002. Due to the foregoing, Atlas did not properly record the expenses associated +with excess or obsolete parts and the reported value of Atlas’s inventory was therefore inflated. As +of December 31, 2001, Atlas overstated the value of its inventory by at least $34.4 million. + +Allowance For Doubtful Accounts + + g. Atlas understated its bad debt expense during the relevant period because it +did not maintain accurate records of its doubtful accounts receivable or implement procedures for +tracking and estimating the collectibility of its accounts receivable. Specifically, Atlas failed to put +in place a procedure to estimate what percentage of its accounts receivable would not be paid and +to establish an appropriate allowance for those accounts. Contrary to GAAP, Atlas carried on its +books many accounts receivable at the full amount of the debt owed, without any offsetting +reserve, even though the accounts had been outstanding for substantial periods of time and were +uncollectible. As a result, Atlas understated its allowance for doubtful accounts as of December +31, 2001 by at least $17.7 million. + +Other Internal Control And Recordkeeping Deficiencies + + h. In addition to the specific instances described above, there were broader, +more systemic deficiencies in Atlas’s internal controls and recordkeeping practices. The lack of +key accounting records and controls made it impossible to determine, among other things, why +certain journal entries were posted to the general ledger or even the identity of the person or +persons responsible for making or directing such entries. Employees from outside the accounting +department were permitted to make accounting entries without approval from senior management +or the accounting department. Journal entry forms, where they existed, often contained nothing +more than vague descriptions of the reasons for the entries and were not accompanied by any +additional documentation to support the entries. Atlas also lacked proper procedures for the + 6 +retention and preservation of the accounting documents that were created. In fact, Atlas did not +establish a document retention policy until 2003. Some of Atlas’s accounting records may have +been lost when the company moved its accounting department from Colorado to New York in +2001, and Atlas failed to put in place adequate procedures to track the records during the move and +to ensure that they all arrived and could be located in New York. + + 3. By reason of the foregoing, Atlas violated Sections 13(a), 13(b)(2)(A) and +13(b)(2)(B) of the Exchange Act and Rules 13a-1, Rule 13a-13 and 12b-20 thereunder. + + 4. In determining to accept the Offer, th e Commission considered remedial acts +undertaken by Atlas and cooperation afforded the Commission staff. + +IV. + + In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondent Atlas’ Offer. + +Accordingly, it is hereby ORDERED that Respondent Atlas cease and desist from +committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A), +13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13 thereunder. + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y + + \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2590.txt b/raw/aaer/2007/AAER-2590.txt new file mode 100644 index 0000000000000000000000000000000000000000..5a939607acc57b5a9e2e9238868fc2521dd6aae3 --- /dev/null +++ b/raw/aaer/2007/AAER-2590.txt @@ -0,0 +1,186 @@ + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55568 / April 2, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2590 / April 2, 2007` + +ADMINISTRATIVE PROCEEDING +File No. 3-12605 + + +In the Matter of + +DANNY EDWARD MOUDY, + +Respondent. + + + +ORDER INSTITUTING CEASE-AND-DESIST +PROCEEDINGS, MAKING FINDINGS, AND +IMPOSING A CEASE-AND-DESIST ORDER +PURSUANT TO SECTION 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 + + +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 Danny Edward Moudy (“Moudy” 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, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease- +and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order Pursuant to +Section 21C of the Securities Exchange Act of 1934 (“Order”), as set forth below. + + 2 +III. + + On the basis of this Order and Res pondent’s Offer, the Commission finds1 that: + +Summary + + This matter arises out of certain improper accounting at UCAP, Inc. concerning its fiscal +year ended September 30, 2002. At all relevant times, Moudy was UCAP’s former chief executive +officer (“CEO”), and knew or should have known that UCAP overstated mortgage revenue during +fiscal year 2002. Specifically, Moudy caused UCAP to record only half of an adjustment +necessary to make the company’s financial statements comply with generally accepted accounted +principles (“GAAP”). Moudy knew or should have known that failing to record the full mortgage +revenue adjustment enabled UCAP to meet improperly a key financial covenant required to save +the company’s sole line of credit. + +Respondent + + 1. Moudy, 57, of Bent on, Arkansas, was UCAP’s CEO from approximately +November 2001 through May 2003, and again from approximately mid-October 2003 through +February 28, 2004. Moudy also served as UCAP’s chairman of the board from approximately +November 2001 through April 20, 2004. + +Other Relevant Entities + + 2 . U C A P , a Colorado corporation, operated a mortgage banking business until +it ceased operations on or about April 30, 2004. UCAP operated through its wholly-owned +subsidiary, United Capital Mortgage Corporation (“UCMC”). UCMC’s principal place of business +was in Aurora, Colorado. UCMC filed for bankruptcy protection on November 2, 2004. UCAP’s +common stock was registered with the Commission pursuant to Section 12(g) of the Exchange Act +from 1996 through August 23, 2005, and pursuant to Section 13(a) of the Exchange Act and Rules +13a-1 and 13a-13 thereunder, the company was obligated to file reports on Forms 10-KSB and +10-QSB during that time period. On August 23, 2005, the Commission revoked UCAP’s securities +registration pursuant to Section 12(j) of the Exchange Act. From July 2002 through August 23, +2005, UCAP’s common stock was quoted on www.pinksheets.com, a service of Pink Sheets LLC. +Prior to July 2002, it was quoted on the OTC Bulletin Board, a service of the NASDAQ Stock +Market, Inc. Neither UCAP nor UCMC have any current operations. + +1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding +on any other person or entity in this or any other proceeding. + + 3 +Background + +4. UCAP, through its operating subsidiary, UCMC, provided mortgage +banking services to consumers nationwide. The company’s mortgage revenue consisted of +mortgage origination fees (the fees earned when borrowers closed on the loans), and the gain or +loss on the sale of mortgages in the secondary market. The company’s revenue, therefore, was +contingent upon the volume of loans it placed and how quickly it could prepare mortgages for sale +in the secondary market. +5. In fiscal years ended September 30, 2002 and 2003, among other things, +UCAP planned to increase loan originations in order to increase revenue and the price of UCAP’s +common stock. UCAP’s mortgage business was dependent on UCMC’s single line of credit, +which funded the mortgages that were originated. Significant increases to the line of credit were +necessary to support UCAP’s growth. Through its sole lender, the available credit grew from +approximately $30 million in January 2002 to at least $125 million in September 2002. UCAP’s +lender required that certain financial covenants be met to maintain the line of credit. With respect +to fiscal year 2002, among other things, (a) UCAP’s subsidiary, UCMC, was required to maintain a +minimum $5 million tangible net worth; and (b) UCAP and UCMC were required to maintain +audited financial statements pursuant to GAAP. +Improper Mortgage Revenue Adjustment +6. As early as fiscal year ended September 30, 2001, UCMC had not been +recognizing mortgage revenue in accordance with GAAP. Specifically, UCMC had been +recognizing mortgage revenue at the time borrowers closed mortgage loans, rather than when loans +were sold in the secondary market as required by GAAP. UCAP’s external auditor stated that he +requested the company make an adjustment to UCAP’s consolidated financial statements for fiscal +year 2001 to correct the error. UCAP’s auditor was informed that UCAP was in the process of +purchasing a computer system that would enable UCMC to more easily track loans from +origination through sale in the secondary market, and therefore the revenue recognition problem +would be corrected in fiscal year 2002. On that basis, Moudy and others agreed to wait until fiscal +year 2002 to address the adjustment. Moudy and others failed, however, to take adequate action to +provide reasonable assurances in fiscal year 2002 that UCMC devised and maintained internal +controls sufficient to recognize mortgage revenue properly under GAAP while the company was +implementing the new computer system. +7. While conducting UCAP’s audit field work for the fiscal year ended +September 30, 2002, UCAP’s auditor determined that UCMC was continuing improperly to +recognize mortgage revenue. UCAP’s auditor informed Moudy that a $1.67 million adjustment to +revenue was necessary to make UCAP’s fiscal year 2002 financial statements comply with GAAP. +Moudy at first agreed that the full amount of the revenue error, or $1.67 million, would be recorded +in UCAP’s fiscal year 2002 consolidated financial statements in order to comply with GAAP. At +an October 22, 2002 board of directors meeting, Moudy discussed the change in accounting for +mortgage revenue. + 4 +8. Thereafter, at or about the time UCAP’s consolidated fiscal year 2002 +financial statements were being finalized, Moudy learned that UCMC might be in breach of the +lender’s $5 million minimum tangible net worth covenant. In or about early January 2003, Moudy +approved recording half of the required $1.67 million revenue adjustment in UCAP’s fiscal year +2002 financial statements and recording half in UCAP’s fiscal year 2003 financial statements as a +means of meeting the lender’s minimum tangible net worth covenant. +9. Moudy knew or should have known that failing to book the full adjustment +would not correct the GAAP error in fiscal year 2002. Moudy failed to inform UCAP’s board of +directors or audit committee that only half the revenue adjustment would be taken. +10. Moudy knew or should have known that recording only half of the required +$1.67 million revenue adjustment was in contravention to GAAP. On January 15, 2003, Moudy +caused UCAP’s fiscal year 2002 consolidated financial statements, included in UCAP’s Form 10- +KSB filed with the Commission, to include only half of the necessary $1.67 million revenue +adjustment. As a result, UCAP’s 2002 Form 10-KSB understated the company’s pre-tax loss by +$378,000 or seven percent. +11. Also on January 15, 2003, Moudy caused UCAP to issue an earnings +release for fiscal 2002. Moudy should have known that the release incorrectly reported $730,000 +in pre-tax income, excluding non-recurring restructuring charges, resulting in an overstatement of +107 percent. UCAP should have reported a pre-tax income, excluding non-recurring restructuring +charges, of $353,000. +Legal Discussion +12. Section 13(a) of the Exchange Act and Rule 13a-1 thereunder require all +issuers with securities registered under Section 12 of the Exchange Act to file annual reports with +the Commission on Form 10-K. These reporting requirements necessarily include the requirement +that the issuer supply accurate information. In addition, Rule 12b-20 requires that reports contain +such further material information as may be necessary to make the required statements, in light of +the circumstances under which they were made, not misleading. As a result of the conduct +described above, UCAP violated, and Moudy caused UCAP’s violations of, Section 13(a) of the +Exchange Act and Rules 12b-20 and 13a-1 thereunder, with respect to UCAP’s Form 10-KSB for +the fiscal year ended September 30, 2002. +13. Also as a result of the conduct described above, UCAP violated, and Moudy +caused UCAP’s violations of, Section 13(b)(2)(A) of the Exchange Act, which requires reporting +companies to make and keep books, records, and accounts which, in reasonable detail, accurately +and fairly reflect their transactions and dispositions of their assets, and Section 13(b)(2)(B), which +requires reporting companies to devise and maintain a system of internal accounting controls +sufficient to provide reasonable assurances that transactions are recorded as necessary to permit +preparation of financial statements in conformity with GAAP. + + 5 +IV. + + In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondent Moudy’s Offer. + + Accordingly, it is hereby ORDERED that: + + Respondent Moudy ceas e and desist from 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 and 13a-1 +thereunder. + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2592.txt b/raw/aaer/2007/AAER-2592.txt new file mode 100644 index 0000000000000000000000000000000000000000..c1f84269ccbb2ce654e9b44d642cbd0cdbc16f45 --- /dev/null +++ b/raw/aaer/2007/AAER-2592.txt @@ -0,0 +1,1402 @@ + + + + + + + + + + + + + + + + SEC.gov | Jimmy Lynn Bradley and Lesley Don Cole + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/500901","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Jimmy Lynn Bradley and Lesley Don Cole , Civ. No. 07-CV-00629-MSK-CBS (D. Colo.) + + SEC Settles with Former Chief Financial Officer and Outside Audit Partner for UCAP, Inc. + + The Securities and Exchange Commission ("Commission") today announced that it has filed a settled civil fraud action against UCAP, Inc.'s former chief financial officer Jimmy Lynn Bradley, a resident of Katy, Texas, and the former engagement partner from UCAP's former outside auditor Lesley Don Cole, a resident of Roland, Arkansas. The Commission's complaint, filed in the United States District Court for the District of Colorado, alleged that Bradley and Cole fraudulently caused UCAP to overstate revenue by recording only half of a revenue adjustment necessary to make the company's financial statements comply with generally accepted accounting principles ("GAAP") and by overstating the value of its real estate. Together, these actions enabled UCAP to meet falsely a key financial covenant required to save the company's sole line of credit. Additionally, the complaint alleged that Bradley and Cole caused UCAP to record fraudulently revenue from a real estate transaction with a related party and fail to record an expense for a settlement agreement between UCAP and a third party. As a result, UCAP's financial statements for the annual period ended September 30, 2002 understated the company's pre-tax net loss by over $1.8 million, or 26 percent, and were therefore false and misleading. + + The Commission's complaint further alleged that Bradley certified falsely UCAP's 2002 Form 10-KSB and filed it with the Commission on January 15, 2003. Moreover, the Commission's complaint alleged that Cole caused UCAP's outside auditing firm to issue an unqualified audit report that was included in UCAP's 2002 Form 10-KSB, which falsely stated that the audit had been performed in accordance with generally accepted auditing standards, and that the financial statements were free of material misstatements and were presented in conformity with GAAP. + + Without admitting or denying the Commission's claims, Bradley consented to the entry of an order permanently enjoining him from future violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13a-14 and 13b2-1 thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder. Further, Bradley consented to a bar from acting as an officer or director of any public company. The Commission did not seek a civil penalty against Bradley based on his demonstrated inability to pay. + + Additionally, Cole, without admitting or denying the Commission's claims, consented to the entry of an order permanently enjoining him from future violations of Section 10(b) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder, and from aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder. Cole further consented to pay a $25,000 civil penalty. + + In addition to the relief described above, Bradley and Cole each consented to the entry of an order in separate Commission administrative proceedings suspending them, pursuant to Rule 102(e) of the Commission's Rules of Practice, from appearing or practicing as accountants before the Commission with the right to apply for reinstatement after five years. + + See SEC Complaint in this matter . + + Related Actions + + On April 2, 2007, the Commission instituted settled cease-and-desist proceedings against Danny Edward Moudy, the former chief executive officer of UCAP, Inc. ( Exchange Act Rel. No. 55568; Accounting and Auditing Rel. No. 2590 ). + + On August 23, 2005, the Commission revoked the registration of UCAP, Inc. securities pursuant to Section 12 of the Exchange Act. ( Exchange Act Rel. No. 34-52322; Admin. Proc. File No. 3-11992 ). + + + + + + + SEC Complaint in this matter --> + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2593.txt b/raw/aaer/2007/AAER-2593.txt new file mode 100644 index 0000000000000000000000000000000000000000..5ee921efee2c63f27b99227b8cabe32a936b0085 --- /dev/null +++ b/raw/aaer/2007/AAER-2593.txt @@ -0,0 +1,118 @@ +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION + + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55587 / April 5, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2593 / April 5, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12609 + + : + : + : + In the Matter of : ORDER INSTITUTING + : A D M I N I S T R A T I V E P R O C E E D I N G S + MYRON F. OLESNYCKYJ, ESQ. : P URSUANT TO RULE 102(e) OF THE + : C O M M I S S I O N ’ S R U L E S O F + Respondent. : PRACTICE, MAKING FINDINGS, AND + : IMPOSING REMEDIAL SANCTIONS + : +____________________________________ : + + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate and in the +public interest that public administrative proceedings be, and hereby are, instituted against Myron +F. Olesnyckyj (“Respondent” or “Olesnyckyj”) pursuant to Rule 102(e)(3)(i) of the Commission’s +Rules of Practice.1 + +II. + + +1 Rule 102(e)(3)(i) provides, in relevant part, that: + + The Commission, with due regard to the public interest and without preliminary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . attorney . . . who has +been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal securities laws or of the rules and regulations +thereunder. + 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, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Section III.3 below, which are admitted, Respondent +consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) +of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions +(“Order”), as set forth below. + +III. + + On the basis of this Order and Responde nt’s Offer, the Commission finds that: + + 1. Myron F. Olesnyckyj, age 45 , is and has been an attorney licensed to practice in the +States of New York and New Jersey. He joined Monster Worldwide, Inc. (formerly known as TMP +Worldwide, Inc.) (“Monster”) as general counsel in 1994. Monster suspended him from his +position on September 19, 2006 and permanently terminated his employment on November 21, +2006. Olesnyckyj prepared and/or reviewed Monster’s periodic filings, proxy statements and +registration statements from at least 1997 through 2006. + +2. Monster Worldwide, Inc., formerly know n as TMP Worldwide, Inc., was, at all +relevant times, a Delaware corporation and parent company of Monster.com, the leading global +online careers and recruitment resource. Headquartered in New York with approximately 4,600 +employees in 35 countries, Monster is a member of the S&P 500 Index and the NASDAQ 100. At +all relevant times, Monster’s common stock was registered with the Commission pursuant to +Section 12(g) of the Exchange Act and traded on the NASDAQ National Market under the symbol +“MNST.” The Company’s initial public offering of shares of its common stock occurred on +December 12, 1996. + + 3. On March 26, 2007, a final judgment was entered against Olesnyckyj, permanently +enjoining him from violating Section 17(a) of the Securities Act of 1933 (“Securities Act”), +Sections 10(b), 13(b)(5) and 14(a) of the Exchange Act, and Rules 10b-5, 13b2-1, 13b2-2 and 14a- +9 thereunder, and for aiding and abetting violations of Section 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, in the civil action +entitled Securities and Exchange Commission v. Myron F. Olesnyckyj, Civil Action Number 07 +Civ. 1176 (HB), in the United States District Court for the Southern District of New York. +Olesnyckyj was also prohibited from acting as an officer or director of any issuer that has a class of +securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports +pursuant to Section 15(d) of the Exchange Act. + +4. The Commission’s complaint alleged that, among other things, that no later than +1997, Olesnyckyj and others engaged in a fraudulent scheme to grant undisclosed, in-the-money +options to himself and others, by backdating stock option grants to coincide with historically low +closing prices for Monster’s stock. Olesnyckyj also directed the issuance of options to employees +without obtaining approval from Monster’s Compensation Committee as required by the terms of + 2 +the company’s stock option plans and discarded documentation to prevent anyone from being able +to detect the fraud. Olesnyckyj’s fraudulent misconduct caused Monster, between fiscal year +1997 and fiscal year 2005, (i) to file materially false and misleading financial statements that +materially understated its compensation expenses and materially overstated its quarterly and +annual net income and earnings per share, and (ii) to make disclosures in its periodic filings and +proxy statements that falsely portrayed Monster’s options as having been granted at exercise +prices equal to the fair market value of Monster’s common stock on the date of the grant. +Olesnyckyj also misled Monster’s outside auditors in an attempt to conceal the scheme. + +IV. + + In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent Olesnyckyj’s Offer. + + Accordingly, it is hereby ORDERED, effective immediately, that: + + Olesnyckyj is suspended from appearing or practicing before the Commission as an +attorney. + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y + 3 \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2594.pdf b/raw/aaer/2007/AAER-2594.pdf new file mode 100644 index 0000000000000000000000000000000000000000..9576bf02fa15524d094b8981ea1a669678121778 Binary files /dev/null and b/raw/aaer/2007/AAER-2594.pdf differ diff --git a/raw/aaer/2007/AAER-2594.txt b/raw/aaer/2007/AAER-2594.txt new file mode 100644 index 0000000000000000000000000000000000000000..f2c1a5fa971047d087efc5ed6f9ba1fe83ae754f --- /dev/null +++ b/raw/aaer/2007/AAER-2594.txt @@ -0,0 +1,89 @@ +CORRECTED +UNITED STATES OF AMERICA + before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55603 / April 9, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2594 / April 9, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12610 +: +: +: +In the Matter of : ORDER INSTITUTING ADMINISTRATIVE +: PROCEEDINGS PURSUANT TO RULE +Lindsey P. Vinson, : 102(e) OF THE COMMISSION’S RULES OF +: PRACTICE, MAKING FINDINGS, AND +Respondent. : IMPOSING REMEDIAL SANCTIONS +: +: +____________________________________ : +I. +The Securities and Exchange Commission (“Commission” or “SEC”) deems it appropriate +and in the public interest that public administrative proceedings be, and hereby are, instituted +against Lindsey P. Vinson (“Respondent” or “Vinson”) pursuant to Rule 102(e)(3)(i) of the +Commission’s Rules of Practice.1 +1 Rule 102(e)(3)(i) provides, in relevant part, that: +The Commission, with due regard to the public interest and without preliminary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . attorney . . . who has +been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal securities laws or of the rules and regulations +thereunder. +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, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Section III.3. below, which are admitted, Respondent +consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) +of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions +(“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds that: +1. Vinson, age 47, of Fort Worth, Texas, is an attorney licensed in Texas. From +October 2003 through January 29, 2004, Vinson was president and chairman of the board of +directors of Moliris Corp. (“Moliris”). From January 29, 2004 through August 2005, Vinson +functioned as the de facto principal executive and principal financial officer of Moliris. +2. Moliris, now known as Digifonica International Corp.,2 is a Florida corporation +with its corporate offices, at relevant times, in Fort Worth, Texas. Moliris’s common stock is +registered with the Commission under Section 12(g) of the Exchange Act. Between October 2003 +and August 2005, Moliris was controlled by Vinson and Clyde R. Parks. Except for a brief period +between November 2003 and July 2004 in which Moliris manufactured corrugated boxes, it was +essentially a public shell company with little or no operations. +3. On December 6, 2006, the Commission filed a complaint against Vinson in SEC v. +Lindsey P. Vinson and Clyde R. Parks (Civil Action No. 3-06CV2240-D, USDC, N. D. Tx., Dallas +Div.). On December 11, 2006, the court entered a final judgment (“Judgment”) permanently +enjoining Vinson, by consent, from future violations of Sections 10(b) and 13(b)(5) of the +Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and aiding and abetting violations +of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and +13a-13 thereunder. Vinson was also ordered to pay $200,597 in disgorgement of ill-gotten gains, +plus prejudgment interest of $29,321, among other relief. Pursuant to the Judgment, Vinson was +also ordered to pay a civil penalty in the amount of $200,000, prohibited from acting as an officer +or director of any U.S. public company, and prohibited from participating in any penny stock +offerings. +4. The Commission’s complaint alleged that from about October 2003 through August +2005, Vinson, who had been previously enjoined by a federal court from violating the federal +Effective July 5, 2006, the company changed its name to “Digifonica International Corp.” For purposes of +this Offer, any reference to “Moliris” should also be construed as a reference to Digifoncia International Corp. +2 +2 +securities laws, with the assistance of Parks: (a) concealed Vinson’s control of Moliris, (b) +approved the filing of false and misleading Commission reports, and (c) in an attempt to profit +from his activities, arranged for Moliris’s stock to be listed and publicly traded on the OTC +Bulletin Board (“OTC-BB”) without disclosing his continuing role at Moliris, his SEC disciplinary +background and his prior bankruptcies. After having obtained the OTC-BB listing, Vinson +participated in the public release of false information regarding a change in Moliris’s line of +business and its business prospects. While engaging in the alleged misconduct, Vinson used +Moliris’s bank accounts to pay a variety of personal expenses. +IV. +In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent Vinson’s Offer. +Accordingly, it is hereby ORDERED, effective immediately, that Vinson is suspended +from appearing or practicing as an attorney before the Commission. + By the Commission. + N ancy M. Morris + S ecretary +3 diff --git a/raw/aaer/2007/AAER-2595.pdf b/raw/aaer/2007/AAER-2595.pdf new file mode 100644 index 0000000000000000000000000000000000000000..4f65502dc64368abd23e0469ddafcdd18fd1a607 Binary files /dev/null and b/raw/aaer/2007/AAER-2595.pdf differ diff --git a/raw/aaer/2007/AAER-2595.txt b/raw/aaer/2007/AAER-2595.txt new file mode 100644 index 0000000000000000000000000000000000000000..b99aee425053e7a9e3ae1284bd09324d28bbacc2 --- /dev/null +++ b/raw/aaer/2007/AAER-2595.txt @@ -0,0 +1,160 @@ + + + UNITED STATES OF AMERICA + before the + SECURITIES AND EXCHANGE COMMISSION + + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55622 / April 12, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2595 / April 12, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12615 + + : + : + : + In the Matter of : ORDER INSTITUTING ADMINISTRATIVE + : PROCEEDINGS PURSUANT TO RULE + JIMMY LYNN BRADLEY (CPA), : 102(e) OF THE COMMISSION’S RULES OF + : PRACTICE, MAKING FINDINGS, AND + Respondent. : IM POSING REMEDIAL SANCTIONS + : + : +____________________________________ : + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate and in the +public interest that public administrative proceedings be, and hereby are, instituted against Jimmy +Lynn Bradley (“Respondent” or “Bradley”) pursuant to Rule 102(e)(3)(i) of the Commission’s +Rules of Practice.1 + + + + +1 Rule 102(e)(3)(i) provides, in relevant part, that: + + The Commission, with due regard to the public interest and without preliminary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has +been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal securities laws or of the rules and regulations +thereunder. + 2 +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, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Section III.3. below, which are admitted, Respondent +consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) +of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions +(“Order”), as set forth below. + +III. + + On the basis of this Order and Respondent’s Offer, the Co mmission finds that: + +1. Bradley, age 44, is a resident of Katy , Texas. At all relevant times, he was a +certified public accountant (“CPA”) licensed in Arkansas. Bradley served as chief financial officer +of UCAP, Inc. (“UCAP”) from approximately March 2001 through May 2003 and again from +October 2003 through April 2004. Bradley also served as a UCAP director from October 30, 2003 +through April 20, 2004. + +2. At all relevant times, UCAP was a Colo rado corporation with its principal place of +business in Aurora, Colorado. UCAP operated a mortgage banking business until it ceased +operations on approximately April 30, 2004. UCAP's common stock was registered with the +Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 (“Exchange Act”) +from 1996 through August 23, 2005, and the company was required to file reports with the +Commission on Forms 10-KSB and 10-QSB. At all relevant times, UCAP’s common stock traded +in the Pink Sheets (on www.pinksheets.com, a service of Pink Sheets LLC). On August 23, 2005, +the Commission revoked UCAP’s securities registration pursuant to Section 12(j) of the Exchange +Act. + +3. On ______, 2006, the Commission filed a complaint against Bradley in SEC v. +Jimmy Lynn Bradley, et al., Civil Action No. 06-____, United States District Court for the District +of Colorado. On ______, 2006, the court entered an order permanently enjoining Bradley, by +consent, from future violations of Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b- +5, 13a-14 and 13b2-1 thereunder, and from aiding and abetting violations of Sections 13(a) and +13(b)(2) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder. The court further ordered +that Bradley be barred from acting as an officer or director of any issuer that has a class of +securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports +pursuant to Section 15(d) of the Exchange Act. + +4. The Commission’s complaint alleged, among other things, that Bradley knowingly +allowed UCAP fraudulently to overstate revenue by recording only half of a revenue adjustment +necessary to make UCAP’s financial statements comply with generally accepted accounting + 3 +principles (“GAAP”) and to overstate the value of real estate. Together, these machinations +enabled UCAP to meet falsely a key financial covenant required to save the company’s sole line of +credit. Additionally, Bradley knowingly allowed UCAP to record revenue from a real estate +transaction with a related party and fail to record an expense for a settlement agreement between +UCAP and a third party. Moreover, on January 15, 2003, Bradley certified falsely UCAP’s 2002 +Form 10-KSB and filed it with the Commission. As a result, UCAP’s financial statements for the +annual period ended September 30, 2002 understated the company’s pre-tax net loss by over $1.8 +million, or 26 percent, and were therefore false and misleading. + +IV. + + In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent Bradley’s Offer. + +Accordingly, it is hereby ORDERED, effective immediately, that: + +A. Bradley is suspended from appearing or practicing before the Commission as +an accountant. + + B. After five years from the date of th is order, Respondent may request that the +Commission consider his reinstatement by submitting an application (attention: Office of the +Chief Accountant) to resume appearing or practicing before the Commission as: + + 1. a preparer or reviewer, or a person responsible for the preparation or review, +of any public company’s financial statements that are filed with the Commission. Such an +application must satisfy the Commission that Respondent’s work in his practice before the +Commission will be reviewed either by the independent audit committee of the public company for +which he works or in some other acceptable manner, as long as he practices before the +Commission in this capacity; and/or + + 2. an independent accountant. Such an application must satisfy the +Commission that: + + (a) Respondent, or the public accounting firm with which he is +associated, is registered with the Public Company Accounting Oversight Board (“Board”) in +accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; + + (b) Respondent, or the registered public accounting firm with which he +is associated, has been inspected by the Board and that inspection did not identify any criticisms of +or potential defects in the Respondent’s or the firm’s quality control system that would indicate +that the Respondent will not receive appropriate supervision; + (c) Respondent has resolved all di sciplinary issues with the Board, and +has complied with all terms and conditions of any sanctions imposed by the Board (other than +reinstatement by the Commission); and + + 4 + (d) Respondent acknowledges his re sponsibility, as long as Respondent +appears or practices before the Commission as an independent accountant, to comply with all +requirements of the Commission and the Board, including, but not limited to, all requirements +relating to registration, inspections, concurring partner reviews and quality control standards. + + C. The Co mmission will consider an application by Respondent to resume +appearing or practicing before the Commission provided that his state CPA license is current +and he has resolved all other disciplinary issues with the applicable state boards of +accountancy. However, if state licensure is dependant on reinstatement by the Commission, +the Commission will consider an application on its other merits. The Commission’s review +may include consideration of, in addition to the matters referenced above, any other matters +relating to Respondent’s character, integrity, professional conduct, or qualifications to appear +or practice before the Commission. + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y + \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2603.txt b/raw/aaer/2007/AAER-2603.txt new file mode 100644 index 0000000000000000000000000000000000000000..0944b40b4308e4db6e56e61d06080dfac77902c4 --- /dev/null +++ b/raw/aaer/2007/AAER-2603.txt @@ -0,0 +1,1377 @@ + + + + + + + + + + + + + + + + SEC.gov | Richard D. Power, Edward Federman, and Richard J. "Skip" Heger + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501041","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Share sensitive information only on official, secure websites. + + + + + + + + + + + + + + + + + SEC homepage + + + + + + + Menu + + + + + + + + + + + + + + Close + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + Search Filings + + + + + + + + + Search Filings + + + + + + + + + Full Text Search + + + + + + Latest Filings + + + + + + Mutual Fund Search + + + + + + Variable Insurance Products Search + + + + + + SIC Codes + + + + + + CIK Lookup + + + + + + Public Dissemination Service (PDS) + + + + + + Search Assistance + + + + + + + + + + + + + Submit Filings + + + + + + + + + Submit Filings + + + + + + + + + EDGAR Filer Management Portal + + + + + + EDGAR Filing Portal + + + + + + Online Forms Management Portal + + + + + + EDGAR Next + + + + + + Forms Index + + + + + + Filer Support & Resources + + + + + + + + + + + + + Data & Research + + + + + + + + + Data & Research + + + + + + + + + Data Library + + + + + + Statistics & Data Visualizations + + + + + + Structured Data + + + + + + Investment Management Data + + + + + + Open Data at the SEC + + + + + + + + + + + + + Rules, Enforcement, & Compliance + + + + + + + + + + + + + + + + + + + + Rules & Regulations + + + + + + + + + Rulemaking Activity + + + + + + Submit Public Comments + + + + + + Staff Guidance + + + + + + No-Action, Interpretive, and Exemptive Letters + + + + + + Self-Regulatory Organization Rulemaking + + + + + + Public Petitions for Rulemaking + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + + + Litigation Releases + + + + + + Administrative Proceedings + + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + + Trading Suspensions + + + + + + Distributions to Harmed Investors + + + + + + Receiverships + + + + + + + + + + + + + + + + + Compliance + + + + + + + + + Examination Priorities + + + + + + Risk Alerts + + + + + + Compliance Outreach Program + + + + + + + + + + + + + + + + + + + + + + + Proposed Rules + + + + + + What's New + + + + + + Whistleblower Program + + + + + + + + + + + + + + + + + + + Featured Topics + + + + + + + + + Featured Topics + + + + + + + + + Crypto Task Force + + + + + + Cybersecurity + + + + + + Market Structure Analytics + + + + + + Saving and Investing for Military Personnel + + + + + + Saving and Investing for Teachers + + + + + + SEC-CFTC Harmonization Initiative + + + + + + Treasury Clearing Implementation + + + + + + + + + + + + + About + + + + + + + + + About + + + + + + + + + Mission + + + + + + Commissioners + + + + + + Divisions & Offices + + + + + + Division & Office Directors + + + + + + Advisory Committees + + + + + + Budget & Performance + + + + + + Reports & Publications + + + + + + Commission Votes + + + + + + Contact the SEC + + + + + + Careers + + + + + + + + + + + + + Submit a Tip or Complaint + + + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + More in this Section + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Richard D. Power, Edward Federman, and Richard J. "Skip" Heger + + + + + + + + + + + + Richard D. Power, Edward Federman, and Richard J. "Skip" Heger + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20096 / April 30, 2007 + + Accounting and Auditing Enforcement Release No. 2603 / April 30, 2007 + + SEC v. Richard D. Power, Edward Federman, and Richard J. "Skip" Heger , Civil Action No. 06-15343 (RWS) (S.D.N.Y. filed December 21, 2006) + + SEC Settles With Former Tyco Executive for Role in Accounting Fraud + + + + The U.S. Securities and Exchange Commission today announced that it had submitted to the United States District Court for the Southern District of New York a proposed settled Final Judgment as to Defendant Edward Federman, in the Commission's previously filed civil injunctive action against Federman and two other former executives of Tyco International Ltd., U.S. Securities and Exchange Commission v. Richard D. Power, Edward Federman, and Richard J. "Skip" Heger , Civil Action No. 06-15343 (RWS) (S.D.N.Y. filed December 21, 2006). The proposed settlement is based on the allegations in the Commission's complaint concerning Federman's involvement in fraudulent accounting practices at Tyco in violation of the federal securities laws. + + Without admitting or denying the allegations in the Commission's complaint, Federman consented to the entry of a final judgment that would permanently enjoin him from violating Rule 13b2-1 promulgated under the Securities Exchange Act of 1934 and from aiding and abetting violations of Sections 10(b), 13(a), and 13(b)(2)(a) of the Exchange Act and Exchange Act Rules 10b-5, 12b-20, 13a-1, and 13a-13. The proposed final judgment would also order Federman to pay disgorgement in the amount of $1,651,064, plus prejudgment interest thereon in the amount of $799,693.10, and a civil penalty in the amount of $200,000. Finally, pursuant to the proposed final judgment, Federman would be barred from serving as an officer or director of a public company for a period of five years. + + Edward Federman joined Tyco in 1983 as Assistant Corporate Controller. From February 1998 through April 1999, Federman was the Controller and Vice President of Finance at Tyco. From 1999 until his resignation in January 2001, Federman was the Executive Vice President and Chief Financial Officer of Tyco's Electronics division. + + The Commission's complaint alleges that Federman and his co-defendants inflated Tyco's publicly reported operating income and cash flow through the use of a sham "dealer connection fee" transaction utilized in Tyco's ADT Security Services, Inc. subsidiary from 1997 through 2002. During the period when Federman served as Corporate Controller, Tyco's independent accountant raised concerns about the transaction. In response to those concerns, Federman successfully defended and repackaged the sham transaction to better conceal its fraudulent nature. As a result, from Tyco's fiscal year ended September 30, 1998, through its fiscal quarter ended December 30, 2002, the dealer connection fee transaction improperly inflated Tyco's operating income and cash flow by hundreds of millions of dollars. The complaint further alleges that Federman assisted the inflation of Tyco's operating income by means of improper acquisition accounting and the misuse of accounting reserves. In one such instance, after Tyco's fiscal 1998 year-end books had been closed, Federman directed the reversal of reserves to offset a previously unanticipated $40 million compensation expense. + + Pursuant to the proposed final judgment, the disgorgement, prejudgment interest, and penalty would be paid into a court account, pursuant to the Fair Fund provisions of Section 308(a) of the Sarbanes-Oxley Act of 2002, for possible ultimate distribution to victims of the fraud. + + See Litigation Release No. 17722 (September 12, 2002); Litigation Release No. 17896 (December 17, 2002); Exchange Act Release No. 48328 (August 13, 2003); Litigation Release No. 19657 (April 17, 2006); Litigation Release No. 19678 (May 1, 2006); Litigation Release No. 19953 (December 21, 2006). + + + + +  + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Phillips + + + + + + + + + + + + Capitol Distributing, LLC and Terry M. Phillips + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20100 / May 2, 2007 + + Accounting and Auditing Enforcement Release No. 2604 / May 2, 2007 + + Securities and Exchange Commission v. Capitol Distributing, LLC and Terry M. Phillips , Civil Action +No. 1:07-CV-00798 (RMC) (D.D.C. May 2, 2007) + + In the Matter of Terry M. Phillips, Securities Exchange Act of 1934 Release +No. 34-55696 / May 2, 2007 + + + Video Game Distributor Capitol Distributing, L.L.C. Settles Charges for Aiding and Abetting Accounting Fraud by Take-Two Interactive Software, Inc.; Terry Phillips, an Owner of Capitol, Agrees to Pay a $50,000 Civil Penalty as Capitol's Controlling Person and Consents to an Antifraud Cease-and-Desist Order + + The Securities and Exchange Commission ("Commission") today announced that it filed a settled civil action in federal district court against video game distributor Capitol Distributing, L.L.C. ("Capitol") and one of its owners, Terry M. Phillips ("Phillips"). The Commission charged Capitol, a privately-owned, Virginia-based video game distributor, with aiding and abetting video game publisher Take-Two Interactive Software, Inc. ("Take-Two") in Take-Two's violations of the antifraud, reporting and recordkeeping provisions of the federal securities laws during fiscal years 2000 and 2001 through a fraudulent video game parking scheme. The Commission also charged Phillips with liability as a controlling person for Capitol's violations and instituted a settled administrative cease-and-desist order against Phillips, which found that Phillips was a cause of Capitol's violations. + + In its complaint filed today, the Commission alleged that Capitol aided and abetted Take-Two's violations of the antifraud, financial reporting and recordkeeping provisions of the federal securities laws by knowingly providing substantial assistance to Take-Two's fraudulent scheme to inflate reported revenue during its fiscal years 2000 and 2001. Specifically, the complaint alleges that Take-Two shipped to Capitol hundreds of thousands of video games, typically at the end of reporting periods, and fraudulently recorded those shipments as sales when, in actuality, Capitol only temporarily parked the games for Take-Two and did not intend to sell them. The complaint alleges that in furtherance of the scheme Take-Two twice provided funds to Capitol or another Phillips-owned entity known as Phillips Land Company ("PLC"), for transmission to Take Two to create the false appearance that Capitol or PLC were paying for the games. According to the complaint, Capitol in two instances returned the games to Take-Two under invoices falsely describing them as "purchases" of "assorted product." The scheme enabled Take-Two to report approximately $15 million in phantom revenue from four separate parking transactions with Capitol. + + Capitol, without admitting or denying the allegations in the complaint, consented to the entry of a final judgment permanently enjoining it from violating Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5, and from aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 13a-13 and 13b2-1. + + The complaint alleges that Phillips, as Capitol's founder, 20 percent owner, and principal operator is a control person of Capitol within the meaning of Section 20(a) of the Exchange Act. Phillips, without admitting or denying the allegations in the complaint, consented to entry of a final judgment ordering him to pay a civil money penalty of $50,000 as a control person of Capitol for its aiding and abetting violations of Sections 10(b), 13(a) and 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 10b-5, 12b 20, 13a-1, 13a-13 and 13b2-1. + + The settlements with Capitol and Phillips are subject to the approval of the United States District Court for the District of Columbia. + + In a related administrative proceeding, Phillips consented, without admitting or denying the Commission's findings, to the entry of a Commission order to cease and desist from committing or causing any violations and any future violations of Section 10(b) of the Exchange Act, and Exchange Act Rules 10b-5 and 13b2-1, and from causing any violations and any future violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1 and 13a-13. The Commission in its order found that Phillips and Take-Two began discussing Capitol's participation in the parking arrangement in July 2000. In October 2000, Take-Two discussed the first parking transaction with Phillips, asking Phillips if he had another company that Take Two could issue a purchase order to for the games in lieu of Capitol sending the games back as a return. Phillips mentioned PLC, then instructed a Capitol employee to work out the details with Take-Two. + + On June 9, 2005, the Commission filed and simultaneously settled civil charges against Take-Two and former and current members of senior management in connection with the parking scheme. See SEC v. Take-Two Interactive Software, Inc., et al., Civil Action No. 05-CV-5443 (DLC) (S.D.N.Y. 2005) (filed June 9, 2005), Litigation Release No. 19260 . + + The Commission's investigation in this matter is continuing. + + + + + + SEC Complaint in this matter , Administrative Proceeding + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + Administrative Proceedings Release + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2605.pdf b/raw/aaer/2007/AAER-2605.pdf new file mode 100644 index 0000000000000000000000000000000000000000..17adfdab2799105d00826011021a13f945e6a751 Binary files /dev/null and b/raw/aaer/2007/AAER-2605.pdf differ diff --git a/raw/aaer/2007/AAER-2605.txt b/raw/aaer/2007/AAER-2605.txt new file mode 100644 index 0000000000000000000000000000000000000000..c6d2beb6c03cbe04bd1f3275a09e324261437f8f --- /dev/null +++ b/raw/aaer/2007/AAER-2605.txt @@ -0,0 +1,241 @@ + + +UNITED STATES OF AMERICA +BEFORE THE +SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55696 / May 2, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2605 / May 2, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12627 + + + + : + : ORDER INSTITUTING CEASE-AND- +In the Matter of : DESI ST PROCEEDINGS, MAKING + : FINDINGS, AND IMPOSING A CEASE- + : AND-DESIST ORDER PURSUANT TO + Terry M. Phillips, : SECTION 21C OF THE SECURITIES + : EXCHANGE ACT OF 1934 + : +Respondent. : : +______________________________ + +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 Terry M. Phillips +(“Phillips” 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, except as to the Commission’s jurisdiction over him and +the subject matter of these proceedings, which are admitted, Respondent consents to the +entry of this Order Instituting Cease-and-Desist Proceedings, Making Findings, and +Imposing a Cease-and-Desist Order Pursuant to Section 21C of the Securities Exchange +Act of 1934 (“Order”), as set forth below. + + + 2 +III. +On the basis of this Order and Respondent’s Offer, the Commission finds1 that: +A. RESPONDENT +Phillips, 48, of Midlothian, Virginia, is the founder, 20 percent owner and +principal operator of Capitol Distributing, L.L.C. (“Capitol”) and the founder and 50 +percent owner of Phillips Land Company (“PLC”). +B. RELEVANT ENTITIES + 1. Capitol is a privately-owned video game distributor organized as a limited +liability company under the laws of the Commonwealth of Virginia. It was founded by +Phillips in 1999. During the relevant period, Capitol had approximately ten employees. + +2. PLC is a Virginia company 50 percent owned and principally operated by +Phillips, has no employees and, in the ordinary course of business, has no involvement in +the purchase, sale, or distribution of video games. + +3. Take-Two Interactive Softw are, Inc. (“Take-Two”) is a Delaware +corporation headquartered in New York, New York. Take-Two develops, markets and +publishes interactive entertainment software games for the personal computer as well as +video game consoles. Since July 31, 2006, Take-Two’s common stock has been +registered with the Commission pursuant to Section 12(b) of the Exchange Act and +currently trades on the NASDAQ NMS under the symbol “TTWO.” + +C. SUMMARY + + +Take-Two and certain of its officers committed numerous violations of the +anti-fraud, financial reporting and recordkeeping provisions of the federal securities laws +to inflate reported revenue during fiscal years 2000 and 2001.2 Phillips was a cause of +some of those violations which resulted from certain transactions between Take-Two, +Capitol and PLC. Specifically, in four separate transactions with Capitol during that +period, Take-Two fraudulently recorded as sales approximately $15 million in revenue + +1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not +binding on any other person or entity in this or any other proceeding. + +2 On June 1, 2005, the Commission authorized and simultaneously settled civil actions in +federal court against Take-Two and several present and former members of senior +management, obtaining injunctions, disgorgement, civil penalties, and officer and +director bars. The Commission also authorized, and simultaneously settled, an +administrative cease-and-desist proceeding against one officer and a Rule 102(e)(3) +administrative proceeding against the former Chief Financial Officer. + + 3 +from shipments of games to Capitol that Capitol parked and subsequently returned +without making any effort to sell. In two of the transactions, Capitol created invoices +falsely describing the returns as “purchases” of “assorted product” by Take-Two from +PLC. In those two transactions, Take-Two also provided the funds to Capitol or PLC that +those entities then used to cover checks they wrote to Take-Two to purportedly “pay” for +the games. + +Based on his participation in certain aspects of these transactions, Phillips was a +cause of Take-Two’s violations of Sections 10(b), 13(a) and 13(b)(2)(A) of the Exchange +Act and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-13 and 13b2-1. +3 +D. FACTS +1. From October 31, 2000 through at least July 31, 2001, Capitol accepted +several hundred thousand video games from Take-Two with the understanding that it +would temporarily warehouse or “park” the games until a subsequent Take-Two +reporting period, and then return the games to Take-Two. Take-Two improperly +recorded and reported approximately $15 million in revenue associated with these +parking transactions. +2. Phillips and Take-Two began discu ssing Capitol’s participation in the +parking arrangement in July 2000. In an e-mail dated July 25, 2000, Phillips explained to +two Capitol employees that “we can take whatever [Take-Two] needs to ship . . . [I]f it is +a huge amount we will need to find someplace to stick it . . . but it shouldn’t be a +problem.” +3. In October 2000, Take-Two discussed the first parking transaction with +Phillips. A Take-Two representative asked Phillips if he had another company that +Take-Two could issue a purchase order to for the games in lieu of Capitol sending the +games back as a return. Phillips mentioned PLC. Phillips instructed a Capitol employee +to work out the details with the Take-Two representative. + 4. On October 31, 2000, the last day of Take-Two’s fiscal year, Capitol +accepted shipment of 230,000 video games from Take-Two with the understanding that +Capitol would park them for a short time and then return the shipment to Take-Two. The +games shipped to Capitol were selected by Take-Two based on Take-Two’s warehouse +inventory at the time. Capitol had no input regarding the games it accepted. Take-Two +improperly recorded $5.4 million as revenue from the shipment – the most revenue from +a single sale that Take-Two had recognized up to that time. + + +3 Simultaneously with the issuance of this Order, Phillips, without admitting or denying +the allegations of the complaint, has consented to a judgment in an action filed against +Phillips and Capitol in the United States District Court for the District of Columbia +ordering him to pay a civil penalty in the amount of $50,000. + 4 + 5. Phillips knew that Capitol made no effort to sell the games. Instead, +Capitol returned all 230,000 games to Take-Two over the next two reporting periods. +When the games were returned, Capitol provided Take-Two with invoices that falsely +described the games as purchases of “assorted product” from Phillips’ company PLC. +Take-Two used those invoices to conceal in its books and records the fact that the +October 31, 2000 “sale” had been returned in its entirety. PLC had no employees, no +inventory, and did not distribute video games in the ordinary course of business. + 6. Take-Two provided Capitol or PLC with money to make purported +“payments” for the games to bolster the appearance that the shipments to Capitol were +legitimate sales. For example, on December 20, 2000, Take-Two wired $2,557,239 to +PLC. Six days later, PLC sent Take-Two a check for $2,557,137, purportedly in partial +payment for the games associated with the October 31, 2000 transaction. + 7. On February 28, 2001, Capitol accepted a second shipment of +approximately 175,000 video games from Take-Two. Take-Two improperly recorded the +transaction as a $4.6 million sale – second in revenue only to the October 31, 2000 +transaction in Take-Two’s history up to that time. All 175,000 games were subsequently +returned to Take-Two with invoices that again falsely described the return as a purchase +of “assorted product” from PLC. Capitol again used funds provided by Take-Two to +purportedly “pay” for the games. Take-Two wired Capitol $4,594,100 on April 26, 2001 +and Capitol sent Take-Two a check for the same amount the next day. + 8. On April 27, 2001, three days before the end of Take-Two’s second fiscal +quarter, Capitol accepted approximately 55,000 games from Take-Two. Take-Two +recorded $1.76 million as revenue from the purported sale. After the end of the quarter, +Capitol returned all these games to Take-Two. + 9. On July 31, 2001, the last day of Take-Two’s third fiscal quarter, Capitol +accepted a shipment of more than 85,000 games from Take-Two. Take-Two recorded +more than $3 million as revenue from the purported sale. After the end of the quarter, +Capitol returned all these games to Take-Two. +E. LEGAL ANALYSIS + +Section 21C(a) of the Exchange Act specifies that a respondent is a cause of +another’s violation if the respondent knew or should have known that his act or omission +would contribute to such violation. + +Section 10(b) of the Exchange Act and Rule 10b-5 thereunder proscribe a variety +of fraudulent practices. An issuer or individual may violate these provisions by either +intentionally or recklessly making materially false or misleading statements in connection +with the purchase or sale of securities. Basic, Inc. v. Levinson, 485 U.S. 224, 231-32 +(1988). To violate Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, a +defendant must act with scienter, Aaron v. SEC, 446 U.S. 680, 695, 701-02 (1980), which +the Supreme Court has defined as “a mental state embracing intent to deceive, + 5 +manipulate, or defraud.” Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n. 12 (1976). +Scienter of a company’s management is imputed to the company. See, e.g., SEC v. +Manor Nursing Centers, 458 F.2d 1082, 1089-96 (2d Cir. 1972). + +Take-Two violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder +by using the transactions with Capitol to materially inflate its operating results, and by +filing and releasing to the public periodic reports, registration statements and press +releases that were materially false and misleading, and that misrepresented Take-Two’s +financial condition. Based on his conduct described above, Phillips was a cause of Take- +Two’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. + +Section 13(a) of the Exchange Act and Exchange Act Rules 13a-1 and 13a-13 +thereunder require all issuers with securities registered under Section 12 of the Exchange +Act to file annual and quarterly reports on Forms 10-K and 10-Q respectively. Exchange +Act Rule 12b-20 requires that, in addition to the information expressly required to be +included in such reports, the issuer include such additional material information as may +be necessary to make the required statements, in light of the circumstances under which +they were made, not misleading. The obligation to file these periodic reports includes the +obligation to ensure that they are complete and accurate in all material respects. See, e.g., +SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1165 (D.C. Cir. 1978), cert. denied, 440 U.S. +913 (1979). No showing of scienter is required to establish violations of these provisions. +Id. at 1167. Information regarding the financial condition of a company is presumptively +material. SEC v. Blavin, 760 F.2d 706, 711 (6 +th Cir. 1985). + +Take-Two violated Section 13(a) of the Exchange Act and Exchange Act Rules +12b-20, 13a-1 and 13a-13 thereunder when, as a result of the parking transactions with +Capitol described above, it filed with the Commission materially false and misleading +annual reports on Forms 10-K for the fiscal years ending October 31, 2000 and October +31, 2001, and quarterly reports on Forms 10-Q for the quarters ending April 30, 2001 and +July 31, 2001, which contained inflated operating results. Based on his conduct +described above, Phillips was a cause of Take-Two’s violations of Section 13(a) of the +Exchange Act and Exchange Act Rules 12b-20, 13a-1 and 13a-13 thereunder. + +Section 13(b)(2)(A) of the Exchange Act requires issuers 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.” Exchange Act Rule 13b2-1 +prohibits direct or indirect falsification or causing falsification of books, records, or +accounts subject to Section 13(b)(2)(A). No showing of scienter is required to establish +violations of Exchange Act Section 13(b)(2)(A) (see SEC v. World-Wide Coin +Investments, Ltd., 567 F. Supp. 724, 749 (N.D. Georgia 1983)) or Exchange Act Rule +13b2-1 (see SEC v. McNulty, 137 F.3d 732, 740-41 (2d Cir. 1998)). + +Take-Two failed to make and keep accurate books, records and accounts with +respect to its transactions with Capitol. It also used those transactions to falsify its books +and records. Based on his conduct described above, Phillips was a cause of Take-Two’s +violations of Section 13(b)(2)(A) of the Exchange Act and Exchange Act Rule 13b2-1. + 6 +IV. + + In view of the foregoing, the Commission deems it appropriate to impose the +sanctions agreed to in Respondent Phillips’ Offer. + +Accordingly, it is hereby ORDERED that: + +Pursuant to Section 21C of the Exchange Act, Respondent Phillips shall +cease and desist from committing or causing any violations and any future +violations of Section 10(b) of the Exchange Act and Exchange Act Rules 10b-5 +and 13b2-1; and from causing any violations and any future violations of Sections +13(a) and 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 12b-20, +13a-1 and 13a-13. + +By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2609.txt b/raw/aaer/2007/AAER-2609.txt new file mode 100644 index 0000000000000000000000000000000000000000..63481a4735fb95ddb9a61418038543370fcccd8f --- /dev/null +++ b/raw/aaer/2007/AAER-2609.txt @@ -0,0 +1,1377 @@ + + + + + + + + + + + + + + + + SEC.gov | Gayle Spence Luacaw + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501131","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Gayle Spence Luacaw + + + + + + + + + + + + Gayle Spence Luacaw + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20114 / May 14, 2007 + + Accounting and Auditing Enforcement Release No. 2609 / May 14, 2007 + + SEC v. Gayle Spence Luacaw , Civil Action No. 07-cv-00037 (D.N.H.) + + Permanent Injunction and Order of Disgorgement Entered As To Gayle Spence Luacaw + + The Securities and Exchange Commission announced today that on May 10th the United States District Court for the District of New Hampshire entered a settled Permanent Injunction and Order of Disgorgement as to Gayle Spence Luacaw, and a final judgment on May 14, 2007. Pursuant to the settlement, Luacaw, without admitting or denying the allegations of the Commission's complaint, consented to an injunction against future violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1 and 13b2-2 thereunder; and from aiding and abetting any violation of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. Under the settlement, Luacaw also agreed to pay disgorgement plus prejudgment interest. + + According to the Commission's complaint, from March 2000 through December 2001, Luacaw, a former vice president for the Executive Office of the President for Enterasys Networks, Inc., participated in a company-wide scheme to fraudulently inflate revenues at Enterasys and its former parent company, Cabletron Systems, Inc., and thereby convince the market that Enterasys was a viable independent company with consistently strong revenue growth. + + Related Actions +Luacaw pled guilty to one count of conspiracy to commit securities fraud and cooperated with the U.S. Attorney's Office for the District of New Hampshire in the prosecution of U.S. v. Barber et al., Criminal No. 04-126 (D.N.H.). + + For further information, see LR-19998 (February 12, 2007). + + + + + + + + SEC Complaint in this matter --> + +   + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2610.txt b/raw/aaer/2007/AAER-2610.txt new file mode 100644 index 0000000000000000000000000000000000000000..a4313691d755dca6e57442bd81813511096cf610 --- /dev/null +++ b/raw/aaer/2007/AAER-2610.txt @@ -0,0 +1,1376 @@ + + + + + + + + + + + + + + + + SEC.gov | Gerald H. Levine and Marie A. Levine + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501176","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Levine and Marie A. Levine + + + + + + + + + + + + Gerald H. Levine and Marie A. Levine + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20124 / May 22, 2007 + + Accounting and Auditing Enforcement Release No. 2610 / May 22, 2007 + + SEC v. Gerald H. Levine and Marie A. Levine , Civil Action No. 99 CIV 02568 +(D.D.C.) (May 8, 2007) + + Court Enters Judgment of Securities Fraud Against Gerald and Marie Levine + + + + On May 8, 2007, the Honorable Henry H. Kennedy, U.S. District Judge for the District of Columbia, entered judgment against defendants Gerald H. Levine and Marie A. Levine in the Commission's litigation against them for violations of the federal securities laws. In addition to finding both Levines liable for securities fraud and other federal securities law violations, the Court held the defendants jointly and severally liable for disgorgement of $217,368.59 plus prejudgment interest and ordered them to pay, jointly and severally, a civil penalty of $200,000. The Court also enjoined the Levines for a period of ten years from violating the anti-fraud provisions of the federal securities laws, and barred each of them for a period of ten years from serving as an officer or director of a public company. + + The judgment followed a December 2006 hearing during which the Court heard evidence on what remedies should be imposed as a result of the October 2003 jury verdict that found that the defendants had fraudulently overstated the assets of C.E.C. Industries Corporation (CEC) and filed false annual and quarterly reports with the Commission. In his Findings of Fact and Conclusions of Law, Judge Kennedy stated, among other things, that "[t]he Levines undertook a complex scheme of stealth and concealment by which they defrauded investors and brought financial gain to themselves," and that they were the "undisputed kingpins" of the scheme. Judge Kennedy further stated the Levines "utterly failed to acknowledge their wrongdoing or show contrition." + + The Commission's complaint, filed on September 28, 1999, alleged that the Levines overstated CEC's assets in reports that they filed with the Commission for CEC's fiscal years 1996 and 1997. Gerald Levine was CEC's chief executive officer; his wife Marie was CEC's secretary-treasurer, and the company's principal financial officer. The complaint also alleged that the Levines, acting through another corporate entity, Wire to Wire Inc., profited from their fraud by selling CEC stock while they knew that they had overstated CEC's assets. In particular, the complaint alleged that the Levines overstated the value of two purported corporate assets: (1) a 9,000-acre tract of land in Tennessee that they claimed held 52 million tons of coal and substantial timber assets; and (2) forty one paintings by "Sky Jones," which they claimed had a value of $1.7 million. The Commission proved at trial that CEC (and its corporate affiliates) did not own the land and that the paintings were worth no more than $10,350. Previously, on September 11, 2001, CEC settled the Commission's financial fraud charges against the company, without admitting or denying the allegations, by consenting to the entry of a final judgment that included a permanent injunction. + + Judge Kennedy specifically found that Gerald and Marie Levine each violated Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5 and 13b2-1 thereunder, and Sections 17(a)(1), (2) and (3) of the Securities Act of 1933, and enjoined the Levines for a period of ten years from violating these provisions. The Court also barred the Levines for a period of ten years from serving as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, or that is required to file reports pursuant to Section 15(d) of the Exchange Act. + + For further background information, please see Litigation Release No. 18420 (October 21, 2003), Litigation Release No. 17139 (September 19, 2001) and Litigation Release No. 16299 (September 28, 1999). + + + + +  + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + The BISYS Group, Inc. + + + + + + + + + + + + The BISYS Group, Inc. + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20125 / May 23, 2007 + + Accounting and Auditing Enforcement Release No. 2611 / May 23, 2007 + + SEC v. The BISYS Group, Inc. , 07-Civ-4010 (KMK)(S.D.N.Y.) + + BISYS to Pay $25 Million to Settle Financial Reporting and Related Charges by SEC + + + + On May 23, 2007, the Securities and Exchange Commission filed a civil injunctive action in United States District Court for the Southern District of New York charging The BISYS Group, Inc., a leading provider of financial products and support services, with violating the financial reporting, books-and-records, and internal control provisions of the Securities Exchange Act of 1934. BISYS has agreed to settle the case, without admitting or denying the Commission's allegations, and has agreed pay approximately $25 million in disgorgement and prejudgment interest. + + The Commission's complaint, filed in federal court in Manhattan, alleges that from July 2000 through December 2003, former BISYS officers and employees engaged in a variety of improper accounting practices that resulted in an overstatement of the company's reported financial results for the fiscal years ended June 30, 2001, 2002, and 2003 by roughly $180 million. The improper accounting practices were primarily based in the company's Insurance Services division, but also occurred in other divisions of the company. + + The Commission's complaint alleges that the improper accounting practices were a product of a corporate focus by former management on meeting aggressive, short-term earnings targets and a lax internal control environment. + + Throughout the relevant period, the Insurance Services division was a major factor in the company's success in achieving its earnings targets. The division's finance department allegedly responded to the corporate focus on making numbers by engaging in improper accounting practices.   + + Although Insurance Services had grown rapidly through a series of acquisitions, during the relevant period, the company failed to adopt and implement adequate controls over the accounting function of the acquired companies as they were integrated. Among other things, the company lacked adequate controls for reconciling account balances or tracking receivables and lacked controls adequate to ensure that the assumptions used in estimating revenue and renewal commissions were valid.   + + With respect to Insurance Services, the complaint alleges that BISYS improperly recorded as its own revenue commissions earned by companies acquired by BISYS before they were acquired; failed adequately to reserve against a substantial aging receivable balance; improperly accounted for renewal and bonus commissions; and made other improper accounting entries that overstated revenue or reduced expenses. The Commission's complaint further alleges that BISYS also engaged in improper accounting practices in other divisions of the company. + The complaint alleges that the improper accounting practices within the Insurance Services division resulted in an overstatement of BISYS's reported pre-tax earnings by roughly $118 million for the fiscal years ended June 30, 2001, 2002, and 2003, and by 34.3%, 38.9%, and 20.6%, respectively, in each of those fiscal years. The improper accounting practices in BISYS's other divisions overstated the company's pre-tax earnings by an additional $60.9 million for the same period. + + The complaint alleges that as a result of these and other improper accounting practices, BISYS filed annual and quarterly reports with the Commission that included financial statements that were inaccurate and misleading. In addition, the company's overstated financial results were incorporated in annual reports to shareholders, press releases, and offering documents including registration statements. + + The complaint alleges that by engaging in this conduct, BISYS violated the financial reporting, books-and-records, and internal controls provisions of the Exchange Act. Specifically, the complaint alleges that BISYS violated 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. The complaint further alleges that BISYS received approximately $20 million in ill-gotten gains as a result of its issuance of convertible debt, stock, and options at prices that were inflated as a result of its violations. + + Without admitting or denying the Commission's allegations, BISYS has agreed to settle the charges by consenting to a permanent injunction against further violations of the relevant reporting, books-and-records, and internal controls provisions of the federal securities laws, and it has agreed pay disgorgement and prejudgment interest totaling approximately $25 million. + + + + + SEC Complaint in this matter + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2612.txt b/raw/aaer/2007/AAER-2612.txt new file mode 100644 index 0000000000000000000000000000000000000000..0f99a2c4188602b80bb77c6b77ee32209f45a03b --- /dev/null +++ b/raw/aaer/2007/AAER-2612.txt @@ -0,0 +1,1374 @@ + + + + + + + + + + + + + + + + SEC.gov | Arthur A. Goodwin + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501191","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. The link you have selected is located on another server. Please click on the OK button below to proceed to the selected site. 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Goodwin + + + + + + + + + + + + Arthur A. Goodwin + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20126 / May 23, 2007 + + Accounting and Auditing Enforcement Release No. 2612 / May 23, 2007 + + Securities and Exchange Commission v. Arthur A. Goodwin , Civil Action No. 02-11913-JTL (D. Mass.) + + The Commission announced today that a final judgment by consent was entered by the United States District Court for the District of Massachusetts against Arthur A. Goodwin, former senior vice-president of worldwide sales of Interspeed, Inc., a now-defunct North Andover, Massachusetts Internet equipment provider. The final judgment against Goodwin, age 45, of Plano, Texas, entered on May 21, 2007, permanently enjoins Goodwin from violating antifraud provisions of the federal securities laws and permanently bars him from serving as an officer or director of a public company. + + The Commission's Complaint, filed on September 30, 2002, alleges that during 2000, Goodwin, the company's senior vice president of world-wide sales, orchestrated a scheme to inflate Interspeed's revenue in order to meet analysts' revenue expectations and to boost his own bonus. The Complaint alleges that Goodwin arranged transactions containing secret side letters, arranged "round-trip" transactions in which funds were funneled to a customer to use to pay for Interspeed products, and forged a signature and falsified the terms of a contract. In November 2000, Interspeed filed amended Forms 10-Q with the Commission restating revenue for the first three quarters of fiscal year 2000. According to the Complaint, Interspeed's reported revenue for the period decreased 60% from $14.1 million to $5.4 million, and its net loss increased from $8.5 million to $12 million. According to the restatement, Interspeed had overstated its revenue by between 25% and 93% for each of the three affected filing periods. Interspeed's fraudulent quarterly reports were also incorporated by reference in a Form S-8 registration statement, filed with the Commission on August 24, 2000. + + To settle the Commission's charges, Goodwin consented, without admitting or denying the allegations of the Complaint, to entry of a final judgment permanently enjoining him from violations of Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1 and 13b2-2 thereunder and from aiding and abetting violations of Section 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. The judgment imposes a permanent officer and director bar. The judgment further orders that Goodwin is liable for disgorgement of his performance-based bonus of $70,500, plus pre-judgment interest of $30,021, but waives payment based on sworn representations by Goodwin in his statement of financial condition and other documents and information submitted to the Commission. + + In a related criminal proceeding, on June 9, 2006, Goodwin was convicted of eight counts of securities and wire fraud following a nine day jury trial prosecuted by the U.S. Attorney's office for the District of Massachusetts. On October 13, 2006, Goodwin was sentenced to serve a prison term of 30 months, followed by supervised release for three years. + + For further information, see Litigation Release No. 18758 (June 22, 2004), Litigation Release No. 18468 (November 17, 2003), Litigation Release No. 18180 (June 6, 2003), and Litigation Release No. 17758 (October 1, 2002). + + + + + + SEC Complaint in this matter --> + +   + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Nacchio, Robert S. Woodruff, Robin R. Szeliga, Afshin Mohebbi, James J. Kozlowski and Frank T. Noyes + + + + + + + + + + + + Joseph P. Nacchio, Robert S. Woodruff, Robin R. Szeliga, Afshin Mohebbi, James J. Kozlowski and Frank T. Noyes + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20138 / June 1, 2007 + + Accounting and Auditing Enforcement Release No. 2614 / June 1, 2007 + + SEC v. Joseph P. Nacchio, Robert S. Woodruff, Robin R. Szeliga, Afshin Mohebbi, James J. Kozlowski and Frank T. Noyes , Civ. No. 05-MSK-480 (CBS) (USDC D. Colorado). + + Court Enters Final Judgment Against Former Qwest Chief Financial Officer Robin R. Szeliga in Settled SEC Financial Fraud Action + + + + The Securities and Exchange Commission announced today that the United States District Court for the District of Colorado ("USDC of Colorado") entered a Final Judgment on May 30, 2007, in a settled action against Robin R. Szeliga, a resident of Littleton, Colorado, and a former chief financial officer of Qwest Communications International Inc. ("Qwest"). Szeliga, without admitting or denying the Commission's allegations, consented to the entry of the judgment that enjoins her from violations of Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13b2-1, and 13b2-2 thereunder, and aiding and abetting violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder; directs her to pay $226,135 of disgorgement, plus $100,917 of prejudgment interest, and a $250,000 civil penalty; and prohibits her from acting as an officer or director of a public company. Szeliga's misconduct occurred when she was Qwest's senior vice president of financial planning and analysis and then chief financial officer. + + According to the SEC's Complaint filed in the USDC of Colorado in March 2005, from at least April 1, 1999 through March 31, 2002, Szeliga and others at Qwest engaged in a massive financial fraud that hid from the investing public the true source of the company's revenue and earnings growth. The complaint alleged that to meet aggressive targets for Qwest's revenue and earnings growth, Qwest fraudulently and repeatedly relied on immediate revenue recognition from one-time sales of assets known as "IRUs" and certain equipment, while falsely claiming to the investing public that the revenue was recurring. The complaint also alleged that Szeliga and others fraudulently and materially misrepresented Qwest's performance and growth to the investing public, failed properly to account for IRU sales transactions in Qwest's financial statements, and caused the company to report falsely approximately $3 billion in revenue. The complaint also alleged that Szeliga and others failed to make required accounting disclosures about IRUs to the investing public. In addition, the complaint alleged that, to meet revenue targets, Szeliga and others caused the manipulation of revenue associated with Qwest Dex, formerly a wholly-owned subsidiary of Qwest. Additionally, the complaint alleged that Szeliga fraudulently lowered liabilities related to employee vacations to increase artificially Qwest's earnings to meet revenue and growth targets. The complaint further alleged that Szeliga sold Qwest stock knowing that Qwest had issued materially false information to the investing public in violation of the insider trading prohibition of the securities laws. + + In addition, the Commission today instituted an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions to which Szeliga consented that suspends Szeliga from appearing or practicing before the Commission as an accountant. + + The litigation against the remaining five defendants named in the Commission's complaint is continuing. + + For additional information on related actions, see Litigation Release No. 20088 (April 24, 2007), Litigation Release No. 19313 (July 26, 2005), Litigation Release No. 19136 (March 15, 2005), Litigation Release No. 19134 (March 15, 2005), Sec. Exch. Act Rel. No. 34-51373 (March 15, 2005), Litigation Release No. 19135 (March 15, 2005), Sec. Exch. Act Rel. No. 34-51375 (March 15, 2005), Sec. Exch. Act Rel. No. 34-51374 (March 15, 2005), Litigation Release No. 18936 (October 21, 2004), Litigation Release No. 18800 (July 27, 2004), Litigation Release No. 18754 (June 21, 2004), Litigation Release No. 18755 (June 21, 2004), Litigation Release No. 18374 (September 29, 2003), and Litigation Release No. 17996 (February 25, 2003). + + + + + SEC Complaint in this matter ; Administrative Proceeding No. 34-55842 + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + Administrative Proceedings Release + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2615.txt b/raw/aaer/2007/AAER-2615.txt new file mode 100644 index 0000000000000000000000000000000000000000..d3277a9a0f10621e6c0093b2eb74a05b23f5f703 --- /dev/null +++ b/raw/aaer/2007/AAER-2615.txt @@ -0,0 +1,119 @@ + UNITED STATES OF AMERICA + before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55887 / June 8, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2615 / June 8, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12655 + + : + : + : +In the Matter of : ORDER INSTITUTING ADMINISTRATIVE + : PROCEEDINGS PURSUANT TO RULE + RAYMOND L. MATHIASEN, CPA : 102(e) OF THE COMMISSION’S RULES OF + : PRACTICE, MAKING FINDINGS, AND + Respondent. : IMPO SING REMEDIAL SANCTIONS + : + : +____________________________________ : + + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate and in the +public interest that public administrative proceedings be, and hereby are, instituted against +Raymond L. Mathiasen (“Respondent” or “Mathiasen”) pursuant to Rule 102(e)(3)(i) of the +Commission’s Rules of Practice.1 + + + + + + +1 Rule 102(e)(3)(i) provides, in relevant part, that: + + The Commission, with due regard to the public interest and without preliminary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has +been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal securities laws or of the rules and regulations +thereunder. + 2 +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, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Section III.3. below, which are admitted, Respondent +consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) +of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions +(“Order”), as set forth below. + +III. + + On the basis of this Order and Respondent’s Offer, the Co mmission finds that: + + 1. Mathiasen is a resident of Los A ngeles, California and was the former +chief accounting officer of Tenet Healthcare Corporation (“Tenet”). Mathiasen joined Tenet +(then known as National Medical Enterprises) in 1985 as a vice president in its accounting +department. He became Tenet’s chief accounting officer in March 1996. He remained in that +position until at least November 2002. Mathiasen retired from Tenet in April 2004. Mathiasen +has been licensed as a CPA in California since 1969. His license is currently inactive. + 2. Tenet is a Nevada corporation with its principal executive offices in Dallas, +Texas. During the relevant time period, Tenet maintained its principal executive offices in Santa +Barbara, California. Tenet is one of the largest publicly traded healthcare companies in the United +States. + + 3. On April 2, 2007, the Commission filed a complaint against Mathiasen in +SEC v. Tenet Healthcare Corp., et al., in the United States District Court for the Central District of +California (the “Court”) (Civil Action No. CV 07-2144 RGK (AGRx)). On April 16, 2007, the +Court entered a Final Judgment Of Permanent Injunction And Other Relief Against Defendant +Raymond L. Mathiasen (“Judgment”) which (a) permanently enjoins Mathiasen from future +violations of Section 17(a) of the Securities Act of 1933 (the “Securities Act”) and Section 10(b) +of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rules 10b-5 and 13b2-1 +thereunder, and aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) of the Exchange +Act, and Rules 12b-20, 13a-1, and 13a-13 promulgated thereunder; (b) orders Mathiasen to pay $1 +in disgorgement and a $240,000 civil penalty; and (c) prohibits Mathiasen from acting as an officer +or director of any issuer that has a class of securities registered pursuant to Section 12 of the +Exchange Act, or that is required to file reports pursuant to Section 15(d) of the Exchange Act for a +period of five years. Mathiasen consented to the entry of the Judgment without admitting or +denying any of the allegations in the complaint. + + 4. The Commission alleged that Math iasen participated in a fraudulent +scheme, in which Tenet made misleading disclosures in the Form 10-K that it filed with the +Commission for its year ended May 31, 2002 and in the Form 10-Q that it filed with the + 3 +Commission for Tenet’s first quarter of its fiscal year 2003 ending August 30, 2002. Mathiasen +signed each filing and substantially participated in the preparation of these filings. Mathiasen also +knew, or was reckless in not knowing, that each filing was misleading because it failed to disclose +the material impact that Tenet’s increases in gross charges was having on the company’s Medicare +outlier revenue, and thereby on its earnings. The complaint further alleged that Mathiasen +authorized improper manual adjustments to Tenet’s contractual allowance reserve accounts from +fiscal year 2000 through fiscal year 2003, in violation of Generally Accepted Accounting +Principles. As a result of Mathiasen’s conduct, Tenet had to restate its financial statements from +fiscal year 2000 through fiscal year 2004. + +IV. + + In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent’s Offer. + +Accordingly, it is hereby ORDERED, effective immediately, that: + +Mathiasen is suspended from appearing or practicing before the Commission as an +accountant. + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2616.pdf b/raw/aaer/2007/AAER-2616.pdf new file mode 100644 index 0000000000000000000000000000000000000000..5274d98f4f9f911123e706b828b772a911dca29f Binary files /dev/null and b/raw/aaer/2007/AAER-2616.pdf differ diff --git a/raw/aaer/2007/AAER-2617.txt b/raw/aaer/2007/AAER-2617.txt new file mode 100644 index 0000000000000000000000000000000000000000..1af68e5d24b52b5b6befb650b609b74596757219 --- /dev/null +++ b/raw/aaer/2007/AAER-2617.txt @@ -0,0 +1,1391 @@ + + + + + + + + + + + + + + + + SEC.gov | Tom Shanahan and Clem Hannon + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501341","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Tom Shanahan and Clem Hannon + + + + + + + + + + + + Tom Shanahan and Clem Hannon + + + + + + + + + + + + + + + + + + + NOTE: On January 13, 2010, the United States District Court for the District of Minnesota granted defendants' motions for summary judgment, dismissing the case with prejudice. + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20156 / June 18, 2007 + + Accounting and Auditing Enforcement Release No. 2617 / June 18, 2007 + + SEC v. Tom Shanahan and Clem Hannon , Civil Action No. 07-2879-JNE-SRN (D. Minn.) filed June 15, 2007 + + SEC Files Financial Fraud Action Against Two Irish Citizens for Their Scheme to Defraud + + + + The Securities and Exchange Commission today announced that on June 15, 2007, it filed a Complaint in the U.S. District Court for the District of Minnesota against two former senior officers of Zomax Limited (Zomax Ireland), the Irish subsidiary of Zomax, Inc. (Zomax), a former U.S. public corporation that was based in Plymouth, Minnesota. The Commission's Complaint alleges that from the end of 2003 through 2004, Tom Shanahan (Shanahan), the former General Manager of Zomax Limited and Clem Hannon (Hannon), the former Financial Controller of Zomax Ireland, engaged in a fraudulent scheme to artificially inflate the financial results of Zomax Ireland by manipulating certain accounting entries and financial records to hide the declining performance of Zomax Ireland. The Complaint seeks injunctive relief against Shanahan and Hannon, as well as the imposition of an officer and director bar. + + The Complaint alleges that Shanahan and Hannon directed one of Zomax Ireland's financial accountants to conceal Zomax Ireland's losses by making false journal entries to overstate the sales accrual account, to capitalize spare machine parts that should have been expensed, and to understate accruals for employee holiday pay. The Complaint further alleges that Shanahan and Hannon submitted false Zomax Ireland financial information to Zomax. In addition, they sent false site certifications to Zomax, which Zomax required in order to fulfill its obligations under the Sarbanes-Oxley Act. The Complaint alleges that Shanahan and Hannon's fraudulent scheme caused Zomax to misstate its financial statements for the first three quarters of 2004. The Complaint also alleges that Shanahan and Hannon's fraudulent accounting at Zomax Ireland had a material effect on Zomax's consolidated quarterly financial statements during the first three quarters of 2004. On March 31, 2005, Zomax filed its Form 10-K for 2004, which restated its financial statements for the first three quarters of 2004. The restatement, caused primarily by Shanahan and Hannon's fraudulent accounting, negatively impacted Zomax's previously reported quarterly results for 2004. For the first quarter of 2004, Zomax previously reported a net loss of $981,000; the restatement increased this net loss by $565,000 to $1,546,000. For the second quarter of 2004, Zomax previously reported net income of $1,252,000; the restatement decreased net income for this period by $718,000 to $534,000. For the third quarter of 2004, Zomax previously reported a net loss of $5,497,000; the restatement increased this net loss by $540,000 to $6,037,000. + + The Complaint alleges that Shanahan and Hannon committed fraud in connection with the purchase and sale of securities, in violation of Sections 10(b) of the Securities and Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The Complaint also alleges that Shanahan and Hannon violated Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder by knowingly circumventing Zomax's system of internal accounting controls, knowingly falsifying Zomax Ireland's books, records and accounts, and as a result, aided and abetted Zomax's violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. + + + + + SEC Complaint in this matter + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Forman, et al. + + + + + + + + + + + + Forman, et al. + + + + + + + + + + + + + + + + + + + CORRECTED + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20164 / June 22, 2007 + + Accounting and Auditing Release No. 2622 / June 22, 2007 + + SEC v. Forman, et al. , United States District Court, District of Massachusetts, Civil Action No.: 07-11151 (RWZ) + + Commission Charges Former CFO, Controller, and Director of Finance at Massachusetts Technology Company + + + + The Securities and Exchange Commission announced that it had filed a civil fraud action in Massachusetts federal court against Richard J. Westelman and Steven Forman, the former CFO and controller of Speechworks International, Inc. (now a part of Nuance, Inc.). The Commission charged that Westelman, a resident of Scituate, Massachusetts, and Forman, a resident of Chelmsford, Massachusetts, engaged in a fraudulent scheme to inflate Speechworks' revenues and misstate other important financial metrics so as to deceive investors as to the company's true financial condition. The Commission also charged Arthur Haberman, Speechworks' former director of finance, with violating and aiding and abetting Speechworks' violations of various books and records provisions of the federal securities laws. Both Westelman and Haberman have agreed to settle with the Commission without admitting or denying the allegations in the complaint. Westelman agreed to the entry of an order that enjoins him from future violations of the antifraud and books and records provisions of the securities laws, imposes a permanent officer and director bar, and requires payment of a $100,000 civil penalty. Haberman agreed to the entry of an order that enjoins him from future violations of the books and records provisions of the securities laws and requires payment of a $25,000 civil penalty. The Commission's action against Forman, in which it is seeking injunctions, an officer and director bar, and a civil penalty, is pending in the U.S. District Court for the District of Massachusetts. + + The Commission's complaint, dated June 21, 2007, alleges that from at least 2001 through at least 2003, Westelman and Forman engaged in a fraudulent scheme to inflate Speechworks' revenues and misstate other key financial information. According to the complaint, Westelman negotiated and approved a series of transactions between Speechworks and one of its key resellers, Intervoice, Inc., that called for the reseller to make royalty payments prior to its shipment of software to end customers. For one transaction, the complaint alleges Westelman requested Intervoice to provide falsified documents that allowed him to improperly recognize as revenue a $900,000 cash payment Intervoice made in return for amending a warrant Speechworks had previously issued to Intervoice. For another transaction, the complaint alleges that Westelman and Forman schemed to recognize as revenue $2 million in prepayments to Speechworks, even though they knew the deal was not properly documented and did not otherwise qualify for revenue recognition under Speechworks' policies and GAAP. The complaint further claims that Westelman and Forman purposefully misled Speechworks' external auditors about the terms of the deal and, among other things, permitted the auditors to rely on documents that they knew to be false and misleading. The complaint also alleges that Westelman helped Intervoice improperly recognize revenue. Finally, the complaint alleges that Haberman improperly recorded Intervoice's royalty prepayments as revenue in the company's books and records. + + The complaint alleges that through their conduct, Westelman and Forman variously violated, or aided and abetted Speechworks' violations of, Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, aided and abetted Speechworks' violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder; and Westelman also aided and abetted Intervoice's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and Haberman violated Rule13b2-1 of the Exchange Act and aided and abetted Speechworks' violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. + + In a related proceeding, the Commission filed a civil injunctive action against Rob Roy J. Graham, Intervoice's former CFO. Graham has agreed to settle with the Commission without admitting or denying the allegations in the complaint. For further information, see Litigation Release No. 20163 + + A copy of the Commission's complaint is attached. + + + + + SEC Complaint in this matter + + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Collins + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501391","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Collins + + + + + + + + + + + + Kevin B. Collins + + + + + + + + + + + + + + + + + + + CORRECTED + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20166 / June 25, 2007 + + Accounting and Auditing Enforcement Release No. 2624 / June 25, 2007 + + SEC v. Kevin B. Collins , Civil Action No. 3:07-0676 (M.D. Tenn.) (filed June 25, 2007) + + In the Matter of International Business Machines Corporation , Exchange Act Rel. No. 34-55954, Accounting and Auditing Enforcement Rel. No. 2623 (June 25, 2007) + + SEC Files Settled Actions Against Kevin B. Collins and IBM for Assisting in Dollar General Corporation's Accounting Fraud + + + + The Securities and Exchange Commission today announced the filing of a settled civil action against Kevin B. Collins, an employee of International Business Machines Corporation (IBM), for aiding and abetting Dollar General Corporation's commission of accounting fraud. The Commission filed the civil action against Collins in the United States District Court for the Middle District of Tennessee. As set forth in the Commission's complaint, Collins assisted Dollar General's commission of accounting fraud through a sham transaction that was designed to achieve a particular accounting result for Dollar General. Also today, the Commission instituted a settled cease-and-desist proceeding against IBM for its role in the Dollar General fraud and for IBM's own books and records violations. + + According to the Commission's complaint, in 1999, IBM and Dollar General agreed that Dollar General would lease new electronic cash registers from IBM to replace Dollar General's old registers. As originally planned, Dollar General would phase out the old registers and purchase the new IBM equipment over a multi-year period. As alleged in the Commission's complaint, in the second half of 2000, IBM, through Collins, instead suggested that Dollar General accelerate the roll-out of new IBM equipment by leasing for approximately $10 million all of the new equipment by the end of 2000. This would have the result of increasing IBM's revenue for fiscal year 2000, as well as increasing Collins' bonus compensation for that period. As alleged by the Commission, Dollar General initially rejected the proposal, however, due to an accounting problem. Specifically, if Dollar General replaced all of the Omron equipment, it would be required to write off the book value of that equipment as an expense. This "book loss" problem, as it became known, in turn, would have a negative impact on Dollar General's earnings for its fiscal year 2000. + + The Commission further alleges in its complaint that IBM, through Collins, devised a way to solve Dollar General's "book loss" problem. Specifically, Collins proposed that IBM would purchase Dollar General's old cash registers for approximately $11 million. As alleged, by selling the equipment at that price, Dollar General would avoid most of the negative consequences of having to write off the book value of the equipment that would have occurred if it simply replaced the old registers with the new IBM equipment. According to the Commission's complaint, the proposed "purchase" was not a bona fide transaction because, among other reasons, IBM's purchase price for Dollar General's old cash registers was repaid to IBM by an offsetting increase in the amount that Dollar General was to pay for the new IBM equipment. In addition, although IBM agreed to buy the Omron equipment for more than Dollar General was going to pay for the new IBM registers, IBM and Collins knew that the old cash registers were worthless to IBM, IBM intended to destroy the equipment, and ultimately IBM never took possession of any of the sales registers. As alleged, IBM nevertheless engaged in the "purchase" and Dollar General removed the old cash registers from its books and minimized the negative impact on its earnings in fiscal year 2000. + + The Commission's complaint alleges that, as a result of his conduct, Collins aided and abetted Dollar General's violations of Sections 10(b), 13(a), and 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 10b-5, 12b-20 and 13a-11. Collins has agreed, without admitting or denying the allegations in the complaint, to the entry of a final judgment permanently enjoining him from aiding and abetting violations of these provisions. In addition, the final judgment orders Collins to pay $95,000, comprising $48,769 in disgorgement, $21,231 in prejudgment interest and a civil penalty of $25,000. Collins' settlement is subject to court approval. + + In the related administrative proceeding instituted today against IBM, the Commission found that, as a result of the above-referenced conduct, IBM caused Dollar General's violations of Sections 10(b), 13(a), and 13(b)(2)(A) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5, 12b-20 and 13a-11. The Commission's order also finds that IBM maintained inaccurate books and records during 2000 and 2001 as a result of numerous discrete revenue recognition errors that took place in the United States and at least 23 other countries, totaling approximately $577 million in revenues over that two-year period. The order also finds that IBM violated Section 13(b)(2)(A) by failing to keep accurate books and records. IBM, without admitting or denying the Commission's findings, consented to the issuance of the Commission's order directing IBM to cease and desist from committing or causing future violations of these provisions. Under the terms of the order, IBM also undertakes to pay $7 million to the court in connection with the Commission's previously filed action SEC v. Dollar General, et al. C.A. No. 3:05-0283 (M.D. Tenn.). + + For additional information, see also SEC v. Dollar General, et al. Litigation Release No. 19174 (April 7, 2005) and Litigation Release No. 19653 (April 12, 2006). + + + + Additional Materials: SEC Complaint in this matter Administrative Proceeding Release No. 34-55954 + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + Administrative Proceedings Release + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Sulfridge + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501426","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Sulfridge + + + + + + + + + + + + Michael W. Sulfridge + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20173 / June 29, 2007 + + Accounting and Auditing Enforcement Release No. 2625 / June 29, 2007 + + SEC v. Michael W. Sulfridge , Civil Action No. 307-CV-1173-L Northern District of Texas (Dallas Division) + + SEC Settles Fraud Charges Against Former Controller of Sourcecorp, Inc. Subsidiary + + + + On June 28, 2007, the Securities and Exchange Commission filed a settled civil action in Dallas federal court against Michael W. Sulfridge, the former controller of Image Entry, Inc., a data entry services provider with its principal office in London, Kentucky. Image Entry is a wholly owned subsidiary of Dallas-based Sourcecorp, Inc., whose common stock previously traded on the Nasdaq National Market but which now is privately owned. + + Sourcecorp acquired Image Entry in 2001 from Image Entry's CEO, Bill Deaton, and members of Deaton's family. As part of the acquisition, Sourcecorp entered into employment agreements with Deaton in which Sourcecorp agreed to pay Deaton an annual bonus, over a three-year "earn out" period, tied to Image Entry's performance against certain earnings criteria. The Commission alleges that Sulfridge and Deaton â€" who previously settled Commission charges â€" planned and executed a scheme to overstate Image Entry's earnings to increase the amount of Deaton's "earn out" bonus. The Commission alleges that Sulfridge received approximately $585,000 from Deaton for his involvement. The Commission's complaint describes an alleged scheme to inflate Image Entry's earnings from 2001 through the first quarter of 2004 by (1) recognizing unearned revenue from state and federal government data entry contracts, (2) prematurely recognizing revenue from a federal government data entry contract that Image Entry had not yet been awarded, and (3) diverting various Image Entry expenses to other companies Deaton owned to reduce Image Entry's expenses and increase its earnings. The Commission contends that this alleged misconduct artificially inflated Image Entry's earnings and, by extension, Deaton's "earn out" bonus. Moreover, because the allegedly inflated figures were included in Sourcecorp's publicly reported consolidated financial results, the Commission's complaint asserts that Sourcecorp's earnings were materially overstated. + + Without or admitting or denying the Commission's allegations, Sulfridge has consented to entry of a final judgment permanently enjoining him from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5 and 13b2-1 thereunder, and aiding and abetting 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. As part of the settlement, Sulfridge also will be barred from serving as an officer or director from a public company for five years. In addition, Sulfridge will disgorge $50,000 of his improper compensation. The Commission has waived the remainder of Sulfridge's disgorgement and not assessed a financial penalty based on Sulfridge's sworn financial statements and other documents submitted to the Commission. + + For additional information, see Commission Litigation Release No. 19834 , SEC v. Billy David Deaton (Sept. 14, 2006). + + + + + SEC Complaint in this matter + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2628.txt b/raw/aaer/2007/AAER-2628.txt new file mode 100644 index 0000000000000000000000000000000000000000..952c0c4a2c354e79240a913ac4cb1fdd7ff52e53 --- /dev/null +++ b/raw/aaer/2007/AAER-2628.txt @@ -0,0 +1,428 @@ + + + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 55996 / June 29, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2628 / June 29, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12674 + + + +In the Matter of + +DWIGHT J. GOSLEE and +HARRY J. HILL, + +Respondents. + + + + + + +ORDER INSTITUTING CEASE-AND- +DESIST PROCEEDINGS, MAKING +FINDINGS, AND IMPOSING A CEASE- +AND-DESIST ORDER PURSUANT TO +SECTION 21C OF THE SECURITIES +EXCHANGE ACT OF 1934 + + + + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate that public +cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the +Securities Exchange Act of 1934 (“Exchange Act”) against Dwight J. Goslee and Harry J. Hill +(“Respondents”). + + +II. + + In anticipation of the institution of these proceedings, Respondents have submitted Offers +of Settlement (“Offers”) 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, except as +to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are +admitted, Respondents consent to the entry of this Order Instituting Cease-and-Desist Proceedings, +Making Findings, and Imposing a Cease-and-Desist Order Pursuant to Section 21C of the +Securities Exchange Act of 1934 (“Order”), as set forth below. + 2 + +III. + + On the basis of this Order and Res pondents’ Offers, the Commission finds1 that: + +RESPONDENTS + + 1. Dwight J. Goslee (“Goslee”), age 56, is a resident of Elkhorn, Nebraska. From +1992 to 1994, he was ConAgra Foods, Inc.’s (“ConAgra” or “Company”) Corporate Controller. +From 1994 to 2001, he was a Vice President at ConAgra and held other senior management +positions, including serving as the head of mergers and acquisitions. In around February 2001, +Goslee was promoted to Executive Vice President of Operations and Control. In that position, he +assumed supervisory responsibilities over ConAgra’s Corporate Controller’s group and Internal +Audit department. From May 2004 to October 2005, Goslee held the position of Executive Vice +President for Strategic Development. On October 1, 2005, Goslee resigned from ConAgra, and +since that time, he has served as a consultant to the Company. He was licensed as a Certified Public +Accountant (“CPA”) in Minnesota, however that license has lapsed. + + 2. Harry J. Hill (“Hill”), age 66, resides in Omaha, Nebraska. From 1983 until his +retirement in 2004, Hill was employed as ConAgra’s Director of Corporate Accounting. From 1994 +to 2002, Hill reported directly to ConAgra’s Controller, first to Kenneth W. DiFonzo, and then to +Jay D. Bolding (“Bolding”). Hill was licensed as a CPA in Nebraska, but that license has expired. + +OTHER RELEVANT ENTITY AND PERSONS + + 3. ConAgra Foods, Inc. (“ConAgra”), is a Delaware corporation with headquarters in +Omaha, Nebraska. ConAgra’s common stock is registered with the Commission pursuant to +Section 12(b) of the Exchange Act, and trades on the New York Stock Exchange. At all times +relevant to this Order, ConAgra was a diversified international food company. ConAgra’s fiscal +year (“FY”) ends on the last Sunday in May of each year. + + 4. James P. O’Donnell (“O’Donnell”), age 59, is a resident of Omaha, Nebraska. +O’Donnell joined ConAgra in 1978. From 1995 until he retired on April 30, 2004, he served as +ConAgra’s Executive Vice President and Chief Financial Officer. Since his retirement, O’Donnell +has acted as a consultant to the Company. + + 5. Jay D. Bolding (“Bolding”), age 47, is a resident of Omaha, Nebraska. From +January 1997 to March 1999, he was the head of ConAgra’s Internal Audit department. From +March 1999 until approximately April 2004, he served as ConAgra’s Corporate Controller. Until +his resignation on June 1, 2006, he held the position of Senior Vice President for Capital and Market +Investment Effectiveness. He was licensed as a CPA in Kansas and Tennessee; however, both +licenses have lapsed. + +1 The findings herein are made pursuant to Respondents’ Offers and are not binding on any other person +or entity in this or any other proceeding. + + 3 + + 6. Kenneth W. DiFonzo (“DiFonzo”), age 55, a resident of Newport Beach, +California, was ConAgra’s Corporate Controller from May 1994 through February 1999. From +February 1999 until May 2004, he held other senior positions with the Company. From May 2004 +to September 2005, DiFonzo served in an advisory capacity at ConAgra regarding various +operational/management issues. Since September 1, 2005, he has been a consultant to the +Company. DiFonzo was a CPA licensed in Illinois; however, his license has become inactive. + +ACCOUNTING AT CONAGRA DURING THE THIRD QUARTER OF FY 2001 + +A. Goslee Caused ConAgra to Improperly Account for the Reduction + of At Least $23.8 Million of Pr ior Period Excess Reserves + +ConAgra Improperly Kept Prior Period Excess Reserves on Its Books +7. As outlined in Statement of Financial Accounting Standards (“SFAS”) No. 5, +Accounting for Contingencies, at paragraph 8, Generally Accepted Accounting Principles +(“GAAP”) requires that a reserve be created, and that a charge to income be taken, if it is both +probable that a liability has been incurred and the amount of the liability can be reasonably +estimated. Conversely, when a liability is no longer probable and reasonably estimable, a +reserve should be removed from the books and income should be increased. In addition, +paragraph 14 of SFAS No. 5 specifically prohibits the accrual of “reserves for general +contingencies” or for “[g]eneral or unspecified business risks.” + +8. In its year-end “Summary of Uncorrected Financial Statement Misstatements” for +FY 2000, ConAgra’s outside auditor identified a potential overstatement of legal and +environmental reserves in the range of about $23.8 million to $51.5 million.2 The outside +auditor informed O’Donnell and Bolding about this potential overstatement at the end of FY +2000 and provided them with the summary. Contrary to the requirements of SFAS No. 5, +O’Donnell and Bolding declined to reduce any of the excess legal and environmental reserves at +the end of FY 2000. These prior-period excess reserves remained on ConAgra’s books in the first +and second quarters of FY 2001. + +Goslee Reduces ConAgra’s Prior Period Excess Reserves + +9. On February 13, 20 01, as ConAgra was approaching the end of its third quarter of +FY 2001, the Company issued a press release, which it filed with the Commission on Form 8-K, in +which it lowered its near-term earnings outlook due to “sharply higher energy costs and a slowing +economy.” In this press release, ConAgra disclosed that it expected its earnings per share for the +third quarter of FY 2001 to be in the range of $0.18 to $0.20. ConAgra’s stock price dropped +almost 20% on the day after it issued this press release. + + +2 ConAgra’s attorneys and other Company personnel provided the outside auditor with the exposure +estimates and reserve account balances used in making this calculation. + + 4 + +10. Also in the third quarte r of FY 2001, after he assumed responsibility for accounting +at ConAgra, Goslee learned that ConAgra’s outside auditor had identified legal and environmental +reserves that were potentially overstated in the range of $23.8 million to $51.5 million at least as +early as the end of FY 2000 and in the first two quarters of FY 2001. Goslee made the decision to +reverse $35 million of ConAgra’s excess legal and environmental reserves to income in the third +quarter of FY 2001.3 + +11. Paragraph 13 of Acc ounting Principles Board (“APB”) Opinion No. 20, +Accounting Changes, states that “[e]rrors in financial statements result from mathematical +mistakes, mistakes in the application of accounting principles, or oversight or misuse of facts that +existed at the time the financial statements were prepared.” Paragraphs 36 through 38 of APB +Opinion No. 20 require the correction of an error to be reported as a prior period adjustment where +the correction has a material effect on current period income before the effect of the change or on +the trend of earnings. In addition, paragraph 18 of APB Opinion No. 9, Reporting the Results of +Operations, requires a prior period adjustment to be reflected by adjusting the opening balance of +retained earnings in the current period, and accordingly, to be excluded from current period +income. + +12. At a minimu m, $23.8 million of the $35 million of ConAgra’s legal and +environmental reserves that Goslee directed be reduced had been in excess since at least the end of +FY 2000. Goslee knew, or should have known, that the accounting for this portion of the excess +reserves reduction was not in accordance with SFAS No. 5 and improperly increased ConAgra’s +reported income before income taxes for the third quarter of FY 2001 by nearly 15%. The +earnings estimates from the analysts covering ConAgra ranged from $0.18 to $0.21 earnings per +share during that period. ConAgra’s reported earnings of $0.19 in earnings per share for the third +quarter of FY 2001, met the consensus estimate of $0.19 per share. Without the $23.8 million +reversal to income of the prior period excess reserves, ConAgra would have earned only $0.16 per +share. + +13. Goslee knew, or should have known, that ConAgra should have treated the removal +of at least $23.8 million of prior period excess reserves from its books as a correction of an error +and reported the correction as a prior period adjustment because the $23.8 million excess should +have been reduced by no later than the end of FY 2000. Also, the $23.8 million reduction was +material to the Company’s reported income before income taxes, net income, earnings per share +and trend of earnings at least by the third quarter of FY 2001, if not earlier. As a result, the $23.8 +million prior period excess reserves reduction should have been excluded from ConAgra’s reported +income before income taxes, net income and earnings per share for the third quarter of FY 2001. + +14. Goslee’s decision to reverse the $23.8 million of prior period excess reserves +caused ConAgra to fail to make and keep books, records, and accounts which accurately and fairly +reflected its transactions; circumvented any system of internal accounting controls that ConAgra +had to provide reasonable assurances that, among other things, its transactions were recorded as + +3 O’Donnell and Bolding were aware of Goslee’s decision to reduce the excess legal and environmental +reserves by $35 million. + + 5 + +necessary to permit preparation of financial statements in conformity with GAAP; and caused +ConAgra’s books, records or accounts to be falsified. + +15. The Company’s Form 10-Q for the third quarter of FY 2001, which was filed on +April 11, 2001, disclosed that the Company’s financial results were positively impacted by the $35 +million reserve reduction and negatively impacted, in part, by a significantly higher bad debt +expense at its Agricultural Products subsidiary (which included UAP). The disclosure regarding +the reserve reduction was misleading because ConAgra failed to disclose that at least $23.8 million +of these reserves were in excess in prior periods. + +16. As a result of ConAgra’s inaccurate accoun ting for, and improper disclosure about, +the excess legal and environmental reserves reduction, ConAgra’s Form 10-Q for the third quarter +of FY 2001 was materially inaccurate. Goslee reviewed ConAgra’s Form 10-Q for the third +quarter of FY 2001, including the disclosure related to the excess reserves reduction. 4 As a result +of the conduct described above, Goslee caused ConAgra to file a materially inaccurate Form 10-Q +for the third quarter of FY 2001. + +B. Hill Caused ConAgra to Improperly Account for Its + Reductions of Various Reserves in FY 1999, FY 2000 and FY 2001 + +17. ConAgra acquired Beatrice Company (“Beatrice”) in FY 1991. Prior to the +acquisition, Beatrice estimated that it had hundreds of millions of dollars of liabilities arising from +tax disputes with federal and state authorities. Beatrice recorded these tax liabilities as tax reserves +on its books and ConAgra inherited these reserves as part of the acquisition. After the Beatrice +acquisition, ConAgra increased the tax reserves it had inherited from Beatrice by adding tens of +millions of dollars of post-acquisition interest. + + 18. Although ConAgra reduced the Beatrice reserves in years at various times prior to +1998, by no later than the end of FY 1998, ConAgra no longer had any probable and reasonably +estimable tax liabilities that justified maintaining the remaining Beatrice acquisition-related tax and +interest reserves on the Company’s books. At that time, these reserves exceeded $181 million. At +various times during FY 1999, FY 2000 and FY 2001, at the request of either DiFonzo or Bolding, +Hill completed and signed journal entries that improperly reversed to income or reallocated certain +of the excess Beatrice acquisition-related tax and interest reserves. For example, during the first +and second quarters of FY 1999, DiFonzo and Hill signed accounting journal entries improperly +reducing the excess Beatrice-related post-acquisition interest reserves to offset, dollar-for-dollar, +additional unrelated, unplanned-for and unreserved-for inventory losses arising from ConAgra’s +attempted sale of meat and poultry into Russia by over $33 million. + + 19. In addition, from at least as early as the end of FY 1998 through the third quarter of +FY 2001, ConAgra fraudulently and improperly used the Company’s Estimated Liabilities account +as a general, or “cookie jar,” reserve which was not in conformity with GAAP. During this time +period, ConAgra increased this reserve by millions of dollars by transferring into it miscellaneous + +4 O’Donnell, Bolding and others reviewed, and they both signed, the Form 10-Q. + + 6 +excess reserves and accruals, and gains from the sale of certain ConAgra assets. In addition, at the +same time, ConAgra improperly used this reserve to offset current period operating expenses. + + 20. By no later than the end of FY 199 8, ConAgra no longer had any probable and +reasonably estimable liabilities that justified maintaining the balance in the Estimated Liabilities +account on its books. On several occasions in FY 1999, FY 2000 and FY 2001, at the request of +either DiFonzo or Bolding, Hill completed journal entries that improperly reduced the balance in +this account to income or to offset current period operating expenses. For example, in the first +quarter of FY 1999, DiFonzo directed Hill to use the Estimated Liabilities account for claims +arising out of a legal settlement for which no reserve had previously been created. DiFonzo and +Hill signed a journal entry reducing the account by over $9.6 million for the bulk of these +expenses. Also, after the end of the third quarter of FY 2000, Bolding and Hill signed a journal +entry offsetting $6 million of unplanned-for and unreserved-for losses arising from a joint venture +in South Africa in that quarter with a dollar-for-dollar reduction of the Estimated Liabilities +account. + + 21. Finally, ConAgra recorded certain rese rves in connection with a restructuring +charge in FY 1996. In FY 1999, ConAgra transferred more than $24.4 million of unused FY 1996 +restructuring reserves from the books of certain of its subsidiaries to the ConAgra Corporate +ledger. ConAgra, however, failed to remove these excess reserves from its books by the end of FY +1999 as required by SFAS No. 5. By no later than the end of FY 1999, at least $24.4 million of the +remaining FY 1996 restructuring reserves were no longer needed and should have been reversed. +In the fourth quarter of FY 2000, at Bolding’s request, Hill drafted and signed the journal entry that +improperly reduced over $24.4 million of the excess FY 1996 restructuring reserves by lowering +the Company’s FY 2000 restructuring charge by an identical amount, and thus increased income +by that amount. + + 22. Hill knew or should have known that ConAgra no longer had any probable and +reasonably estimable liabilities that justified maintaining the remaining Beatrice acquisition related +tax and interest reserves, the balance of the Estimated Liabilities account, and the at least $24.4 +million of the FY 1996 restructuring reserves on its books and that each of these journal entries +was not in conformity with GAAP. For example, many of the journal entries reversing prior +period excess reserves to increase current period income or decrease current period operating +expenses were not in accordance with SFAS No. 5, APB Opinion No. 9 and APB Opinion No. 20. +Also, many of these journal entries had the effect of improperly increasing ConAgra’s income +before income taxes, net income and earnings per share. + + 23. Accordingly, as a result of the journa l entries he made, Hill caused ConAgra to +include financial statements that were materially false and misleading in the Company’s Quarterly +Reports filed on Forms 10-Q for the first, second and third quarters of FY 1999, in its Form 10-K +for FY 1999, in its Quarterly Report filed on Form 10-Q for the third quarter of FY 2000, in its +Annual Report filed on Form 10-K for FY 2000, and in its Form 10-Q for the third quarter of FY +2001. Also, by signing the improper journal entries, Hill caused ConAgra to fail to make and +keep books, records, and accounts which accurately and fairly reflected its transactions; +circumvented any system of internal accounting controls that ConAgra had to provide reasonable + 7 +assurances that, among other things, its transactions were recorded as necessary to permit +preparation of financial statements in conformity with GAAP; and caused ConAgra’s books, +records or accounts to be falsified. + +FEDERAL SECURITIES LAW VIOLATIONS + +C. Goslee and Hill Caused ConAgra to + Violate the Reporting Provi sions of the Exchange Act + +24. Section 13(a) of the Exchange Act, an d Rules 13a-1 and 13a-13 thereunder, require +issuers whose securities are registered with the Commission pursuant to Section 12 of the +Exchange Act to file annual and quarterly reports with the Commission containing such +information as the Commission’s rules prescribe. These reports must be complete and accurate. +United States v. Bilzerian, 926 F.2d 1285, 1298 (2d Cir. 1991); SEC v. Savoy Indus., 587 F.2d +1149, 1165 (D.C. Cir. 1978), cert. denied, 440 U.S. 913 (1979). Rule 12b-20 of the Exchange Act +requires that an issuer’s periodic reports include any additional information “as necessary to make +the required statements, in the light of the circumstances under which they are made, not +misleading.” No showing of scienter is required to establish an issuer’s violation of the corporate +reporting provisions. +SEC v. McNulty, 137 F.2d 732, 740-41 (2d Cir. 1998). Information is +material where there is a substantial likelihood that a reasonable investor would consider the +information important in making an investment decision. Basic, Inc. v. Levinson, 485 U.S. 224, +231-32 (1988). + +25. Section 21C of the Exchange Act provides that the Commission may issue a +cease-and-desist order against a person who is “a cause of [another person’s] violation, due to an +act or omission the person knew or should have known would contribute to such violation.” +Where the primary violations underlying a finding that a person is “a cause of” violations do not +themselves require a finding of scienter, the standard of liability for being “a cause of” such +violations under Section 21C of the Exchange Act is negligence. See KPMG LLP v. SEC, 289 F. +3d 109, 112 (DC Cir. 2002). + +26. As a result of the conduct described a bove, Goslee caused ConAgra to violate +Section 13(a) of the Exchange Act and Exchange Act Rules 12b-20 and 13a-13. Goslee’s +improper accounting for, and disclosure of, the reversal of at least $23.8 million of prior period +excess reserves caused ConAgra’s financial statements in its Quarterly Report for the third quarter +of FY 2001, filed on Form 10-Q with the Commission on April 11, 2001, to be materially false and +misleading. + +27. As a result of the conduct described above , Hill caused ConAgra to violate Section +13(a) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1 and 13a-13. Hill’s signing of +journal entries reversing various excess reserves caused ConAgra to include financial statements +that were materially false and misleading in the Company’s Forms 10-Q for the first, second and +third quarters of FY 1999, in its Form 10-K for FY 1999, in its Form 10-Q for the third quarter of +FY 2000, in its Form 10-K for FY 2000 and in its Form 10-Q for the third quarter of FY 2001. + + 8 +D. Goslee and Hill Violated, and Caused ConAgra to + Violate, the Books and Records Provisions of the Exchange Act + +28. Section 13(b)(2)(A) of the Exchange Act requires reporting companies to make and +keep books, records, and accounts which, in reasonable detail, accurately and fairly reflect their +transactions and dispositions of their assets. Rule 13b2-1 of the Exchange Act prohibits any person +from, directly or indirectly, falsifying or causing to be falsified, any book, record or account +subject to Exchange Act Section 13(b)(2)(A). No showing of scienter is required to support a +violation of these provisions. See SEC v. WorldWide Coin Investments, Ltd., 567 F. Supp. 724, +749 (N.D. Ga. 1983); McNulty, 137 F.3d at 740-41. + +29. As a result of the conduct described a bove, Goslee caused ConAgra to violate +Section 13(b)(2)(A) of the Exchange Act, and he violated Exchange Act Rule 13b2-1. Goslee +caused ConAgra’s violation of Section 13(b)(2)(A) of the Exchange Act, and violated Exchange +Act Rule 13b2-1, when he directed the reduction of at least $23.8 million of ConAgra’s excess +legal and environmental reserves in a manner not in conformity with GAAP. The resulting +adjustments to ConAgra’s reserve accounts and related books and records were false because they +did not accurately reflect changes in the Company’s probable and reasonably estimable liabilities, +or the Company’s current period income before income taxes, net income, and earnings per share. + +30. As a result of the conduct described above , Hill caused ConAgra to violate Section +13(b)(2)(A) of the Exchange Act, and he violated Exchange Act Rule 13b2-1. Hill caused +ConAgra’s violation of Section 13(b)(2)(A) of the Exchange Act, and violated Exchange Act Rule +13b2-1, when he completed journal entries reducing various ConAgra excess reserves in the first +and second quarters of FY 1999, the third and fourth quarters of FY 2000, and the third quarter of +FY 2001 in a manner not in conformity with GAAP. These journal entries, and the resulting +adjustments to related accounts, books and records, were false because they did not accurately +reflect changes in the Company’s probable and reasonably estimable liabilities, or the Company’s +current period income before income taxes, net income and earnings per share. + +E. Goslee and Hill Caused ConAgra to +Violate the Internal Controls Provisions of the Exchange Act + +31. Section 13(b)(2)(B) of the Exchange Ac t requires reporting companies to devise +and maintain a system of internal accounting controls sufficient to reasonably assure that +transactions are recorded and financial statements are prepared in conformity with GAAP. No +showing of scienter is required to support a violation of these provisions. See WorldWide Coin +Investments, Ltd., 567 F. Supp. at 749. + +32. As a result of the conduct described a bove, Goslee and Hill caused ConAgra to +violate Section 13(b)(2)(B) of the Exchange Act. + + 9 +UNDERTAKINGS + +In connection with this action and any judicial or administrative proceeding or +investigation related to or arising out of any of the facts, events or transactions alleged in the Order, +which is commenced by the Commission or to which the Commission is a party, each of the +Respondents undertakes to cooperate with the Commission staff and: (i) agrees to appear and be +interviewed by Commission staff at such times and places as the staff requests upon reasonable +notice; (ii) will accept service by mail or facsimile transmission of notices or subpoenas issued by +the Commission for documents or testimony at depositions, hearings, or trials, or in connection +with any related investigation by Commission staff; (iii) appoints his or her attorney as agent to +receive service of such notices and subpoenas; (iv) with respect to such notices and subpoenas, +waives the territorial limits on service contained in Rule 45 of the Federal Rules of Civil Procedure +and any applicable local rules, provided that the party requesting the testimony reimburses his or +her travel, lodging, and subsistence expenses at the then-prevailing U.S. Government per diem +rates; and (v) consents to personal jurisdiction over him or her in any United States District Court +for purposes of enforcing any such subpoena. + +In determining whether to accept the Offers, the Commission has considered these +undertakings. + +IV. + + In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offers. + + Accordingly, it is hereby ORDERED that: + + A. Respondent Goslee ceas e and desist from committing or causing any violation and +any future violations of Rule 13b2-1 of the Exchange Act, and cease and desist from causing any +violation and any future violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange +Act and Exchange Act Rules 12b-20 and 13a-13. + + B. Respondent Hill cease and desist from committing or causing any violation and any +future violations of Rule 13b2-1 of the Exchange Act, and cease and desist from causing any +violation and any future violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange +Act and Exchange Act Rules 12b-20, 13a-1 and 13a-13. + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y + + \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2629.txt b/raw/aaer/2007/AAER-2629.txt new file mode 100644 index 0000000000000000000000000000000000000000..6d724578cd523b6a1c850f793ee7e6da9840fc56 --- /dev/null +++ b/raw/aaer/2007/AAER-2629.txt @@ -0,0 +1,1392 @@ + + + + + + + + + + + + + + + + SEC.gov | James P. O'Donnell, Jay D. Bolding and Debra L. Keith; Kenneth W. DiFonzo; Dwight J. Goslee and Harry J. Hill + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501441","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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O'Donnell, Jay D. Bolding and Debra L. Keith; Kenneth W. DiFonzo; Dwight J. Goslee and Harry J. Hill + + + + + + + + + + + + James P. O'Donnell, Jay D. Bolding and Debra L. Keith; Kenneth W. DiFonzo; Dwight J. Goslee and Harry J. Hill + + + + + + + + + + + + + + + + + + + + + Litigation Release No. 20176 / June 29, 2007 + + Accounting and Auditing Release No. 2629 / June 29, 2007 + + Securities and Exchange Commission v. James P. O'Donnell, Jay D. Bolding and Debra L. Keith, United States District Court for the District of Colorado, Civil Action No. 07-CV-01373 RPM-MJW (D.C. Colo. June 29, 2007); Securities and Exchange Commission v. Kenneth W. DiFonzo, United States District Court for the District of Colorado, Civil Action No. 07-CV-01374 WDM-MEH (D.C. Colo. June 29, 2007); Securities and Exchange Commission v. Dwight J. Goslee and Harry J. Hill, United States District Court for the District of Colorado, Civil Action No. 07-CV-01377 REB-MEH (D.C. Colo. June 29, 2007) + + SEC BRINGS SETTLED ACTIONS INVOLVING FINANCIAL DISCLOSURE AGAINST FORMER CONAGRA FOODS, INC. CORPORATE EXECUTIVES; RELIEF INCLUDES OVER $1.7 MILLION IN CIVIL PENALTIES, DISGORGEMENT AND PREJUDGMENT INTEREST. + + The Commission today filed settled civil actions in the United States District Court for Colorado against the following former executives of ConAgra Foods, Inc., (ConAgra): the former Chief Financial Officer, James O'Donnell (O'Donnell), two former Corporate Controllers, Jay Bolding (Bolding) and Kenneth DiFonzo (DiFonzo), and the former Vice President for Taxes, Debra Keith. The Commission also instituted settled administrative proceedings and filed settled penalty actions against Dwight Goslee (Goslee), the former Executive Vice President of Operations and Control and Harry Hill (Hill), the former Director of Corporate Accounting. These enforcement actions variously address alleged improper accounting practices, inaccurate disclosure and income tax errors occurring between ConAgra's fiscal years 1999 and 2005 that resulted in ConAgra materially misstating its financial performance in its public statements and periodic filings with the Commission. + +According to the allegations set forth in the Commission's Complaints: + DiFonzo directed certain improper accounting practices in fiscal year 1999 relating to the establishment and use of excess tax, interest, and purchase accounting reserves and the use of a reserve account as a "cookie jar";   + + After the end of the third quarter of fiscal year 2000, Bolding offset $6 million of unplanned-for and unreserved-for losses in a joint venture with a dollar-for-dollar reduction in an excess reserve account. Near the end of the fourth quarter of fiscal year 2000, Bolding reduced excess legal and environmental reserves to offset, dollar-for-dollar, more than $5.4 million in unrelated, unplanned-for and unreserved-for losses resulting from a ConAgra Frequent Flyer Miles promotion. In the fourth quarter of fiscal year 2000, Bolding improperly reduced a fiscal year 1996 restructuring reserve by $24.4 million; +   + O'Donnell, Bolding and Keith did not ensure in fiscal year 1999 that ConAgra properly accounted for its income tax expense, and O'Donnell and Bolding should have known that ConAgra's disclosure about the reduction of its income tax expense was inaccurate; +   + In the third quarter of fiscal year 2001, Goslee reversed $35 million of ConAgra's excess legal and environmental reserves to income. O'Donnell should have known, and Bolding and Goslee knew, or should have known, that the accounting for $23.8 million of this reduction was not in accordance with GAAP and should have been reported as a prior period adjustment. O'Donnell, Bolding and Goslee reviewed the Company's Form 10-Q for that quarter which disclosed the $35 million reserve reduction but misleadingly failed to disclose that at least $23.8 million of these reserves were excess in prior periods; +   + O'Donnell and Bolding should have known, based on information that had come to their attention by the end of fiscal year 2000 with respect to accounting improprieties at United Agri-Products, a former ConAgra subsidiary, that ConAgra's fiscal year 2000 Form 10-K and the financial statements contained in it were materially inaccurate; +   + Keith in fiscal year 2004 improperly calculated the stock basis following the sale by ConAgra of several beef/pork subsidiaries and, as a result, incorrectly determined that the sale had resulted in a capital loss for tax purposes. Keith also knew, or should have known, that ConAgra used an incorrect methodology to calculate its overall foreign loss in fiscal year 2003 and before, and accordingly, ConAgra's tax liability was incorrectly calculated. Keith did not consider appropriate tax strategies in fiscal year 2003 when ConAgra was able to utilize foreign tax credits; and +   + Hill, at the request of DiFonzo or Bolding, signed journal entries that improperly reduced or allocated certain excess reserves accounts from fiscal year 1999 through fiscal year 2001. + O'Donnell, Bolding, and DiFonzo, without admitting or denying the allegations in the complaints, have each consented to the entry of final judgments that enjoin them from violating and/or aiding and abetting violations of certain reporting, books and records, and internal controls provisions of the federal securities laws. Specifically, O'Donnell, Bolding and DiFonzo have consented to final judgments that will enjoin them from violating and/or aiding and abetting violations of Exchange Act Rule 13b2-1, and Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Rules 12b-20, 13a-1 and 13a-13. Similarly, Keith, without admitting or denying the Commission's allegations, has consented to the entry of a final judgment that enjoins her from violating and/or aiding and abetting violations of these same provisions, with the exception of Exchange Act Rule 13a-13. O'Donnell has agreed to pay disgorgement in the amount of $425,531, to pay prejudgment interest thereon of $174,151, to divest 17,648 unexercised ConAgra stock options, and to pay a civil penalty of $100,000. Bolding has agreed to pay disgorgement of $345,790, prejudgment interest of $129,816, and a $125,000 civil penalty. DiFonzo has agreed to pay $139,988 in disgorgement and $65,590 in prejudgment interest, and to divest 20,192 unexercised ConAgra stock options. Keith has agreed to disgorge $132,456 and the monetary value of 2872 shares of ConAgra stock, to pay $19,225 in prejudgment interest, to divest 866 unexercised ConAgra stock options, and to pay a civil penalty of $60,000. The settlement terms for all the parties are subject to court approval. + +As part of these settlements, and following the entry of proposed final judgments against them, Bolding and DiFonzo, without admitting or denying the Commission's findings, have each consented to the issuance of administrative orders, pursuant to Rule 102(e)(3) of the Commission's Rules of Practice, suspending them from appearing or practicing before the Commission as accountants with leave to apply for reinstatement after one year. + +Additionally, in an administrative cease-and-desist proceeding, Goslee and Hill, without admitting or denying the Commission's findings, have consented to the issuance of Orders finding that each committed violations of Exchange Act Rule 13b2-1 and caused violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20 and 13a-13, and additionally as to Hill, Exchange Act Rule 13a-1. In a separate civil action, Goslee also has agreed to pay a $45,000 civil penalty and Hill has agreed to pay disgorgement of $10,463, plus $4,756 of prejudgment interest, and a $20,000 civil penalty. + + +For further information, see Litigation Release No. 19969 (January 17, 2007). + + + + + + SEC Complaint in this matter +--> + +  + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Chancellor Corporation, et al. , (United States District Court for the District of Massachusetts, C.A. No. 03-10762-PBS) + + Commission Moves for Order Holding Defendant Brian Adley in Civil Contempt, Subject to Default Judgment and Other Sanctions for Failing to Comply with Court Orders + + + + The Securities and Exchange Commission announced that on June 14, 2007, the Commission filed a motion for civil contempt, default judgment, and other sanctions against Defendant Brian Adley. Adley is the last remaining defendant in the Commission's accounting fraud case related to the now defunct Chancellor Corporation. The Commission filed its motion based on Adley's failure to comply with the Court's May 16, 2007 and June 11, 2007 Orders, entered by the Honorable Patti B. Saris of the United States District Court for the District of Massachusetts, requiring that Adley appear for a deposition, as well as Adley's failure to appear at properly noticed depositions. + + According to the Commission's Memorandum in Support of its Motion, at a May 16, 2007 status conference, the Court ordered that Adley sit for a deposition "in early June." The SEC properly noticed Adley's deposition on several occasions, but, each time, Adley failed to appear. On June 8, 2007, the SEC moved on an emergency basis to compel Adley's deposition. The Emergency Motion to Compel requested that the Court order Adley to sit for a deposition to start on June 12 or June 13, 2007. On June 11, 2007, the Court granted the Commission's Emergency Motion to Compel. The Commission scheduled Adley's deposition for June 13, 2007. On that day, however, Adley again failed to appear. + + The Commission's June 14, 2007 Motion requests that the Court hold Adley in civil contempt, impose default judgment and other sanctions including (to the extent that the Court allows a trial to proceed): (1) prohibiting Adley from introducing his own testimony at trial; (2) allowing the Commission to introduce evidence of Adley's failure to appear at his deposition at trial and instructing the jury that they may draw an adverse inference from Adley's refusal to appear; (3) requiring Aldey to pay reasonable expenses, including attorney's fees; and (4) imposing other sanctions. + + The Court has set a hearing on the Commission's Motion for July 18th. For further information, see Litigation Release Nos. 18104 (April 24, 2003) and 19177(April 11, 2005). + + + + +  + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Newton + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501451","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Share sensitive information only on official, secure websites. + + + + + + + + + + + + + + + + + SEC homepage + + + + + + + Menu + + + + + + + + + + + + + + Close + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + Search Filings + + + + + + + + + Search Filings + + + + + + + + + Full Text Search + + + + + + Latest Filings + + + + + + Mutual Fund Search + + + + + + Variable Insurance Products Search + + + + + + SIC Codes + + + + + + CIK Lookup + + + + + + Public Dissemination Service (PDS) + + + + + + Search Assistance + + + + + + + + + + + + + Submit Filings + + + + + + + + + Submit Filings + + + + + + + + + EDGAR Filer Management Portal + + + + + + EDGAR Filing Portal + + + + + + Online Forms Management Portal + + + + + + EDGAR Next + + + + + + Forms Index + + + + + + Filer Support & Resources + + + + + + + + + + + + + Data & Research + + + + + + + + + Data & Research + + + + + + + + + Data Library + + + + + + Statistics & Data Visualizations + + + + + + Structured Data + + + + + + Investment Management Data + + + + + + Open Data at the SEC + + + + + + + + + + + + + Rules, Enforcement, & Compliance + + + + + + + + + + + + + + + + + + + + Rules & Regulations + + + + + + + + + Rulemaking Activity + + + + + + Submit Public Comments + + + + + + Staff Guidance + + + + + + No-Action, Interpretive, and Exemptive Letters + + + + + + Self-Regulatory Organization Rulemaking + + + + + + Public Petitions for Rulemaking + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + + + Litigation Releases + + + + + + Administrative Proceedings + + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + + Trading Suspensions + + + + + + Distributions to Harmed Investors + + + + + + Receiverships + + + + + + + + + + + + + + + + + Compliance + + + + + + + + + Examination Priorities + + + + + + Risk Alerts + + + + + + Compliance Outreach Program + + + + + + + + + + + + + + + + + + + + + + + Proposed Rules + + + + + + What's New + + + + + + Whistleblower Program + + + + + + + + + + + + + + + + + + + Featured Topics + + + + + + + + + Featured Topics + + + + + + + + + Crypto Task Force + + + + + + Cybersecurity + + + + + + Market Structure Analytics + + + + + + Saving and Investing for Military Personnel + + + + + + Saving and Investing for Teachers + + + + + + SEC-CFTC Harmonization Initiative + + + + + + Treasury Clearing Implementation + + + + + + + + + + + + + About + + + + + + + + + About + + + + + + + + + Mission + + + + + + Commissioners + + + + + + Divisions & Offices + + + + + + Division & Office Directors + + + + + + Advisory Committees + + + + + + Budget & Performance + + + + + + Reports & Publications + + + + + + Commission Votes + + + + + + Contact the SEC + + + + + + Careers + + + + + + + + + + + + + Submit a Tip or Complaint + + + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + More in this Section + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Mark Leslie, Kenneth E. Lonchar, Paul A. Sallaberry, Michael M. Cully and Douglas S. Newton + + + + + + + + + + + + Mark Leslie, Kenneth E. Lonchar, Paul A. Sallaberry, Michael M. Cully and Douglas S. Newton + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20178 / July 2, 2007 + + Accounting and Auditing Enforcement Release No. 2631 / July 2, 2007 + + SEC v. Mark Leslie, Kenneth E. Lonchar, Paul A. Sallaberry, Michael M. Cully and Douglas S. Newton , Civil Action No. C 07-3444 (JF) (N.D. Cal.) + + SEC Charges Five Former Officers of Veritas Software Corporation with Participating in Accounting Fraud Scheme + + + + On July 2, 2007, the Securities and Exchange Commission filed civil fraud charges in the United States District Court for the Northern District of California against five former officers of Veritas Software Corporation. The SEC's complaint alleges that the defendants artificially inflated and/or intentionally manipulated and distorted Veritas' reported financial results and misled Veritas' independent auditors. The complaint alleges that, as a result of this misconduct, Veritas filed false and misleading financial statements from 2000 through 2002. + + The individuals charged in the complaint are Mark Leslie, former chairman and chief executive officer, Kenneth E. Lonchar, former chief financial officer, Paul A. Sallaberry, former head of sales, Michael M. Cully, former controller, and Douglas S. Newton, former assistant controller. According to the complaint, Leslie, Lonchar and Sallaberry knowingly participated in a fraudulent scheme by artificially inflating Veritas' publicly reported revenues and earnings through an improper round-trip transaction with America Online, Inc. and by lying to Veritas' independent auditors. In addition, Lonchar, with the participation and assistance of Cully and Newton, intentionally manipulated and distorted Veritas' reported financial results from 2000 through 2002. Lonchar, Cully and Newton also misled Veritas' independent auditors. + + Cully and Newton have agreed to settle the Commission's charges. Cully agreed to be permanently enjoined from violating Section 17(a) of the Securities Act of 1933 (the "Securities Act"), Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (the "Exchange Act") and Exchange Act Rules 10b-5, 13b2-1 and 13b2-2 and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 13a-11 and 13a-13, to be barred from serving as an officer or director of a public company for five years, to pay disgorgement and prejudgment interest of $181,470.67 and a civil penalty of $35,000. Newton agreed to be permanently enjoined from violating Section 13(b)(5) of the Exchange Act and Exchange Act Rules 13b2-1 and 13b2-2 and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 13a-11 and 13a-13, to pay disgorgement and prejudgment interest of $37,263.36 and a civil penalty of $25,000. The settlements by Cully and Newton are subject to court approval. + + The Commission's complaint charges Leslie, Lonchar and Sallaberry with committing violations of Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act and Exchange Act Rules 10b-5, 13b2-1 and 13b2-2 and aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 13a-13 and 13b2-1. Lonchar is also charged with aiding and abetting violations of Section 13(b)(2)(B) of the Exchange Act. The complaint seeks injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, civil monetary penalties and officer and director bars against each of them. + + On February 20, 2007, the Commission filed a settled enforcement against Veritas. See http://sec.gov/litigation/litreleases/2007/lr20008.htm . If the court approves the Cully and Newton settlements, their disgorgement and penalties will be added to a Fair Fund for injured investors established in connection with that action. + + + + + SEC Complaint in this matter + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Share sensitive information only on official, secure websites. + + + + + + + + + + + + + + + + + SEC homepage + + + + + + + Menu + + + + + + + + + + + + + + Close + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + Search Filings + + + + + + + + + Search Filings + + + + + + + + + Full Text Search + + + + + + Latest Filings + + + + + + Mutual Fund Search + + + + + + Variable Insurance Products Search + + + + + + SIC Codes + + + + + + CIK Lookup + + + + + + Public Dissemination Service (PDS) + + + + + + Search Assistance + + + + + + + + + + + + + Submit Filings + + + + + + + + + Submit Filings + + + + + + + + + EDGAR Filer Management Portal + + + + + + EDGAR Filing Portal + + + + + + Online Forms Management Portal + + + + + + EDGAR Next + + + + + + Forms Index + + + + + + Filer Support & Resources + + + + + + + + + + + + + Data & Research + + + + + + + + + Data & Research + + + + + + + + + Data Library + + + + + + Statistics & Data Visualizations + + + + + + Structured Data + + + + + + Investment Management Data + + + + + + Open Data at the SEC + + + + + + + + + + + + + Rules, Enforcement, & Compliance + + + + + + + + + + + + + + + + + + + + Rules & Regulations + + + + + + + + + Rulemaking Activity + + + + + + Submit Public Comments + + + + + + Staff Guidance + + + + + + No-Action, Interpretive, and Exemptive Letters + + + + + + Self-Regulatory Organization Rulemaking + + + + + + Public Petitions for Rulemaking + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + + + Litigation Releases + + + + + + Administrative Proceedings + + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + + Trading Suspensions + + + + + + Distributions to Harmed Investors + + + + + + Receiverships + + + + + + + + + + + + + + + + + Compliance + + + + + + + + + Examination Priorities + + + + + + Risk Alerts + + + + + + Compliance Outreach Program + + + + + + + + + + + + + + + + + + + + + + + Proposed Rules + + + + + + What's New + + + + + + Whistleblower Program + + + + + + + + + + + + + + + + + + + Featured Topics + + + + + + + + + Featured Topics + + + + + + + + + Crypto Task Force + + + + + + Cybersecurity + + + + + + Market Structure Analytics + + + + + + Saving and Investing for Military Personnel + + + + + + Saving and Investing for Teachers + + + + + + SEC-CFTC Harmonization Initiative + + + + + + Treasury Clearing Implementation + + + + + + + + + + + + + About + + + + + + + + + About + + + + + + + + + Mission + + + + + + Commissioners + + + + + + Divisions & Offices + + + + + + Division & Office Directors + + + + + + Advisory Committees + + + + + + Budget & Performance + + + + + + Reports & Publications + + + + + + Commission Votes + + + + + + Contact the SEC + + + + + + Careers + + + + + + + + + + + + + Submit a Tip or Complaint + + + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + More in this Section + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Brightpoint, Inc., American International Group, Inc., Phillip Bounsall, John Delaney and Timothy Harcharik + + + + + + + + + + + + Brightpoint, Inc., American International Group, Inc., Phillip Bounsall, John Delaney and Timothy Harcharik + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20185 / July 9, 2007 + + Accounting and Auditing Release No. 2632 / July 9, 2007 + + SEC v. Brightpoint, Inc., American International Group, Inc., Phillip Bounsall, John Delaney and Timothy Harcharik , Case No. 03 CV 7045 (S.D.N.Y.) (HB) + + Following Jury Verdict in First Case to Be Tried Involving Finite Insurance, Court Enters Final Judgment Imposing Injunction and Civil Penalty Against Former Brightpoint Director of Risk Management Timothy Harcharik for Role in Accounting Fraud + + + + The Securities and Exchange Commission announced that on July 6, 2007, following a jury verdict, the United States District Court for the Southern District of New York entered a Final Judgment against Timothy Harcharik (Harcharik), former director of risk management for Brightpoint, Inc. (Brightpoint) enjoining Harcharik for a period of five years from future violations of the antifraud, books-and-records, and internal controls provisions of the federal securities laws and ordering him to pay $50,000 in civil penalties. This final judgment follows a jury verdict on May 25, 2007, in favor of the Commission, rendered after a four-day trial before the Honorable Harold Baer, Jr., United States District Judge for the Southern District of New York. Harcharik played a key role in a fraudulent scheme involving a purported insurance policy that enabled Brightpoint to conceal $11.9 million in losses that it sustained in 1998. + + In its complaint, filed on September 11, 2003, the Commission alleged that Harcharik and other co-defendants, including John Delaney, Brightpoint's former corporate controller, devised and executed an accounting fraud scheme in order to keep escalating losses at Brightpoint within a previously announced range. Specifically, the complaint alleged that Harcharik negotiated and executed a sham insurance policy issued by American International Group, Inc. (AIG) for the sole purpose of allowing Brightpoint to write off these losses as covered by insurance. The complaint further alleged that the purported policy was simply a vehicle that masked a round trip of cash between Brightpoint and AIG, rather than real insurance. As a result of the scheme, Brightpoint's pre-tax net income for 1998 was overstated by 61 percent. + + This was the first case to go to trial involving the fraudulent use of finite insurance. The jury found Harcharik liable for aiding and abetting securities fraud in violation of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 (Exchange Act), and aiding and abetting violations of Exchange Act Section 13(b)(5) (internal controls and books-and-records provision) and Exchange Act Rule 13b2-1 (books-and-records provision). + + The final judgment entered against Harcharik concludes the Commission's litigation in this matter. Previously, all of the defendants except Harcharik had agreed to settle the Commission's charges. In connection with the settlements, AIG paid a civil penalty of $10 million, Brightpoint paid a civil penalty of $450,000, Delaney paid a civil penalty of $100,000 and consented to the entry of a Final Judgment that permanently enjoined him from future violations of the securities laws and permanently barred him from serving as an officer or director of any public company, and Brightpoint's former chief financial officer, Phillip Bounsall (Bounsall), agreed to pay a civil penalty of $45,000. + + AIG, Brightpoint and Bounsall also consented to the issuance of separate cease-and-desist orders by the Commission. In a related criminal case, Delaney pled guilty to securities fraud and, as a result, was sentenced to 12 months probation, including eight months of home detention. + + For additional information, see Litigation Release No. 18340 . + + + + +  + + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Shanahan, Sr., et al. + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501526","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Shanahan, Sr., et al. + + + + + + + + + + + + Michael F. Shanahan, Sr., et al. + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20193 / July 12, 2007 + + Accounting and Auditing Release No. 2633 / July 12, 2007 + + Securities and Exchange Commission v. Michael F. Shanahan, Sr., et al , United States District Court for the Eastern District of Missouri, Civil Action No. 4:07-cv-1262 (E.D. Mo. July 12, 2007) + + SEC Files Actions Against Former CEO and Former Board Member of Engineered Support Systems, Inc. Relating to Options Backdating Scheme + + On July 12, 2007, the Securities and Exchange Commission filed a civil injunctive action against Michael F. Shanahan, Sr. ("Shanahan"), the former Chief Executive Officer of Engineered Support Systems, Inc., and his son Michael F. Shanahan, Jr. ("Shanahan Jr."), a former member of Engineered Support's Compensation Committee of its Board of Directors, alleging that they participated in a fraudulent scheme in which they granted undisclosed, in-the-money stock options to themselves and to other Engineered Support officers, employees, and directors. According to the complaint, Engineered Support employees and directors received approximately $20 million in unauthorized and undisclosed compensation as a result of the backdating, $16 million of which was received by top executives and directors. Shanahan personally profited from the backdating scheme by $8,916,562. + + The complaint alleges that, from 1997 through 2002, Shanahan and Shanahan Jr. approved the issuance of backdated stock options that coincided with historically low closing prices of Engineered Support's common stock. The company's stock options vested at the time of grant, providing the option recipients with instantly realizable compensation. In addition, the complaint alleges that, on at least two occasions, Shanahan approved the cancellation and reissuance of previously backdated Engineered Support stock options that had fallen out-of-the-money with new backdated grant dates and exercise prices, in order to bring them back in-the-money. The complaint also alleges that Shanahan granted additional Engineered Support stock options to non-employee directors in excess of authorized amounts, from which these directors profited by approximately $6 million. The complaint alleges that Shanahan Jr. profited by $379,738 from the receipt of unauthorized stock options. + + As part of the scheme, Shanahan and Shanahan Jr. allegedly caused Engineered Support to misrepresent in its Forms 10-K, proxy statements, and registration statements filed with the Commission that all stock options had been and would be granted at the fair market value of the Company's common stock on the date of the award. The complaint also alleges that Engineered Support failed to report the additional compensation its executives had received through in-the-money option grants, and that the Company failed to disclose the repricing of options that had fallen out-of-the-money, or the granting of stock options to non-employee directors in excess of authorized amounts. + + The Commission's complaint alleges that Shanahan and Shanahan Jr. violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 14(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5 and 14a-9 thereunder, and aided and abetted violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 13a-1 and 12b-20 thereunder. The Complaint also alleges that Shanahan violated Section 13(b)(5) and Exchange Act Rules 13b2-1 and 13a-14. The Commission is seeking permanent injunctions, disgorgement of ill-gotten gains, including prejudgment interest, civil penalties, and bars from serving as an officer or director of any public company against Shanahan and Shanahan Jr. The Commission is also seeking from Shanahan reimbursement of certain bonuses, other incentive-based and equity-based compensation, and stock sale profits, pursuant to Section 304 of the Sarbanes-Oxley Act of 2002. + + The Commission's investigation in this matter is continuing. + + For further information, see Litigation Release No. 19990 (February 6, 2007). + + + + + + SEC Complaint in this matter + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2634.pdf b/raw/aaer/2007/AAER-2634.pdf new file mode 100644 index 0000000000000000000000000000000000000000..15ab7ab57ad0e42e8297082de9cd452f75c31d7a Binary files /dev/null and b/raw/aaer/2007/AAER-2634.pdf differ diff --git a/raw/aaer/2007/AAER-2634.txt b/raw/aaer/2007/AAER-2634.txt new file mode 100644 index 0000000000000000000000000000000000000000..995280e7c91d32ec5a5d8d072867eb1b1c1398ac --- /dev/null +++ b/raw/aaer/2007/AAER-2634.txt @@ -0,0 +1,111 @@ + +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56066 / July 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2634 / July 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-9331 + +In the Matter of +B.J. Thomas + +: +: +: +: +: +: +ORDER GRANTING APPLICATION FOR +REINSTATEMENT TO APPEAR AND PRACTICE +BEFORE THE COMMISSION AS AN ACCOUNTANT +RESPONSIBLE FOR THE PREPARATION OR +REVIEW OF FINANCIAL STATEMENTS REQUIRED +TO BE FILED WITH THE COMMISSION + +On June 10, 1997, B.J. Thomas (“Thomas”) was suspended from appearing or practicing +as an accountant before the Commission as a result of public administrative proceedings +instituted by the Commission against Thomas pursuant to Rule 102(e)(3) of the Commission's +Rules of Practice.1 The suspension stemmed from Thomas’s consent to the entry of a final +judgment against him on March 11, 1997 in an action brought by the Commission in federal +district court. The final judgment permanently enjoined him from violating Section 17(a) of the +Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 +thereunder. + The Commission’s complaint in federal district court alleged that Thomas served as the +chief financial officer of Technology International, Ltd. (“TIL”) from at least March 1993 until +February 1994. TIL’s Form 10-Q for the quarter ended June 30, 1993 materially misstated its +financial condition. TIL reported ownership of approximately $2.1 million of rental properties +when, in fact, as of the end of the quarter, TIL had not consummated the purchase of those +properties and could not, consistent with GAAP, report them as assets. TIL also improperly +capitalized $828,744 of “Pre Operating and Deferred Costs,” including consulting fees, officers’ +salaries, the cost of running the Shareholders Relations Department and interest costs. Finally, +TIL failed, contrary to the requirements of Regulation S-X, to disclose that it had made a prior +period adjustment to capitalize costs that had previously been expensed. Thomas prepared TIL’s + +1 See Accounting and Auditing Enforcement Release No. 922, dated June 10, 1997. Thomas was temporarily +suspended from appearing or practicing before the Commission. This suspension became permanent, pursuant to +Rule 102(e)(3)(ii) after 30 days from the date of the release. + +June 30, 1993 financial statements and was responsible for all of TIL’s accounting policies and +practices during that time period. + +This order is issued in response to Thomas’s application for reinstatement to practice +before the Commission as an accountant responsible for the preparation or review of financial +statements required to be filed with the Commission. + + In his capacity as a preparer or reviewer, or a person responsible for the preparation or +review of financial statements required to be filed with the Commission, Thomas attests that he +will have his work reviewed by the independent audit committee of any company for which he +works, or in some other manner acceptable to the Commission, while practicing before the +Commission in this capacity. Thomas is not, at this time, seeking to appear or practice before the +Commission as an independent accountant. If he should wish to resume appearing and +practicing before the Commission as an independent accountant, he will be required to submit an +application to the Commission showing that he has complied and will comply with the terms of +the original suspension order in this regard. Therefore, Thomas’s suspension from practice +before the Commission as an independent accountant continues in effect until the Commission +determines that a sufficient showing has been made in this regard in accordance with the terms of +the original suspension order. + +Rule 102(e)(5) of the Commission’s Rules of Practice governs applications for +reinstatement, and provides that the Commission may reinstate the privilege to appear and +practice before the Commission “for good cause shown.”2 This “good cause” determination is +necessarily highly fact specific. + +On the basis of information supplied, representations made, and undertakings agreed to +by Thomas, it appears that he has complied with the terms of the June 10, 1997 order suspending +him from practice before the Commission as an accountant, that no information has come to the +attention of the Commission relating to his character, integrity, professional conduct or +qualifications to practice before the Commission that would be a basis for adverse action against +him pursuant to Rule 102(e) of the Commission's Rules of Practice, and that Thomas, by +undertaking to have his work reviewed by the independent audit committee of any company for +which he works, or in some other manner acceptable to the Commission, in his practice before +the Commission as a preparer or reviewer of financial statements required to be filed with the +Commission, has shown good cause for reinstatement. Therefore, it is accordingly, + + + + + + +2 Rule 102(e)(5)(i) provides: + +“An application for reinstatement of a person permanently suspended or disqualified under paragraph (e)(1) or (e)(3) +of this section may be made at any time, and the applicant may, in the Commission’s discretion, be afforded a +hearing; however, the suspension or disqualification shall continue unless and until the applicant has been reinstated +by the Commission for good cause shown.” 17 C.F.R. § 201.102(e)(5)(i). + + + +ORDERED pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice that B.J. +Thomas is hereby reinstated to appear and practice before the Commission as an accountant +responsible for the preparation or review of financial statements required to be filed with the +Commission. + +By the Commission. + + +Nancy M. Morris +Secretary \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2635.txt b/raw/aaer/2007/AAER-2635.txt new file mode 100644 index 0000000000000000000000000000000000000000..24b3d0d79fcd764a7db33b5c1a82b0a5be3d1edc --- /dev/null +++ b/raw/aaer/2007/AAER-2635.txt @@ -0,0 +1,208 @@ + + + + +UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56074 / July 13, 2007 + +ACCOUNTING AND AUDIT ENFORCEMENT +Release No. 2635 / July 13, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12689 + + +In the Matter of + +Paul Kearney, + +Respondent. + +ORDER INSTITUTING CEASE-AND- +DESIST PROCEEDINGS, MAKING +FINDINGS, AND IMPOSING A CEASE- +AND-DESIST ORDER PURSUANT TO +SECTION 21C OF THE SECURITIES +EXCHANGE ACT OF 1934 + + +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 Paul Kearney (“Kearney” 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, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease- +and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order Pursuant to +Section 21C of the Securities Exchange Act of 1934 (“Order”), as set forth below. + + + + 2 +III. + + On the basis of this Order and Res pondent’s Offer, the Commission finds1 that: + +Respondent + +1. Paul Kearney, age 33, is an Irish citizen and a resident of Hollywood, Ireland. +Kearney was the financial accountant of Zomax Limited’s Operations Facility in Clondalkin, +Ireland from April 2000 until January 2005, when he voluntarily resigned. + +Relevant Entities + +2. Zomax, Inc. (“Zomax”) was a Minnesota corporation founded in February 1996 +with its headquarters in Plymouth, Minnesota. Zomax was a manufacturer of CDs and DVDs, and +provides software and related services to computer manufacturers and other producers of +multimedia products. Zomax operated eleven facilities across the United States, Canada, Mexico, +and Ireland. Zomax’s common stock was registered with the Commission pursuant to Section +12(g) of the Exchange Act and was listed on the Nasdaq National Market. For the period ended +December 31, 2004 the Company’s revenue was $199 million with operating losses of $15.3 +million and net losses of $8.4 million. + + 3. Zomax Limited (“Zomax Ireland”) was an Irish limited liability company and the +Irish subsidiary of Zomax. Zomax Ireland was comprised of two distinct divisions: the Marketing +Service Group located in Santry, Ireland and the Operations Facility located in Clondalkin, Ireland +(“Operations Facility”). The Marketing Service Group was a customer contact center, and the +Operations Facility was engaged in replication, print management, printing, packaging, +warehousing, and distribution activities. For the period ended December 31, 2004, Zomax +Ireland’s revenue was approximately $35 million, which represented approximately 17.5 percent of +Zomax’s total revenues. For the period ended December 31, 2004, Zomax Ireland’s operating +losses were $3.4 million with net losses of $3.3 million. + +Background + +4. From the end of 2003 th rough 2004, the former general manager of Zomax Ireland +(“General Manager”), the former financial controller of the Operations Facility (“Controller”), and +Kearney were the Zomax Ireland employees primarily responsible for reporting Zomax Ireland’s +financial results to Zomax. The General Manager was the top executive officer of Zomax Ireland +and the Controller was the top financial officer of Zomax Ireland’s Operations Facility. As the +financial accountant for the Operations Facility, Kearney reported directly to the Controller and he +also took direction from the General Manager. Kearney’s duties included making journal entries +for the operations facility and sending Zomax Ireland’s monthly financial documents to Zomax. + + +1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding +on any other person or entity in this or any other proceeding. + 3 + 5. Zomax Ireland’s performance started to decline in late 2003, due to increased +manufacturing costs, decreased demand, and a corresponding drop in prices to attempt to address +the falling demand. These problems were caused by a substantial increase in the cost of raw +materials, specifically petroleum based materials, which drastically increased Zomax Ireland’s +costs. Also, many of Zomax Ireland’s customers started moving to competitors with production +plants located in Eastern Europe and other parts of the world with lower labor costs. Finally, +Zomax Ireland’s machinery was aging, making it more difficult to produce CDs and DVDs in a +cost effective manner. These problems led to significant declines in Zomax Ireland’s operating +performance beginning in late 2003 and continuing throughout 2004. + + 6. From the end of 2003 through 2004, the General Manager, the Controller, and +Kearney engaged in a fraudulent scheme to inflate the financial results of Zomax Ireland by +manipulating certain accounts to hide the declining performance of Zomax Ireland during 2004. +Specifically, the General Manager and the Controller directed Kearney to conceal Zomax Ireland’s +losses by making false journal entries to overstate the sales accrual account, to capitalize spare +machine parts that should have been expensed, to understate accruals for employee holiday pay, +and then to conceal the fraudulent conduct by sending false Zomax Ireland financial information to +Zomax. + +7. The General Manager, the Controller, and Kearney’s fraudulent scheme to +manipulate the sales accrual account throughout 2004 resulted in this account being substantially +overstated by $367,424, $573,804, and $392,266 during the first three quarters of 2004. These +sales accrual overstatements, in turn, resulted in revenue being overstated for the first three +quarters of 2004. The General Manager, the Controller, and Kearney also inappropriately +capitalized $136,470 and $79,129 of spare machine parts in the second and third quarters of 2004, +respectively. The inappropriate capitalization of spare machine parts resulted in the corresponding +understatement of Zomax Ireland’s expenses and overstatement of its earnings in the second and +third quarters of 2004. Lastly, their understatement of accruals for employee holiday pay during +the third and fourth quarters of 2004 understated expenses by $54,896 during these quarters. + +8. Throughout 2004, the General Manager and the Controller hid this fraudulent +scheme by continually misrepresenting Zomax Ireland’s true financial status to Zomax. At the +direction of the General Manager and the Controller, Kearney submitted fraudulent monthly +financial packages to Zomax. Then the General Manger and the Controller reaffirmed the false +financial information contained in the fraudulent monthly financial packages during telephone +meetings with Zomax senior officers. In addition, the General Manager and the Controller each +signed and submitted to Zomax false certifications for Zomax Ireland’s quarterly financial +statements. In turn, Zomax’s senior officers relied on these false certifications in connection with +their certifications to the Commission as required by Sections 302 and 906 of the Sarbanes-Oxley +Act for Zomax’s Forms 10-Q for the first three quarters of 2004. + + 9. Zomax unknowingly incor porated Zomax Ireland’s false financial information in its +Forms 10-Q for the first three quarters of 2004. The General Manager, the Controller, and +Kearney’s fraudulent scheme to inflate the financial results of Zomax Ireland had a material effect +on Zomax’s consolidated quarterly financial statements during 2004. On March 31, 2005, Zomax + 4 +filed its Form 10-K for 2004, which restated the financial statements for 2003 and the first three +quarters of 2004. This restatement, caused primarily by the General Manager, the Controller, and +Kearney’s fraudulent scheme, negatively impacted the previously reported quarterly results for +2004. For the first quarter of 2004, Zomax previously reported a net loss of $981,000; the +restatement increased this net loss by $565,000 to $1,546,000, which represents a 58% increase in +net loss. For the second quarter of 2004, Zomax previously reported net income of $1,252,000; the +restatement decreased net income for this period by $718,000 to $534,000, which represents a 57% +decrease in net income. Finally, for the third quarter of 2004, Zomax previously reported a net loss +of $5,497,000; the restatement increased this net loss by $540,000 to $6,037,000, which represents +a 10% increase in net loss. + + 10. The General Manager, the Controller, and Kearney, as part of their fraudulent +scheme, knowingly circumvented a system of internal accounting controls, knowingly falsified +books, records or accounts, and directly or indirectly falsified or caused to be falsified any book, +record, or account. + + 11. The General Manager, the Controller, and Kearney’s fraudulent scheme caused +Zomax to fail to make and keep its books, records, and accounts in reasonable detail to accurately +and fairly reflect its transactions and dispositions of assets. + + 12. The General Manager, the Controller, and Kearney’s fraudulent scheme caused +Zomax to file with the Commission Forms 10-Q for the first three quarters of 2004 that contained +false statements of material fact and omitted to state material facts necessary to add such further +material information as was necessary, in order to make the statements made, in the light of the +circumstances under which they were made, not misleading. + 13. As a result of the conduct described a bove, Kearney violated Section 10(b) of the +Exchange Act and Rule 10b-5 thereunder, which prohibit fraudulent conduct in connection with +the purchase or sale of securities. + + 14. Also, as a result of the conduct described above, Kearney violated Section 13(b)(5) +of the Exchange Act and Rule 13b2-1 thereunder, which prohibit persons from knowingly +circumventing a system of internal accounting controls, knowingly falsifying any book, record or +account, and directly or indirectly falsifying or causing to be falsified any book, record, or account. + + 15. Also, as a result of the conduct de scribed above, Kearney caused Zomax’s +violations of Section 13(b)(2)(A) of the Exchange Act, which requires reporting companies to +make and keep books, records, and accounts which, in reasonable detail, accurately and fairly +reflect their transactions and dispositions of their assets. + + 16. Lastly, as a result of the conduct described above, Kearney caused Zomax’s +violations of Sections 13(a) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. + +17. In determining to accept th e Offer, the Commission considered the cooperation that +Respondent afforded the Commission staff. + + 5 +IV. + + In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondent Kearney’s Offer. + + Accordingly, it is hereby ORDERED that Paul Kearney cease and desist from committing +or causing any violations and any future violations of Sections 10(b) and 13(b)(5) of the Exchange +Act and Rules 10b-5 and 13b2-1 thereunder, and from causing any violations and any future +violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 +thereunder + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2636.txt b/raw/aaer/2007/AAER-2636.txt new file mode 100644 index 0000000000000000000000000000000000000000..c8292ada847055d2a0f828e4cae56cf7e8cf1290 --- /dev/null +++ b/raw/aaer/2007/AAER-2636.txt @@ -0,0 +1,164 @@ + + +UNITED STATES OF AMERICA + before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56078 / July 16, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2636 / July 16, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12690 + + + : + : + : +In the Matter of : ORDER INSTITUTING ADMINISTRATIVE + : PROCEEDINGS PURSUANT TO RULE + Kipp D. Orme, CP A, : 102(e) OF THE COMMISSION’S RULES OF + : PRACTICE, MAKING FINDINGS, AND + Respondent. : IMPO SING REMEDIAL SANCTIONS + : + : +____________________________________ : + + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate and in the +public interest that public administrative proceedings be, and hereby are, instituted against Kipp D. +Orme (“Respondent” or “Orme”) pursuant to Rule 102(e)(3)(i) of the Commission’s Rules of +Practice.1 + + + + +1 Rule 102(e)(3)(i) provides, in relevant part, that: + + The Commission, with due regard to the public interest and without preliminary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has +been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal securities laws or of the rules and regulations +thereunder. + 2 + +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, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Section III.C. below, which are admitted, Respondent +consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) +of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions +(“Order”), as set forth below. + +III. + + On the basis of this Order and Responde nt’s Offer, the Commission finds that: + +A. Orme, age 48, is and has been a certif ied public accountant holding an inactive +license to practice in the State of Kansas. Orme served as chief financial officer of NorthWestern +Corporation (“NorthWestern”) from approximately February 2001 through September 2003. + +B. NorthWestern was at all relevant times a Delaware corporation with its principal +place of business in Sioux Falls, South Dakota. NorthWestern operates a regulated utility business +in South Dakota, Nebraska and Montana. During the period of conduct described herein, +NorthWestern consolidated the financial results of two significant non-utility entities, Expanets, +Inc. (“Expanets”) and Blue Dot Services, Inc. (“Blue Dot”). At all relevant times, NorthWestern’s +common stock was registered with the Commission pursuant to Section 12(b) of the Securities +Exchange Act of 1934 (“Exchange Act”), and traded on the New York Stock Exchange. + +C. On July 9, 2007 a final judgment was entered against Respondent, permanently +enjoining him from future violations of Section 17(a) of the Securities Act of 1933, and Section +10(b) of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and aiding and +abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules +12b-20, 13a-11 and 13a-13 thereunder, in the civil action entitled Securities and Exchange +Commission v. Kipp D. Orme, Civil Action Number 07-4060 in the United States District Court +for the District of South Dakota. + +D. The Commission’s Complaint alleged, among other things, that during 2002, +Respondent misled investors about the operating results and financial condition of NorthWestern +and its operating segments. First, the Complaint alleged that Respondent misled investors about +the functionality of Expanets’ new computer system, which materially impacted Expanets’ billing +and collection functions. The Commission’s Complaint alleged that, as a result of these problems, +Expanets improperly accounted for its accounts receivable and adjustments to customers’ bills, +causing material overstatements of NorthWestern’s reported income from continuing operations +in the second and third quarters of 2002, respectively. Second, the Commission’s Complaint + 3 +alleged that Respondent misled investors about the nature of NorthWestern’s and Expanets’ +reported income by misrepresenting or failing to disclose the magnitude of Expanets’ reserve +reductions or its receipt of unusual non-compete payments. Third, the Commission’s Complaint +alleged that Respondent misrepresented or failed to disclose facts relating to other issues critical +to NorthWestern’s liquidity, including NorthWestern’s transfer of cash in continued support of its +subsidiaries. Finally, the Commission’s Complaint alleged that Respondent’s false and misleading +statements facilitated NorthWestern’s registration of more than $800 million in securities +offerings in September and October 2002, including an $87.5 million equity offering that raised +operating capital for the company. + +IV. + + In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent’s Offer. + + Accordingly, it is hereby ORDERED, effective immediately, that: + + A. Respondent is suspended from appearing or practicing before the Commission as an +accountant. + + B. After five years from the date of th is order, Respondent may request that the +Commission consider his reinstatement by submitting an application (attention: Office of the +Chief Accountant) to resume appearing or practicing before the Commission as: + + 1. a preparer or reviewer, or a person responsible for the preparation or +review, of any public company’s financial statements that are filed with the Commission. Such +an application must satisfy the Commission that Respondent’s work in his practice before the +Commission will be reviewed either by the independent audit committee of the public company +for which he works or in some other acceptable manner, as long as he practices before the +Commission in this capacity; and/or + + 2. an independent accountant. Such an application must satisfy the +Commission that: + + (a) Respondent, or the public accounting firm with which he is +associated, is registered with the Public Company Accounting Oversight Board (“Board”) in +accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; + + (b) Respondent, or the registered public accounting firm with which he +is associated, has been inspected by the Board and that inspection did not identify any criticisms +of or potential defects in the Respondent’s or the firm’s quality control system that would +indicate that the Respondent will not receive appropriate supervision. + + 4 + (c) Respondent has resolved all di sciplinary issues with the Board, +and has complied with all terms and conditions of any sanctions imposed by the Board (other +than reinstatement by the Commission); and + + (d) Respondent acknowledges his responsibility, as long as +Respondent appears or practices before the Commission as an independent accountant, to +comply with all requirements of the Commission and the Board, including, but not limited to, all +requirements relating to registration, inspections, concurring partner reviews and quality control +standards. + +C. The Commission will consider an application by Respondent to resume +appearing or practicing before the Commission provided that his state CPA license is +current and he has resolved all other disciplinary issues with the applicable state boards of +accountancy. However, if state licensure is dependent on reinstatement by the +Commission, the Commission will consider an application on its other merits. The +Commission’s review may include consideration of, in addition to the matters referenced +above, any other matters relating to Respondent’s character, integrity, professional conduct, +or qualifications to appear or practice before the Commission. + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y + \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2637.pdf b/raw/aaer/2007/AAER-2637.pdf new file mode 100644 index 0000000000000000000000000000000000000000..855a287143a0d0c1da1ba93a7478f1cc6ad95dcd Binary files /dev/null and b/raw/aaer/2007/AAER-2637.pdf differ diff --git a/raw/aaer/2007/AAER-2638.txt b/raw/aaer/2007/AAER-2638.txt new file mode 100644 index 0000000000000000000000000000000000000000..10b03fe0412d43205869179399cdf143138fb669 --- /dev/null +++ b/raw/aaer/2007/AAER-2638.txt @@ -0,0 +1,167 @@ + + +UNITED STATES OF AMERICA + before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56080 / July 16, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2638 / July 16, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12692 + + : + : + : +In the Matter of : ORDER INSTITUTING ADMINISTRATIVE + : PROCEEDINGS PURSUANT TO RULE + Richard R. Hylland, CPA, : 102(e) OF THE COMMISSION’S RULES OF + : PRACTICE, MAKING FINDINGS, AND + Respondent. : IMPO SING REMEDIAL SANCTIONS + : + : +____________________________________ : + + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate and in the +public interest that public administrative proceedings be, and hereby are, instituted against +Richard R. Hylland (“Respondent” or “Hylland”) pursuant to Rule 102(e)(3)(i) of the +Commission’s Rules of Practice.1 + + + + + +1 Rule 102(e)(3)(i) provides, in relevant part, that: + + The Commission, with due regard to the public interest and without preliminary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has +been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal securities laws or of the rules and regulations +thereunder. + 2 +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, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Section III.C. below, which are admitted, Respondent +consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) +of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions +(“Order”), as set forth below. + +III. + + On the basis of this Order and Responde nt’s Offer, the Commission finds that: + +A. Hylland, age 47, is and has been a certified public accountant holding an inactive +license to practice in the State of South Dakota. Hylland served as president, chief operating +officer, and a member of the board of directors of NorthWestern Corporation (“NorthWestern”) +from May 1998 until April 2003. Hylland also served as vice-chairman of the board of directors of +Expanets, Inc. (“Expanets”) from December 1997 until April 2003. + +B. NorthWestern was, at all relevant times, a Delaware corporation with its principal +place of business in Sioux Falls, South Dakota. NorthWestern operates a regulated utility business +in South Dakota, Nebraska and Montana. During the period of conduct described herein, +NorthWestern consolidated the financial results of two significant non-utility entities, Expanets, +and Blue Dot Services, Inc. (“Blue Dot”). At all relevant times, NorthWestern’s common stock +was registered with the Commission pursuant to Section 12(b) of the Securities Exchange Act of +1934 (“Exchange Act”), and traded on the New York Stock Exchange. + +C. On July 9, 2007 a final judgment was entered against Respondent, permanently +enjoining him from future violations of Section 17(a) of the Securities Act of 1933, and Sections +10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder, and aiding and +abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules +12b-20, 13a-11 and 13a-13 thereunder, in the civil action entitled Securities and Exchange +Commission v. Richard R. Hylland, Civil Action Number 07-4058 in the United States District +Court for the District of South Dakota. + +D. The Commission’s Complaint alleged, among other things, that during 2002, +Respondent misled investors about the operating results and financial condition of NorthWestern +and its operating segments. First, the Complaint alleged that Respondent misled investors about +the functionality of Expanets’ new computer system, which materially impacted Expanets’ billing +and collection functions. The Commission’s Complaint further alleged that Respondent knew that +Expanets’ improperly accounted for accounts receivable and adjustments to customers’ bills, +causing overstatements of NorthWestern’s reported income from continuing operations of 90% + 3 +and 109% in the second and third quarters of 2002, respectively. Second, the Commission’s +Complaint alleged that Respondent misled investors about the nature of NorthWestern’s and +Expanets’ reported income by misrepresenting or failing to disclose the magnitude of Expanets’ +reserve reductions or its receipt of unusual non-compete payments. Third, the Commission’s +Complaint alleged that Respondent misled investors about other issues critical to NorthWestern’s +liquidity, including NorthWestern’s transfer of large amounts of cash in continued support of +Expanets and Blue Dot, and NorthWestern’s inability to collect $97 million it had publicly +anticipated from the sale of certain utility assets. Finally, the Commission’s Complaint alleged +that Respondent’s false and misleading statements facilitated more than $800 million in securities +offerings by NorthWestern in September and October 2002, including an $87.5 million equity +offering that raised badly needed operating capital for the company. + +IV. + + In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent’s Offer. + + Accordingly, it is hereby ORDERED, effective immediately, that: + + A. Respondent is suspended from appearing or practicing before the Commission as an +accountant. + + B. After five years from the date of th is order, Respondent may request that the +Commission consider his reinstatement by submitting an application (attention: Office of the +Chief Accountant) to resume appearing or practicing before the Commission as: + + 1. a preparer or reviewer, or a person responsible for the preparation or +review, of any public company’s financial statements that are filed with the Commission. Such +an application must satisfy the Commission that Respondent’s work in his practice before the +Commission will be reviewed either by the independent audit committee of the public company +for which he works or in some other acceptable manner, as long as he practices before the +Commission in this capacity; and/or + + 2. an independent accountant. Such an application must satisfy the +Commission that: + + (a) Respondent, or the public accounting firm with which he is +associated, is registered with the Public Company Accounting Oversight Board (“Board”) in +accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; + + (b) Respondent, or the registered public accounting firm with which he +is associated, has been inspected by the Board and that inspection did not identify any criticisms +of or potential defects in the Respondent’s or the firm’s quality control system that would +indicate that the Respondent will not receive appropriate supervision. + + 4 + (c) Respondent has resolved all di sciplinary issues with the Board, +and has complied with all terms and conditions of any sanctions imposed by the Board (other +than reinstatement by the Commission); and + + (d) Respondent acknowledges his responsibility, as long as +Respondent appears or practices before the Commission as an independent accountant, to +comply with all requirements of the Commission and the Board, including, but not limited to, all +requirements relating to registration, inspections, concurring partner reviews and quality control +standards. + + +C. The Commission will consider an application by Respondent to resume +appearing or practicing before the Commission provided that his state CPA license is +current and he has resolved all other disciplinary issues with the applicable state boards of +accountancy. However, if state licensure is dependent on reinstatement by the +Commission, the Commission will consider an application on its other merits. The +Commission’s review may include consideration of, in addition to the matters referenced +above, any other matters relating to Respondent’s character, integrity, professional conduct, +or qualifications to appear or practice before the Commission. + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y + \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2640.pdf b/raw/aaer/2007/AAER-2640.pdf new file mode 100644 index 0000000000000000000000000000000000000000..fe0c13ec03b36c90b1a496db52314389ad7d3d5b Binary files /dev/null and b/raw/aaer/2007/AAER-2640.pdf differ diff --git a/raw/aaer/2007/AAER-2640.txt b/raw/aaer/2007/AAER-2640.txt new file mode 100644 index 0000000000000000000000000000000000000000..aa4ca2979ad8f612b73ce0f426815ac917bc85f6 --- /dev/null +++ b/raw/aaer/2007/AAER-2640.txt @@ -0,0 +1,155 @@ +UNITED STATES OF AMERICA +before the +SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56087 / July 17, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2640 / July 17, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12698 + +_______________________________ + : +In the Matter of : + : ORDER INSTITUTING ADMINISTRATIVE +Jay D. Bolding (CPA), : PROCEEDINGS PURSUANT TO RULE + : 1 0 2 ( e ) O F T H E C O M M I S S I O N ’ S R U L E S O F + : PRACTICE, MAKING FINDINGS, AND + Respondent. : IMPO SING REMEDIAL SANCTIONS +_____________________________ : + +I. + +The Securities and Exchange Commission (“Commission”) deems it appropriate and in +the public interest that public administrative proceedings be, and hereby are, instituted against +Jay D. Bolding (“Bolding” or “Respondent”) pursuant to Rule 102(e)(3)(i) of the Commission's +Rules of Practice.1 + +II. + +In anticipation of the institution of these proceedings, Bolding 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, except as to +the Commission's jurisdiction over him and the subject matter of these proceedings, and the +findings contained in Section III.3. below, which are admitted, Bolding consents to the entry of this + +1 Rule 102(e)(3)(i) provides, in relevant part, that: “The Commission, with due regard to the public +interest and without preliminary hearing, may, by or der, . . . suspend from appearing or practicing before +it any . . . accountant . . . who has been by name . . . permanently enjoined by any court of competent +jurisdiction, by reason of his or her misconduct in an action brought by the Commission, from violating or +aiding and abetting the violation of any provision of the Federal securities laws or of the rules and +regulations thereunder.” +Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of +Practice, Making Findings, and Imposing Remedial Sanctions (“Order”), as set forth below. + +III. + +On the basis of this Order and Respondent's Offer, the Commission finds that: + +1. Bolding, age 47, is a resident of Omaha, Nebraska. He was licensed as a certified +public accountant in Kansas and Tennessee; however, both licenses have lapsed. He worked for +approximately 14 years in public accounting as an auditor, including as a Senior Manager. From +January 1997 to the beginning of ConAgra’s fourth quarter of fiscal year 1999 (March 1999), he +was the head of ConAgra Food, Inc.’s (“ConAgra”) Internal Audit department. From March +1999 until approximately April 2004, he served as ConAgra’s Corporate Controller. Until his +resignation on June 1, 2006, he held the position of Senior Vice President for Capital and Market +Investment Effectiveness at ConAgra. + +2. ConAgra, a Delaware corporation with headquarters in Omaha, Nebraska, is a +diversified international food company. ConAgra’s common stock is registered with the +Commission pursuant to Section 12(b) of the Securities Exchange Act of 1934 (“Exchange +Act”), and trades on the New York Stock Exchange. ConAgra’s fiscal year ends on the last +Sunday in May of each year. + +3. On June 29, 2007, the Commission file d a complaint against Bolding in SEC v. +James P. O’Donnell, et al. (Civil Action No. 07-cv-01373-RPM). On July 6, 2007, the court +entered a final judgment against Bolding which permanently enjoined Bolding, by consent, from +future violations of Exchange Act Rule 13b2-1, and from aiding and abetting violations of +Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b- +20, 13a-1 and 13a-13. Bolding was also ordered to disgorge (a) $345,790, plus prejudgment +interest of $129,816, and (b) $117,207, representing the market value, determined as of the date +the Commission accepts Bolding’s settlement offer, of 4,341 shares of ConAgra common stock; +and to pay a $125,000 civil money penalty. + +4. The Commission's complaint alleged, am ong other things, that Bolding directed +ConAgra’s improper accounting for excess reserves in fiscal year 2000, that he did not ensure that +ConAgra properly accounted for its income tax expense in fiscal year 1999 and that he should +have known that the ConAgra’s disclosure in note 14 to the financial statements regarding the +reduction of its income tax expense in its Form 10-K for fiscal year 1999 was inaccurate. The +complaint also alleged that Bolding knew, or should have known, about ConAgra’s improper +accounting for excess reserves in fiscal year 2001. Further, the complaint alleged that Bolding was +aware about improper accounting practices at United Agri Products (“UAP”), a subsidiary of +ConAgra, involving the improper recognition of revenue and the failure to record adequate bad +debt expense in fiscal year 2000. According to the allegations in the complaint, as a result of the +improper accounting, which was not in accordance with Generally Accepted Accounting Principles +(“GAAP”), certain of ConAgra’s filings with the Commission between fiscal year 1999 and the +third quarter of fiscal year 2001 were materially false and misleading because they overstated +ConAgra’s reported income before income taxes, net income and earnings per share. In addition, + 2 +ConAgra’s registration statement related to its proposed merger with International Home Foods, +Inc. (“IHF”) filed on Forms S-4 and S-4/A in June and July of 2000, respectively, were materially +false and misleading. Additionally, the complaint alleged that Bolding violated, and aided and +abetted ConAgra’s violations of, the provisions of the federal securities laws as noted in Section +III.3. above. + +IV. + +In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent Bolding’s Offer. + +Accordingly, it is hereby ORDERED, effective immediately, that: + +A. Bolding is suspended from appearing or practicing before the Commission as an +accountant. + +B. After one (1) year from the date of th is order, Respondent may request that the +Commission consider his reinstatement by submitting an application (attention: Office of the Chief +Accountant) to resume appearing or practicing before the Commission as: + +1. a preparer or review er, or a person responsible for the preparation or +review, of any public company's financial statements that are filed with the Commission. Such +an application must satisfy the Commission that Respondent's work in his practice before the +Commission will be reviewed either by the inde pendent audit committee of the public company +for which he works or in some other acceptable manner, as long as he practices before the +Commission in this capacity; and/or + +2. an independent accountant. Such an application must satisfy the +Commission that: +(a) Respondent, or the public accounting firm with which he is +associated, is registered with the Public Company Accoun ting Oversight Board (“Board”) in +accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; + +(b) Respondent, or the registered public accounting firm with which +he is associated, has been inspected by the Board and that inspection did not identify any +criticisms of or potential defect s in the Respondent's or the firm's quality control system that +would indicate that the Respondent will not receive appropriate supervision; + +(c) Respondent has resolved all disc iplinary issues with the Board, and +has complied with all terms and conditions of any sanctions imposed by the Board (other than +reinstatement by the Commission); and + +(d) Respondent acknowledges his responsibility, as long as +Respondent appears or practices before the Commission as an independent accountant, to comply + 3 +with all requirements of the Commission and the Board, incl uding, but not limited to, all +requirements relating to registration, inspections, concurring partner reviews and quality control +standards. + +C. The Commission will consider an application by Respondent to resume +appearing or practicing before the Commission provided that his state CPA license is current and +he has resolved all other disciplinary issues with the applicable state boards of accountancy. +However, if state licensure is dependant on reinstat ement by the Commiss ion, the Commission +will consider an application on its other merits. The Commission's review may include +consideration of, in addition to the matters re ferenced above, any other matters relating to +Respondent's character, integrity, professional conduct, or qualifications to appear or practice +before the Commission. +By the Commission. + +Nancy M. Morris +Secretary + + 4 \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2642.txt b/raw/aaer/2007/AAER-2642.txt new file mode 100644 index 0000000000000000000000000000000000000000..fbef4d6dab21e35b428dc49fb2c667b9fe9e07e2 --- /dev/null +++ b/raw/aaer/2007/AAER-2642.txt @@ -0,0 +1,1400 @@ + + + + + + + + + + + + + + + + SEC.gov | James M. Materna, John R. Holtzhauser, and Paul R. 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Materna, John R. Holtzhauser, and Paul R. Venesky + + + + + + + + + + + + James M. Materna, John R. Holtzhauser, and Paul R. Venesky + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20199 / July 18, 2007 + + Accounting and Auditing Enforcement Release No. 2642 / July 18, 2007 + + SEC v. James M. Materna, John R. Holtzhauser, and Paul R. Venesky , 1:07-CV-01274 (D.D.C.)(HHK) + + SEC Files Settled Accounting Fraud Charges Against the Former CFO and Former Controller of OM Group, Inc. and Former Controller of OMG Americas and Also Files Settled Cease-and-Desist Proceedings Against OM Group, Inc. + + + + On July 18, 2007, the Securities and Exchange Commission filed civil fraud charges in the U.S. District Court for the District of Columbia against James Materna, the former chief financial officer of OM Group, John Holtzhauser, the former controller of OM Group, and Paul Venesky, the former controller of OMG Americas, a subsidiary. According to the Complaint, Materna and Holtzhauser engaged in accounting fraud by recording and directing numerous adjustments to the consolidated financials ("top-side adjustments"), which were wholly unsupported and often duplicative of entries already recorded at the operating unit level. The Complaint alleges that Venesky made improper accounting entries at OMG Americas. According to the Complaint, the improper accounting practices were done with the intent to manage earnings. The scheme resulted in the filing of materially false and misleading financial statements in the company's annual report on Form 10-K for the fiscal years ended December 31, 2001 and December 31, 2002, and in the company's quarterly reports on Form 10-Q for the first three quarters of 2002, and the fourth quarter results on Form 10-K, and the first three quarters of 2003 filed on Form 10-Q. In March 2005, after conducting an internal investigation, OM Group issued a restatement reducing its retained earnings for the relevant period by $64 million as a result of the fraud. The Commission's Complaint charges Materna and Holtzhauser with violating, among others, the antifraud provisions of the federal securities laws. The Commission's Complaint charges Venesky with aiding and abetting violations of the antifraud provisions, among others. On July 18, 2007, the Commission issued a settled cease-and-desist order that finds that OM Group violated the antifraud, reporting, books and records, and internal controls provisions. OM Group produces value-added, metal based specialty chemicals and related materials. + + According to the Commission's Complaint: + + At the end of each quarter and fiscal year, OM Group consolidated the financial statements of its operating entities into one consolidated financial statement, which was reported on OM Group's Forms 10-K and 10-Q. During the close process, Holtzhauser and Materna made more than 700 top-side adjustments to OM Group's consolidated financial statement. The adjustments were across the divisions and the support for the adjustments was either inadequate or did not exist. Many of the improper accounting practices included, among other things, overcapitalizing overhead costs, inflated inventory recovery yields, improper supplier receivables and interest receivables, duplicating entries already made at the operating unit level, recording inaccurate inventory estimates, and recording expenses out of period. Venesky, the Controller of OMG Americas, was responsible for consolidating OMG Americas' financial results. Venesky used inaccurate estimates to record inventory. More often than not, Venesky's estimates increased following feedback from Holtzhauser and Materna. + + E-mails reflect the intent to adjust numbers to meet earnings targets or to enhance OM Group's performance. E-mails also show that there was a concerted effort by Materna, Holtzhauser, and Venesky to conceal material information from auditors. In one e-mail, Venesky wrote to Materna and Holtzhauser that "My concern about inventory is that going too heavy in WIP [work-in-process] or others will trigger even greater scrutiny. Truth is, we have a fresh set of auditors, and I have no idea how much conversational auditing this group will take…." The documents also reflect a pattern of recording almost random round numbers to journal entries to try to manage earnings, and to look for "other candidates," i.e., other accounting categories in which to make more adjustments. In addition, certain journal entries were made at locations that auditors would not likely visit during audits. During the relevant period, OM Group did not have an adequate system of internal controls that would detect and prevent the improper accounting practices. + + Materna and Holtzhauser, without admitting or denying the allegations in the Commission's complaint, each consented to the entry of a final judgment permanently enjoining each from violating Section 17(a) of the Securities Act, and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1, and 13b2-2 thereunder, and aiding and abetting 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; imposes a $100,000 civil penalty; and a five-year officer-and-director bar; and consented to the issuance of an order imposing a five-year 102(e) suspension. Holtzhauser will also pay disgorgement of $76,707. Venesky, without admitting or denying the allegations in the Commission's complaint, consented to the entry of a final judgment permanently enjoining him from aiding and abetting violations of Section 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder, and violating Rules 13b2-1 and 13b2-2 thereunder, and imposing a $25,000 civil penalty; and consented to the issuance of an order imposing a three-year 102(e) suspension. OM Group consented, without admitting or denying the findings by the Commission, to an order to cease-and-desist from committing any future violations of Section 17(a) of the Securities Act and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. + + The Commission considered remedial acts promptly undertaken by OM Group and cooperation afforded the Commission staff. + + + + + SEC Complaint in this matter ; Administrative Proceeding 33-8826 + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + Administrative Proceedings Release + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2643.txt b/raw/aaer/2007/AAER-2643.txt new file mode 100644 index 0000000000000000000000000000000000000000..f6d03b55373ec24cc1f2bc562a19dd98ec2f47b6 --- /dev/null +++ b/raw/aaer/2007/AAER-2643.txt @@ -0,0 +1,503 @@ + + + + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES ACT OF 1933 +Release No. 8826 / July 18, 2007 + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56089 / July 18, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2643 / July 18, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12699 + +In the Matter of + +OM GROUP, INC. + +Respondent. + +ORDER INSTITUTING CEASE-AND- +DESIST PROCEEDINGS, MAKING +FINDINGS, AND IMPOSING A CEASE- +AND-DESIST ORDER PURSUANT TO +SECTION 8A OF THE SECURITIES ACT +OF 1933 AND SECTION 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate that cease- +and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act +of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange +Act”), against OM Group, Inc. (“OM Group” 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, except as to the Commission’s jurisdiction over it and the subject matter of these +proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease- +and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order Pursuant to +Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934 +(“Order”), as set forth below. + + 2 +III. + + On the basis of this Order and Res pondent’s Offer, the Commission finds1 that: + +A. RESPONDENT + +OM Group is a Delaware corporation headquartered in Cleveland, Ohio. OM Group is +engaged in the production and marketing of value-added, metal-based specialty chemicals and +related materials, primarily from cobalt and nickel. At all relevant times and continuing through +today, OM Group’s common stock has been registered with the Commission pursuant to Section +12(b) of the Exchange Act, and is listed on the New York Stock Exchange under the ticker symbol +“OMG.” Its fiscal year end is December 31 of each year and its independent auditor is Ernst & +Young LLP. + +B. SUMMARY + +This matter involves a pattern of accounting fraud by OM Group and certain of its senior +officers in 2001, 2002, and years prior. OM Group is a metal-based specialty chemicals company +that is based in Cleveland, Ohio and has operations globally. At the end of each quarter and each +fiscal year, OM Group consolidated the financial statements of its various operating entities and +subsidiaries into one consolidated statement. OM Group’s former Chief Financial Officer (“CFO”) +and former Corporate Controller (“Controller”) were responsible for the entire consolidation +process. OMG Americas was one of OM Group’s wholly owned subsidiaries, and was comprised +of manufacturing and other facilities at five North American locations. The former Controller of +OMG Americas oversaw the consolidation process for OMG Americas. OM Group, through its +CFO and Controller, engaged in accounting fraud by recording and directing numerous +adjustments to the consolidated financials (“top-side adjustments”), which were wholly +unsupported and often duplicative of entries already recorded at the operating unit level. The +Controller of OMG Americas recorded erroneous and unsupported accounting entries at the +direction of the CFO and Controller to OMG Americas’ books and records. Many of the improper +accounting practices were done with the intent to manage earnings and to achieve financial results +that were closer to OM Group’s annual plan. + + These practices materially increased OM Gr oup’s annual and quarterly net income in a +departure from generally accepted accounting principles (“GAAP”). During the relevant period, +OM Group did not have an adequate system of internal controls that would detect and prevent this +type of conduct. In addition, certain information was concealed from OM Group’s independent +outside auditor, Ernst & Young LLP (“E & Y”). As a result of the conduct, OM Group filed +materially false and misleading financial statements in the company’s annual report on Form 10-K +for the fiscal years ended December 31, 2001 and December 31, 2002, and in the company’s +quarterly reports on Form 10-Q for the first three quarters of 2002, and the fourth quarter results + +1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on +any other person or entity in this or any other proceeding. + + 3 +filed on Form 10-K, and the first three quarters of 2003 filed on Form 10-Q. In March 2005, after +conducting an internal investigation into the accounting improprieties, OM Group issued a +restatement reducing its retained earnings for the relevant period by $64 million as a result of the +fraudulent conduct. + +C. BACKGROUD + +1. OM Group History and Growth + +OM Group is a producer and marketer of metal-based specialty chemicals and related +materials primarily from cobalt and nickel. OM Group was formed in 1991 and was the parent +company of three operating subsidiaries, Mooney Chemicals, Kokkola Chemicals in Finland, and +Vasset S.A. in France. It became a public company in September of 1993. OM Group +experienced tremendous growth from 1992 through 2001, acquiring a number of entities in the +United States and internationally. In 2000, OM Group acquired a nickel refinery in Harjavalta, +Finland, which increased OM Group’s sales revenue from approximately $500 million to nearly $1 +billion. The most significant acquisition occurred in August 2001, when OM Group completed the +acquisition of Degussa Metals Catalysts Cerdec (“dmc2”), which consisted of multiple operating +entities. After the dmc2 acquisition, OM Group had over $2 billion in sales revenue.2 OM Group +also experienced earnings growth during the 1999 through 2001 period and reported positive net +income that increased each year during that period.3 Although OM Group grew through +acquisitions, the accounting staff at corporate did not grow at the same rate and the accounting staff +at the operating unit level was thin. + +At the end of each quarter and each fiscal year, OM Group consolidated the financial +statements of its various operating entities and subsidiaries into one consolidated financial +statement, which was reported on OM Group’s Forms 10-K and 10-Q. During the relevant period, +the CFO and Controller were responsible for the entire consolidation process, which took place at +their Cleveland headquarters. In practice, each operating unit submitted to the Controller +electronically its monthly financial statement, which the Controller consolidated into one corporate +financial statement. During the close process, both the Controller and CFO made numerous top- +side adjustments to OM Group’s consolidated financial statement. In some instances, either the +Controller or CFO directed the individual controllers of the operating units to make adjustments at +the local level and resubmit the financials. The Controller of OMG Americas made numerous +entries at the direction of the Controller and CFO of OM Group. OM Group did not have an + +2 The Harjavalta acquisition was financed with about $200 million in bank borrowing. dmc2 was financed +with debt (a bridge loan), equity, and the sale of assets. In conjunction with the dmc2 acquisition, OM Group sold +certain assets to repay a portion of the bridge loan. Shortly thereafter, in December 2001, the company completed a +$400 million bond offering and used the proceeds to repay the remainder of the bridge loan. In January 2002, the +company completed a $225.7 million equity offering and used the proceeds to repay other debts. OM Group filed +registration statements for both the equity and bond offerings, which contained financial statements covering the +1999 through 2000, and 1999 through 2001 periods, respectively. + +3 OM Group’s net income for the 1999 through 2001 period was as follows: 1999--$55.8 million; 2000-- +$71.5 million; 2001--$75.6 million: Q1 2002--$23.3 million (up from $19.6 million in Q1 2001); Q2 2002--$25.5 +million (up from $20.1 million in Q2 2001). + 4 +internal audit group during the relevant period. Thus, there was no review of the work being +performed by the Controller or the CFO other than the audits performed by E & Y. + +2. The Shareholder Litigation, Audit Committee Investigation, and $64 Million +Restatement + +The CFO retired from OM Group in May 2002. In the third quarter of 2002, under the +direction of a new CFO, OM Group announced a lower of cost or market adjustment to inventory +of $108 million, after changing its outlook for the price of cobalt and determining that it had to +lower production levels of cobalt and sell off inventory to raise cash. OM Group’s trend of +obtaining positive net income ceased when OM Group’s third quarter of 2002 reflected a net loss +of $71.2 million for the three month period, and $22.3 million for the nine month period. In +response to this announcement, OM Group’s stock price dropped 71% from $30.90 to $8.95, and +shareholders filed a class action lawsuit on November 1, 2002 and a shareholder derivative suit on +December 12, 2002. During the discovery phase of the shareholder lawsuit in mid-2003, OM +Group’s attorneys found e-mails that raised questions about whether there was adequate support +for adjustments that were made to OM Group’s inventory balances. In November 2003, OM +Group’s audit committee hired outside counsel and forensic accountants to conduct an independent +investigation. At the conclusion of its internal investigation, OM Group reported its findings to the +Commission staff in August 2004. The company also underwent a restatement audit.4 The +internal investigation and restatement audit by E & Y concluded that there were numerous +unsupported top-side adjustments and other accounting entries to OM Group’s financial +statements. On March 31, 2005, as a result of the investigation, OM Group restated its financials +for fiscal years ended December 31, 2002 and 2001, quarters ended September 30, 2003, June 30, +2003, March 31, 2003, and all four quarters of 2002. The restatement also affected periods prior to +2001. + +The restatement adjustments reduced previously reported retained earnings as of September +30, 2003 by $64.0 million. A summary of the impact of the restatement follows (in millions): + +Increase in net income for the nine months + Ended September 30, 2003 $111.3 + +Increase in 2002 net income 125.1 + +Decrease in 2001 net income (123.5) + +Decrease in net income for years prior to 2001 (176.9) + +Cumulative net decrease in previously reported + Retained earnings at September 30, 2003 $(64.0) + + + +4 OM Group also undertook steps to improve its internal controls and compliance program, including +implementing a formal financial statement “close process” and creating an internal audit function. + 5 + +The materiality of the adjustments is demonstrated below: + +(in millions) 9 months ended Year ended Year ended Years prior to Total + 9-30-03 12-31-02 12-31-01 1-1-01 + +Net income 57.6 (327.9) 75.7 +(loss) as +originally +reported + +Adjustments 111.3 125.1 (123.5) (176.9) (64.0) + +Net income 168.9 (202.8) (47.8) +(loss) as +restated* + +Percent (66%) (62%) 258% +overstated +(understated) + +* Before OM Group’s change from the LIFO to FIFO method of valuing inventory. + +D. IMPROPER ACCOUNTING PRACTICES AND FRAUDULENT CONDUCT + +1. Corporate Level Top-Side Adjustments + +OM Group, through its CFO and Controller, made more than 700 top-side adjustments to +OM Group’s financials. The adjustments were made across the divisions of OM Group and +appeared to have no pattern. The support for the adjustments was either inadequate or did not +exist. In addition, there were numerous e-mails and other documents that showed the adjustments +were made with the intent to manage earnings and to achieve financial results that were closer to +OM Group’s annual plan. There are also e-mails and other documents that show a concerted effort +to conceal the conduct from E & Y. The improper top-side adjustments are discussed below. + +a. Over Capitalizing Overhead Costs + +During the 1999 through 2002 period, the CFO and Controller made top-side adjustments +to capitalize additional overhead costs related to certain of its operating units. These adjustments +were wrong because they were duplicative of amounts already recorded at the operating unit level. +Thus, their top-side adjustments to OM Group’s consolidated financial statements contributed to an +overstatement of OM Group’s income. + + + + 6 + +b. Cobalt Inventory Recovery Yields + +OM Group had to extract their raw materials, like cobalt, from slag piles. Although OM +Group estimated the yields for the piles, extraction was a very inexact process and resulted in +inconsistent yields from month to month. When the yields were below what the CFO and +Controller predicted -- for example, if they expected the operating unit to extract 10% cobalt but it +only extracted 8% -- the CFO and/or Controller made a top-side adjustment for the remaining +expected yield. OM Group’s contention was that the remaining 2% was still in the pile or +somewhere in the manufacturing process. However, there was no process for extracting the +remaining 2%, nor was there any analysis done to determine whether it was cost effective to +attempt to recover any remaining content. This accounting practice was not consistent with +GAAP.5 Thus, these inappropriate top-side adjustments allowed OM Group to increase income. + +c. Supplier Receivables + +Prior to 2001, OM Group was in a contractual dispute with three cobalt raw material +suppliers concerning the metal content of raw materials that OM Group bought from the suppliers. +In connection with this dispute, the CFO recorded three receivables totaling $26.9 million that +were treated as prepaid inventory representing advance payments for future inventory shipments. +It was determined that OM Group waived its claim to these recoverable amounts in its dispute +negotiations with the suppliers, or otherwise did not adequately document its position to support +recording these assets. The top-side adjustments resulted in an overstatement of OM Group’s +assets. + +d. Interest Receivables + +OM Group advanced $27.6 million to its joint venture partners during construction of a +smelter in years prior to 2001. OM Group recorded a receivable for such amount. Although there +was no agreement between OM Group and the joint venture partners providing for interest on the +advance, OM Group recorded interest income on the advances in 2001 and years prior of $5.5 +million and $9.9 million, respectively. In 2002, OM Group established a reserve of $12.0 million +against the interest receivable of $15.4 million. In 2003, OM Group finalized a written agreement +with one of the partners, which provided for $6.8 million in interest income. The original interest +recorded represented a contingent asset that should not have been recorded until a written +agreement was finalized.6 Thus, the interest receivable and the 2002 reserve should not have been +recorded. + +5 The term inventory embraces goods awaiting sale, goods in the course of production (work-in-process), and +goods to be consumed directly or indirectly in production (raw materials and supplies). ARB 43, chapter 4, +paragraph 3. + +6 Without a written agreement, OM Group’s recordation of the interest receivable and corresponding interest +income constituted a contingent gain. SFAS No. 5, “Accounting for Contingencies.” Paragraph 17 prohibits the +reflection of gain contingencies in financial statements, since to do so might be to recognize revenue prior to its +realization. + 7 + +e. Duplicating Entries Already Made at the Operating Unit Level + +OM Group purchased nickel raw material that was off-specification and incurred +incremental costs to process this material to a usable form, which was recorded as a receivable +from the supplier by the CFO and Controller. However, the raw material contract included +provisions for financial remedy for off-specification raw material, and the remedy properly was +accounted for at the operating unit level. The CFO and Controller made numerous other top-side +adjustments to capitalize costs that were expensed at the operating unit level for certain fixed asset +projects, software implementation projects, and miscellaneous other assets. The adjustments were +not appropriate because the operating units appropriately accounted for the expenses. + +f. Other Erroneous and Un supported Accounting Entries + +There were numerous other top-side adjustments and errors that were restated, including +inappropriate adjustments to fixed asset construction projects, certain accounts payable and cost of +sales related to raw material contracts, inventory numbers, incorrect entries related to purchase +accounting for the Harjavalta acquisition, errors in foreign currency remeasurement and +intercompany profit elimination, improper derivative accounting, and expenses charged in a period +that should have been taken in an earlier period. All of these top-side adjustments were wholly +inaccurate and unsupported. + +2. Inaccurate Estimates to OMG Americas’ Books and Records Made by the +Controller of OMG Americas at the Direction of the CFO and Controller of +OM Group + +The Controller of OMG Americas was responsible for consolidating OMG Americas’ +financial results and submitting them to OM Group’s Controller. The OMG Americas Controller +used inaccurate estimates to record inventory amounts at OMG Americas. During the relevant +period, OMG Americas did not have an inventory tracking system that could account for inventory +that was “work-in-process” i.e., raw materials that had entered into the manufacturing process but +not yet into finished goods. As a result, work-in-process was estimated by the OMG Americas +Controller at the direction and review of the Controller and CFO of OM Group. Similarly, +estimates were used to record amounts of finished goods inventory in-transit to company +warehouses from the Franklin facility based on the theory that the system could not account for +inventory that was in-transit to a distribution center. Estimates were also used to record inventory +balances for containers, packaging, and certain lab inventory at the Franklin facility. Finally, +entries were made to record the valuation of inventory full absorption costing. + +These estimates were inaccurate and unsupported. At the end of each year, the Franklin +plant slowed down production in anticipation of a holiday shutdown. By December 31st, little or +no work-in-process existed because the manufacturing process was completed by that time, and the +materials were turned into finished goods and shipped out. Thus, the OMG Americas Controller’s +estimates for work-in-process were wholly inaccurate and unsupported. It was determined that in- +transit inventory was fully accounted for on OMG America’s books. Thus, there was no need for + 8 +the Controller of OMG Americas to record additional amounts or estimates to record in-transit +inventory. OM Group sold materials to customers in totes, to which OM Group retained +ownership. The Controller of OMG Americas estimated the number of totes in inventory; +however, he could not describe a mechanism that was in place to retrieve the totes from the +customer, nor could he specifically describe how the totes were tracked when they were sent out to +customers. Thus, there was no reasonable basis for his inventory estimates. In addition, there was +no supporting documentation for his valuation of inventory full absorption at the Franklin facility. +The Controller of OMG Americas submitted all of his estimates to the CFO and the Controller of +OM Group for review. More often than not, the OMG Americas Controller’s estimates increased +following feedback from these two more senior officers. + + The Controller of OMG Americ as also recorded inaccurate journal entries concerning +certain litigation. In 2000, the Controller of OMG Americas recorded $4.5 million for anticipated +recovery of contributions previously made by the company to a settlement trust and related legal +fees for product liability litigation. The asset was reduced to $2.5 million in 2001 and was written +off in December 2002. Despite having an adverse judgment entered against the company’s +position and other unfavorable facts and circumstances, OM Group kept the receivable on its +books. The Controller of OMG Americas established the receivable pursuant to discussions with +the CFO and Controller of OM Group based upon their expectation that when the claimants had +settled the matter, the funds in the trust would be redistributed to the contributors. However, the +Controller of OMG Americas did not recall learning from the CFO or Controller of OM Group that +an adverse judgment had been rendered against the company. + +3. Evidence that the Accounting Improprieties Amounted to Fraud + +There are numerous e-mails and documents that clearly demonstrate that OM Group +through its CFO and Controller engaged in fraudulent accounting practices, and that the Controller +of OMG Americas was a participant. The e-mails evidence the intent to adjust numbers to meet +earnings targets or to enhance OM Group’s performance in a particular quarter or year end. The e- +mails also show that there was a concerted effort by the CFO, the Controller, and the Controller of +OMG Americas to hide information from E & Y. One e-mail from the Controller of OMG +Americas to the CFO and Controller of OM Group states: “My concern about inventory is that +going too heavy in WIP [work-in-process] or others will trigger even greater scrutiny. Truth is, we +have a fresh set of auditors, and I have no idea how much conversational auditing this group will +take.” Another e-mail discusses making “small undetectable changes to inventory” in documents +that would be submitted to E & Y, and then further states that “I can’t change them by much, it +would not be a prudent move.” The e-mails and other documents also show that the CFO and +Controller of OM Group were aware that the accounting entries made to OM Group’s financial +statements were not supportable and that OM Group’s financial statements were potentially +materially misstated during the relevant period. There are also e-mails that show the Controller of +OMG Americas raised red flags to the CFO and Controller that certain of the journal entries made +to OMG Americas’ financial statements were not supportable. For example, the Controller of +OMG Americas wrote to the Controller of OM Group that “I do believe that we were too +aggressive in our estimation of an SGA [sales general administrative expenses] adjustment. I +believe that we can substantiate one-fourth that number, the rest is tight.” + 9 + +The documents also reflect a pattern of recording almost random round numbers to journal +entries to try to manage OM Group’s earnings, and to look for “other candidates,” i.e., other +accounting categories in which to make more adjustments. There is also evidence that certain +journal entries were made at locations that E & Y would not likely visit during audits. + +E. LEGAL ANALYSIS + +1. Violations of the Antifraud Provisions: Section 17(a) of the Securities Act and +Section 10(b) of the Exchange Act and Rule 10b-5 thereunder + +Section 17(a) of the Securities Act prohibits fraud in the offer or sale of securities. Section +10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit securities fraud in connection with +the purchase or sale of securities. To establish a violation of these antifraud provisions, the +Commission must generally prove that the defendant made materially false or misleading +representations or omissions in connection with the offer, purchase or sale of securities, with +scienter. Aaron v. SEC, 446 U.S. 680, 697 (1980); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 195 +(1976); SEC v. Monarch Funding Corp., 192 F.3d 295, 308 (2d Cir. 1999); SEC v. First Jersey +Secs., Inc., 101 F.3d 1450, 1466-67 (2d Cir. 1996). “Recklessness” satisfies the scienter standard. +Press v. Chemical Investment Svcs. Corp., 166 F. 3d 529, 527-38 (2d Cir. 1999). + +A statement or omission is material if “there is a substantial likelihood that a reasonable +shareholder would consider it important” or, in other words, “there [is] a substantial likelihood that +the disclosure of the omitted fact would have been viewed by the reasonable shareholder as having +significantly altered the ‘total mix’ of information available.” Basic, Inc. v. Levinson, 485 U.S. +224, 232 (1988) (adopting standard of TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449 +(1976)). Precipitous movement in stock price can be an indication of materiality. United States v. +Bilzerian, 926 F.2d 1285, 1298 (2d Cir. 1991). The “in connection with” requirement is satisfied +by showing that false financial information was disseminated into the market place in a manner +reasonably calculated to influence the investing public. Ames Department Stores, Inc. Stock Litig., +991 F.2d 953, 962, 966 (2d Cir. 1993) (“in connection with” requirement satisfied by allegations +that corporation disseminated false financial information into marketplace through press releases, +annual reports, Form 10-K and two Forms 10-Q). + +OM Group violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange +Act and Rule 10b-5 thereunder as a result of the conduct described above. OM Group included in +its offering documents, periodic filings, and press releases financial information that senior +management knew, or was reckless in not knowing, was materially false and misleading. The top- +side adjustments and other improper accounting entries caused OM Group’s financial statements to +be materially misstated. OM Group’s $64 million retained earnings restatement is evidence of the +materiality of the accounting improprieties. The materially false financial statements were +included in OM Group’s annual and quarterly reports during fiscal years 2001 and 2002 and in the + 10 +Form S-1, effective January 16, 2002,7 that was issued in OM Group’s $225.7 million equity +offering. The materially incorrect financial information was also disseminated to the public +through earnings releases. The level of scienter was high. The CFO and Controller concealed +from the company’s auditor the fact that many of their top-side adjustments lacked support and +were done with the intent to manage earnings. The CFO’s and the Controller’s scienter is imputed +to OM Group. + +2. Violations of the Reporting Provisions: Section 13(a) of the Exchange Act and +Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder + +Section 13(a) of the Exchange Act requires all issuers of securities registered under Section +12 of the Exchange Act to file reports with the Commission containing such information as the +Commission’s rules and regulations prescribe. 15 U.S.C. § 78m(a) (2006). Rules 13a-1, 13a-11 +and 13a-13 thereunder require issuers to file annual, current, and quarterly reports, respectively. +The reports must contain financial statements prepared in conformity with GAAP and not contain +any materially false or misleading information. See Ponce v. SEC, 345 F.3d 722, 734-37 (9th Cir. +2003). Additionally, Rule 12b-20 requires that in addition to the information required in a report, +further material information should be added as necessary to make the required statements, in light +of the circumstances under which they were made, not misleading. Information regarding the +financial condition of a company is presumptively material. SEC v. Blavin, 760 F.2d 706, 711 (6th +Cir. 1985). No showing of scienter is required to establish a violation of Section 13 of the +Exchange Act. SEC v. McNulty, 137 F.3d 732, 740-41 (2d Cir. 1998). + +OM Group violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 +and 13a-13 thereunder as a result of the conduct described above. OM Group filed reports with the +Commission that misrepresented OM Group’s financial results for fiscal years ended December +31, 2001 and December 31, 2002 on Form 10-K, and in the company’s quarterly reports on Form +10-Q for the first three quarters of 2002 and the fourth quarter results filed on Form 10-K, and the +first three quarters of 2003 filed on Form 10-Q. Some of the misrepresented financials were +included in Forms 8-K. + +3. Violations of the Books and Records and Internal Controls Provisions: +Sections 13(b)(2)(A) and 13(b)(2(B) of the Exchange Act + +a. Books and Records Violations + +Section 13(b)(2)(A) of the Exchange Act requires issuers to make and keep books and +records which in reasonable detail fairly and accurately reflect the transactions and disposition of +the assets of the issuer. 15 U.S.C. § 78m (b)(2)(A) (2006). OM Group violated Section +13(b)(2)(A) of the Exchange Act as a result of the conduct described above. OM group failed to +make and keep books and records in accordance with GAAP. + + + +7 OM Group filed an S-1 on December 5, 2001 that became effective on January 16, 2002 that contained +financial statements for the fiscal year ended December 31, 2000 and the nine months ended September 30, 2001. + 11 +b. Internal Controls Violations + +Section 13(b)(2)(B) of the Exchange Act requires issuers to “devise and maintain a system +of internal accounting controls sufficient to provide reasonable assurances that … transactions are +recorded as necessary to (I) 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.” 15 U.S.C. § 78m(b)(2)(B) (2006). OM Group violated Section +13(b)(2)(B) of the Exchange Act by failing to implement a system of internal accounting controls +that would detect and prevent the improper accounting practices engaged in by its CFO, Controller, +and Controller of OMG Americas. + +F. REMEDIAL EFFORTS + +In determining to accept the Offer, the Commission considered remedial acts promptly +undertaken by OM Group and cooperation afforded the Commission staff. + +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: + + Respondent OM Group cease an d desist from committing or causing any violations and any +future violations of Section 17(a) of the Securities Act and Sections 10(b), 13(a), 13(b)(2)(A), and +13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. + + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2644.txt b/raw/aaer/2007/AAER-2644.txt new file mode 100644 index 0000000000000000000000000000000000000000..89cd3108a8dfb5d4bac53ace1a76b6b9c21c3cb0 --- /dev/null +++ b/raw/aaer/2007/AAER-2644.txt @@ -0,0 +1,488 @@ +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES ACT OF 1933 CORRECTED +Release No. 8825 / July 17, 2007 +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56082 / July 17, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2644 / July 17, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12695 + +In the Matter of + +QUOVADX, INC., + +Respondent. +: +: +: +: +: +: +: +: +ORDER INSTITUTING CEASE-AND- +DESIST PROCEEDINGS, MAKING +FINDINGS, AND IMPOSING A +CEASE-AND-DESIST ORDER +PURSUANT TO SECTION 8A OF +THE SECURITIES ACT OF 1933 AND +SECTION 21C OF THE SECURITIES +EXCHANGE ACT OF 1934 +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate that +cease-and-desist proceedings be, and hereby are, instituted against Quovadx, Inc. (“Quovadx”) +pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”) and Section 21C of the +Securities Exchange Act of 1934 (“Exchange Act”). +II. +In anticipation of the institution of these proceedings, Quovadx 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, except as +to the Commission’s jurisdiction over it and the subject matter of these proceedings which are +admitted, Quovadx consents to the entry of this Order Instituting Cease-and-Desist Proceedings, +Making Findings, and Imposing a Cease-and-Desist Order Pursuant to Section 8A of the +Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934 (“Order”), as set +forth below. + + + + + -2- +III. +FACTS + On the basis of this Order and Quovadx’s Offer, the Commission finds 1 that: +A. Respondent +Quovadx, a Delaware corporation based in Englewood, Colorado, is a software company +that licenses software and sells related services to the healthcare industry. Quovadx’s stock was +registered with the Commission under Section 12(g) of the Exchange Act during the relevant +time and traded on the NASDAQ National Market. During 2002 and 2003, Quovadx derived +about one-third of its reported revenue from software licensing fees, with the rest coming from +software maintenance and service contracts. Quovadx separately reported its software licensing +revenue, which included sales of both software and licenses.2 During the relevant period, +Quovadx had a continuously effective offering of securities pursuant to Form S-8. It also +registered an offer of securities pursuant to Form S-4 in the fourth quarter of 2003. +B. Summary +Between 2002 and 2003, Quovadx improperly recognized over $12 million in revenue +from software licensing deals with four of its customers in an attempt to meet aggressive revenue +and sales goals set by the company. In transactions with three customers - Sourceworks, +Microstar, and Infotech - Quovadx’s recognition of revenue was fraudulent. In each of these +transactions, one or more members of Quovadx’s then senior management knowingly or +recklessly engaged in the improper revenue recognition and other conduct described herein.3 In +the fourth transaction, Quovadx improperly accelerated recognition of the revenue. As a result, +Quovadx materially overstated its software licensing revenues in its quarterly reports by amounts +ranging from 10% in the third quarter of 2002 to nearly 180% by the third and fourth quarters of +2003. +On March 15, 2004, when it could not collect payment from Infotech for transactions it +had previously booked as revenue, Quovadx announced that it would restate its prior results to +decrease revenue by approximately $11 million. Quovadx’s stock price fell 29%, and dropped +further after Quovadx announced on May 13, 2004, that it was reviewing two additional +contracts. By August 16, 2004, when Quovadx restated its results for the second time to correct +for the transactions with Sourceworks, MicroStar, and the fourth customer, Quovadx’s stock was +trading at $1.65 per share. +C. Applicable Accounting Principles for Software Sales +As a public company, Quovadx was required to file quarterly and annual reports with the +Commission that presented its financial results in conformity with Generally Accepted + +1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding +on any other person or entity in this or any other proceeding. +2 Throughout this Order, “softwa re sales” and “software license sales” are used interchangeably. +3 References below to Quovadx’s “management” re fer to the former management that departed +Quovadx in Spring 2004. + + -3- +Accounting Principles (“GAAP”). The American Institute of Certified Public Accountants’ +Statement of Position 97-2, Software Revenue Recognition (“SOP 97-2”) and related +interpretations are the principal GAAP provisions governing the recognition of revenue for sales +of software and software licenses. Under SOP 97-2, a company may not recognize revenue from +a software license sale unless and until there is: persuasive evidence of an arrangement; delivery +of the software; a fixed or determinable seller’s fee; and a reasonable probability of collecting +the accounts receivable. Further, if payment is substantially contingent on the buyer’s success in +distributing the product to the customer, either due to the terms of the deal or because the buyer +is so undercapitalized that it cannot pay until it sells the product, the seller may not recognize the +software license revenue at the time of sale. +In its financial reports filed with the Commission, Quovadx claimed that it had +recognized revenue in accordance with GAAP. Between 2002 and 2003, in a series of +transactions with four different customers, however, Quovadx recognized revenue that was not in +conformity with SOP 97-2 and that materially overstated the company’s financial results. +D. The Sourceworks Transaction +In early 2003, Quovadx solicited the Veterans’ Administration (“VA”) to buy licenses for +Quovadx’s Insurenet software, a product for processing patient medical insurance information. +The VA refused to buy the licenses, but expressed an interest in using the software and +periodically paying Quovadx a fee based on the number of insurance transactions that it +processed. Quovadx was not interested in this proposal because it did not want to license +software on a per-use basis. Quovadx therefore developed a plan whereby Quovadx would sell +the licenses to a third party, which would then enter into a contract with the VA to offer the +software on a per-use basis. +A Quovadx employee contacted a Colorado-based venture capital firm and proposed that +the firm buy the Insurenet licenses from Quovadx. In return, Quovadx would negotiate a +contract for the venture capital firm to license the software on a per-use basis to the VA. As the +end of the second quarter of 2003 approached, the venture capital firm agreed in principle to +Quovadx’s proposal. However, because it was not a software reseller, the firm repeatedly said +that it would not pay for the Insurenet licenses unless and until Quovadx obtained the promised +user contract with the VA. The Quovadx employee expressed confidence that it would obtain +the contract with the VA early in the third quarter. With that understanding, the venture capital +firm created a shell company, Sourceworks USA LLC, in late June 2003 to buy the Insurenet +licenses from Quovadx and enter into the user contract with the VA. On June 30, 2003, +Quovadx and Sourceworks executed a contract requiring Sourceworks to pay Quovadx $600,000 +for the Insurenet licenses. The contract, which gave Sourceworks six months to pay Quovadx, +did not indicate that Sourceworks’ ability to pay Quovadx was contingent upon Quovadx +successfully negotiating a VA deal for Sourceworks. +Quovadx knew or was reckless in not knowing that Sourceworks could not pay for the +licenses unless the venture capital firm provided the funds or the VA contract was secured.4 +Nevertheless, Quovadx recognized the entire $600,000 in the second quarter, based upon the + +4 Sourceworks USA LLC was formed as a subsidiary of Sourceworks Consulting, a Canadian firm. +Sourceworks Consulting supplied incomplete and unaudited financial statements to Quovadx that +did not support a conclusion that either the parent or the subsidiary Sourceworks could pay for the +Insurenet licenses. + + -4- +June 30, 2003 contract. It issued a press release on July 23, 2003, touting the company’s second +quarter financial results, which included the Sourceworks revenue. For the next eight months, +Quovadx attempted to secure a contract between Sourceworks and the VA. However, these +negotiations ultimately failed. As a result, other than one $30,000 payment in August 2003, +Sourceworks did not pay Quovadx for the Insurenet licenses.5 Because Sourceworks did not pay +the remaining $570,000, Quovadx’s new senior management and auditor reviewed the +Sourceworks transaction in the Spring of 2004 and reversed the revenue as part of the company’s +second restatement. +As a result of its fraudulent recognition of the Sourceworks revenue, Quovadx overstated +its software licensing revenues by $570,000, or approximately 9%, in the second quarter of +2003. +6 +E. The MicroStar Transactions +In the third quarter of 2003, Quovadx fraudulently recognized $380,000 in software +licensing revenue from three purported sales of licenses to MicroStar, Inc. (“MicroStar”), an +Ohio company that sells software licenses and maintenance services to the healthcare industry. +The sales were, in fact, part of a parking arrangement designed to accelerate revenue recognition +from other transactions that Quovadx was in the process of negotiating, but had been unable to +finalize before the end of the quarter. Quovadx carried out this arrangement in an attempt to +meet its third quarter sales targets. Quovadx knew or recklessly disregarded that MicroStar was +merely holding the licenses in its inventory so that Quovadx could recognize revenue on their +“sale.” MicroStar had no ability or intent to pay for the licenses unless Quovadx found +customers to which MicroStar could resell the licenses. Therefore, Quovadx should not have +recorded the transactions as revenue. +In late September 2003, shortly before the close of the third quarter, MicroStar and +Quovadx signed three separate software license purchase contracts with a total value of about +$380,000. Quovadx and MicroStar simultaneously reached a side-agreement that MicroStar did +not have to pay Quovadx for the licenses until Quovadx finalized sales of those licenses to three +anticipated customers with whom Quovadx had already been negotiating. Under the side- +agreement, Quovadx gave MicroStar a discount on the license price in exchange for holding the +licenses in MicroStar’s inventory. Certain senior management at Quovadx became aware of this +arrangement with MicroStar before the end of the third quarter. Nevertheless, Quovadx treated +the MicroStar contracts as bona fide sales agreements and recorded $380,000 of revenue in the +third quarter. Quovadx issued a preliminary earnings release and a quarterly report for the third +quarter of 2003 that included the revenue from the arrangement with MicroStar. +In fact, MicroStar was unwilling or unable to pay for the licenses unless and until it was +able to resell them to the customers with whom Quovadx had been negotiating. Shortly after +Quovadx filed its quarterly report, the company learned that MicroStar had not paid for any of +the software licenses because the anticipated customers had declined to buy the licenses from + +5 Sourceworks has since demanded that Quovadx re turn the $30,000; Quovadx has not done so. +Sourceworks, in turn, has rejected Quovadx’s demand for payment of the $570,000 balance due +on the purchase of the licenses. +6 Quovadx overstated its software licensing reve nue in its July 23, 2003, Form 8-K, which +incorporated its preliminary earnings results, its quarterly report for the second quarter of 2003, +and its annual report for 2003. + + -5- +MicroStar. Quovadx did not reverse the MicroStar revenue, but instead Quovadx’s sales staff +attempted to find alternative customers to buy the software licenses from MicroStar. Quovadx’s +sales staff was unable to find other buyers. +In December 2003, one of the three anticipated customers purchased different software +licenses for approximately $257,000 from a Quovadx subsidiary in the United Kingdom. In +February 2004, when the customer made payment, the U.K. subsidiary, at Quovadx’s direction, +reversed the transaction from its books and sent the approximately $257,000 to Quovadx’s U.S. +offices. Quovadx then wired this money to MicroStar with the instruction that MicroStar would +wire it back to Quovadx, less $10,000 as payment to MicroStar. MicroStar wired the money less +its payment. By channeling the payment through MicroStar, Quovadx created the false +appearance that MicroStar had paid a significant portion of what it owed. Quovadx’s employees +also continued unsuccessfully to search for additional opportunities to channel software license +sales through MicroStar to eliminate the remaining balance. In August 2004, Quovadx reversed +all three software license sales to MicroStar as part of its second restatement.7 +F. The Infotech Transactions +In the third and fourth quarters of 2003, Quovadx fraudulently recognized a total of $11.1 +million in software licensing revenue from a series of transactions with Infotech Network Group +(“Infotech”), a company based in India.8 Because each of these transactions had material +contingencies and the collection of payment was not probable, Quovadx was precluded from +recognizing this revenue. Moreover, even after Infotech did not pay for its third quarter 2003 +purchases, Quovadx shipped additional software to Infotech and recognized revenue on those +sales in the fourth quarter of 2003. +1. The Third Quarter Transactions +In early September 2003, Quovadx and Infotech executed two related agreements. Under +the first (“the distributor agreement”), Infotech agreed to buy $5 million of software licenses +from Quovadx and to be the exclusive distributor of Quovadx products in India. Under the +second agreement (“the outsourcing agreement”), Quovadx agreed to pay Infotech to +perform certain services and conduct various research and development projects, pursuant to +Statements of Work that would be subsequently negotiated. The agreements required both +parties to fund letters-of-credit to guarantee the payment of their respective obligations. The +distributor agreement required that Infotech fund a $5.46 million letter-of-credit before Quovadx +shipped any software to it. +As required by the outsourcing agreement, Quovadx immediately funded a letter-of- +credit for $2.46 million to pay Infotech as it rendered outsourcing services. By mid-September, +however, Infotech had not funded its letter-of-credit. Quovadx nevertheless shipped the $5 +million of software licenses to Infotech. In an attempt to meet its third quarter revenue goals, +Quovadx also asked Infotech to buy more software. Infotech agreed, on the condition that + +7 Quovadx overstated its software licensing revenue by $380,000 in its October 22, 2003, Form 8- +K incorporating its preliminary earnings results, its quarterly report for the third quarter of 2003, +and its annual report for 2003. +8 Infotech Network Group represented itself to Quovadx as a consortium of major Indian +companies that sought outsourced research and development projects from U.S. software +companies. + + -6- +Quovadx guarantee pre-payment of outsourcing funds. On September 30, 2003, the parties +signed supplemental contracts under which Infotech was to buy $2.1 million of software licenses +and Quovadx was to pre-pay Infotech approximately $1 million for unspecified outsourcing +work. Quovadx shipped the additional $2.1 million in software to Infotech on the last day of the +quarter. Quovadx, with the concurrence of its outside auditor, offset the revenue from these two +purported sales by its estimated outsourcing obligation to Infotech and recognized approximately +$4.6 million in revenue for the quarter. Quovadx planned to recognize the remaining revenue as +Infotech performed outsourcing services. +In early October 2003, before Quovadx filed its quarterly report for the third quarter, +Infotech told Quovadx that it did not have enough money to fund its required letters-of-credit. +Quovadx agreed to wire $410,000 to assist Infotech in making a margin payment to an Indian +bank, purportedly to establish and fund the required letters of credit.9 In return, Infotech gave +Quovadx a letter from the Indian bank expressing confidence that Infotech’s letter-of-credit +would be opened (not funded) by October 21, 2003. Quovadx relied on this letter as support for +Infotech’s supposed ability to pay and recognized revenue on the third quarter Infotech +transactions. Quovadx falsely entered the $410,000 payment to Infotech in its books and records +as a prepayment under the outsourcing agreements, when in fact Infotech had not satisfied the +conditions for prepayment. +On October 22, 2003, Quovadx issued both a press release announcing the distribution +and software development agreement with Infotech and a preliminary earnings release touting a +183% increase in software licensing revenue over the third quarter of 2002. The Infotech +transaction accounted for approximately 60% of Quovadx’s reported third quarter software +licensing revenue. Quovadx’s share price increased over 25% on the news of the third quarter +results. +2. The Fourth Quarter Transactions +By mid-December 2003, although it appeared to Quovadx that Infotech had established +one letter-of-credit, Infotech still had not funded this letter-of-credit and had not paid for either +of its third quarter purchases. Infotech told Quovadx that the software had still not been released +from customs in India, which Infotech claimed was necessary before it could fund its letter-of- +credit. Despite these significant issues, Quovadx, hoping to meet Wall Street expectations, asked +Infotech to make another software purchase. Infotech was unwilling to agree unless Quovadx +immediately wired $500,000 to it as part of the outsourcing prepayment to which Quovadx had +committed at the end of the third quarter. Quovadx made this payment, even though Infotech +had not met the conditions for prepayment under the outsourcing agreement for $440,000 of this +amount. To preserve its legal remedies, Quovadx also sent Infotech a default letter for failing to +pay for its third quarter purchases. Thus, by mid-December, Quovadx had sent $910,000 to +Infotech, yet Infotech had not paid for any of the software licenses that it had bought from +Quovadx. +10 + +9 In fact, unbeknownst to Quovadx, Infotech never used the money to establish and fund a letter-of- +credit. +10 During the fourth quarter, Quovadx provided Infotech with about $10,000 in outsourcing work, +and trained some Infotech subcontractors on the use of Quovadx software. Infotech eventually +performed outsourcing work for Quovadx worth about $500,000 based on the December 2003 +prepayments. + + -7- +On December 31, 2003, Quovadx signed a contract to sell $6.5 million of software +licenses to Infotech. Quovadx simultaneously signed a supplemental agreement to pay Infotech +up to $1.94 million for any outsourcing work that Infotech actually performed through August +2004. Quovadx also provided Infotech assurances that it would increase Quovadx’s outsourcing +to Infotech significantly over the coming year. +On February 11, 2004, Quovadx issued its preliminary fourth quarter earnings release +(attached to a Form 8-K filed the same day), which included the $6.5 million in Infotech +revenue. Quovadx issued this release even though Infotech had not paid for the third quarter +purchases and Infotech’s ability to pay for the fourth quarter purchases depended on its ability to +resell the software licenses. The earnings release claimed that Quovadx’s total annual revenue +for 2003 had increased about 30% and that its year-over-year software licensing revenue had +grown about 173%. The Infotech transactions accounted for virtually the entire increase in +Quovadx’s software licensing revenue. After this announcement, Quovadx’s stock price +increased by about 10%, closing at $6.66 per share on February 12. +At the time of Quovadx’s year-end audit in mid-February 2004, Infotech still had not +funded a letter-of-credit or made any payments for either the third or fourth quarter software +purchases. In early March 2004, Quovadx’s auditor advised it that the company would have to +reverse the Infotech revenue from both the third and fourth quarters unless Infotech made a +substantial payment before Quovadx’s annual report was due to be filed. On March 8, 2004, +therefore, Quovadx authorized Infotech to draw down the $1.94 million balance on Quovadx’s +outsourcing letter-of-credit, with the understanding that Infotech would use these funds to +arrange bank financing to pay Quovadx for the software purchases. Immediately after receiving +the $1.94 million, Infotech told Quovadx that it believed it was entitled to this money under the +outsourcing agreement and would not use it to pay Quovadx for the software. When Quovadx +requested that Infotech return the money, Infotech refused. Infotech never returned the money or +paid for the software. +On March 15, 2004, Quovadx announced that it would reverse all revenue on sales to +Infotech in the third and fourth quarters of 2003. On March 18, Quovadx filed its annual report +for 2003 which restated its financial results for the third and fourth quarters of 2003 and removed +$11.1 million in revenue from transactions with Infotech. In response to these events, the +Quovadx board of directors commenced an investigation into the Infotech relationship which +subsequently encompassed the Sourceworks and MicroStar transactions. Shortly thereafter, +Quovadx’s chief executive officer and chief financial officer resigned. On May 14, 2004, +Quovadx filed a Form 8-K in which it indicated that, as a result of its internal investigation, +Quovadx had discontinued any further severance payments to its former chief executive officer +and chief financial officer and demanded the return of severance payments already paid and prior +compensation, including bonuses. Quovadx also indicated that it had terminated its executive +vice president of sales. +G. Quovadx Prematurely Recognized $250,000 in Revenue in the Third Quarter +of 2002 +In addition to the software licensing revenue that Quovadx fraudulently recognized in +2003, Quovadx prematurely recognized $250,000 in the third quarter of 2002. In May 2002, +Quovadx announced the release of QuickTrials 1.0, a software product designed to help +automate the management of clinical drug trials. The following month, Quovadx entered into +negotiations to sell QuickTrials for $250,000 to a company that managed clinical trials in the + + -8- +pharmaceutical industry. Because the existing version of QuickTrials did not meet all of the +customer’s specifications, Quovadx and the customer discussed developing an acceptable +version of QuickTrials, to be called QuickTrials 2.0. In early September 2002, Quovadx +proposed that the customer pay $250,000 for the platform software needed to run QuickTrials, +and that they enter into a partnership to develop QuickTrials 2.0. Quovadx told the customer that +it would deliver the platform software in September and the first development (or beta) version +of QuickTrials 2.0 in October 2002. +On September 30, 2002, the last day of the third quarter, Quovadx and the customer +executed a contract under which Quovadx would provide the company beta versions of +QuickTrials 2.0 and a commercial version of that software, if and when released. Further, at the +request of the customer, Quovadx extended the payment over eight months, which roughly +corresponded to the anticipated completion of the development of QuickTrials 2.0. Despite this +extended payment plan and promise to deliver QuickTrials 2.0 in the future if and when +Quovadx released it, Quovadx recognized the full $250,000 in revenue in the third quarter of +2002. +In substance, the value of the transaction for the customer lay in obtaining the beta +versions of QuickTrials 2.0, not the platform programs delivered in the third quarter.11 +Therefore, Quovadx should not have recognized the revenue from the transaction with the +customer until at least the fourth quarter of 2002. By prematurely recognizing this revenue, +Quovadx overstated its software revenues for the third quarter of 2002 by approximately 10%. +As part of its second restatement, Quovadx reversed the $250,000 in revenue from the third +quarter of 2002 and recognized that amount for the fourth quarter of 2002. +IV . + +LEGAL CONCLUSIONS +A. Violations of the Antifraud Provisions +Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and +Rule 10b-5 thereunder prohibit a variety of fraudulent practices in connection with the offer, +purchase or sale of securities. An issuer violates these provisions when it makes material +misstatements or omissions in annual or quarterly reports filed with the Commission, or in +earning releases or other public statements. SEC v. McNulty, 137 F.3d 732, 741 (2d Cir. 1998). +“Moreover, half-truths are as violative ... as outright falsehoods.” SEC v. Schiffer, S.D.N.Y. +1998 Fed. Sec. L. Rep. ¶ 90,247, 1998 WL 307375, at *2 (S.D.N.Y.). A fact is material if there +is a substantial likelihood that a reasonable investor would consider the information to be +important. Basic v. Levinson, 485 U.S. 224, 231-32 (1988). Information concerning a +company’s financial condition and profitability is material information. See, e.g., SEC v. +Murphy, 626 F.2d 633, 653 (9th Cir. 1980). “[E]arnings reports are among the pieces of data +that investors find most relevant to their investment decisions.” Ganino v. Citizens Util. Co., 228 +F.3d 154, 164 (2d Cir. 2000) (citation omitted). + +11 SOP 97-2 provides in pertinent part that: “When-and-if-available deliverables should be +considered in determining whether an arrangement includes multiple elements.... If an +arrangement includes multiple elements, the fee should be allocated to the various elements based +on vendor-specific objective evidence of fair value, regardless of any separate prices stated within +the contract for each element.” + + -9- + +Section 10(b) and Rule 10b-5 of the Exchange Act and Section 17(a)(l) of the Securities +Act require that a defendant act with scienter, which has been defined as “a mental state +embracing intent to deceive, manipulate, or defraud.” Aaron v. SEC, 446 U.S. 680, 701-02 +(1980); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n. 12 (1976). Scienter can be satisfied +by showing that a defendant acted recklessly. See. e.g., ITT v. Cornfeld, 619 F.2d 909, 923 (2d +Cir. 1980); Schiffer, 1998 WL 307375, at *3. For the purposes of establishing scienter on the +part of a company, the mental state of the company’s officers is imputed to the company. SEC v. +Manor Nursing Centers, Inc., 458 F.2d 1082, 1089 n.3 (2d Cir. 1972). +Quovadx fraudulently recognized revenue on the Sourceworks, MicroStar, and Infotech +transactions. In each of those transactions, one or more members of Quovadx’s senior +management knew, or recklessly disregarded that those transactions either had material +contingencies or were not true sales, and collection from the customers was not reasonably +probable. Sourceworks could not and would not pay for software licenses unless and until +Quovadx secured a contract between Sourceworks and the VA. The arrangement with +MicroStar to hold software licenses in MicroStar’s inventory had no legitimate business purpose +and MicroStar had no intent or ability to pay for the software licenses unless it could resell them +to customers identified by Quovadx. Quovadx attempted to disguise this arrangement by +funneling an unrelated payment through MicroStar to make it appear that MicroStar had partially +paid for the licenses. Finally, Quovadx recognized more than $11 million in revenue on software +sales to Infotech, even after the company knew or was reckless in not knowing that it was not +reasonably probable that Infotech would pay for the software. Indeed, Quovadx advanced +Infotech nearly $1 million as an inducement for Infotech to buy some of the software, even +though Infotech had not funded its required letters-of-credit. Further, fearing that its auditor +would require it to reverse the Infotech revenue, Quovadx gave Infotech nearly another $2 +million in the vain hope that Infotech would use that money to pay some of its debt. +As a result of its improper recognition of revenue from these transactions, Quovadx +fraudulently overstated its software licensing revenue by $600,000 in the second quarter of 2003, +by almost $5 million in the third quarter of 2003, and by $6.5 million in the fourth quarter of +2003. Moreover, although Quovadx had reversed the Infotech overstatement by the time the +company filed its annual report for 2003, that annual report still included the revenue from the +Sourceworks and MicroStar transactions. Quovadx also issued false and misleading press +releases during the period that materially misrepresented the company’s financial results and +were attached to the Forms 8-K that Quovadx filed with the Commission in the second, third and +fourth quarters of 2003. +As a result of this conduct, Quovadx violated Section 10(b) of the Exchange Act and +Rule 10b-5 thereunder. Because Quovadx had a continuously effective offering of securities +pursuant to Forms S-8 and S-4 during the period, the company also violated Section 17(a) of the +Securities Act.12 + + +12 In May 2002, Quovadx filed a Form S-8 that became effective to offer stock in connection with +the company’s employee stock purchase plan (the Form S-8 was incorporated into Quovadx’s +subsequent annual and quarterly reports). In addition, Quovadx filed a Form S-4 on November +12, 2003, and Amended Forms S-4 on December 4 and December 10, 2003, registering an offer +of securities in connection with Quovadx’s acquisition of RogueWave Software. + + -10- +B. Reporting Violations +Section 13(a) of the Exchange Act and Rules 13a-1, 13a-11, and 13a-13 thereunder +require that issuers with securities registered under Section 12 of the Exchange Act, such as +Quovadx, file annual and quarterly reports with the Commission and keep this information +current. These reports must be complete and accurate in all material respects. United States v. +Bilzerian, 926 F.2d 1285, 1298 (2d Cir. 1991); SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1165 +(D.C. Cir. 1978), cert. denied, 440 U.S. 913 (1979). Rule 12b-20 of the Exchange Act requires +that an issuer’s periodic reports include any additional information “necessary to make the +required statements, in the light of the circumstances under which they are made, not +misleading.” The issuer’s legal obligation “extends not only to accurate quantitative reporting of +the required items in its financial statements, but also to other information, qualitative as well as +quantitative, needed to enable investors to make informed decisions.” In re Sony Corp. and +Sumio Sano, 67 SEC Docket 1609, 1998 WL 439898 at *4 (Aug. 5, 1998). +Quovadx filed a quarterly report on Form 10-Q for the third quarter of 2002 that +overstated the company’s software licensing revenue by 10% as a result of the company’s +premature recognition of revenue from the transaction with the clinical trials manager. +Recognition of the $250,000 in revenue in the third quarter did not conform to SOP 97-2, and +Quovadx should have deferred recognizing this revenue until a subsequent quarter. +Quovadx entered into transactions with Sourceworks, MicroStar, and Infotech in which +Quovadx knew or was reckless in not knowing that revenue should not be recognized. By doing +so, Quovadx fraudulently recognized revenue on transactions that were not actual sales. As a +result, Quovadx’s annual report for 2003, quarterly reports for the second and third quarters of +2003, and earning releases for the second, third, and fourth quarters of 2003 contained materially +false and misleading statements concerning Quovadx’s software licensing revenue. Accordingly, +Quovadx violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a- +13 thereunder. +C. Record-Keeping and Internal Controls Violations +Section 13(b)(2)(A) of the Exchange Act requires that issuers make and keep books, +records, and accounts which, in reasonable detail, accurately and fairly reflect the transactions +and dispositions of the assets of the company. Section 13(b)(2)(B) of the Exchange Act requires +reporting companies to devise and maintain a system of internal accounting controls sufficient to +provide reasonable assurances that transactions are recorded as necessary to permit preparation +of financial statements in conformity with GAAP and to maintain accountability of assets. +As discussed above, Quovadx improperly recognized revenue in the third quarter of 2002 +from the transaction with the clinical trials manager and, in the second, third and fourth quarters +of 2003, from the transactions with Sourceworks, MicroStar, and Infotech. As a result, +Quovadx’s books and records were materially inaccurate because they overstated software +licensing revenue and did not accurately or fairly reflect the transactions of the company. +Quovadx also failed to maintain internal controls sufficient to ensure that revenue recognition +would occur properly and that its financial statements would be prepared in conformity with +GAAP. Therefore, Quovadx violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. + + -11- +V. + +FINDINGS +Based on the foregoing, the Commission finds that Quovadx violated Section 17(a) of the +Securities Act and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and +Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. +VI. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Quovadx’s offer. +Accordingly, IT IS HEREBY ORDERED that: +Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, +Quovadx cease and desist from committing or causing any violations and any future violations of +Section 17(a) of the Securities Act and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the +Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. +By the Commission. + +Nancy M. Morris +Secretary + \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2646.txt b/raw/aaer/2007/AAER-2646.txt new file mode 100644 index 0000000000000000000000000000000000000000..91418469019500c7bd0ff23f183eba7756b3b46f --- /dev/null +++ b/raw/aaer/2007/AAER-2646.txt @@ -0,0 +1,122 @@ + UNITED STATES OF AMERICA + before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56097 / July 18, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2646 / July 18, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12701 +: +: +: +In the Matter of : ORDER INSTITUTING ADMINISTRATIVE +: PROCEEDINGS PURSUANT TO RULE +JEFFREY McMAHON, CPA, : 102(e) OF THE COMMISSION’S RULES OF +: PRACTICE, MAKING FINDINGS, AND +Respondent. : IMPOSING REMEDIAL SANCTIONS +: +: +____________________________________ : +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate and in the +public interest that public administrative proceedings be, and hereby are, instituted against Jeffrey +McMahon (“Respondent” or “McMahon”) pursuant to Rule 102(e)(3)(i) of the Commission’s +Rules of Practice.1 +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 +1 Rule 102(e)(3)(i) provides, in relevant part, that: +The Commission, with due regard to the public interest and without preliminary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has +been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal securities laws or of the rules and regulations +thereunder. + +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, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Section III.3 below, which are admitted, Respondent +consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) +of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions +(“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds that: +1. Jeffrey McMahon, age 46, is a certified public accountant licensed to +practice in the State of Texas. He served as Treasurer of Enron Corp. (Enron), from April 1998 +until May 2000, as Chief Financial Officer from October 2001 until February 2002, and as Chief +Operating Officer from February 2002 until June 2002, when he voluntarily resigned from Enron. +2. Enron was, at all relevant times, an Oregon corporation with its principal +place of business in Houston, Texas. Until its bankruptcy filing in December 2001, Enron was the +seventh largest corporation in the United States based on reported revenue. In the previous ten +years, Enron had evolved from a regional natural gas provider to a commodity trader of natural +gas, electricity, and other physical commodities with retail operations in energy and other products. +The Company also created and traded financial products. At all relevant times, the common stock +of Enron was registered with the Commission pursuant to Section 12(b) of the Securities and +Exchange Act of 1934 (“Exchange Act”) and traded on the New York Stock Exchange. +3. On July 6, 2007, a final judgment was entered against McMahon, +permanently enjoining him from future violations of Sections 10(b) and 13(b)(5) of the Exchange +Act and Exchange Act Rules 10b-5 and 13b2-1, and from aiding and abetting violations of +Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20, +13a-1, and 13a-13 thereunder, in the civil action entitled Securities and Exchange Commission v. +Jeffrey McMahon, Civil Action Number H-07-2051, in the United States District Court for the +Southern District of Texas. McMahon also was ordered to pay disgorgement of $109,275, +prejudgment interest of $40,725, and a civil money penalty of $150,000. +4. The Commission’s complaint alleged, among other things, that McMahon +participated in a fraudulent asset parking arrangement that allowed Enron to improperly record +$12 million in earnings in the fourth quarter of 1999. The complaint also alleged that McMahon, +while serving as Enron’s Treasurer from April 1998 until May 2000, made several false and +misleading statements and omissions to the national credit rating agencies regarding the stability, +predictability, and sources of Enron’s cash flows. In addition, the Complaint alleges that +McMahon made similar false and misleading statements to the rating agencies while serving as +Enron’s Chief Financial Officer during the crisis period prior to Enron’s bankruptcy filing, +October – December 2001. +2 + +IV. +In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent McMahon’s’s Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +A. McMahon is suspended from appearing or practicing before the Commission as an +accountant. +B. After three years from the date of this order, Respondent may request that the +Commission consider his reinstatement by submitting an application (attention: Office of the +Chief Accountant) to resume appearing or practicing before the Commission as: +1. a preparer or reviewer, or a person responsible for the preparation or +review, of any public company’s financial statements that are filed with the Commission. Such +an application must satisfy the Commission that Respondent’s work in his practice before the +Commission will be reviewed either by the independent audit committee of the public company +for which he works or in some other acceptable manner, as long as he practices before the +Commission in this capacity; and/or +2. an independent accountant. Such an application must satisfy the +Commission that: +(a) Respondent, or the public accounting firm with which he is +associated, is registered with the Public Company Accounting Oversight Board (“Board”) in +accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; +(b) Respondent, or the registered public accounting firm with which he +is associated, has been inspected by the Board and that inspection did not identify any criticisms +of or potential defects in the respondent’s or the firm’s quality control system that would indicate +that the respondent will not receive appropriate supervision; + (c) Respondent has resolved all disciplinary issues with the Board, and +has complied with all terms and conditions of any sanctions imposed by the Board (other than +reinstatement by the Commission); and +(d) Respondent acknowledges his responsibility, as long as +Respondent appears or practices before the Commission as an independent accountant, to +comply with all requirements of the Commission and the Board, including, but not limited to, all +requirements relating to registration, inspections, concurring partner reviews and quality control +standards. +C. The Commission will consider an application by Respondent to resume +appearing or practicing before the Commission provided that his state CPA license is +current and he has resolved all other disciplinary issues with the applicable state boards of +3 + +accountancy. However, if state licensure is dependant on reinstatement by the +Commission, the Commission will consider an application on its other merits. The +Commission’s review may include consideration of, in addition to the matters referenced +above, any other matters relating to Respondent’s character, integrity, professional conduct, +or qualifications to appear or practice before the Commission. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2649.txt b/raw/aaer/2007/AAER-2649.txt new file mode 100644 index 0000000000000000000000000000000000000000..b36028b33bf7db1ac8f5ab7565022f53bef43918 --- /dev/null +++ b/raw/aaer/2007/AAER-2649.txt @@ -0,0 +1,1377 @@ + + + + + + + + + + + + + + + + SEC.gov | David C. Drummond, John P. Hayes, and Patrick E. Murphy, and Patrick T. 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Drummond, John P. Hayes, and Patrick E. Murphy, and Patrick T. Chew + + + + + + + + + + + + David C. Drummond, John P. Hayes, and Patrick E. Murphy, and Patrick T. Chew + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20202 / July 19, 2007 + + Accounting and Auditing Enforcement Release No. 2649 / July 19, 2007 + + SEC v. David C. Drummond, John P. Hayes, and Patrick E. Murphy , Civil Action No. 07 CV 219 JM (D.N.H.) + + SEC v. Patrick T. Chew , Civil Action No. 07 CV 220 PB (D.N.H.) + + SEC Files Settled Actions Against Four Former Executives of SmartForce PLC Concerning Improper Revenue Recognition + + + + The Commission filed civil actions in U.S. District Court in New Hampshire against former SmartForce Chief Financial Officer David C. Drummond and two former vice presidents of finance, Patrick E. Murphy and John P. Hayes, in connection with the software company's overstatement of revenue by $113.6 million and net income by $127 million during a 3½-year period ending in mid-2002. The Commission also filed a separate injunctive action against Patrick T. Chew, former controller of SmartForce's subsidiary in the United States ("SmartForce US"). The four former SmartForce executives will pay civil penalties in a total amount of $325,000 in these District Court actions. + + According to the Commission's Complaints, SmartForce's financial statements failed to comply with generally accepted accounting principles ("GAAP") as a result of the defendants' conduct regarding the improper recognition of revenue from various types of transactions, including multiple-element arrangements, reciprocal transactions, and reseller agreements. SmartForce, which was based in Redwood, California, has since merged into SkillSoft PLC, and is now based in Hew Hampshire, according to the Complaint. + + In the District Court action against Drummond, Murphy, and Hayes, the Commission alleged that each violated Section 13(b)(5) of the Exchange Act and aided and abetted the company's violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. Each defendant consented to the entry of a final judgment that requires them to pay civil penalties as follows: $125,000 for Drummond, $100,000 for Murphy, and $75,000 for Hayes. Drummond, Murphy, and Hayes neither admitted nor denied the allegations in the Commission's Complaint. + + In the action against Chew, he consented to the entry of a final judgment that enjoins him from future violations of Section 13(b)(5) of the Exchange Act and Rule 13b2-2 thereunder, and from aiding and abetting the company's violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. The final judgment also requires Chew to pay $85,885 in disgorgement and prejudgment interest and a civil penalty of $25,000. Chew consented to entry of the judgment without admitting or denying the allegations of the Complaint. + + In the related administrative proceeding, which was instituted against Drummond, Murphy, and Hayes, each is required to pay total disgorgement and prejudgment interest as follows: $573,979 for Drummond, $567,866 for Murphy, and $862,395 for Hayes. The administrative order further bars Murphy and Hayes from practicing before the Commission as accountants, with the right to apply for reinstatement after two years. The administrative order also requires that Drummond, Murphy, and Hayes cease and desist from committing or causing any violations or future violations of Section 13(b)(5) of the Exchange Act; and from 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 and 13a-13 thereunder. 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ConAgra Foods, Inc. , 07cv01557-MSK-MEH + + SEC Charges ConAgra Foods, Inc. in Financial Fraud and Accounting Case + + ConAgra Agrees to Pay $45 Million Penalty to Settle Charges + + The Securities and Exchange Commission has filed civil charges against ConAgra Foods, Inc., a diversified international food company headquartered in Omaha, Nebraska, alleging that it engaged in improper, and in certain instances fraudulent, accounting practices during its fiscal years 1999 through 2001. The fraudulent practices alleged involved the misuse of corporate reserves to manipulate reported earnings in fiscal year 1999 and a scheme at its former subsidiary, United Agri-Products (UAP), in 2000 that involved, among other things, improper and premature revenue recognition. Additionally, the complaint alleges that between fiscal years 2002 and 2005, ConAgra's corporate tax department made numerous tax errors, causing the company to improperly account for tax benefits and understate its income tax expense. Between the first quarter of fiscal year 1999 and the third quarter of fiscal year 2001 ConAgra misstated its reported income before income taxes by nearly $218.5 million. As a result of the income tax errors, ConAgra misstated its reported income tax expense by $105 million. + + The complaint alleges varied misconduct that includes the following: + + Misuse of Reserves + During the first and second quarters of fiscal year 1999, ConAgra improperly used tens of millions of dollars of certain excess reserves to offset, dollar-for-dollar, unrelated, unplanned-for and unreserved-for losses. Separately, but at the same time as the second quarter of fiscal year 1999 reduction, ConAgra improperly transferred over $93 million of remaining excess reserves into two newly created "general" reserve accounts, using approximately $60 million of these transferred reserves to cover unrelated, unplanned-for and unreserved-for exposures related to legal and environmental matters. Additionally, from at least as early as the first quarter of fiscal year 1999, ConAgra fraudulently used an Estimated Liabilities reserve account as a "cookie jar" reserve, using it to offset millions in current period operating expenses. These reductions of excess reserves in 1999 caused ConAgra to overstate its annual reported income by 15% and its earnings per share by over 10 cents per share.   + ConAgra maintained excess reserves on its books in fiscal year 2000. On several occasions in that year, ConAgra offset unplanned-for and unreserved-for losses with a dollar-for-dollar reduction to excess reserves in certain of its excess reserve accounts.   + In fiscal year 2001, ConAgra made a reduction of $35 million to its excess legal and environmental reserves. At least $23.8 million of the $35 million was improperly taken to income for the third quarter of 2001; rather it should have been reported as a prior period adjustment as the $23.8 million should have been reduced by no later than the end of fiscal year 2000. + Fraudulent Scheme at UAP + In fiscal year 2000, former senior executives at UAP participated in a scheme to overstate UAP's operating results through the use of improper accounting practices including the improper recognition of revenue from deferred delivery sales and associated rebates from its suppliers, the failure to record bad debt expenses when realized and the premature recognition of revenue from advance vendor rebates.   + + Forensic accountants retained by special counsel to the Audit Committee of ConAgra tested a sample valued at over $247 million of UAP's deferred delivery sales originally recorded from fiscal year 1998 through the second quarter of fiscal year 2001 and determined that approximately 40% of the transactions tested were fraudulent.   + + The UAP misconduct caused ConAgra to overstate its agricultural products segment's operating profit by approximately 35% and ConAgra's reported income before income taxes by 7.85% in fiscal year 2000. + Misleading Disclosure + ConAgra's disclosure in its Form 10-Q for the third quarter of fiscal year 2001 was misleading as it failed to disclose that at least $23.8 million of the $35 million reduction of excess reserves was in excess in prior periods. + Income Tax Errors + At the end of fiscal year 1999 ConAgra took an unsupported reduction of $4,658,064 to its income tax expense. Without this reduction, ConAgra would have missed the Wall Street analysts' consensus estimate.   + + ConAgra improperly understated its income tax expense for fiscal year 2004 by a total of $84.9 million after it incorrectly calculated the stock basis following its sale of beef/pork subsidiaries and determined that it resulted in a capital loss for tax purposes.   + + ConAgra also used an incorrect methodology to calculate its overall foreign loss in fiscal year 2003 and before, and accordingly, ConAgra's tax liability was incorrectly calculated. ConAgra failed to consider appropriate tax strategies in fiscal year 2003 when ConAgra was able to utilize foreign tax credits. As a result, ConAgra failed to record sufficient tax benefits related it its foreign tax credits and therefore, either understated or overstated its net income after income taxes in fiscal years 2003, 2004, and 2005. + The complaint alleges that, without engaging in the improper and at times fraudulent accounting practices, ConAgra would have missed the Wall Street analysts' consensus estimates of the company's earnings per share for at least six of eleven fiscal quarters in fiscal years 1999, 2000 and 2001. As a result of the conduct described above, ConAgra materially misstated its financial performance in earnings releases and in periodic reports filed with the Commission. Other financial misstatements of ConAgra during this time include a registration statement filed with the Commission. ConAgra has restated its financial results for the years 1999 through 2005. + + To settle the charges, ConAgra has agreed to pay a $45 million penalty, which the SEC will seek to place into a Fair Fund for distribution to harmed investors. Without admitting or denying the allegations in the complaint, ConAgra agreed to be permanently enjoined from violating the antifraud, reporting, books and records and internal controls provisions of the federal securities laws (Sections 10(b), 13(a), 13(b(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10-b-5, 12b-20, 13a-1 and 13a-13). ConAgra also has consented to a review by an independent consultant of its policies and procedures and financial and accounting compliance functions with respect to certain reserve accounts. The settlement is subject to court approval. + + Earlier this year, the Commission brought settled civil injunctive actions and settled administrative proceedings against six former ConAgra executives, including two former corporate controllers, its former chief financial offer, its former vice president of operations and control, and against two senior executives at UAP. Litigation is currently pending against a third UAP senior executive. See Litigation Release Nos. 19969 (January 17, 2007) and 20176 (June 29, 2007). + + + + + SEC Complaint in this matter + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Therrien + + + + + + + + + + + + Robert J. Therrien + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20210 / July 26, 2007 + + Accounting and Auditing Enforcement Release No. 2653 / July 26, 2007 + + SEC v. Robert J. Therrien , Civil Action No. 07 CA 11364 RCL (D. Mass.) + + SEC Charges Former Chairman and CEO of Brooks Automation, Inc. with Securities Fraud and Reporting Violations in Stock Option Backdating Scheme + + The Securities and Exchange Commission today announced the filing of a civil securities fraud action against Robert J. Therrien of Osterville, Massachusetts, former President and CEO of Brooks Automation, Inc., a Chelmsford, Massachusetts software company, alleging that Therrien received millions of dollars in undisclosed compensation when he fraudulently backdated his exercise of an option to purchase company stock and engaged in a scheme to manipulate grants of stock options in order to provide Brooks' employees and executives, including himself, with more lucrative in-the-money options, while avoiding having to inform shareholders of the millions of dollars in resulting compensation expense. According to the complaint, Therrien engaged in the scheme to grant in-the-money options by falsifying company records to create the false appearance that the options actually had been granted at a lower market price on an earlier date. The complaint alleges that Therrien personally benefited by over $10 million from his fraudulent conduct. + + According to the complaint, Therrien engaged in a scheme in which Brooks granted "in-the-money" options (which had exercise prices below the stock's market price on the day of the grant, giving the recipient an immediate paper gain) to himself and other employees, but backdated them to make it appear that the options were "at-the-money" (with an exercise price the same as the stock's market price on the day of the grant). Under applicable accounting principles, Brooks did not need to record an expense in its financial statements for grants of at-the-money options, but was required to record an expense for any in-the-money options. Accordingly, the complaint alleges, by backdating the options, Therrien and Brooks concealed millions of dollars in compensation expenses incurred in the option grants. As a result of the transactions alleged in the complaint, Brooks' financial statements allegedly overstated income and understated employee compensation expenses by at least $54 million during the period from 1999 through 2005. After the backdating of stock option grants was discovered, Brooks announced in July 2006 that it was restating its financial results for the fiscal years 1996 through 2005 to record additional cumulative compensation expense of $64.5 million reflecting all options grants. + + The complaint alleges that Therrien received approximately $5.8 million in undisclosed compensation from a single options transaction that was falsely reported. That transaction allegedly took place in November 1999, after Therrien learned that an option he held to purchase 225,000 shares at approximately 10% of Brooks' market price had expired unexercised the previous August. Therrien allegedly signed false documents in November 1999 resulting in the issuance of a new in-the-money option to him at the original price, which he immediately exercised to purchase 225,000 shares of Brooks' stock at a fraction of its current market price. According to the complaint, as a result of his fraudulent exercise, Therrien received approximately $5.8 million in undisclosed compensation from Brooks. The complaint alleges that Brooks and Therrien falsely reported this transaction in Commission filings as an option exercise that had occurred the prior August and failed to report Therrien's compensation from the issuance of the new option. + + The Commission's complaint describes several instances of company-wide option grants with purported grant dates that Therrien allegedly knew were backdated and in which he personally received backdated options. For example, the complaint alleges that he knew that option grants with a purported date of October 1, 2001 in fact were not finalized until November 30, 2001. During that period the price of Brooks' stock rose by more than $11 per share, so that the backdating produced immediate compensation to its recipients totaling over $22 million, which Brooks failed to disclose in its financial reports. Therrien personally benefited by $1 million from this instance of backdating. + + The complaint alleges that by his conduct Therrien violated the general antifraud provisions of the federal securities laws, and provisions that prohibit falsifying records, making materially misleading filings with the Commission, and making misrepresentations to accountants, including Section 17(a) of the Securities Act of 1933, and Sections 10(b), 13(b)(5), 14(a), and 16(a) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rules 10b-5, 13a-14, 13b2-1, 13b2-2, 14a-9 and 16a-3 thereunder, and that he aided and abetted Brooks' uncharged violations of financial reporting, recordkeeping and internal controls requirements, including Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Exchange Act Rules 12b-20, 13a-1 and 13a-13 thereunder. + + The Commission's action seeks injunctive relief, a civil penalty, disgorgement and an officer and director bar against Therrien. + + + + + + + SEC Complaint in this matter + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2655.pdf b/raw/aaer/2007/AAER-2655.pdf new file mode 100644 index 0000000000000000000000000000000000000000..afeb822a2420bf0f08d5d98994c6db593044973e Binary files /dev/null and b/raw/aaer/2007/AAER-2655.pdf differ diff --git a/raw/aaer/2007/AAER-2656.txt b/raw/aaer/2007/AAER-2656.txt new file mode 100644 index 0000000000000000000000000000000000000000..33dd81717e60daea2aa652f2e87b2878d17f8e07 --- /dev/null +++ b/raw/aaer/2007/AAER-2656.txt @@ -0,0 +1,121 @@ +______________________________ +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +RELEASE NO. 56137 / July 26, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +RELEASE NO. 2656 / July 26, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12711 +: +In the Matter of : ORDER INSTITUTING ADMINISTRATIVE +: PROCEEDINGS PURSUANT TO RULE 102(e) +: OF THE COMMISSION=S RULES OF +PATRICK T. CHEW, CPA, : PRACTICE, MAKING FINDINGS, AND +: IMPOSING REMEDIAL SANCTIONS +Respondent. : +______________________________: +I. +The Securities and Exchange Commission (ACommission@) deems it appropriate and in +the public interest that public administrative proceedings be, and hereby are, instituted against +Patrick E. Chew (ARespondent@ or AChew@) pursuant to Rule 102(e)(3)(i) of the Commission's +Rules of Practice [17 C.F.R. ' 201.102(e)].1 +II. +In anticipation of the institution of these proceedings, Respondent has submitted an +Offer of Settlement (the AOffer@) 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, except as to the Commission=s jurisdiction over him and the subject matter of +Rule 102(e)(3)(i) provides, in relevant part, that: +The Commission, with due regard to the public interest and without preliminary hearing, may, by order, . . . +suspend from appearing or practicing before it any . . . accountant . . . who has been by name . . . permanently +enjoined by any court of competent jurisdiction, by reason of his or her misconduct in an action brought by the +Commission, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of +the rules and regulations thereunder. +1 +these proceedings, and the findings contained in Section III. 3 below, which are admitted, +Respondent consents to the entry of this Order Instituting Administrative Proceedings Pursuant +to Rule 102(e) of the Commission=s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions (AOrder@), as set forth below. +III. +On the basis of this Order and Respondents= Offer, the Commission finds2 that: +1. Chew, age 40, was the controller of SmartForce=s U.S. subsidiary, which +generated 70 percent of the Company=s business, from January 1998 until February 2002. +Chew was responsible for recognizing revenue on standard agreements but did not set or +otherwise determine the Company=s revenue recognition policy. During all relevant times, +Chew was a certified public accountant. +2. SmartForce PLC (ASmartForce@), now known as SkillSoft PLC (ASkillSoft@), was +at all relevant times a company organized under the laws of the Republic of Ireland with its +principal place of business in Redwood City, California. SmartForce provided Internet-based +training courseware and professional services geared toward business and IT professionals. At +all relevant times, SmartForce=s common stock was registered with the Commission pursuant to +Section 12(b) of the Exchange Act and trades on NASDAQ National Market. +3. On July 19, 2007, the Commission filed a complaint against Chew in SEC v. +Patrick T. Chew (Civil Action No. 07CV220). On July 23, 2007, the court entered an order +permanently enjoining Chew, by consent, from future violations of Section 13(b)(5) of the +Exchange Act and Rule 13b2-2 thereunder, and aiding and abetting violations of Sections 13(a), +13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 +thereunder. Chew was also ordered to pay $67,559 in disgorgement, representing losses +avoided as a result of the conduct alleged in the Complaint, and $18,326 in prejudgment +interest; and a $25,000 civil money penalty. +4. The Commission=s complaint alleged, among other things, that Chew engaged in +improper accounting practices which resulted in SmartForce filing materially false and +misleading financial statements in the company=s quarterly reports on Form 10-Q for the second +and third quarters of fiscal year 2001, and in the company=s annual report on Form 10-K for the +fiscal year ended December 31, 2001. These practices included improperly recognizing +revenue from non-binding agreements and from a transaction for which no product was shipped +to the customer. As a result of these practices, SmartForce=s annual and quarterly revenue and +net income were materially increased. +The findings herein are made pursuant to Respondent= Offer of Settlement and are not binding on any other +person or entity in this or any other proceeding. +2 +2 +IV. +In view of the foregoing, the Commission deems it appropriate and in the public interest +to impose the sanctions agreed to in Respondent Chew=s Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +A. Respondent is suspended from appearing or practicing before the Commission as +an accountant. +B. After three (3) years from the date of this order, Respondent may request that the +Commission consider his reinstatement by submitting an application (attention: Office of the +Chief Accountant) to resume appearing or practicing before the Commission as: +1. a preparer or reviewer, or a person responsible for the preparation or +review, of any public company's financial statements that are filed with the Commission. Such +an application must satisfy the Commission that the Respondent's work in his practice before +the Commission will be reviewed either by the independent audit committee of the public +company for which he works or in some other acceptable manner, as long as he practices before +the Commission in this capacity; and/or +2. an independent accountant. Such an application must satisfy the +Commission that: +(a) Respondent, or the public accounting firm with which he is +associated, is registered with the Public Company Accounting Oversight Board ("Board") in +accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be +effective; +(b) Respondent, or the registered public accounting firm with which +he is associated, has been inspected by the Board or equivalent Canadian organization and that +inspection did not identify any criticisms of or potential defects in the Respondent's or the firm's +quality control system that would indicate that the Respondent will not receive appropriate +supervision; +(c) Respondent has resolved all disciplinary issues with the Board or +equivalent Canadian organization, and has complied with all terms and conditions of any +sanctions imposed (other than reinstatement by the Commission); and +(d) Respondent acknowledges his responsibility, as long as the +Respondent appears or practices before the Commission as an independent accountant, to +3 + +comply with all requirements of the Commission and the Board, including, but not limited to, +all requirements relating to registration, inspections, concurring partner reviews and quality +control standards. +C. The Commission will consider an application by Respondent to resume +appearing or practicing before the Commission provided that his certified public accountant +and/or chartered accountant license is current and he has resolved all other disciplinary issues +with the Board or applicable Canadian organization. However, if licensure is dependent on +reinstatement by the Commission, the Commission will consider an application on its other +merits. The Commission's review may include consideration of, in addition to the matters +referenced above, any other matters relating to the Respondent's character, integrity, +professional conduct, or qualifications to appear or practice before the Commission. +By the Commission. +Nancy M. Morris +Secretary +4 diff --git a/raw/aaer/2007/AAER-2657.txt b/raw/aaer/2007/AAER-2657.txt new file mode 100644 index 0000000000000000000000000000000000000000..9e327b1e1c696e53d4a7c923f6a842c462736dcb --- /dev/null +++ b/raw/aaer/2007/AAER-2657.txt @@ -0,0 +1,1394 @@ + + + + + + + + + + + + + + + + SEC.gov | Delta & Pine Land Company and Turk Deltapine, Inc. + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501631","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Delta & Pine Land Company and Turk Deltapine, Inc. , Case No. 1:07-CV-01352 (RWR) (U.S.D.C., D.D.C) (filed July 25, 2007) + + Delta & Pine and Turk Deltapine Agree to Pay a $300,000 Penalty to Settle FCPA Charges + + On July 25 and 26, 2007, the Commission filed two settled enforcement proceedings charging Delta & Pine Land Company, a Scott, Mississippi-based company engaged in the production and marketing of cottonseed, and its subsidiary, Turk Deltapine, Inc., with violations of the Foreign Corrupt Practices Act ("FCPA"). First, on July 25, the Commission filed a lawsuit in the United States District Court for the District of Columbia charging Delta & Pine and Turk Deltapine with violating the FCPA and seeking a civil penalty. Second, on July 26, the Commission issued an administrative order finding that Delta & Pine violated the books-and-records and internal controls provisions of the FCPA and that Turk Deltapine violated the anti-bribery provisions of the FCPA. In the administrative proceeding, the Commission ordered the respondents to cease and desist from such violations, and required Delta & Pine to retain an independent consultant to review and make recommendations concerning the company's FCPA compliance policies and procedures. In the federal lawsuit, Delta & Pine and Turk Deltapine agreed to the entry of a final judgment requiring them to pay jointly and severally a $300,000 penalty. Delta & Pine was acquired on June 1, 2007 by Monsanto Company; the conduct charged by the Commission occurred prior to the acquisition. + + In both its federal court complaint and its administrative order, the Commission charged that, from 2001 through 2006, Turk Deltapine made payments of approximately $43,000 to officials of the Turkish Ministry of Agricultural and Rural Affairs in order to obtain governmental reports and certifications that were necessary for Turk Deltapine to obtain, retain, and operate its business in Turkey. In addition, in connection with these improper payments, Delta & Pine failed to keep accurate books and records, and failed to have effective internal controls. + + As a result of the conduct described above, the Commission charged that Turk Deltapine violated Section 30A of the Securities Exchange Act of 1934. The Commission also charged that Delta & Pine, in connection with the payments by Turk Deltapine, violated Exchange Act Sections 13(b)(2)(A) and Section 13(b)(2)(B). Delta & Pine and Turk Deltapine consented to both actions on a neither admit nor deny basis. + + + + + + SEC Complaint in this matter + + Administrative Proceeding 34-56138 + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + Administrative Proceedings Release + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2658.txt b/raw/aaer/2007/AAER-2658.txt new file mode 100644 index 0000000000000000000000000000000000000000..9e4256bde742beb02759cc6c8b1c81c864afdcf0 --- /dev/null +++ b/raw/aaer/2007/AAER-2658.txt @@ -0,0 +1,278 @@ +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56138 / July 26, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2658 / July 26, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12712 +________________________________ +: +In the Matter of : ORDER INSTITUTING CEASE-AND- +: DESIST PROCEEDINGS, MAKING +DELTA & PINE LAND COMPANY : FINDINGS, AND IMPOSING A CEASE- +: AND-DESIST ORDER PURSUANT TO +and : SECTION 21C OF THE SECURITIES +: EXCHANGE ACT OF 1934 +TURK DELTAPINE, INC., : +: +Respondents. : +: +: ________________________________ +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 (the “Exchange Act”) against Delta & Pine Land Company +(“Delta & Pine”) and Turk Deltapine, Inc. (“Turk Deltapine”) (collectively “Respondents”). +II. +In anticipation of the institution of these proceedings, Respondents have submitted +Offers of Settlement (the “Offers”) that 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, except as to the Commission’s jurisdiction over them and the subject matter +of these proceedings, which are admitted, Respondents consent to the entry of this Order +Instituting Cease-and-Desist, Making Findings, and Imposing a Cease-and-Desist Order +Pursuant to Section 21C of the Securities and Exchange Act of 1934 ("Order"), as set forth +below.1 +III. +On the basis of this Order and Respondents’ Offers, the Commission finds2 that: +A. Respondents +1. Respondent Delta & Pine is a Delaware corporation with its headquarters in Scott, +Mississippi. Delta & Pine is primarily engaged in the breeding, production, +conditioning and marketing of proprietary varieties of cotton planting seed. Delta & +Pine conducts operations in a number of foreign jurisdictions, including Turkey. +Delta & Pine’s common stock was registered with the Commission pursuant to +Section 12(b) of the Exchange Act and was traded on the New York Stock Exchange +during the relevant time. Delta & Pine was acquired by Monsanto on June 1, 2007, +subject to the terms of a settled Proposed Final Judgment that Monsanto and the +Department of Justice filed on May 31, 2007, and, pursuant to the acquisition, its +common stock was delisted and deregistered on June 5, 2007. +2. Respondent Turk Deltapine is a Delaware corporation with its headquarters in Scott, +Mississippi. Turk Deltapine is a wholly-owned subsidiary of Delta & Pine and is +engaged in the production and sale of cottonseed in Turkey, both for domestic +consumption in Turkey and for export to other countries. +B. Facts +Summary +1. From 2001-2006, Turk Deltapine made payments valued at approximately $43,000 +(including cash, payment of travel and hotel expenses, air conditioners, computers, +office furniture and refrigerators) to multiple officials of the Turkish Ministry of +Agricultural and Rural Affairs ("MOA"). Turk Deltapine made the payments in order +to obtain governmental reports and certifications that were necessary for Turk +Deltapine to operate its business in Turkey. These payments, which assisted the +Respondents in obtaining and retaining business, violated the anti-bribery provisions +of the Foreign Corrupt Practices Act (“FCPA”). In addition, in connection with these +improper payments, Delta & Pine failed to keep accurate books and records, and +1 In addition, the Commission has contemporaneously filed a complaint in the United States District +Court for the District of Columbia charging Respondents with the violations set forth in this order and seeking a +civil penalty. Without admitting or denying the Commission’s allegations, Delta & Pine and Turk Deltapine +have consented to the entry of a final judgment by the Court that would require Delta & Pine and Turk +Deltapine to jointly and severally pay a $300,000 civil penalty. See SEC v. Delta & Pine Land Co., No. 1:07- +cv-01352 (RWR) (D.D.C) (July 25, 2007). +2 The findings herein are made pursuant to Respondents’ Offers of Settlement and are not binding on +any other person or entity in this or any other proceeding. +2 + +failed to have effective internal controls. Accordingly, Delta & Pine violated the +books and records and internal controls provisions of the FCPA. +Turk Deltapine’s Payments to Turkish Officials +2. Turk Deltapine contracts annually with a number of Turkish farmers to grow seed on +their farms for Turk Deltapine. The Turkish farmers own the seed until it is sold to +Turk Deltapine. Inspectors from provincial offices of MOA inspect the fields to +determine the spacing and size of the fields, and to estimate their anticipated +production. The inspections are time-sensitive, in that they must occur while the +cotton crop is in the field and before more than one-third of the cotton bolls open. +Upon completion of the inspection, MOA inspectors are required to complete +inspection reports. The inspections and inspection reports must be completed before +Turk Deltapine can purchase the cotton seeds from Turkish farmers. In a number of +cases, MOA inspectors receiving payments from Turk Deltapine did not actually +inspect the fields prior to completing inspection reports, as they were required to do. +3. Turk Deltapine also was required to obtain certifications from laboratories authorized +by MOA to perform tests required by the Organisation for Economic Cooperation and +Development (“OECD”) for quality and to confirm the absence of certain +characteristics. Turk Deltapine also needed another certificate from MOA’s plant +protection office to export seed for sale. In order to obtain these certifications, +inspectors from MOA obtain samples of the seed from Turk Deltapine facilities. The +sampling officials collect samples from each lot of seed and seal the sample in an +official envelope before sending the seed to laboratories for testing and certification. +During the process of sampling and preparing the seed for transmission to +laboratories, the sampling officials are required to certify that the seed samples have +been properly chemically treated and bagged. These MOA certifications must be +completed before Turk Deltapine is permitted to sell its seeds in Turkey or export the +seeds to other countries. In a number of cases, MOA officials providing the +certifications, and who received payments from Turk Deltapine, did not comply with +regulations concerning the chemical treatment and bagging of seed. +4. Prior to May 2004, payments to MOA officials were made in part using revenue +generated from the sale of Turk Deltapine waste products and products from waste +allowance. These sales, and the payments to MOA officials made from the proceeds +of those sales, were not recorded in Respondents’ books, records, and accounts. In +addition, some payments to MOA officials were recorded in Turk Deltapine’s books, +records, and accounts as “Porter Fees” paid to non-existent persons. +Delta & Pine Learns of Turk Deltapine’s Payments but the Payments Continue +5. In May 2004, Delta & Pine officers in the United States learned that Turk Deltapine +was making payments to MOA officials. Delta & Pine reviewed the circumstances of +the payments, but did not receive all facts concerning those payments from Turk +Deltapine employees. +3 + + +6. Instead of halting the payments, Delta & Pine permitted the payments to continue +using the following procedure in consultation with Turk Deltapine employees. Rather +than Turk Deltapine making the payments directly to MOA employees, Turk +Deltapine arranged to have the payments made by a chemical company supplier to +Turk Deltapine. Turk Deltapine employees estimated the annual amount of payments +that would be made to MOA employees, and arranged to have the chemical company +pay those amounts to MOA employees. The chemical company, in turn, would +include those sums, plus a 10 percent fee for handling the transactions, in its invoices +for chemicals supplied to Turk Deltapine. The payments to MOA officials made after +May 2004 therefore similarly were not recorded in the books, records, and accounts +of Turk Deltapine or Delta & Pine. Moreover, in setting out this procedure, an +internal Delta & Pine memorandum noted that there were “no effective controls to put +in place to monitor this process.” +7. Turk Deltapine’s payments to MOA officials did not cease until 2006, when the +payments came to light in connection with due diligence being performed by a +potential acquirer of Delta & Pine. +C. Legal Analysis +Section 30A of the Exchange Act prohibits issuers, and certain other persons +including agents of issuers, from, among other things, making improper payments to foreign +officials for the purpose of influencing their decisions in order to obtain or retain business. +Exchange Act Section 13(b)(2)(A) requires public companies 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; and Exchange Act Section +13(b)(2)(B) requires such companies 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; and (ii) transactions are +recorded as necessary to permit preparation of financial statements in conformity with +generally accepted accounting principles or any other criteria applicable to such statements, +and to maintain accountability for assets. 15 U.S.C. §§ 78m(b)(2)(A) and 78m(b)(2)(B). +As detailed above, Turk Deltapine, as agent for Delta & Pine, made numerous +improper payments to MOA inspectors, with the purpose and effect of influencing their +decisions in order to obtain or retain business. Throughout the relevant period, MOA +inspectors were foreign officials within the meaning of the FCPA, and MOA was an +instrumentality of a foreign government within the meaning of the FCPA. Turk Deltapine +therefore violated the anti-bribery provisions of Exchange Act Section 30A. Moreover, in +connection with these payments, Delta & Pine failed to make and keep accurate books, +records, and accounts as required by Exchange Act Section 13(b)(2)(A). Finally, and as +evidenced by the extent and duration of the improper payments to foreign officials, and the +improper recording of these payments in its subsidiary’s books and records, Delta & Pine +failed to devise and maintain an effective system of internal controls to prevent these +violations of the FCPA, as required by Exchange Act Section 13(b)(2)(B). +4 + +IV. +As a result of the conduct described above, Delta & Pine violated Section 13(b)(2)(A) +of the Exchange Act, 15 U.S.C. § 78m(b)(2)(A), which requires issuers 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; and Section 13(b)(2)(B) of the +Exchange Act, 15 U.S.C. § 78m(b)(2)(B), which requires issuers to devise and maintain a +system of internal accounting controls sufficient to provide the reasonable assurances set +forth in that statute. +As a result of the conduct described above, Turk Deltapine violated Section 30A of +the Exchange Act, 15 U.S.C. § 78dd-1, which provides that it is unlawful for an agent of an +issuer corruptly to give, promise to give, or authorize the giving of anything of value to any +foreign official for purposes of (i) influencing any act or decision of such foreign official in +his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation +of the lawful duty of such official, or (iii) securing any improper advantage, in order to assist +such issuer in obtaining or retaining business for or with, or directing business to, any person. +Based on the foregoing, the Commission finds that Turk Deltapine violated Exchange +Act Section 30A and Delta & Pine violated Exchange Act Sections 13(b)(2)(A) and +13(b)(2)(B). +V. +Respondent Delta & Pine has undertaken to: +1. Retain, through Delta & Pine’s Board of Directors, within 60 days after the entry of +this order, an independent consultant ("Independent Consultant"), not unacceptable to +the staff of the Commission, to review and evaluate Delta & Pine’s internal controls, +record-keeping, and financial reporting policies and procedures as they relate to its +compliance with the books and records, internal accounting controls, and anti-bribery +provisions of the FCPA, codified at Sections 13(b)(2)(A), 13(b)(2)(B) and 30A of the +Exchange Act [15 U.S.C. §§ 78m(b)(2)(A) & (B) and 78dd-1]. Delta & Pine shall +cooperate fully with the Independent Consultant and shall provide the Independent +Consultant with access to its files, books, records, and personnel as reasonably +requested for the review; +2. Require that the Independent Consultant issue a report, within sixty (60) days after +being retained, summarizing the review and recommending policies and procedures +reasonably designed to ensure compliance with the federal securities laws as they +relate to the FCPA. Simultaneously with providing that report to Delta & Pine’s +Board of Directors, Delta & Pine shall require that the Independent Consultant +contemporaneously transmit a copy to Kenneth R. Lench, Assistant Director, +Division of Enforcement, Securities and Exchange Commission, 100 F Street, N.E., +Washington, D.C. 20549-6041; +5 + +3. Adopt all recommendations in the report of the Independent Consultant; provided, +however, that within sixty (60) days after the Independent Consultant serves that +report, Delta & Pine shall in writing advise the Independent Consultant and the +Commission of any recommendations that it considers to be unduly burdensome, +impractical, or costly. With respect to any recommendation that Delta & Pine +considers unduly burdensome, impractical or costly, Delta & Pine need not adopt that +recommendation at that time but shall propose in writing an alternative policy, +procedure or system designed to achieve the same objective or purpose. As to any +recommendation on which Delta & Pine and the Independent Consultant do not +agree, such parties shall attempt in good faith to reach an agreement within sixty (60) +days after Delta & Pine serves the written advice. In the event Delta & Pine and the +Independent Consultant are unable to agree on an alternative proposal, Delta & Pine +will abide by the determinations of the Independent Consultant; +4. Require the Independent Consultant to undertake a review, which shall be completed +within one year of the entry of this order, of Delta & Pine’s policies and procedures +regarding compliance with the federal securities laws as they relate to the FCPA. +During the review of Delta & Pine’s compliance program, the Independent +Consultant shall (i) certify that Delta & Pine’s policies and procedures are +appropriately designed to accomplish their goals, (ii) monitor Delta & Pine’s +implementation and compliance with the policies and procedures, and (iii) report on +the Independent Consultant’s findings as to the effectiveness of the policies and +procedures to Delta & Pine’s Audit Committee. Should the Independent Consultant, +during this period, determine that there is a reasonable likelihood that corrupt +payments have been offered, promised, paid, or authorized by any Delta & Pine +entity, including agents, consultants, and joint ventures, shareholders acting on Delta +& Pine’s behalf, and contractors and sub-contractors working directly or indirectly for +Delta & Pine, the Consultant shall promptly report such payments to Delta & Pine’s +Audit Committee, and Delta & Pine shall then be obligated to promptly report the +same to the staff of the Commission at the address listed above. Should Delta & Pine +fail to make such disclosure, the Independent Consultant shall independently disclose +its findings to the staff of the Commission, at the address listed above. Further, the +Independent Consultant shall disclose to the staff of the Commission in the event that +Delta & Pine, or its officers, employees, consultants, agents, and joint ventures, or +shareholders acting on Delta & Pine’s behalf, or contractors or sub-contractors +working directly or indirectly for Delta & Pine refuse to provide information +necessary for the performance of the Independent Consultant’s responsibilities. Delta +& Pine agrees that it will not take any action to retaliate against the Independent +Consultant for such disclosures. During the period, Delta & Pine shall immediately +disclose to the staff of the Commission, at the address listed above, any information +of which it learns that suggests there is a reasonable likelihood that corrupt payments +were offered, promised, paid, or authorized by any Delta & Pine entity, including +agents, consultants, and joint ventures, shareholders working on Delta & Pine’s +behalf, and contractors or sub-contractors working directly or indirectly for Delta & +Pine; and +6 + +5. Require the Independent Consultant to enter into an agreement with Delta & Pine that +provides that for the period of engagement and for a period of two years from +completion of the engagement, the Independent Consultant shall not enter into any +employment, consultant, attorney-client, auditing or other professional relationship +with Delta & Pine, or any of its present or former affiliates, directors, officers, +employees, or agents acting in their capacity. The agreement will also provide that +the Independent Consultant will require that any firm with which he/she is affiliated +or of which he/she is a member, and any person engaged to assist the Independent +Consultant in performance of his/her duties under this Order shall not, without prior +written consent of the Securities and Exchange Commission’s Division of +Enforcement, enter into any employment, consultant, attorney-client, auditing or +other professional relationship with Delta & Pine, or any of its present or former +affiliates, directors, officers, employees, or agents acting in their capacity as such for +the period of the engagement and for a period of two years after the engagement. +6. These undertakings shall be binding upon any acquirer or successor in interest to +Delta & Pine or substantially all of Delta & Pine’s assets and liabilities or business. +7. For good cause shown, the Commission's staff may extend any of the procedural +dates set forth above. +VI. +Accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the Exchange Act, +that: +(i) Respondent Delta & Pine cease and desist from committing or causing any +violations and any future violations of Exchange Act Sections 13(b)(2)(A) and +13(b)(2)(B); +(ii) Respondent Turk Deltapine cease and desist from committing or causing any +violations and any future violations of Exchange Act Section 30A; and +(ii) Delta & Pine comply with the undertaking set forth in Section V above. +By the Commission. +Nancy Morris +Secretary +7 diff --git a/raw/aaer/2007/AAER-2659.txt b/raw/aaer/2007/AAER-2659.txt new file mode 100644 index 0000000000000000000000000000000000000000..c61c8531266792ff9563613e80de93c2087fb50f --- /dev/null +++ b/raw/aaer/2007/AAER-2659.txt @@ -0,0 +1,1373 @@ + + + + + + + + + + + + + + + + SEC.gov | Dean A. Nichols + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501646","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Nichols + + + + + + + + + + + + Dean A. Nichols + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20217 / July 30, 2007 + + Accounting and Auditing Enforcement Release No. 2659 / July 30, 2007 + + SEC v. Dean A. Nichols , Civil Action No. 04-CV-641 (D.N.J.) + + Court Issues Final Judgment by Consent Against Defendant Dean A. Nichols + + + + The Securities and Exchange Commission ("Commission") announced today that on July 19, 2007, Judge Harold A. Ackerman of the United States District Court for the District of New Jersey issued a Final Judgment against Dean A. Nichols ("Nichols"), a certified public accountant who formerly served as a senior manager at a subsidiary of Performance Food Group Company ("PFG"), a large public company. The Final Judgment: (1) permanently enjoins Nichols from violating Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5 and 13b2-1 thereunder, and from aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder; and (2) orders Nichols to pay a civil penalty in the amount of $25,000 under Section 21(d)(3) of the Exchange Act. Nichols consented to the entry of the Final Judgment without admitting or denying the allegations of the Commission's Complaint. + + The Commission filed its action against Nichols in February 2004, alleging that, during 2000 and 2001, Nichols engaged in a fraudulent course of conduct in which he made numerous improper accounting journal entries on the books of AFI Foodservice Distributor, Inc., a subsidiary of PFG. Nichols= conduct caused PFG to overstate its income by a total of $3.8 million in the company=s Forms 10-Q filed with the Commission for the second and third quarters of 2000, and for the first and third quarters of 2001. + + As part of the settlement, Nichols also agreed to the entry of a Commission Order suspending him from appearing or practicing before the Commission as an accountant. + + For further information, please see Litigation Release Number 18578 . + + + + +  + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Fischer + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501656","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Fischer + + + + + + + + + + + + Integrated Silicon Solution, Inc. and Gary L. Fischer + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20219 / August 1, 2007 + + Accounting and Auditing Enforcement Release No. 2661 / August 1, 2007 + + Securities and Exchange Commission v. Integrated Silicon Solution, Inc. and Gary L. Fischer , Case No. C 07-3945 HRL (N.D. Cal. filed August 1, 2007) + + SEC Files Action Against Integrated Silicon Solution and Its Former CFO For Improper Stock Options Backdating + + The Securities and Exchange Commission today filed charges against Silicon Valley semiconductor company Integrated Silicon Solution, Inc. (ISSI) and its former Chief Financial Officer, Gary L. Fischer, alleging that they engaged in a long-running fraudulent scheme to backdate stock option grants. The Commission alleges that ISSI and Fischer concealed millions of dollars of stock option compensation expenses by providing executives and employees with potentially lucrative in-the-money options while backdating the grants to avoid reporting the expenses to investors. Both Fischer, of Santa Clara, Calif., and ISSI, settled the matter without admitting or denying the Commission's charges. + + The Commission's complaint against ISSI and Fischer, filed in the Northern District of California, alleges that Fischer routinely used hindsight to select option grant dates when ISSI's stock traded at or near monthly or quarterly lows, and at prices below the closing price on the date when Fischer actually selected the grant date. According to the complaint, the dates Fischer selected were then incorporated into Stock Option Committee resolutions and Compensation Committee minutes, even though the committees rarely, if ever, met on the date listed on the minutes and resolutions. + + Pricing the options below current prices would have required the company to report a compensation expense under well-settled accounting principles. By falsely documenting that the options had been granted on an earlier date, ISSI avoided reporting the expenses in its financial statements. The complaint alleges that the backdated grants resulted in materially misleading disclosures, with the company overstating its actual net income (as restated) or understating its actual net loss (as restated) in fiscal years 1997 through 2005, including a 528 percent overstatement of actual net income in fiscal year 2004. The Commission further alleges that Fischer personally benefited from the backdating scheme. Fischer received backdated options which he later exercised to reap undisclosed profits. + + Fischer, without admitting or denying the allegations of the Commission's complaint, agreed to settle the matter by consenting to a permanent injunction against violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5), 14(a) and 16(a) of the Securities Exchange Act of 1934 and Rules 10b 5, 13a-14, 12b-20, 13a 1, 13a 11, 13a-13, 13b2 1, 13b2 2, 14a-9 and 16a 3 thereunder, paying $414,830 in disgorgement and interest, and a $125,000 civil penalty, and consenting to an order barring him for five years from acting as an officer or director of a public company. + + ISSI, without admitting or denying the allegations in the Commission's complaint, agreed to settle the matter by consenting to a permanent injunction against violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a) of the Securities Exchange Act of 1934, and Rules 10b-5, 12b 20, 13a-1, 13a-11, 13a-13 and 14a-9 thereunder. + + + + + + SEC Complaint in this matter + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Lynn + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501686","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Share sensitive information only on official, secure websites. + + + + + + + + + + + + + + + + + SEC homepage + + + + + + + Menu + + + + + + + + + + + + + + Close + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + Search Filings + + + + + + + + + Search Filings + + + + + + + + + Full Text Search + + + + + + Latest Filings + + + + + + Mutual Fund Search + + + + + + Variable Insurance Products Search + + + + + + SIC Codes + + + + + + CIK Lookup + + + + + + Public Dissemination Service (PDS) + + + + + + Search Assistance + + + + + + + + + + + + + Submit Filings + + + + + + + + + Submit Filings + + + + + + + + + EDGAR Filer Management Portal + + + + + + EDGAR Filing Portal + + + + + + Online Forms Management Portal + + + + + + EDGAR Next + + + + + + Forms Index + + + + + + Filer Support & Resources + + + + + + + + + + + + + Data & Research + + + + + + + + + Data & Research + + + + + + + + + Data Library + + + + + + Statistics & Data Visualizations + + + + + + Structured Data + + + + + + Investment Management Data + + + + + + Open Data at the SEC + + + + + + + + + + + + + Rules, Enforcement, & Compliance + + + + + + + + + + + + + + + + + + + + Rules & Regulations + + + + + + + + + Rulemaking Activity + + + + + + Submit Public Comments + + + + + + Staff Guidance + + + + + + No-Action, Interpretive, and Exemptive Letters + + + + + + Self-Regulatory Organization Rulemaking + + + + + + Public Petitions for Rulemaking + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + + + Litigation Releases + + + + + + Administrative Proceedings + + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + + Trading Suspensions + + + + + + Distributions to Harmed Investors + + + + + + Receiverships + + + + + + + + + + + + + + + + + Compliance + + + + + + + + + Examination Priorities + + + + + + Risk Alerts + + + + + + Compliance Outreach Program + + + + + + + + + + + + + + + + + + + + + + + Proposed Rules + + + + + + What's New + + + + + + Whistleblower Program + + + + + + + + + + + + + + + + + + + Featured Topics + + + + + + + + + Featured Topics + + + + + + + + + Crypto Task Force + + + + + + Cybersecurity + + + + + + Market Structure Analytics + + + + + + Saving and Investing for Military Personnel + + + + + + Saving and Investing for Teachers + + + + + + SEC-CFTC Harmonization Initiative + + + + + + Treasury Clearing Implementation + + + + + + + + + + + + + About + + + + + + + + + About + + + + + + + + + Mission + + + + + + Commissioners + + + + + + Divisions & Offices + + + + + + Division & Office Directors + + + + + + Advisory Committees + + + + + + Budget & Performance + + + + + + Reports & Publications + + + + + + Commission Votes + + + + + + Contact the SEC + + + + + + Careers + + + + + + + + + + + + + Submit a Tip or Complaint + + + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + More in this Section + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Jerry K. Castleman and Kathleen M. Lynn + + + + + + + + + + + + Jerry K. Castleman and Kathleen M. Lynn + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20225 / August 6, 2007 + + Accounting and Auditing Enforcement Release No. 2663 / August 6, 2007 + + SEC v. Jerry K. Castleman and Kathleen M. Lynn , Civil Action No. 06-3226 (Werlein) (S.D. Tex.) + + SEC Settles Civil Fraud Charges Against Two Former Enron Executives + + + + The Securities and Exchange Commission (Commission) announced today that on August 2, 2007, the U.S. District Court in Houston entered final judgments in the Commission's civil action against Jerry K. Castleman, a former Enron executive and accountant, and Kathleen M. Lynn, a former Enron executive. + + In its complaint filed on October 13, 2006, the Commission alleged that Castleman, Lynn, and others participated in a transaction that defrauded Enron's security holders to enrich themselves and others. The complaint also alleged that the defendants' conduct involved both the closing of a sham sale pursuant to which Enron manufactured earnings, and the later unwinding of this sham sale by Enron repurchasing the asset without reversing the previously (and improperly) recognized earnings. The sham sale manipulated Enron's publicly-reported earnings, which resulted in Enron filing materially false and misleading financial statements in the company's annual report on Form 10-K for the fiscal years ended December 31, 1999 and 2000, and in the company's quarterly reports on Form 10-Q for the third quarter of fiscal year 1999, the first three quarters of fiscal year 2000, and the first two quarters of fiscal year 2001. + + Specifically, the Commission's complaint alleged, among other things, that Enron sold an interest in a troubled power project in Cuiaba, Brazil to a related party called LJM Cayman, LP (LJM1), controlled by Enron's then Chief Financial Officer, Andrew Fastow (the "selldown"). Through the selldown, Enron South America (ESA), an Enron subsidiary, deconsolidated its interest in the project and Enron recognized earnings from related gas supply contracts. Enron and ESA needed these earnings to meet earnings estimates for the third and fourth quarters of 1999. In conformity with relevant accounting rules, deconsolidation and recognition were not appropriate, because the seller (Enron) did not transfer to the buyer (LJM1) the usual risks and rewards of ownership, in that the selldown included an oral side agreement that LJM1 would not lose money on its Cuiaba investment (the "side agreement"). The side agreement was neither memorialized in the deal documents nor disclosed to Enron's auditor. In 2001, to satisfy the side agreement, Enron bought back LJM1's interest without reversing the previously (and improperly) recognized earnings. In addition, Enron paid LJM1 a profit, despite the poor economics of the project. + + Castleman and Lynn each consented to the final judgments without admitting or denying the allegations in the Commission's complaint. They each agreed to be enjoined permanently from violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5 and 13b2-1, and from aiding and abetting violations of Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Exchange Act Rules 12b-20, 13a-1 and 13a-13. Castleman also agreed to be enjoined permanently from violating Exchange Act Rule13b2-2. Lynn's judgment orders her to pay nominal disgorgement of $1 and a civil penalty of $30,000. Castleman's judgment orders him to pay $41,268.29, consisting of disgorgement of $30,000 and prejudgment interest of $11,268.29, with all but $12,000 waived, based upon Castleman's sworn financial statements and other documents submitted to the Commission. The Commission intends to have the disgorgement and civil penalty amounts paid into a court account pursuant to the Fair Fund provisions of Section 308(a) of the Sarbanes-Oxley Act of 2002 for ultimate distribution to victims of the fraud. + + In settlement of this action, Castleman also consented to the entry of an Administrative Order, pursuant to Rule 102(e) of the Commission's Rules of Practice, suspending him from appearing or practicing before the Commission as an accountant, with a right to apply for reinstatement after five years. + + For additional information see Litigation Release No. 19865 , October 13, 2006. + + + + +  + + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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+ + + + + + + + + + + + Michael, Adest & Blumenkrantz, P.C., David Michael, CPA, and Paul Adest, CPA; + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20231 / August 8, 2007 + + Accounting and Auditing Enforcement Release No. 2665 / August 8, 2007 + + SEC v. Gershon Tannenbaum and Jay M. Vermonty , Civ. Action No. 1:99-CV-06050 (E.D.N.Y.) (ARR) (JMA). + + Court Enters Final Judgments Against Gershon Tannenbaum and Jay Vermonty For Securities Fraud Imposing Civil Penalties and Disgorgement + + On July 25, 2007, the United States District Court for the Eastern District of New York entered final judgments against Gershon Tannenbaum ("Tannenbaum") and Jay M. Vermonty ("Vermonty") for securities fraud, imposing civil penalties totaling $200,000 and disgorgement in excess of $155,000. The Commission alleged in its action that Tannenbaum and Vermonty were part of a fraudulent scheme from 1995 through 1997 to falsify and inflate the financial condition of Power Phone Inc. and its successor TMC Agroworld Corporation. The Commission alleged in its action that Tannenbaum and Vermonty fraudulently promoted Power Phone and TMC Agroworld stock. + + The Commission's complaint alleged that Power Phone's audited financial statements for the fiscal year ended June 30, 1995 improperly included two assets that Power Phone did not own: (i) artwork with a purported value of $2 million; and (ii) a commercial grade application software program also with a purported value of $2 million. Collectively, these assets accounted for 95% of Power Phone's total assets. The Commission's complaint alleged that Tannenbaum and Vermonty actively and fraudulently touted the stock of Power Phone and TMC Agroworld to the investing public and then sold their stock in those entities at artificially inflated prices. + + Under the terms of the final judgments, Tannenbaum and Vermonty were each permanently enjoined from further violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rule 10b-5. The court also ordered Tannenbaum to pay disgorgement in the amount of $95,026, plus prejudgment interest, and $100,000 in civil penalties. The court ordered Vermonty to pay disgorgement in the amount of $63,880, plus prejudgment interest, and $100,000 in civil penalties. The court also ordered both Tannenbaum and Vermonty to provide a verified, sworn accounting. + + For additional information regarding this action, see Litigation Release No. 1173 (Sept. 28, 1999) (describing the initial filing). Also see In the Matter of Michael, Adest & Blumenkrantz, P.C., et al. , Admin. Proc. File No. 3-9873 (Apr. 14, 1999); In the Matter of Joseph Salamon , Admin. Proc. File No. 3-10095 (Nov. 10, 1999); In the Matter of Isaac Hager , Admin. Proc. 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Fisher, Halloran, and Behrens , United States District Court for the Northern District of Illinois Eastern Division, Civil Action No. 07C 4483 + + On August 9, 2007, the Securities and Exchange Commission filed a civil injunctive action against former Chairman, CEO and President Thomas Fisher, former CFO and Executive Vice-President Kathleen Halloran, and former Treasurer and Vice-President George Behrens of Nicor, Inc., a major Chicago-area natural gas distributor, alleging financial fraud lasting from 1999 to 2002. + + The complaint alleges that in 1999, Fisher, Halloran, and Behrens participated in devising a method by which Nicor could profit by accessing its low-cost last-in, first-out ("LIFO") layers of gas inventory. As a result, from 1999 through 2002, the former officer defendants engaged in or approved improper transactions, and made material misrepresentations in financial statements and documents filed with the Commission. They also failed to disclose material information regarding Nicor's rigged reductions in gas inventory levels that enabled it to improperly manipulate its earnings and to increase Nicor's revenues under a performance-based utility rate plan. In addition, the former officers materially understated Nicor's expenses during the first and second quarters of 2001 by improperly bundling a weather-insurance contract with an agreement to supply gas to Nicor's insurance provider at below-market prices. Moreover, they caused the losses on the supply agreement with the insurance provider to be improperly charged to Nicor's utility customers. These improper transactions enabled Nicor to understate its expenses and to manipulate its earnings to achieve its earnings targets. As a result of the manipulative scheme, Nicor materially overstated its reported income for the years ending 2000 and 2001, and for each of the quarters within those years and the financial statements filed with those reports. + + Additionally, the former officer defendants failed to make disclosures required by GAAP about the effects of LIFO inventory liquidations on Nicor's reported income. Nicor, through Fisher, Halloran, and Behrens, failed to disclose in either its Management's Discussion & Analysis section of its 2000 and 2001 annual and quarterly reports, or in its financial statements filed with those reports, that it had recorded material increases to income resulting from the liquidation of its LIFO inventory, and that the continued liquidation of Nicor's low-cost inventory was not sustainable. + + The complaint alleges that by their conduct Fisher, Halloran, and Behrens violated the antifraud provisions of the federal securities laws and aided and abetted Nicor's violations of the reporting provisions of the same laws, including Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(a) of the Securities Exchange Act of 1934, and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder. + + Nicor, Inc. previously consented to the entry of a court order enjoining it from violating the antifraud and reporting provisions of the federal securities laws and ordering that it pay a $10 million civil penalty [LR-20060, March 29, 2007]. + + The Commission's action seeks injunctive relief, disgorgement, civil penalties, and officer and director bars against Fisher, Halloran, and Behrens. + + + + + + SEC Complaint in this matter + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2667.txt b/raw/aaer/2007/AAER-2667.txt new file mode 100644 index 0000000000000000000000000000000000000000..9228fa80ff2f18e8ee9d807a25fc24445447d4fe --- /dev/null +++ b/raw/aaer/2007/AAER-2667.txt @@ -0,0 +1,122 @@ +1 + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56230 / August 9, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2667 / August 9, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12721 +In the Matter of +JERRY KENT +CASTLEMAN, CPA + Respondent. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE PROCEEDINGS +PURSUANT TO RULE 102(e)(3) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS AND IMPOSING +REMEDIAL SANCTION +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate and in the +public interest that publi c administrative proceedings be, and hereby are , instituted a gainst Jerry +Kent Castleman (“Respondent” or “Castleman”) pursuant to Rule 102(e)(3) of the Commission’s +Rules of Practice.1 +Rule 102(e)(3)(i) provides, in relevant part, that: +The Commission, with due regard to the public interest and without prelim inary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has +been by name . . . per manently enjoined by any c ourt of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal secu rities la ws or of the rules and regulations +thereunder. +II. +In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlement (“Offer”) which the Commission has determined to accept. Solely for the purpose of +these proceedings and any other proceedings brought by or on be half of the Commi ssion, or t o +which the Commission is a party, and without admitting or denying the findings herein, except as +to the Commission’s jurisdiction over hi m and the subject matte r of these proceedi ngs, and the +findings contained in Section III.3 below, which are admitted, Respondent consents to the entry of +this Order Instituting Public Administrative Pr oceedings Pursua nt to Rule 102( e)(3) of the +Commission’s Rules of Practice, Making Findings and Imposing Remedial Sanction (“Order”), as +set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds that: +1. Castleman, age 43, is a nd has been a certified public accountant (“CPA”) +licensed to practice in the State of Texas. From March 1998 through September 2000, he was the +Vice President and Chief Accounting Officer (“CAO”) of Enron South America, and later the CAO +of the Enron Industrial Markets division of Enron Cor p. (“Enron” or the “company”). Prior t o +joining Enron’s Corporate Accounting Unit in 1997, Castleman was an auditor at Arthur Andersen +LLP. +2. Enron was, at all rel evant times, an Oregon cor poration with its principal +place of business in Houston, Texas. Until its bankruptcy filing in December 2001, Enron was the +seventh largest corporation in t he United States based on re ported revenue. In the previous ten +years, Enron had evolve d from a regional natur al gas provi der to a commodit y trader of natur al +gas, electricity, and other physical commodities with retail operations in energy and other products. +The Company also created and traded financial products. At all relevant times, the common stock +of Enron was registered with the Commission pursuant to Section 12(b) of the Securities Exchange +Act of 1934 (“Exchange Act”) and traded on the New York Stock Exchange. +3. On August 2, 2007, the U. S. Di strict Court for th e Sout hern District of +Texas, Houston Division, entered a final judgment against Castleman, permanently enjoining him +from violating Section 17(a) of the Securities Act of 1933, Sec tions 10(b) and 13(b)(5) of the +Securities Exchange Act of 1934 and Excha nge Act Rules 10b-5, 13b2- 1 and 13b2- 2, and fro m +aiding and abetting violations of Exc hange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) and +Exchange Act Rules 12b-20, 13a-1 and 13a-13. Securities and Exchange Commission v. Jerry K. +Castleman, et al. , Civil Action Number 06- 3226. The Court also or dered Castle man to pa y +$41,268.29, consisting of disgorgement of $30,000 and prejudgment interest of $11,268.29, with +all but $12,000 waived, based upon Castleman’s sworn financial statements and other documents +and information. +4. The Commission’s complaint alleged that Castle man and others +participated in a transaction th at de frauded Enron’s security hol ders to enrich t hemselves and +others. The complaint also alleges that Respondent’s fraudulent conduct involved both the closing +2 + +of a s ham sale pursuant to which Enron manufa ctured earnings, and the later unwinding of this +sham sale by repurchasing the asset without reversing the previously (and improperly) recognized +earnings. +IV. +In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent’s Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +A. Castleman is suspended from appearing or practicing before the Commission as an +accountant. +B. After five years from the date of this order, Respondent may request that the +Commission consider his reinstatement by submitting an application (attention: Office of the +Chief Accountant) to resume appearing or practicing before the Commission as: +1. a preparer or reviewer, or a person respons ible for the preparation or +review, of any public company’s financial statem ents that are filed with the Comm ission. Such +an application m ust satisfy the Commission that Respondent’s work in his practice before the +Commission will be rev iewed either by the ind ependent audit committee of the public com pany +for which he works or in som e other acceptabl e m anner, as long as he practices before the +Commission in this capacity; and/or +2. an inde pendent ac countant. Such an a pplication must s atisfy t he +Commission that: +(a) Respondent, or the public accounting firm with which he is +associated, is reg istered with the Public Co mpany Accounting Oversight Board (“Board”) in +accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; +(b) Respondent, or the registered public accounting firm with which he +is associated, has been inspected by the Board an d that inspection did not identify any criticisms +of or potential defects in the respondent’s or the firm’s quality control system that would indicate +that the respondent will not receive appropriate supervision; +(c) Respondent has resolved all disciplinary issues with the Board, and +has complied with all term s and conditions of a ny sanctions im posed by the Board (other than +reinstatement by the Commission); and +(d) Respondent acknowledges his responsibility, as long as +Respondent appears or practices before the Comm ission as an independent accountant, to +comply with all requirements of the Commission and the Board, including, but not limited to, all +requirements relating to registration, inspections, concurring partner reviews and quality con trol +standards. +3 + +C. The Commission will consider an application by Respondent to resume appearing +or practicing before the Comm ission as an accountant provided that his state CPA license is +current and he has resolved all other disciplinar y issues with the ap plicable state boards of +accountancy. However, if state licensure is dependent on reinstatement by the Comm ission, the +Commission will consid er an applic ation on it s other m erits. The Commission’s review m ay +include consideration of, in addition to the m atters referenced above, any other m atters relating +to Respondent’s character, integrity, professional conduct, or qualifications to appear or practice +before the Commission. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2668.txt b/raw/aaer/2007/AAER-2668.txt new file mode 100644 index 0000000000000000000000000000000000000000..4a6657c0e812ca606d25db6fe03f07e18ed9573d --- /dev/null +++ b/raw/aaer/2007/AAER-2668.txt @@ -0,0 +1,62 @@ +UNITED STATES OF AMERICA +before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Rel. No. 56242 / August 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Rel. No. 2668 / August 13, 2007 +Admin. Proc. File No. 3-12208 +In the Matter of +KEVIN HALL, CPA +and +ROSEMARY MEYER, CPA +ORDER GRANTING PARTIAL PROTECTIVE ORDER +On July 3, 2007, Kevin Hall, CPA, and Rosemary Meyer, CPA, submitted a Motion +seeking a protective order under Rule of Practice 322 1/ limiting disclosure of the motion, the +accompanying memorandum, certain attachments and affidavits with accompanying exhibits, as +well as all future briefing, filed in support of a motion for summary disposition filed by Hall and +Meyer. Under Rule 322, any party "may file a motion requesting a protective order to limit from +disclosure to other parties or to the public documents or testimony that contain confidential +information." 2/ "A motion for a protective order shall be granted only upon a finding that the +harm resulting from disclosure would outweigh the benefits of disclosure." 3/ The Commission's +staff has not opposed the Respondents' request for a protective order. +The Commission recognizes that the documents Respondents submitted contain sensitive +information. At this stage in the proceeding, we believe that the harm resulting from complete +disclosure outweighs the benefits. On June 29, 2007, the Commission issued an order denying +1/ 17 C.F.R. § 201.322. +2/ 17 C.F.R. § 201.322(a). +3/ 17 C.F.R. § 201.322(b). +2 +Respondents' motion for summary disposition. 4/ We do not anticipate any further filings with +respect to that matter. +We have determined that disclosure of certain information included in the documents +now filed with us may be necessary to the resolution of the issues before the Commission and the +Hearing Officer. +Accordingly, IT IS ORDERED that: +1. Except as otherwise provided in this Order, the documents Hall and Meyer provided +shall be disclosed only to the parties to this action, their counsel, the Hearing Officer, the +Commission, any staff advising the Commission in its deliberative processes with respect to this +proceeding, and in the event of an appeal of the Commission's determination, any staff acting for +the Commission in connection with that appeal. +2. All persons who receive access to these documents or the information contained in +these documents shall keep them confidential and, except as provided in this Order, shall not +divulge the documents or information to any person. +3. No person to whom the documents or information covered by this Order is disclosed +shall make any copies or otherwise use such documents or information, except in connection +with this proceeding or any appeal thereof. +4. The Office of the Secretary shall place the documents in sealed envelopes or other +sealed containers marked with the title of this action, identifying each document and marked +"CONFIDENTIAL." +5. The requirements of sealing and confidentiality shall not apply to any reference to the +existence of the documents or to citation of particular information contained therein in +testimony, oral argument, briefs, opinions, or in any other similar use directly connected with +this action or any appeal thereof. +4/ Kevin Hall, Securities Exchange Act Rel. No. 55987 (Jun2 29, 2007), __ SEC Docket +____. +3 +6. The Commission expressly reserves the authority to reach a different conclusion +regarding the confidentiality of the documents or information covered by this Order at any time +before it determines the issues raised in the proceeding. +By the Commission. +Nancy M. Morris + Secretary \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2669.pdf b/raw/aaer/2007/AAER-2669.pdf new file mode 100644 index 0000000000000000000000000000000000000000..7a58e5ab1a58d38b3473b165ba795fd7d962ff13 Binary files /dev/null and b/raw/aaer/2007/AAER-2669.pdf differ diff --git a/raw/aaer/2007/AAER-2670.txt b/raw/aaer/2007/AAER-2670.txt new file mode 100644 index 0000000000000000000000000000000000000000..fbdcbdd84384c2d10c44072c72b9b0b484b25d63 --- /dev/null +++ b/raw/aaer/2007/AAER-2670.txt @@ -0,0 +1,123 @@ + UNITED STATES OF AMERICA + before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56334 / August 29, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2670 / August 29, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12740 +: +: +In the Matter of : ORDER INSTITUTING ADMINISTRATIVE +: PROCEEDINGS PURSUANT TO RULE + ILO NA KAY COLLINS, +Respondent. +: +: +: +: +102(e) OF THE COMMISSION’S RULES OF +PRACTICE, MAKING FINDINGS, AND +IMPOSING REMEDIAL SANCTIONS +____________________________________ : +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate and in +the public interest that public administrative proceedings be, and hereby are, instituted against +Ilona Kay Collins (“Respondent” or “Collins”) pursuant to Rule 102(e)(3)(i) of the +Commission’s Rules of Practice.1 +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, except as to the Commission’s jurisdiction over her and the subject matter of +1 Rule 102(e)(3)(i) provides, in relevant part, that: +The Commission, with due regard to the public interest and without preliminary +hearing, may, by order, … suspend from appearing or practicing before it any . . . accountant . +. . who has been by name . . . permanently enjoined by any court of competent jurisdiction, by +reason of his or her misconduct in an action brought by the Commission, from violating or +aiding and abetting the violation of any provision of the Federal securities laws or of the rules +and regulations thereunder. +these proceedings, and the findings contained in paragraph III.3 below, which are admitted, +Respondent consents to the entry of this Order Instituting Administrative Proceedings Pursuant +to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions (“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds that: +1. Collins, age 44, was a certified public accountant licensed to practice in the State +of Iowa from February 1986 to June 2004 and licensed to practice in the State of Colorado from +June 1991 to May 2004. She was the Controller at Quovadx, Inc. (“Quovadx” or the +“Company”) from approximately November 2000 until April 2004. +2. Quovadx, a Delaware corporation headquartered in Englewood, Colorado, is a +software company that licenses software and sells related services to the healthcare industry. At +all relevant times, Quovadx’s common stock was registered with the Commission under +Section 12(g) of the Securities Exchange Act of 1934 (“Exchange Act”) and traded on the +NASDAQ. +3. On August 14, 2007, a final judgment was entered against Collins, permanently +enjoining her from violating, directly or indirectly, Section 17(a) of the Securities Act of 1933, +Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 +thereunder, and aiding and abetting any violation of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) +of the Exchange Act and Rules 12b-20, 13a-11, and 13a-13, thereunder, in the civil action +entitled Securities and Exchange Commission v. Ilona Kay Collins, Civil Action Number 07-cv- +01506-WDM-MEH, in the United States District Court for the District of Colorado. +4. The Commission’s Complaint alleged, among other things, that, in the third +quarter of 2003, Quovadx fraudulently recognized approximately $380,000 in software +licensing revenue from three purported sales to one of its customers. The Complaint also +alleged that Collins approved the recognition of the revenue from these transactions when she +knew or was reckless in not knowing that this customer was merely holding the software +licenses until they were resold to other customers the next quarter and there was no likelihood +that Quovadx would otherwise collect the revenues from those transactions. The Complaint +also alleged that in February 2004, Collins participated in a plan to channel payment from +another Quovadx customer to the customer holding the software licenses, which created the +false appearance that Quovadx had collected part of the revenue from these three transactions. +The Complaint also alleged that Collins also signed a management representation letter for +2003 sent to Quovadx’s outside auditor that failed to disclose the true facts and circumstances +of these three transactions. +2 + +IV. +In view of the foregoing, the Commission deems it appropriate and in the public interest +to impose the sanction agreed to in Respondent Collins’ Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +A. Collins is suspended from appearing or practicing before the Commission as an +accountant. +B. After five years from the date of this order, Collins may request that the +Commission consider her reinstatement by submitting an application (attention: Office of +the Chief Accountant) to resume appearing or practicing before the Commission as: +1. a preparer or reviewer, or a person responsible for the preparation or review, of +any public company’s financial statements that are filed with the Commission. Such an +application must satisfy the Commission that Respondent’s work in her practice before the +Commission will be reviewed either by the independent audit committee of the public +company for which she works or in some other acceptable manner, as long as she practices +before the Commission in this capacity; and/or +2. an independent accountant. Such an application must satisfy the +Commission that: +(a) Respondent, or the public accounting firm with which she is associated, +is registered with the Public Company Accounting Oversight Board (“Board”) in accordance +with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; +(b) Respondent, or the registered public accounting firm with which she is +associated, has been inspected by the Board and that inspection did not identify any criticisms +of or potential defects in the Respondent’s or the firm’s quality control system that would +indicate that the Respondent will not receive appropriate supervision; +(c) Respondent has resolved all disciplinary issues with the Board, and has +complied with all terms and conditions of any sanctions imposed by the Board (other than +reinstatement by the Commission); and +(d) Respondent acknowledges her responsibility, as long as Respondent +appears or practices before the Commission as an independent accountant, to comply with all +requirements of the Commission and the Board, including, but not limited to, all requirements +relating to registration, inspections, concurring partner reviews and quality control standards. +3 + +C. The Commission will consider an application by Respondent to resume +appearing or practicing before the Commission provided that her state CPA license is +current and she has resolved all other disciplinary issues with the applicable state boards +of accountancy. However, if state licensure is dependent on reinstatement by the +Commission, the Commission will consider an application on its other merits. The +Commission’s review may include consideration of, in addition to the matters +referenced above, any other matters relating to Respondent’s character, integrity, +professional conduct, or qualifications to appear or practice before the Commission. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2671.pdf b/raw/aaer/2007/AAER-2671.pdf new file mode 100644 index 0000000000000000000000000000000000000000..63b027afff61ae1757b5747579ffa4d2079d60a3 Binary files /dev/null and b/raw/aaer/2007/AAER-2671.pdf differ diff --git a/raw/aaer/2007/AAER-2671.txt b/raw/aaer/2007/AAER-2671.txt new file mode 100644 index 0000000000000000000000000000000000000000..ecf75a5ca54ecaf347546f924ff69783bd9eadfa --- /dev/null +++ b/raw/aaer/2007/AAER-2671.txt @@ -0,0 +1,111 @@ +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56340 / August 30, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2671 / August 30, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-11091 + +In the Matter of +David R. Decker, CPA + +: +: +: +: +: +: +ORDER GRANTING APPLICATION FOR +REINSTATEMENT TO APPEAR AND PRACTICE +BEFORE THE COMMISSION AS AN ACCOUNTANT +RESPONSIBLE FOR THE PREPARATION OR +REVIEW OF FINANCIAL STATEMENTS REQUIRED +TO BE FILED WITH THE COMMISSION + +On April 24, 2003, David R. Decker ("Decker") was denied the privilege of appearing or +practicing as an accountant before the Commission as a result of settled public administrative +proceedings instituted by the Commission against Decker pursuant to Rule 102(e) of the +Commission's Rules of Practice.1 Decker consented to the entry of the April 24, 2003 order +without admitting or denying the findings therein. This order is issued in response to Decker’s +application for reinstatement to appear and practice before the Commission as an accountant +responsible for the preparation or review of financial statements required to be filed with the +Commission. + Decker was alleged to have engaged in improper professional conduct in connection +with his work on BKR Metcalf Davis’ (“Metcalf Davis”) audit of Chancellor Corporation’s +(“Chancellor”) 1998 financial statements. Decker was responsible for conducting a review of the +audit workpapers as part of the Metcalf Davis’ quality control function. In addition, he also +performed audit steps to determine the appropriate date of consolidation of Chancellor’s results +with that of a subsidiary it acquired during 1998. In performing his work on the Chancellor +audit, Decker failed to exercise due professional care, maintain professional skepticism and +obtain sufficient evidential matter. In addition, Decker failed to design appropriate audit +procedures to determine whether or not Chancellor’s senior management had fraudulently +fabricated documents to support their accounting positions. Finally, Decker’s actions on the +audit caused Chancellor to file a materially false and misleading Form 10-KSB for 1998. + +1 See Accounting and Auditing Enforcement Release No. 1762 dated April 24, 2003. Decker was permitted, +pursuant to the order, to apply for reinstatement after three years upon making certain showings. + + +In his capacity as a preparer or reviewer, or as a person responsible for the preparation or +review, of financial statements of a public company to be filed with the Commission, Decker +attests that he will undertake to have his work reviewed by the independent audit committee of +any company for which he works, or in some other manner acceptable to the Commission, while +practicing before the Commission in this capacity. Decker is not, at this time, seeking to appear +or practice before the Commission as an independent accountant. If he should wish to resume +appearing and practicing before the Commission as an independent accountant, he will be +required to submit an application to the Commission showing that he has complied and will +comply with the terms of the original suspension order in this regard. Therefore, Decker’s +suspension from practice before the Commission as an independent accountant continues in +effect until the Commission determines that a sufficient showing has been made in this regard in +accordance with the terms of the original suspension order. + +Rule 102(e)(5) of the Commission’s Rules of Practice governs applications for +reinstatement, and provides that the Commission may reinstate the privilege to appear and +practice before the Commission “for good cause shown.”2 This “good cause” determination is +necessarily highly fact specific. + +On the basis of information supplied, representations made, and undertakings agreed to +by Decker, it appears that he has complied with the terms of the April 24, 2003 order denying +him the privilege of appearing or practicing before the Commission as an accountant, that no +information has come to the attention of the Commission relating to his character, integrity, +professional conduct or qualifications to practice before the Commission that would be a basis +for adverse action against him pursuant to Rule 102(e) of the Commission's Rules of Practice, +and that Decker, by undertaking to have his work reviewed by the independent audit committee +of any company for which he works, or in some other manner acceptable to the Commission, in +his practice before the Commission as a preparer or reviewer of financial statements required to +be filed with the Commission, has shown good cause for reinstatement. Therefore, it is +accordingly, + + + + + + + + + + +2 Rule 102(e)(5)(i) provides: + +“An application for reinstatement of a person permanently suspended or disqualified under paragraph (e)(1) or (e)(3) +of this section may be made at any time, and the applicant may, in the Commission’s discretion, be afforded a +hearing; however, the suspension or disqualification shall continue unless and until the applicant has been reinstated +by the Commission for good cause shown.” 17 C.F.R. § 201.102(e)(5)(i). + + 2 + +ORDERED pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice that +David R. Decker, CPA is hereby reinstated to appear and practice before the Commission as an +accountant responsible for the preparation or review of financial statements required to be filed +with the Commission. + +By the Commission. + + + +Nancy M. Morris +Secretary + 3 \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2672.pdf b/raw/aaer/2007/AAER-2672.pdf new file mode 100644 index 0000000000000000000000000000000000000000..08f9a6ebc6a3373056ec14020e0aea139fad564d Binary files /dev/null and b/raw/aaer/2007/AAER-2672.pdf differ diff --git a/raw/aaer/2007/AAER-2672.txt b/raw/aaer/2007/AAER-2672.txt new file mode 100644 index 0000000000000000000000000000000000000000..4fd5e9cc8d7b62ee056682b4daab5f72e52a29c4 --- /dev/null +++ b/raw/aaer/2007/AAER-2672.txt @@ -0,0 +1,137 @@ + + + +UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56341 / August 30, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2672 / August 30, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12741 + + +In the Matter of + +DAVID A. MILLER, CPA + +Respondent. + + + +ORDER INSTITUTING CEASE-AND-DESIST +PROCEEDINGS, MAKING FINDINGS, AND +IMPOSING A CEASE-AND-DESIST ORDER +PURSUANT TO SECTION 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 + +I. + + The Securities and Exchange Commission (“Co mmission”) deems it appropriate that cease- +and-desist proceedings be, and he reby are, instituted pursuant to Section 21C of the Securities +Exchange Act of 1934 (“Exchange Act”), against David A. Miller (“Miller” or “Respondent”). + +II. + + In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlement (the “Offer”) whic h 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, except as to the Commission’s jurisd iction over him and the subject matter of these +proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease- +and-Desist Proceedings, Making Findings, and Impo sing a Cease-and-Desist Order Pursuant to +Section 21C of the Securities Exchange Act of 1934 (“Order”), as set forth below. + + 2 + +III. + + On the basis of this Order and Res pondent’s Offer, the Commission finds1 that: + + 1. Miller, age 36, is a resident of Houston, Texas. During the relevant time +period, Miller was the Chief Accounting Officer of Integrated Electrical Services, Inc. (“IES”). +Among his duties, Miller was responsible for ensuring proper disclosure in IES's financial +statements. Miller is currently self employed. From January 2005 to April 2007, Miller was the +Chief Financial Officer of IES. Miller is a licensed CPA in the State of Texas. +2. IES is a Delaware corporation headqu artered in Houston, Texas. During the +relevant time period, IES was a leading provider of electrical contracting services in the United +States, whose shares were traded on the New York Stock Exchange and registered with the +Commission under Section 12(b) of the Exchange Act. + 3. For the quarter ended June 30, 2003, the fiscal year ended September 30, +2003, the quarter ended December 31, 2003, and the quarter ended March 31, 2004, IES failed to +properly disclose material loss contingencies related to its accounts receivable.2 The loss +contingencies surrounding IES’s accounts receivable comprised approximately $3 million in +revenues recorded on unsigned, disputed change orders from two electrical construction contracts +at an IES subsidiary, Pan American Electric, Inc. (“Pan Am”). + + 4. In February 2000, Pan Am contracted with Centex Rodgers, Inc. (“Centex”) +for work on construction of the Vanderbilt University Medical Center. By the end of 2002, IES +had recorded revenue of approximately $1.7 million based on work performed pursuant to +unsigned change orders. Centex later disputed payment on those change orders. After +negotiations, in June 2004 IES accepted $35,000 as payment in full and wrote-off the remaining +balance associated with the disputed account receivable, approximately $1.7 million, with the +agreement that Centex would continue to work with IES and its subsidiaries. + + 5. In June 2000, Pan Am contracted with Beers Skanska for work on +construction of the Bay Medical Center Surgery/ER unit in Panama City, Florida. By the end of +2002, IES had recorded revenue of approximately $1.3 million based on work performed pursuant +to unsigned change orders. Beers Skanska later disputed payment on those change orders. IES +wrote down the value of the change orders by 50% in September 2004. After negotiations and +litigation, IES recovered $810,000 on the project in January 2005. + + +1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding +on any other person or entity in this or any other proceeding. +2 On August 29, 2007, the Commission filed a Complaint in the Southern District of Texas, Houston Division, +entitled SEC v. IES, et al. (“Complaint”), alleging that IES and certain individuals violated the federal securities laws. +Simultaneous with the filing of the Complaint, without admitting or denying the allegations therein, IES agreed to the +entry of a permanent injunction for violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and +Rules 13a-1, 13a-13, and 12b-20 thereunder. Miller is not a party to, or named as a defendant in, the Complaint. + + 3 + 6. Prior to writing down the va lue on the Vanderbilt and Bay Medical +account receivables, IES failed to properly disclose the material loss contingencies that existed +on the two projects. Moreover, Miller failed to ensure IES's proper disclosure of these material +loss contingencies. + + 7. IES maintained an allowance for dou btful accounts, which IES disclosed in +its filings with the Commission. Among other things, IES’s disclosure states that the allowance +maintained is subject to “judgments and estimates,” and the specific amount of the allowance was +reflected quarterly and annually in IES’s financial statements. However, IES failed to properly +disclose material changes in estimates for its allowance for doubtful accounts reserve when it +lowered such reserve by nearly $2 million over the course of three consecutive quarters. + + 8. During the quarters ended Sept ember 30, 2003, December 31, 2003, and +March 31, 2004, IES changed the percentage basis for estimating the general portion of its +uncollectible accounts receivable from approximately 1% down to 0.25%. This resulted in IES +reducing its allowance account and thereby increasing its pre-tax income by $550,000 for the +quarter and fiscal year ended September 30, 2003, by $1.1 million for the quarter-ended December +31, 2003, and by $200,000 for the quarter-ended March 31, 2004. These reductions were material +to IES’s pre-tax income in each period. However, IES failed to properly disclose that it had +changed the percentage basis for its doubtful accounts. Moreover, Miller failed to ensure IES's +proper disclosure of the changes of the percentage basis for its doubtful accounts. + + 9. As a result of the conduct describe d above, Miller caused violations of +Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 12b-20 thereunder. + +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 Miller cease and desist from causing any +violations and any future violations of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13, +and 12b-20 thereunder. + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y + + \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2675.pdf b/raw/aaer/2007/AAER-2675.pdf new file mode 100644 index 0000000000000000000000000000000000000000..10ddd6c8bb193c51be7e70237a1639aa56bb881a Binary files /dev/null and b/raw/aaer/2007/AAER-2675.pdf differ diff --git a/raw/aaer/2007/AAER-2677.txt b/raw/aaer/2007/AAER-2677.txt new file mode 100644 index 0000000000000000000000000000000000000000..d631e7f47141cce7dfbd18cd386c54e147091140 --- /dev/null +++ b/raw/aaer/2007/AAER-2677.txt @@ -0,0 +1,77 @@ + + + + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56395 / September 12, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2677 / September 12, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12759 +______________________________ +: +In the Matter of : + : ORDER OF SUSPENSION PURSUANT +DAVID HEYMAN, CPA, : TO RULE 102(e)(2) OF THE +: COMMISSION’S RULES OF PRACTICE +Respondent. : +______________________________: + + I. + +The Securities and Exchange Commission deems it appropriate to issue an order of +forthwith suspension of David Heyman pursuant to Rule 102(e)(2) of the Commission=s Rules of +Practice [17 C.F.R. ' 200.102(e)(2)].1 + + II. + +The Commission finds that: + +1. Heyman is a certified public accountant licensed in the State of New York. + +2. On July 31, 2007, a judgment of conviction was entered against Heyman in +United States v. Zvi Rosenthal, et al., No. 07-CR-69-01 (JG), in the United States District Court +for the Eastern District of New York, finding him guilty of one count of conspiracy to commit +securities fraud. + + + +1 Rule 102(e)(2) provides in pertinent part: “Any ... person who has been convicted of a felony or a +misdemeanor involving moral turpitude shall be forthwith suspended from appearing or practicing before the +Commission.” + + + + +2 + +3. As a result of this conviction, Heyman was sentenced to fifteen months’ +imprisonment in a federal penitentiary, three years of supervised release following his +incarceration and four hundred hours of community service. + +III. + +In view of the foregoing, the Commission finds that Heyman has been convicted of a +felony within the meaning of Rule 102(e)(2) of the Commission’s Rules of Practice. + +Accordingly, it is ORDERED, that David Heyman is forthwith suspended from appearing +or practicing before the Commission pursuant to Rule 102(e)(2) of the Commission=s Rules of +Practice. + + +By the Commission. + + + +Nancy M. Morris +Secretary + + + + \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2678.txt b/raw/aaer/2007/AAER-2678.txt new file mode 100644 index 0000000000000000000000000000000000000000..6340d4bf70009ef12812eabc548afe954d340789 --- /dev/null +++ b/raw/aaer/2007/AAER-2678.txt @@ -0,0 +1,205 @@ + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + + CORRECTED +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56398 / September 13, 2007 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2678 / September 13, 2007 + +ADMINISTRATIVE PROCEEDING +File No. 3-12803 + + +In the Matter of + +Andrew M. Smith, CPA, + +Respondent. + + + +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND A CEASE- +AND-DESIST ORDER + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative and cease-and-desist proceedings be, and hereby are, instituted against Andrew M. +Smith, CPA (“Respondent” or “Smith”) pursuant to Sections 4C1 and 21C of the Securities +Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(iii) of the Commission’s Rules of +Practice.2 + +1 Section 4C provides, in relevant part, that: + +The Commission may censure any person, or deny, temporarily or permanently, +to any person the privilege of appearing or practicing before the Commission in +any way, if that person is found . . . to have willfully violate d, or willfully aided +and abetted the violation of, any provision of the securities laws or the rules and +regulations thereunder. + +2 Rule 102(e)(1)(iii) provides, in relevant part, that: + +The Commission may censure a person or deny, temporarily or permanently, the +privilege of appearing or pr acticing before it in any way to any person who is +found . . . to have willfully violated, or willfully aided and abetted the violation of +II. + + In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are +admitted, Respondent consents to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. + +III. + + On the basis of this Order and Res pondent’s Offer, the Commission finds3 that: + +A. RESPONDENT + + Andrew M. Smith, CPA, age 58, of Los Angeles, California, is a certified public +accountant licensed in the state of California since 1972, doing business as a sole proprietorship. +Smith audited Safe Travel Care, Inc.’s, Meridian Holdings, Inc.’s, and InterCare DX, Inc.’s +financial statements for each company’s respective 2003 fiscal year ended December 31, 2003. + +B. FACTS + +1. Safe Travel Care, Inc. (“Safe Travel”) is a Nevada corporation based in Cardiff, +California. During the relevant period, Safe Travel’s common stock traded on the OTC Bulletin +Board. Its common stock is registered with the Commission pursuant to Section 12(g) of the +Exchange Act. Safe Travel reported no revenue and total assets of $146,000 for fiscal year ended +December 31, 2003. + + 2. Meridian Holdings, Inc. (“Meridian”) is a Colorado corporation based in Culver +City, California. Meridian’s common stock trades on the Pink Sheets under the symbol +MRDH.PK and is registered with the Commission pursuant to Section 12(g) of the Exchange Act. +The company reported revenues of approximately $2.6 million and total assets of $5.3 million for +fiscal year ended December 31, 2003. + + +any provision of the Federal securities laws or the rules and regulations +thereunder. + +3 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not +binding on any other person or entity in this or any other proceeding. + + 2 + 3. InterCare DX, Inc. (“InterCare”) is a Ca lifornia corporation based in Los Angeles, +California. InterCare’s common stock trades on the OTC Bulletin Board under the symbol +ICCO.OB and is registered with the Commission pursuant to Section 12(g) of the Exchange Act. +The company reported no revenue and total assets of $1.5 million for fiscal year ended December +31, 2003. + + 4. Safe Travel, Meridian, and InterCare, eac h, has at all relevant times been an issuer +as defined by the Sarbanes-Oxley Act of 2002 (the “Act”). + + 5. Smith audited Safe Travel’s 2003 financ ial statements included in Safe Travel’s +annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission on May 6, 2004. +As part of that audit, Smith prepared and issued an audit report dated February 20, 2004 (the “Safe +Travel audit report”), which the company included in its 2003 Form 10-KSB. Smith audited +Meridian’s 2003 financial statements included in Meridian’s annual report for fiscal year 2003 on +Form 10-KSB, filed with the Commission on April 1, 2004. As part of that audit, Smith prepared +and issued an audit report dated March 31, 2004 (the “Meridian audit report”), which the company +included in its 2003 Form 10-KSB. Smith audited InterCare’s 2003 financial statements included +in InterCare’s annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission on +March 31, 2004. As part of that audit, Smith prepared and issued an audit report, also dated March +31, 2004 (the “InterCare audit report”), which the company included in its 2003 Form 10-KSB. +Safe Travel, Meridian, and InterCare, collectively, paid Smith $9,500 for the audit work.4 + + 6. At the time Smith prepared and issued the Safe Travel, Meridian, and InterCare +audit reports, he was not registered with the Public Company Accounting Oversight Board (the +“Board”), as required by Section 102(a) of the Act. + +C. VIOLATIONS + +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”5 + +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.6 + +4 During the course of the Commission’s investigation, Smith voluntarily reimbursed Safe +Travel, Meridian, and InterCare the $9,500 in audit fees through the provision of non-audit or +other services to the issuers. In view of Smith’s reimbursement, the Commission is not ordering +disgorgement in this matter. + +5 A violation of the Act or any rule that the Board issues under the Act is treated for all +purposes in the same manner as a violation of the Exchange Act, including with respect to +penalties. Sarbanes-Oxley Act of 2002, 15 U.S.C.A. § 7202(b)(1) (West 2002). + +6 Section 102(a) became effective “[b]eginning 180 days after the date of the determination +of the Commission under Section 101(d)” of the Act that the Board was prepared to undertake its +statutory responsibilities. The Commission made the required determination on April 25, 2003. + 3 + +3. Based on the conduct described above, Respondent willfully7 violated Section +102(a) of the Act. + +D. FINDINGS + + Based on the foregoing, the Commission finds that Smith willfu lly violated Section 102(a) +of the Sarbanes-Oxley Act of 2002. + +E. UNDERTAKING + + Respondent undertakes not to request, demand, or accept, directly or indirectly, any +compensation from Safe Travel, Meridian, and InterCare in connection with the audit work +associated with the audit reports for these companies. In determining whether to accept the Offer, +the Commission has considered this undertaking. + +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 ORDE RED, effective immediately, that: + +A. Smith shall cease and desi st from committing or causing any violations and any +future violations of Section 102(a) of the Act. + +B. Smith is censured. + +C. Smith may practice before the Commission as an independent accountant provided +that: + +1. The public accounting firm with which he is associated is registered with +the Board in accordance with the Act, and such registration continues to be effective; and + + + + + + +See Order Regarding Section 101(d) of the Sarbanes-Oxley Act of 2002, Securities Act Release +No. 8223, Exchange Act Release No. 47746, 2003 WL 1956164 (Apr. 25, 2003). + +7 “Willfully” as used in this Offer means intentionally committing the act that constitutes +the violation. There is no requirement that the actor also be aware that he is violating a rule or +statute. See Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 +(2d Cir. 1965). + 4 +2. He has submitted to the Commission st aff (attention: Office of the Chief +Accountant) the Board’s letter notifying the public accounting firm with which he is associated that +its registration application has been approved. + + By the Commission. + + + + N a n c y M . M o r r i s + S e c r e t a r y + 5 \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2679.txt b/raw/aaer/2007/AAER-2679.txt new file mode 100644 index 0000000000000000000000000000000000000000..f88b9d62f81067e3253a5e550cdfb66a7d644370 --- /dev/null +++ b/raw/aaer/2007/AAER-2679.txt @@ -0,0 +1,194 @@ + UNITED STATES OF AMERICA + B efore the + SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56399 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2679 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12760 +In the Matter of +Beckman Kirkland & Whitney, +James M. Kirkland, CPA, and +Robert J. Whitney, CPA, +Respondents. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND 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 against Beckman Kirkland & +Whitney, James M. Kirkland, CPA, and Robert J. Whitney, CPA (collectively “Respondents”) +pursuant to Section 21C of the Securities Exchange Act of 1934 (“Exchange Act”), and that +public administrative proceedings be, and herby are, instituted against Beckman Kirkland & +Whitney pursuant to Section 4C1 of the Exchange Act and Rule 102(e)(1)(iii) of the +Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, tem porarily or perm anently, +to any person the privilege of appearing or practicing before the Commission in +any way, if that person is found . . . to ha ve willfully violate d, or willfully aided +and abetted the violation of, any provision of the securities laws or the rules and +regulations thereunder. +1 +Commission’s Rules of Practice.2 + II. +In anticipation of the institution of these proceedings, Respondents have submitted an +Offer of Settlement (“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, except as to the Commission’s jurisdiction over them and the subject matter of +these proceedings, which are admitted, Respondents consent to the entry of this Order Instituting +Public Administrative and Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the +Securities Exchange Act of 1934 and Rule 102(e) of the Commission’s Rules of Practice, +Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as +set forth below. +III. +On the basis of this Order and Respondents’ Offer, the Commission finds3 that: +A. RESPONDENTS +1. Beckman Kirkland & Whitney (the “Firm”) is a California partnership and a +public accounting firm headquartered in Agoura Hills, California. The Firm audited The +Flamemaster Corporation’s financial statements for the company’s 2003 fiscal year ended +September 30, 2003. The firm resigned as The Flamemaster Corporation’s independent auditor +on May 5, 2004. +2. James M. Kirkland, CPA (“Kirkland”), age 46, is a certified public accountant +licensed in the state of California since 1993. Kirkland was the engagement partner in +connection with the Firm’s audit of The Flamemaster Corporation’s financial statements for the +company’s 2003 fiscal year ended September 30, 2003. +3. Robert J. Whitney, CPA (“Whitney”), age 45, is a certified public accountant +licensed in the state of California since 1990. Whitney was the reviewing partner in connection +with the Firm’s audit of The Flamemaster Corporation’s financial statements for the company’s +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The Commission may censure a person or deny, temporarily or perm anently, the +privilege of appearing or pr acticing before it in any way to any person who is +found . . . to have willfully violated, or willfully aided and abetted the violation of +any provision of the Federal securities laws or the rules and regulations +thereunder. +3 The findings herein are made pursuant to Respondents’ Offer of Settlement and are not +binding on any other person or entity in this or any other proceeding. +2 + +2003 fiscal year ended September 30, 2003. +B. FACTS +1. The Flamemaster Corporation (“Flamemaster”) is a corporation with its +headquarters in Sun Valley, California. Flamemaster’s common stock traded on the pink sheets +and was registered with the Commission pursuant to Section 12(g) of the Exchange Act until +May 26, 2005, when the company filed a Form 15 with the Commission to terminate the +registration of its stock. For its fiscal year ended September 30, 2003, Flamemaster reported +revenues of $5.1 million and total assets of $7.4 million. +2. Flamemaster has at all relevant times been an issuer as defined by the Sarbanes- +Oxley Act of 2002 (the “Act”). +3. The Firm audited Flamemaster’s 2003 financial statements included in +Flamemaster’s annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission +on December 19, 2003. As part of that audit, the Firm prepared and issued an audit report dated +December 8, 2003 (the “Flamemaster audit report”), which the company included in its 2003 +Form 10-KSB. Flamemaster paid the Firm $25,800 for the audit work.4 +4. At the time the Firm issued the Flamemaster audit report, it was not registered +with the Public Company Accounting Oversight Board (the “Board”), as required by Section +102(a) of the Act. +5. Kirkland was the engagement partner on the Firm’s audit of Flamemaster’s 2003 +financial statements, and Whitney was the reviewing partner on the audit. Kirkland and Whitney +participated in the preparation and issuance of the Flamemaster audit report. +6. By order dated June 8, 2005, the Board accepted an offer of settlement made by +the Firm and disapproved an application for registration it had submitted based in part on the +Firm’s violation of Section 102(a) of the Act in issuing the Flamemaster audit report.5 The order +effectively prevented the Firm from becoming registered with the Board until after October 1, +2005.6 Kirkland and Whitney have only worked as accountants through the Firm since before +4 During the course of the Commission’s investigation, the Firm voluntarily reimbursed +Flamemaster $25,800 in audit fees. In view of the Firm’s reimbursement, the Commission is not +ordering disgorgement in this matter. +5 PCAOB Release No. 2005-012 (June 8, 2005). The order also found that the Firm’s +issuance of the Flamemaster audit report violated Board Rule 2100, which implemented Section +102(a) of the Act. Id. +6 The order states that with respect to any new registration application the Firm submits +after October 1, 2005, the Board will not issue a notice of hearing to determine whether to +approve or disapprove such application based solely on the violations subject to the Board’s +order. Id. The Board noted in its order that it had received a registration application from the +Firm on December 30, 2003. The Board issued a Notice of Hearing on that application dated +3 + +the Board’s order and have not otherwise been associated with a public accounting firm +registered with the Board. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”7 +2. The provisions of Section 102(a) of the Act became effective on October 22, +2003.8 +3. Based on the conduct described above, the Firm willfully9 violated Section 102(a) +of the Act. +4. Based on the conduct described above, Kirkland and Whitney caused the Firm’s +violation of Section 102(a) of the Act. +D. FINDINGS +Based on the foregoing, the Commission finds that the Firm willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002, and that Kirkland and Whitney caused the Firm’s +violation of Section 102(a) of the Act. +February 2, 2004. In response, the Firm requested a hearing but then, withdrew its application +before a determination by the Board. Id. +7 A violation of the Act or any rule that the Board issues under the Act is treated for all +purposes in the same manner as a violation of the Exchange Act, including with respect to +penalties. Sarbanes-Oxley Act of 2002, 15 U.S.C.A. § 7202(b)(1) (West 2002). +8 Section 102(a) became effective “[b]eginning 180 days after the date of the determination +of the Commission under Section 101(d)” of the Act that the Board was prepared to undertake its +statutory responsibilities. The Commission made the required determination on April 25, 2003. +See Order Regarding Section 101(d) of the Sarbanes-Oxley Act of 2002, Securities Act Release +No. 8223, Exchange Act Release No. 47746, 2003 WL 1956164 (Apr. 25, 2003). +9 “Willfully” as used in this Offer means intentionally committing the act that constitutes +the violation. There is no requirement that the actor also be aware that he is violating a rule or +statute. See Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 +(2d Cir. 1965). +4 + +E. UNDERTAKING +Respondents undertake not to request, demand, or accept, directly or indirectly, any +compensation from Flamemaster in connection with the audit work associated with the Flame- +master report. In determining whether to accept the Offer, the Commission has considered this +undertaking. +IV. + In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +1. Beckman Kirkland & Whitney +A. The Firm shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. +B. The Firm is censured. +C. The Firm may practice before the Commission as an independent accountant +provided that: +1. It is registered with the Board in accordance with the Act, and such +registration continues to be effective; and +2. It has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the Firm that its registration application has been +approved. +2. James M. Kirkland, CPA +A. Kirkland shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. +B. Kirkland may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is +registered with the Board in accordance with the Act, and such registration continues to be +effective; and +2. He has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the public accounting firm with which he is +associated that its registration application has been approved. +5 + +3. Robert J. Whitney, CPA +A. Whitney shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. +B. Whitney may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is +registered with the Board in accordance with the Act, and such registration continues to be +effective; and +2. He has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the public accounting firm with which he is +associated that its registration application has been approved. +By the Commission. + N ancy M. Morris + S ecretary +6 diff --git a/raw/aaer/2007/AAER-2682.txt b/raw/aaer/2007/AAER-2682.txt new file mode 100644 index 0000000000000000000000000000000000000000..291ff28ed5036e94bd7bda0278405c05e372bdf7 --- /dev/null +++ b/raw/aaer/2007/AAER-2682.txt @@ -0,0 +1,140 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56402 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2682 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 12763 +In the Matter of +Bray & Associates CPA’s LLC +and Arnold David Bray, CPA, +Respondents. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND 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 against Bray & Associates CPA’s LLC and +Arnold David Bray, CPA (collectively “Respondents”) pursuant to Section 21C of the Securities +Exchange Act of 1934 (“Exchange Act”), and that public administrative proceedings be, and +hereby are, instituted against Bray & Associates CPA’s LLC pursuant to Section 4C1 of the +Exchange Act and Rule 102(e)(1)(iii) of the Commission’s Rules of Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondents have submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are +admitted, Respondents consent to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondents’ Offer, the Commission finds3 that: +A. RESPONDENTS +1. Bray & Associates CPA’s LLC (the “Firm”) is an Indiana limited liability +company headquartered in Greencastle, Indiana. The Firm audited Alanar Real Estate Investment +Trust Series 1 Corporation’s (“Alanar”) balance sheet as of May 19, 2004. +2. Arnold David Bray, CPA, (“Bray”), 59, of Greencastle, Indiana, is a certified +public accountant licensed in the state of Indiana since 1977. Bray was the engagement partner in +connection with the Firm’s audit of Alanar’s balance sheet as of May 19, 2004. +B. FACTS +1. Alanar is an Indiana corporation with its headquarters in Sullivan, Indiana. As of +May 19, 2004, Alanar reported total assets of $200,000. +2. Alanar has at all relevant times been an issuer as defined by the Sarbanes-Oxley +Act of 2002 (the “Act”). +3. The Firm audited Alanar’s balance sheet as of May 19, 2004, which was included +in Alanar’s registration statement on Form S-11/A, filed with the Commission on September 15, +2004. As part of that audit, the Firm prepared and issued an audit report dated May 20, 2004 (the +“Alanar audit report”), which the company included in its Form S-11/A. Alanar paid the Firm +$800 for the audit work.4 +3 The findings herein are made pursuant to Respondents’ Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +4 During the course of the Commission’s investigation, the Firm voluntarily reimbursed Alanar the $800 in +audit fees. In view of the Firm’s reimbursement, the Commission is not ordering disgorgement in this matter. +2 + +4. At the time the Firm issued the Alanar audit report, it was not registered with the +Public Company Accounting Oversight Board (the “Board”), as required by Section 102(a) of the +Act. +5. Bray was the engagement partner on the Firm’s audit of Alanar’s balance sheet as +of May 19, 2004. Bray participated in the preparation and issuance of the Alanar audit report. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”5 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.6 +3. Based on the conduct described above, the Firm willfully7 violated Section 102(a) +of the Act. +4. Based on the conduct described above, Bray caused the Firm’s violation of Section +102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that the Firm willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002, and that Bray caused the Firm’s violation of Section +102(a) of the Act. +E. UNDERTAKING +Respondents have undertaken not to request, demand, or accept, directly or indirectly, any +compensation from Alanar in connection with the audit work associated with the Alanar audit +report. In determining whether to accept the Offer, the Commission has considered this +undertaking. +5 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +6 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +7 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +IV. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +1. Bray & Associates CPA’s LLC +A. The Firm shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. + B . The Firm is censured. +C. The Firm may practice before the Commission as an independent accountant +provided that: +1. It is registered with the Board in accordance with the Act, and such +registration continues to be effective; and +2. It has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the Firm that its registration application has been +approved. +2. Arnold David Bray, CPA +A. Bray shall cease and desist from committing or causing any violations and +any future violations of Section 102(a) of the Act. +B. Bray may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is registered +with the Board in accordance with the Act, and such registration continues to be effective; and +2. He has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the public accounting firm with which he is +associated that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2683.txt b/raw/aaer/2007/AAER-2683.txt new file mode 100644 index 0000000000000000000000000000000000000000..e22ee5477d818d57b2c473774af438263227e057 --- /dev/null +++ b/raw/aaer/2007/AAER-2683.txt @@ -0,0 +1,124 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56403 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2683 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12764 +In the Matter of +Bruce Redlin, CPA, +Respondent. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND A CEASE- +AND-DESIST ORDER +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative and cease-and-desist proceedings be, and hereby are, instituted against Bruce +Redlin, CPA (“Respondent” or “Redlin”) pursuant to Sections 4C1 and 21C of the Securities +Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(iii) of the Commission’s Rules of +Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are +admitted, Respondent consents to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds3 that: +A. RESPONDENT +Bruce Redlin, CPA, 55, of New Berlin, Wisconsin is a certified public accountant licensed +in the state of Wisconsin since 1975 and doing business as a sole proprietorship. Redlin audited +Commerce Group Corp.’s (“Commerce Group”) financial statements for the company’s 2003 +fiscal year ended March 31, 2004. +B. FACTS +1. Commerce Group is a Wisconsin corporation with its headquarters in Milwaukee, +Wisconsin. Commerce Group’s common stock is registered with the Commission pursuant to +Section 12(b) of the Exchange Act and trades on the OTC Bulletin Board under the symbol +CGCO. For its fiscal year ended March 31, 2004, Commerce Group reported no revenues and +total assets of $35.4 million. +2. Commerce Group has at all relevant times been an issuer as defined by the +Sarbanes-Oxley Act of 2002 (the “Act”). +3. Redlin audited Commerce Group’s 2003 financial statements included in +Commerce Group’s annual report for fiscal year 2003 on Form 10-K, filed with the Commission +on May 27, 2004. As part of that audit, Redlin prepared and issued an audit report dated May 10, +2004 (the “Commerce Group audit report”), which the company included in its 2003 Form 10-K. +Commerce Group paid Redlin $6,500 for the audit work.4 +3 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +4 During the course of the Commission’s investigation, Redlin voluntarily reimbursed Commerce Group the +$6,500 in audit fees. In view of Redlin’s reimbursement, the Commission is not ordering disgorgement in this +matter. +2 + +4. At the time Redlin prepared and issued the Commerce Group audit report, he was +not registered with the Public Company Accounting Oversight Board (the “Board”), as required by +Section 102(a) of the Act. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”5 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.6 +3. Based on the conduct described above, Respondent willfully7 violated Section +102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that Redlin willfully violated Section 102(a) +of the Sarbanes-Oxley Act of 2002. +E. UNDERTAKING +Respondent has undertaken not to request, demand, or accept, directly or indirectly, any +compensation from Commerce Group in connection with the audit work associated with the +Commerce Group audit report. In determining whether to accept the Offer, the Commission has +considered this undertaking. +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, effective immediately, that: +5 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +6 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +7 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +A. Redlin shall cease and desist from committing or causing any violations and any +future violations of Section 102(a) of the Act. +B. Redlin is censured. +C. Redlin may practice before the Commission as an independent accountant provided +that: +1. The public accounting firm with which he is associated is registered with +the Board in accordance with the Act, and such registration continues to be effective; and +2. He has submitted to the Commission staff (attention: Office of the Chief +Accountant) the Board’s letter notifying the public accounting firm with which he is associated +that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2684.txt b/raw/aaer/2007/AAER-2684.txt new file mode 100644 index 0000000000000000000000000000000000000000..dd25668fb9965f1aa153123ffb3f87fdd4c639e1 --- /dev/null +++ b/raw/aaer/2007/AAER-2684.txt @@ -0,0 +1,159 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56404 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2684 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 12765 +In the Matter of +Bujan & Associates, Ltd and +Frank Bujan, CPA, +Respondents. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND 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 against Bujan & Associates, Ltd and Frank +Bujan, CPA (collectively “Respondents”) pursuant to Section 21C of the Securities Exchange Act +of 1934 (“Exchange Act”), and that public administrative proceedings be, and hereby are, instituted +against Bujan & Associates, Ltd pursuant to Section 4C1 of the Exchange Act and Rule +102(e)(1)(iii) of the Commission’s Rules of Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondents have submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are +admitted, Respondents consent to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondents’ Offer, the Commission finds3 that: +A. RESPONDENTS +1. Bujan & Associates, Ltd (the “Firm”) is an Illinois corporation and a public +accounting firm headquartered in Homer Glen, Illinois. The Firm audited eNucleus, Inc.’s +(“eNucleus”) financial statements for the company’s 2003 fiscal year ended December 31, 2003. +eNucleus dismissed the Firm as its independent auditor on December 15, 2004. +2. Frank Bujan, CPA, (“Bujan”) of Homer Glen, Illinois is a certified public +accountant licensed in the state of Illinois since 1992. Bujan was the engagement partner in +connection with the Firm’s audit of eNucleus’s financial statements for the company’s 2003 fiscal +year ended December 31, 2003. +B. FACTS +1. eNucleus is a Delaware corporation with its headquarters in Rolling Meadows, +Illinois. eNucleus’s common stock is registered with the Commission pursuant to Section 12(g) of +the Exchange Act and trades on the OTC Bulletin Board under the symbol ENUI. For its fiscal +year ended December 31, 2003, eNucleus reported revenues of $578,000 and total assets of $1.8 +million. +2. eNucleus has at all relevant times been an issuer as defined by the Sarbanes-Oxley +Act of 2002 (the “Act”). +3. The Firm audited eNucleus’s 2003 financial statements included in eNucleus’s +annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission on April 14, 2004. +As part of that audit, the Firm prepared and issued an audit report dated April 12, 2004 (the +“eNucleus audit report”), which the company included in its 2003 Form 10-KSB. eNucleus paid +The findings herein are made pursuant to Respondents’ Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +2 +3 +the Firm $8,500 for the audit work.4 +4. At the time the Firm issued the eNucleus audit report, it was not registered with the +Public Company Accounting Oversight Board (the “Board”), as required by Section 102(a) of the +Act. +5. Bujan was the engagement partner on the Firm’s audit of eNucleus’s 2003 financial +statements. Bujan participated in the preparation and issuance of the eNucleus audit report. +6. By order dated July 28, 2005, the Board disapproved an application for registration +submitted by the Firm based in part on the Firm’s violation of Section 102(a) of the Act in issuing +the eNucleus audit report.5 The order effectively prevented the Firm from becoming registered +with the Board until after April 1, 2006, approximately one year from the date the Board issued a +notice of hearing on the Firm’s application.6 Bujan has only worked as an accountant through the +Firm since before the Board’s order and has not otherwise been associated with a public +accounting firm registered with the Board. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”7 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.8 +4 During the course of the Commission’s investigation, the Firm voluntarily reimbursed eNucleus the $8,500 +in audit fees. In view of the Firm’s reimbursement, the Commission is not ordering disgorgement in this matter. +5 PCAOB Release No. 2005-016 (July 28, 2005). The order also found that the Firm’s issuance of the eNucleus +audit report violated Board Rule 2100, which implemented Section 102(a) of the Act. Id. +6 The order states that with respect to any new registration application the Firm submits after April 1, 2006, +the Board will not issue a notice of hearing to determine whether to approve or disapprove such application based +solely on the violations subject to the Board’s order. Id. +7 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +8 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +3 + +3. Based on the conduct described above, the Firm willfully9 violated Section 102(a) +of the Act. +4. Based on the conduct described above, Bujan caused the Firm’s violation of +Section 102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that the Firm willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002, and that Bujan caused the Firm’s violation of Section +102(a) of the Act. +E. UNDERTAKING +Respondents have undertaken not to request, demand, or accept, directly or indirectly, any +compensation from eNucleus in connection with the audit work associated with the eNucleus audit +report. In determining whether to accept the Offer, the Commission has considered this +undertaking. +IV. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +1. Bujan & Associates, Ltd +A. The Firm shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. +B. The Firm is censured. +C. The Firm may practice before the Commission as an independent accountant +provided that: +1. It is registered with the Board in accordance with the Act, and such +registration continues to be effective; and +2. It has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the Firm that its registration application has been +approved. +“Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +4 +9 +2. Frank Bujan, CPA +A. Bujan shall cease and desist from committing or causing any violations and +any future violations of Section 102(a) of the Act. +B. Bujan may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is registered +with the Board in accordance with the Act, and such registration continues to be effective; and +2. He has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the public accounting firm with which he is +associated that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +5 diff --git a/raw/aaer/2007/AAER-2685.txt b/raw/aaer/2007/AAER-2685.txt new file mode 100644 index 0000000000000000000000000000000000000000..b2f339f2692e00479b9c143dd2c2af1dd928470e --- /dev/null +++ b/raw/aaer/2007/AAER-2685.txt @@ -0,0 +1,137 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56405 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2685 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12766 +In the Matter of +Charles J. Birnberg, CPA, +Respondent. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND A CEASE- +AND-DESIST ORDER +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative and cease-and-desist proceedings be, and hereby are, instituted against Charles J. +Birnberg, CPA (“Respondent” or “Birnberg”) pursuant to Sections 4C1 and 21C of the Securities +Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(iii) of the Commission’s Rules of +Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are +admitted, Respondent consents to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds3 that: +A. RESPONDENT +Charles J. Birnberg, CPA, 65, of West Paterson, New Jersey, is a certified public +accountant licensed in the state of New Jersey since 1981 and doing business as a sole +proprietorship. Birnberg audited Renewal Fuels, Inc.’s (“Renewal Fuels”) financial statements for +the company’s 2003 fiscal year ended December 31, 2003. Renewal Fuels dismissed Birnberg as +its independent auditor on October 1, 2004. +B. FACTS +1. Renewal Fuels (known as Tech Laboratories, Inc. during the relevant period) is a +Delaware corporation with its headquarters in Milwaukee, Wisconsin. Renewal Fuels’s common +stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act and trades +on the OTC Bulletin Board under the symbol RNWF. For its fiscal year ended December 31, +2003, Renewal Fuels reported revenues of $236,000 and total assets of $1.75 million. +2. Renewal Fuels has at all relevant times been an issuer as defined by the Sarbanes- +Oxley Act of 2002 (the “Act”). +3. Birnberg audited Renewal Fuels’s 2003 financial statements included in Renewal +Fuels’s annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission on April +14, 2004. As part of that audit, Birnberg prepared and issued an audit report dated April 14, 2004 +(the “Renewal Fuels audit report”), which the company included in its 2003 Form 10-KSB. +Renewal Fuels paid Birnberg $10,000 for the audit work.4 +3 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +4 During the course of the Commission’s investigation, Birnberg voluntarily reimbursed Renewal Fuels +$4,200 of the $10,000 in audit fees through a combination of repayment and the provision of non-audit or other +services to Renewal Fuels. In view of Birnberg’s $4,200 reimbursement, the Commission is only ordering +2 + +4. At the time Birnberg prepared and issued the Renewal Fuels audit report, he was +not registered with the Public Company Accounting Oversight Board (the “Board”), as required by +Section 102(a) of the Act. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”5 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.6 +3. Based on the conduct described above, Respondent willfully7 violated Section +102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that Birnberg willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002. +E. UNDERTAKING +Respondent has undertaken not to request, demand, or accept, directly or indirectly, any +compensation from Renewal Fuels in connection with the audit work associated with the Renewal +Fuels audit report. In determining whether to accept the Offer, the Commission has considered this +undertaking. +disgorgement in the amount of $5,800, plus prejudgment interest, to cover the balance of audit fees Birnberg +received. +5 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +6 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +7 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +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, effective immediately, that: +A. Birnberg shall cease and desist from committing or causing any violations and any +future violations of Section 102(a) of the Act. +B. Birnberg is censured. +C. Birnberg may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is registered with +the Board in accordance with the Act, and such registration continues to be effective; and +2. He has submitted to the Commission staff (attention: Office of the Chief +Accountant) the Board’s letter notifying the public accounting firm with which he is associated that +its registration application has been approved. +D. IT IS FURTHER ORDERED that Respondent shall, within 10 days of the entry of +this Order, pay disgorgement of $5,800 and prejudgment interest of $521.38 to the Securities and +Exchange Commission. Such payment shall be: (A) made by United States postal money order, +certified check, bank cashier’s check, or bank money order; (B) made payable to the Securities and +Exchange Commission; (C) hand-delivered or mailed to the Office of Financial Management, +Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, +Alexandria, VA 22312; and (D) submitted under cover letter that identifies Charles J. Birnberg as a +Respondent in these proceedings, the file number of these proceedings, a copy of which cover +letter and money order or check shall be sent to Christopher Conte, Division of Enforcement, +Securities and Exchange Commission, 100 F Street N.E., Washington, D.C. 20549. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2686.txt b/raw/aaer/2007/AAER-2686.txt new file mode 100644 index 0000000000000000000000000000000000000000..71751e83dc509dc60f52da11204e08944ca89f93 --- /dev/null +++ b/raw/aaer/2007/AAER-2686.txt @@ -0,0 +1,146 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56406 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2686 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12767 +In the Matter of +Charles R. Hunt, CPA, PA and +Charles R. Hunt, CPA, +Respondents. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND 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 against Charles R. Hunt, CPA, PA and +Charles R. Hunt, CPA, (collectively “Respondents”) pursuant to Section 21C of the Securities +Exchange Act of 1934 (“Exchange Act”), and that public administrative proceedings be, and +hereby are, instituted against Charles R. Hunt, CPA, PA pursuant to Section 4C1 of the Exchange +Act and Rule 102(e)(1)(iii) of the Commission’s Rules of Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondents have submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are +admitted, Respondents consent to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondents’ Offer, the Commission finds3 that: +A. RESPONDENTS +1. Charles R. Hunt, CPA, PA (the “Firm”) is a Florida professional association +headquartered in Edgewater, Florida. The Firm audited E’ Prime Aerospace Corporation’s (“E’ +Prime”) financial statements for the company’s 2003 fiscal year ended September 30, 2003. E’ +Prime dismissed the Firm as its independent auditor on May 27, 2005. +2. Charles R. Hunt, CPA, (“Hunt”), 64, of Titusville, Florida, is a certified public +accountant licensed in the state of Florida since 1989. Hunt was the engagement partner in +connection with the Firm’s audit of E’ Prime’s financial statements for the company’s 2003 fiscal +year ended September 30, 2003. +B. FACTS +1. E’ Prime is a Colorado corporation with its headquarters in Titusville, Florida. E’ +Prime’s common stock is registered with the Commission pursuant to Section 12(g) of the +Exchange Act and trades on the Pink Sheets under the symbol EPEO. For its fiscal year ended +September 30, 2003, E’ Prime reported no revenues and total assets of $234,848. +2. E’ Prime has at all relevant times been an issuer as defined by the Sarbanes-Oxley +Act of 2002 (the “Act”). +3. The Firm audited E’ Prime’s 2003 financial statements included in E’ Prime’s +annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission on December 23, +2003. As part of that audit, the Firm prepared and issued an audit report dated December 18, 2003 +The findings herein are made pursuant to Respondents’ Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +2 +3 +(the “E’ Prime audit report”), which the company included in its 2003 Form 10-KSB. +E’ Prime paid the Firm $3,500 for the audit work.4 +4. At the time the Firm issued the E’ Prime audit report, it was not registered with the +Public Company Accounting Oversight Board (the “Board”), as required by Section 102(a) of the +Act. +5. Hunt was the engagement partner on the Firm’s audit of E’ Prime’s 2003 financial +statements. Hunt participated in the preparation and issuance of the E’ Prime audit report. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”5 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.6 +3. Based on the conduct described above, the Firm willfully7 violated Section 102(a) +of the Act. +4. Based on the conduct described above, Hunt caused the Firm’s violation of Section +102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that the Firm willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002, and that Hunt caused the Firm’s violation of Section +102(a) of the Act. +4 During the course of the Commission’s investigation, the Firm voluntarily reimbursed E’ Prime the $3,500 +in audit fees. In view of the Firm’s reimbursement, the Commission is not ordering disgorgement in this matter. +5 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +6 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +7 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +E. UNDERTAKING +Respondents have undertaken not to request, demand, or accept, directly or indirectly, any +compensation from E’ Prime in connection with the audit work associated with the E’ Prime audit +report. In determining whether to accept the Offer, the Commission has considered this +undertaking. +IV. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +1. Charles R. Hunt, CPA, PA +A. The Firm shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. + B . The Firm is censured. +C. The Firm may practice before the Commission as an independent accountant +provided that: +1. It is registered with the Board in accordance with the Act, and such +registration continues to be effective; and +2. It has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the Firm that its registration application has been +approved. +2. Charles R. Hunt, CPA, +A. Hunt shall cease and desist from committing or causing any violations and +any future violations of Section 102(a) of the Act. +B. Hunt may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is registered +with the Board in accordance with the Act, and such registration continues to be effective; and +4 + +2. He has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the public accounting firm with which he is +associated that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +5 diff --git a/raw/aaer/2007/AAER-2687.txt b/raw/aaer/2007/AAER-2687.txt new file mode 100644 index 0000000000000000000000000000000000000000..131dd8a569b393d8bb5b30ac2a8e679100263527 --- /dev/null +++ b/raw/aaer/2007/AAER-2687.txt @@ -0,0 +1,144 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56407/ September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2687 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12768 +In the Matter of +Dan Clasby & Company and +Daniel E. Clasby, CPA, +Respondents. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND 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 against Dan Clasby & Company and Daniel +E. Clasby, CPA (collectively “Respondents”) pursuant to Section 21C of the Securities Exchange +Act of 1934 (“Exchange Act”), and that public administrative proceedings be, and hereby are, +instituted against Dan Clasby & Company pursuant to Section 4C1 of the Exchange Act and Rule +102(e)(1)(iii) of the Commission’s Rules of Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondents have submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are +admitted, Respondents consent to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondents’ Offer, the Commission finds3 that: +A. RESPONDENTS +1. Dan Clasby & Company (the “Firm”) is a sole proprietorship and public +accounting firm based in Beverly, Massachusetts. The Firm audited Unitronix Corporation’s +(“Unitronix”) financial statements for the company’s 2004 fiscal year ended June 30, 2004. +Unitronix dismissed the Firm as its independent auditor on February 11, 2005. +2. Daniel E. Clasby, CPA, (“Clasby”), 51, of Ipswich, Massachusetts, is a certified +public accountant licensed in the state of Massachusetts since 1983. Clasby was the engagement +partner in connection with the Firm’s audit of Unitronix’s financial statements for the company’s +2004 fiscal year ended June 30, 2004. +B. FACTS +1. Unitronix is a New Jersey corporation with its headquarters in Greenville, South +Carolina. Unitronix’s common stock is registered with the Commission pursuant to Section 12(g) +of the Exchange Act and trades on the Pink Sheets under the symbol UTRX. For its fiscal year +ended June 30, 2004, Unitronix reported revenues of $114,000 and total assets of $19,700. +2. Unitronix has at all relevant times been an issuer as defined by the Sarbanes-Oxley +Act of 2002 (the “Act”). +3. The Firm audited Unitronix’s 2004 financial statements included in Unitronix’s +annual report for fiscal year 2004 on Form 10-K, filed with the Commission on September 28, +2004. As part of that audit, the Firm prepared and issued an audit report dated September 20, 2004 +(the “Unitronix audit report”), which the company included in its 2004 Form 10-K. The Firm did +not collect any fees for the audit work. +The findings herein are made pursuant to Respondents’ Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +2 +3 +4. At the time the Firm issued the Unitronix audit report, it was not registered with the +Public Company Accounting Oversight Board (the “Board”), as required by Section 102(a) of the +Act. +5. Clasby was the engagement partner on the Firm’s audit of Unitronix’s 2004 +financial statements. Clasby participated in the preparation and issuance of the Unitronix audit +report. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”4 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.5 +3. Based on the conduct described above, the Firm willfully6 violated Section 102(a) +of the Act. +4. Based on the conduct described above, Clasby caused the Firm’s violation of +Section 102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that the Firm willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002, and that Clasby caused the Firm’s violation of Section +102(a) of the Act. +E. UNDERTAKING +Respondents have undertaken not to request, demand, or accept, directly or indirectly, any +compensation from Unitronix in connection with the audit work associated with the Unitronix +audit report. In determining whether to accept the Offer, the Commission has considered this +undertaking. +IV. +4 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +5 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +6 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +1. Dan Clasby & Company +A. The Firm shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. + B . The Firm is censured. +C. The Firm may practice before the Commission as an independent accountant +provided that: +1. It is registered with the Board in accordance with the Act, and such +registration continues to be effective; and +2. It has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the Firm that its registration application has been +approved. +2. Daniel E. Clasby, CPA +A. Clasby shall cease and desist from committing or causing any violations and +any future violations of Section 102(a) of the Act. +B. Clasby may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is +registered with the Board in accordance with the Act, and such registration continues to be +effective; and +2. He has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the public accounting firm with which he is +associated that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2688.txt b/raw/aaer/2007/AAER-2688.txt new file mode 100644 index 0000000000000000000000000000000000000000..76b885c528e95326993c11203c4e0256053d78e0 --- /dev/null +++ b/raw/aaer/2007/AAER-2688.txt @@ -0,0 +1,146 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56408 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2688 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12769 +In the Matter of +Darilek, Butler & Co., P.C. and +Robert F. Darilek, CPA, +Respondents. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND 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 against Darilek, Butler & Co., P.C. and +Robert F. Darilek, CPA (collectively “Respondents”) pursuant to Section 21C of the Securities +Exchange Act of 1934 (“Exchange Act”), and that public administrative proceedings be, and +hereby are, instituted against Darilek, Butler & Co., P.C. pursuant to Section 4C1 of the Exchange +Act and Rule 102(e)(1)(iii) of the Commission’s Rules of Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondents have submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are +admitted, Respondents consent to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondents’ Offer, the Commission finds3 that: +A. RESPONDENTS +1. Darilek, Butler & Co., P.C. (the “Firm”) is a Texas professional corporation and a +public accounting firm headquartered in San Antonio, Texas. The Firm audited Health Discovery +Corporation’s (“HDC”) financial statements for the company’s 2003 fiscal year ended December +31, 2003. +2. Robert F. Darilek, CPA, (“Darilek”), 52, of San Antonio, Texas, is a certified +public accountant licensed in the state of Texas. Darilek was the engagement partner in connection +with the Firm’s audit of HDC’s financial statements for the company’s 2003 fiscal year ended +December 31, 2003. Darilek has been licensed as a CPA in Texas since 1982. +B. FACTS +1. HDC is a Georgia corporation with its headquarters in Savannah, Georgia. HDC’s +common stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act +and is traded on the OTC Bulletin Board under the symbol HDVY. For its fiscal year ended +December 31, 2003, HDC reported revenues of $50 and total assets of $941,000. +2. HDC has at all relevant times been an issuer as defined by the Sarbanes-Oxley Act +of 2002 (the “Act”). +3. The Firm audited HDC’s 2003 financial statements included in HDC’s annual +report for fiscal year 2003 on Form 10-KSB, filed with the Commission on March 30, 2004. As +part of that audit, the Firm prepared and issued an audit report dated February 27, 2004 (the “HDC +audit report”), which the company included in its 2003 Form 10-KSB. HDC paid the Firm +The findings herein are made pursuant to Respondents’ Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +2 +3 +$10,000 for the audit work.4 +4. At the time the Firm issued the HDC audit report, it was not registered with the +Public Company Accounting Oversight Board (the “Board”), as required by Section 102(a) of the +Act. +5. Darilek was the engagement partner on the Firm’s audit of HDC’s 2003 financial +statements. Darilek participated in the preparation and issuance of the HDC audit report. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”5 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.6 +3. Based on the conduct described above, the Firm willfully7 violated Section 102(a) +of the Act. +4. Based on the conduct described above, Darilek caused the Firm’s violation of +Section 102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that the Firm willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002, and that Darilek caused the Firm’s violation of Section +102(a) of the Act. +4 During the course of the Commission’s investigation, the Firm voluntarily reimbursed HDC the $10,000 in +audit fees through the provision of non-audit or other services to the issuer. In view of the Firm’s reimbursement, +the Commission is not ordering disgorgement in this matter. +5 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +6 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +7 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +E. UNDERTAKING +Respondents have undertaken not to request, demand, or accept, directly or indirectly, any +compensation from HDC in connection with the audit work associated with the HDC audit report. +In determining whether to accept the Offer, the Commission has considered this undertaking. +IV. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +1. Darilek, Butler & Co., P.C. +A. The Firm shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. + B . The Firm is censured. +C. The Firm may practice before the Commission as an independent accountant +provided that: +1. It is registered with the Board in accordance with the Act, and such +registration continues to be effective; and +2. It has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the Firm that its registration application has been +approved. +2. Robert F. Darilek, CPA +A. Darilek shall cease and desist from committing or causing any violations and +any future violations of Section 102(a) of the Act. +B. Darilek may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is registered +with the Board in accordance with the Act, and such registration continues to be effective; and +4 + +2. He has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the public accounting firm with which he is +associated that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +5 diff --git a/raw/aaer/2007/AAER-2691.txt b/raw/aaer/2007/AAER-2691.txt new file mode 100644 index 0000000000000000000000000000000000000000..c066c18916aec0bf50e4cef7d747b899a4131ed6 --- /dev/null +++ b/raw/aaer/2007/AAER-2691.txt @@ -0,0 +1,144 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56411 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2691/ September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12772 +In the Matter of +F. X. Duffy & Co., Inc. and +Kevin Patrick Duffy, CPA, +Respondents. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND 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 against F. X. Duffy & Co., Inc. and Kevin +Patrick Duffy, CPA (collectively “Respondents”) pursuant to Section 21C of the Securities +Exchange Act of 1934 (“Exchange Act”), and that public administrative proceedings be, and +hereby are, instituted against F. X. Duffy & Co., Inc. pursuant to Section 4C1 of the Exchange Act +and Rule 102(e)(1)(iii) of the Commission’s Rules of Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondents have submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are +admitted, Respondents consent to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondents’ Offer, the Commission finds3 that: +A. RESPONDENTS +1. F. X. Duffy & Co., Inc. (the “Firm”) is a Pennsylvania corporation and +accounting firm headquartered in Philadelphia, Pennsylvania. The Firm audited Sentry Builders +Corp.’s (“Sentry Builders”) financial statements for the company’s 2003 and 2004 fiscal years +ended July 31, 2003 and 2004, respectively. +2. Kevin Patrick Duffy, CPA, (“Duffy”), 40, of Philadelphia, Pennsylvania, is a +certified public accountant licensed in the state of Pennsylvania since 1992. Duffy was the +engagement partner in connection with the Firm’s audit of Sentry Builders’ financial statements for +the company’s 2003 and 2004 fiscal years. +B. FACTS +1. Sentry Builders is a Delaware corporation with its headquarters in Huntington, New +York. During the relevant period, Sentry Builders’ common stock was registered with the +Commission pursuant to Section 12(g) of the Exchange Act. For its fiscal year ended July 31, +2003, Sentry Builders reported no revenues and no assets. +2. Sentry Builders has at all relevant times been an issuer as defined by the Sarbanes- +Oxley Act of 2002 (the “Act”). +3. The Firm audited Sentry Builders’ 2003 and 2004 financial statements included in +Sentry Builders’ annual report for fiscal years 2003 and 2004, respectively, on Form 10-K, both +filed with the Commission on August 5, 2004. As part of the audits, the Firm prepared and issued +two separate audit reports dated June 18, 2004 (the “Sentry Builders audit reports”), which the +company included in its 2003 and 2004 Form 10-Ks. +The findings herein are made pursuant to Respondents’ Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +2 +3 +4. At the time the Firm issued the Sentry Builders audit reports, it was not registered +with the Public Company Accounting Oversight Board (the “Board”), as required by Section +102(a) of the Act. +5. Duffy was the engagement partner on the Firm’s audit of Sentry Builders’ 2003 and +2004 financial statements. Duffy participated in the preparation and issuance of the Sentry +Builders audit reports. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”4 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.5 +3. Based on the conduct described above, the Firm willfully6 violated Section 102(a) +of the Act. +4. Based on the conduct described above, Duffy caused the Firm’s violation of +Section 102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that the Firm willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002, and that Duffy caused the Firm’s violation of Section +102(a) of the Act. +E. UNDERTAKING +Respondents have undertaken not to request, demand, or accept, directly or indirectly, any +compensation from Sentry Builders in connection with the audit work associated with the Sentry +Builders audit reports. In determining whether to accept the Offer, the Commission has considered +this undertaking. +4 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +5 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +6 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +IV. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +1. F. X. Duffy & Co., Inc. +A. The Firm shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. + B . The Firm is censured. +C. The Firm may practice before the Commission as an independent accountant +provided that: +1. It is registered with the Board in accordance with the Act, and such +registration continues to be effective; and +2. It has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the Firm that its registration application has been +approved. +2. Kevin Patrick Duffy, CPA +A. Duffy shall cease and desist from committing or causing any violations and +any future violations of Section 102(a) of the Act. +B. Duffy may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is +registered with the Board in accordance with the Act and such registration continues to be +effective; and +2. He has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the public accounting firm with which he is +associated that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2692.txt b/raw/aaer/2007/AAER-2692.txt new file mode 100644 index 0000000000000000000000000000000000000000..a7a71c047296d7975dc3a8899352bd54a766ba88 --- /dev/null +++ b/raw/aaer/2007/AAER-2692.txt @@ -0,0 +1,136 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56412 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2692 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12773 +In the Matter of +Harvey S. Weingard, CPA, +Respondent. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND A CEASE- +AND-DESIST ORDER +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative and cease-and-desist proceedings be, and hereby are, instituted against Harvey S. +Weingard, CPA (“Respondent” or “Weingard”) pursuant to Sections 4C1 and 21C of the Securities +Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(iii) of the Commission’s Rules of +Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are +admitted, Respondent consents to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds3 that: +A. RESPONDENT +Harvey S. Weingard, CPA, 73, of Boynton Beach, Florida, is a certified public accountant +licensed in the state of Florida since 2002 and doing business as a sole proprietorship. Weingard +audited The Furia Organization, Inc.’s (“Furia”) financial statements for the company’s 2003 and +2004 fiscal years ended June 30, 2003, and June 30, 2004, respectively. +B. FACTS +1. Furia is a Delaware corporation with its headquarters in Rockwall, Texas. For its +fiscal years ended June 30, 2003, and June 30, 2004, Furia had no revenues and no assets. +2. Furia has at all relevant times been an issuer as defined by the Sarbanes-Oxley Act +of 2002 (the “Act”). +3. Weingard audited Furia’s 2003 financial statements included in Furia’s annual +report for fiscal year 2003 on Form 10-KSB, filed with the Commission on July 6, 2004. As part +of that audit, Weingard prepared and issued an audit report dated June 30, 2004, which the +company included in its 2003 Form 10-KSB. Furia paid Weingard $3,000 for the audit work. +4. Weingard also audited Furia’s 2004 financial statements included in Furia’s annual +report for fiscal year 2004 on Form 10-KSB, filed with the Commission on October 21, 2004. As +part of that audit, Weingard prepared and issued an audit report dated October 13, 2004 (together +with the June 30, 2004 audit report, the “Furia audit reports”), which the company included in its +The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +2 +3 +2004 Form 10-KSB. Furia paid Weingard $5,000 for the audit work.4 +5. At the time Weingard prepared and issued the Furia audit reports, he was not +registered with the Public Company Accounting Oversight Board (the “Board”), as required by +Section 102(a) of the Act. +6. By order dated April 18, 2005, the Board disapproved an application for +registration submitted by Weingard based in part on Weingard’s violation of Section 102(a) of +the Act in issuing the Furia audit reports.5 The order effectively prevented Weingard from +becoming registered with the Board until after February 15, 2006, approximately one year from +the date the Board issued a notice of hearing on Weingard’s application.6 Weingard has only +worked as an accountant through his sole proprietorship and has not otherwise been associated +with a public accounting firm registered with the Board. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”7 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.8 +3. Based on the conduct described above, Respondent willfully9 violated Section +102(a) of the Act. +4 During the course of the Commission’s investigation, Weingard voluntarily reimbursed Furia the $8,000 in +audit fees through a combination of repayment and the provision of non-audit services to Furia. In view of +Weingard’s reimbursement, the Commission is not ordering disgorgement in this matter. +5 PCAOB Release No. 2005-004 (Apr. 18, 2005). The order also found that Weingard’s issuance of the Furia +audit reports violated Board Rule 2100, which implemented Section 102(a) of the Act. +6 The order states that with respect to any new registration application Weingard submits after February 15, +2006, the Board will not issue a notice of hearing to determine whether to approve or disapprove such application +based solely on the violations subject to the Board’s order. Id. +7 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +8 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +9 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +D. FINDI NGS +Based on the foregoing, the Commission finds that Weingard willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002. +E. UNDERTAKING +Respondent has undertaken not to request, demand, or accept, directly or indirectly, any +compensation from Furia in connection with the audit work associated with the Furia audit reports. +In determining whether to accept the Offer, the Commission has considered this undertaking. +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, effective immediately, that: +A. Weingard shall cease and desist from committing or causing any violations and any +future violations of Section 102(a) of the Act. +B. W eingard is censured. +C. Weingard may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is registered with +the Board in accordance with the Act, and such registration continues to be effective; and +2. He has submitted to the Commission staff (attention: Office of the Chief +Accountant) the Board’s letter notifying the public accounting firm with which he is associated +that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2693.txt b/raw/aaer/2007/AAER-2693.txt new file mode 100644 index 0000000000000000000000000000000000000000..9b61a73f935808a052257428914eb3714b0d6f96 --- /dev/null +++ b/raw/aaer/2007/AAER-2693.txt @@ -0,0 +1,145 @@ +UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56413 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2693 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12774 +In the Matter of +Henry L. Creel Co., Inc. and +Henry L. Creel, CPA, +Respondents. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND 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 against Henry L. Creel Co., Inc. and Henry L. +Creel, CPA (collectively “Respondents”) pursuant to Section 21C of the Securities Exchange Act +of 1934 (“Exchange Act”), and that public administrative proceedings be, and hereby are, instituted +against Henry L. Creel Co., Inc. pursuant to Section 4C1 of the Exchange Act and Rule +102(e)(1)(iii) of the Commission’s Rules of Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. + +II. +In anticipation of the institution of these proceedings, Respondents have submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are +admitted, Respondents consent to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondents’ Offer, the Commission finds3 that: +A. RESPONDENTS +1. Henry L. Creel Co., Inc. (the “Firm”) is an Ohio corporation and a public +accounting firm headquartered in Shaker Heights, Ohio. The Firm audited AuGRID Corporation’s +(“AuGRID”) financial statements for the company’s 2003 fiscal year ended December 31, 2003. +AuGRID dismissed the Firm as its independent auditor on January 27, 2005. +2. Henry L. Creel, CPA, (“Creel”), 64, of Shaker Heights, Ohio, is a certified public +accountant licensed in the state of Ohio since 1972. Creel was the engagement partner in +connection with the Firm’s audit of AuGRID’s financial statements for the company’s 2003 fiscal +year ended December 31, 2003. +B. FACTS +1. AuGRID is a Nevada corporation with its headquarters in Houston, Texas. During +the relevant period, AuGRID’s common stock was registered with the Commission pursuant to +Section 12(g) of the Exchange Act and traded on the Pink Sheets under the symbol AGHD. For its +fiscal year ended December 31, 2003, AuGRID reported revenues of $111,000 and total assets of +$477,000. +2. AuGRID has at all relevant times been an issuer as defined by the Sarbanes-Oxley +Act of 2002 (the “Act”). +3. The Firm audited AuGRID’s 2003 financial statements included in AuGRID’s +annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission on April 14, 2004. +As part of that audit, the Firm prepared and issued an audit report dated March 1, 2004 (the +“AuGRID audit report”), which the company included in its 2003 Form 10-KSB. The Firm did +not collect any fees for the audit work. +The findings herein are made pursuant to Respondents’ Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +2 +3 +4. At the time the Firm issued the AuGRID audit report, it was not registered with the +Public Company Accounting Oversight Board (the “Board”), as required by Section 102(a) of the +Act. +5. Creel was the engagement partner on the Firm’s audit of AuGRID’s 2003 financial +statements. Creel participated in the preparation and issuance of the AuGRID audit report. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”4 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.5 +3. Based on the conduct described above, the Firm willfully6 violated Section 102(a) +of the Act. +4. Based on the conduct described above, Creel caused the Firm’s violation of Section +102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that the Firm willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002, and that Creel caused the Firm’s violation of Section +102(a) of the Act. +E. UNDERTAKING +Respondents have undertaken not to request, demand, or accept, directly or indirectly, any +compensation from AuGRID in connection with the audit work associated with the AuGRID audit +report. In determining whether to accept the Offer, the Commission has considered this +undertaking. +4 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +5 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +6 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +IV. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +1. Henry L. Creel Co., Inc. +A. The Firm shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. + B . The Firm is censured. +C. The Firm may practice before the Commission as an independent accountant +provided that: +1. It is registered with the Board in accordance with the Act, and such +registration continues to be effective; and +2. It has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the Firm that its registration application has been +approved. +2. Henry L. Creel, CPA +A. Creel shall cease and desist from committing or causing any violations and +any future violations of Section 102(a) of the Act. +B. Creel may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is +registered with the Board in accordance with the Act, and such registration continues to be +effective; and +2. He has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the public accounting firm with which he is +associated that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2695.txt b/raw/aaer/2007/AAER-2695.txt new file mode 100644 index 0000000000000000000000000000000000000000..e1dcdc3e9ca4cf810d90abadf0e41ec52ba7d55a --- /dev/null +++ b/raw/aaer/2007/AAER-2695.txt @@ -0,0 +1,125 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56415 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2695 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12776 +In the Matter of +Isaac Gordon, CPA, +Respondent. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND A CEASE- +AND-DESIST ORDER +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative and cease-and-desist proceedings be, and hereby are, instituted against Isaac +Gordon, CPA (“Respondent” or “Gordon”) pursuant to Sections 4C1 and 21C of the Securities +Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(iii) of the Commission’s Rules of +Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, tem porarily or perm anently, +to any person the privilege of appearing or practicing before the Commission in +any way, if that person is found . . . to ha ve willfully violate d, or willfully aided +and abetted the violation of, any provision of the securities laws or the rules and +regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The Commission may censure a person or deny, temporarily or perm anently, the +privilege of appearing or pr acticing before it in any way to any person who is +found . . . to have willfully violated, or willfully aided and abetted the violation of +II. +In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are +admitted, Respondent consents to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds3 that: +A. RESPONDENT +Isaac Gordon, CPA, 47, of Los Angeles, California, is a certified public accountant licensed +in the state of Maryland and doing business as a sole proprietorship. Gordon audited Toffee +Sensations, Inc.’s financial statements for the company’s 2003 fiscal year ended September 30, +2003, as well as those for the period ended April 30, 2004. Gordon has been licensed as a CPA in +Maryland since 1988. +B. FACTS +1. Toffee Sensations, Inc. (“Toffee Sensations”) is a California corporation with its +headquarters in Los Angeles, California. The audit report in question was issued in connection +with a Form SB-2/A registration statement filed with the Commission by Toffee Sensations which +has not yet gone effective. For its fiscal year ended September 30, 2003, Toffee Sensations +reported revenues of approximately $6,500 and total assets of approximately $1,700. +2. Toffee Sensations has at all relevant times been an issuer as defined by the +Sarbanes-Oxley Act of 2002 (the “Act”). +3. Gordon audited Toffee Sensations’ 2003 financial statements, as well as those for +the period ended April 30, 2004. As part of that audit, Gordon prepared and issued an audit report +dated May 13, 2004 (the “Toffee Sensations audit report”), which the company included in its +Form SB-2/A registration statement filed with the Commission on August 24, 2004. Gordon +received no fees for the audit work. +any provision of the Federal securities laws or the rules and regulations +thereunder. +The findings herein are made pursuant to Respondent’s Offer of Settlement and are not +binding on any other person or entity in this or any other proceeding. +2 +3 +4. At the time Gordon prepared and issued the Toffee Sensations audit report, he was +not registered with the Public Company Accounting Oversight Board (the “Board”), as required by +Section 102(a) of the Act. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”4 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.5 +3. Based on the conduct described above, Respondent willfully6 violated Section +102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that Gordon willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002. +E. UNDERTAKING +Respondent undertakes not to request, demand, or accept, directly or indirectly, any +compensation from Toffee Sensations in connection with the audit work associated with the Toffee +Sensations audit report. In determining whether to accept the Offer, the Commission has +considered this undertaking. +IV. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondent’s Offer. +4 A violation of the Act or any rule that the Board issues under the Act is treated for all +purposes in the same manner as a violation of the Exchange Act, including with respect to +penalties. Sarbanes-Oxley Act of 2002, 15 U.S.C.A. § 7202(b)(1) (West 2002). +5 Section 102(a) became effective “[b]eginning 180 days after the date of the determination +of the Commission under Section 101(d)” of the Act that the Board was prepared to undertake its +statutory responsibilities. The Commission made the required determination on April 25, 2003. +See Order Regarding Section 101(d) of the Sarbanes-Oxley Act of 2002, Securities Act Release +No. 8223, Exchange Act Release No. 47746, 2003 WL 1956164 (Apr. 25, 2003). +6 “Willfully” as used in this Offer means intentionally committing the act that constitutes +the violation. There is no requirement that the actor also be aware that he is violating a rule or +statute. See Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 +(2d Cir. 1965). +3 + +Accordingly, it is hereby ORDERED, effective immediately, that: +A. Gordon shall cease and desist from committing or causing any violations and any +future violations of Section 102(a) of the Act. +B. Gordon is censured. +C. Gordon may practice before the Commission as an independent accountant provided +that: +1. The public accounting firm with which he is associated is registered with +the Board in accordance with the Act, and such registration continues to be effective; and +2. He has submitted to the Commission staff (attention: Office of the Chief +Accountant) the Board’s letter notifying the public accounting firm with which he is associated that +its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2696.txt b/raw/aaer/2007/AAER-2696.txt new file mode 100644 index 0000000000000000000000000000000000000000..1a501d0346d41bc273ee68db058bb90fe17755f2 --- /dev/null +++ b/raw/aaer/2007/AAER-2696.txt @@ -0,0 +1,123 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56416 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2696 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12777 +In the Matter of +Joseph Mao, CPA, +Respondent. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND A CEASE- +AND-DESIST ORDER +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative and cease-and-desist proceedings be, and hereby are, instituted against Joseph Mao, +CPA (“Respondent” or “Mao”) pursuant to Sections 4C1 and 21C of the Securities Exchange Act +of 1934 (“Exchange Act”) and Rule 102(e)(1)(iii) of the Commission’s Rules of Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are +admitted, Respondent consents to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds3 that: +A. RESPONDENT +Joseph Mao, CPA, 55, of New Hyde Park, New York is a certified public accountant +licensed in the state of New York and doing business as a sole proprietorship. Mao audited +SOYODO Group Holdings, Inc.’s (“Soyodo”) financial statements for the company’s 2003 fiscal +year ended December 31, 2003. Mao has been licensed as a CPA in New York since 1995. +B. FACTS +1. Soyodo (known as TOP Group Holdings, Inc. during the relevant time period) is a +Delaware corporation with its headquarters in New York. Soyodo’s common stock is registered +with the Commission pursuant to Section 12(g) of the Exchange Act and is listed on the OTC +Bulletin Board under the symbol SOYD (the company’s symbol was QXIT during the relevant +time period). For its fiscal year ended December 31, 2003, Soyodo reported no revenues and total +assets of $12,500. +2. Soyodo has at all relevant times been an issuer as defined by the Sarbanes-Oxley +Act of 2002 (the “Act”). +3. Mao audited Soyodo’s 2003 financial statements included in Soyodo’s annual +report for fiscal year 2003 on Form 10-KSB, filed with the Commission on April 13, 2004. As part +of that audit, Mao prepared and issued an audit report dated April 5, 2004 (the “Soyodo audit +report”), which the company included in its 2003 Form 10-KSB. Soyodo paid Mao $2,000 for the +audit work.4 +3 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +4 Before the Commission’s investigation, Mao voluntarily reimbursed Soyodo the $2,000 in audit fees. In +view of Mao’s reimbursement, the Commission is not ordering disgorgement in this matter. +2 + +4. At the time Mao prepared and issued the Soyodo audit report, he was not registered +with the Public Company Accounting Oversight Board (the “Board”), as required by Section +102(a) of the Act. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”5 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.6 +3. Based on the conduct described above, Respondent willfully7 violated Section +102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that Mao willfully violated Section 102(a) +of the Sarbanes-Oxley Act of 2002. +E. UNDERTAKING +Respondent has undertaken not to request, demand, or accept, directly or indirectly, any +compensation from Soyodo in connection with the audit work associated with the Soyodo audit +report. In determining whether to accept the Offer, the Commission has considered this +undertaking. +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, effective immediately, that: +5 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +6 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +7 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +A. Mao shall cease and desist from committing or causing any violations and any future +violations of Section 102(a) of the Act. +B. Mao is censured. +C. Mao may practice before the Commission as an independent accountant provided +that: +1. The public accounting firm with which he is associated is registered with +the Board in accordance with the Act; and +2. He has submitted to the Commission staff (attention: Office of the Chief +Accountant) the Board’s letter notifying the public accounting firm with which he is associated +that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2699.txt b/raw/aaer/2007/AAER-2699.txt new file mode 100644 index 0000000000000000000000000000000000000000..0bc34bd604a308ba9d2629aee5b05cdc9e9e8120 --- /dev/null +++ b/raw/aaer/2007/AAER-2699.txt @@ -0,0 +1,148 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56419 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2699 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12780 +In the Matter of +Milner and Brock, CPA’s and +Stephen D. Milner, CPA, +Respondents. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND 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 against Milner and Brock, CPA’s and Stephen +D. Milner, CPA (collectively “Respondents”) pursuant to Section 21C of the Securities Exchange +Act of 1934 (“Exchange Act”), and that public administrative proceedings be, and hereby are, +instituted against Milner and Brock, CPA’s pursuant to Section 4C1 of the Exchange Act and Rule +102(e)(1)(iii) of the Commission’s Rules of Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondents have submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are +admitted, Respondents consent to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondents’ Offer, the Commission finds3 that: +A. RESPONDENTS +1. Milner and Brock, CPA’s (the “Firm”) is a South Carolina partnership and a +public accounting firm headquartered in Greenville, South Carolina. The Firm audited Myriad +Entertainment & Resorts, Inc.’s (“Myriad”) financial statements for the company’s 2003 fiscal +year ended December 31, 2003. Myriad dismissed the Firm as its independent auditor on January +17, 2005. +2. Stephen D. Milner, CPA, (“Milner”), 54, of Greenville, South Carolina, is a +certified public accountant licensed in the state of South Carolina since 1977. Milner was the +engagement partner in connection with the Firm’s audit of Myriad’s financial statements for the +company’s 2003 fiscal year ended December 31, 2003. +B. FACTS +1. Myriad (known as Synergy 2000, Inc. during the relevant period) is a Delaware +corporation with its headquarters in Edmonton, Alberta, Canada. Myriad’s common stock is +registered with the Commission pursuant to Section 12(g) of the Exchange Act and trades on the +Pink Sheets under the symbol MYRA. For its fiscal year ended December 31, 2003, Myriad +reported revenues of $949 and total assets of $6,701. +2. Myriad has at all relevant times been an issuer as defined by the Sarbanes-Oxley +Act of 2002 (the “Act”). +3. The Firm audited Myriad’s 2003 financial statements included in Myriad’s annual +report for fiscal year 2003 on Form 10-KSB, filed with the Commission on March 29, 2004. As +part of that audit, the Firm prepared and issued an audit report dated March 22, 2004 (the “Myriad +audit report”), which the company included in its 2003 Form 10-KSB. Myriad paid the Firm +The findings herein are made pursuant to Respondents’ Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +2 +3 +$7,500 for the audit work.4 +4. At the time the Firm issued the Myriad audit report, it was not registered with the +Public Company Accounting Oversight Board (the “Board”), as required by Section 102(a) of the +Act. +5. Milner was the engagement partner on the Firm’s audit of Myriad’s 2003 financial +statements. Milner participated in the preparation and issuance of the Myriad audit report. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”5 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.6 +3. Based on the conduct described above, the Firm willfully7 violated Section 102(a) +of the Act. +4. Based on the conduct described above, Milner caused the Firm’s violation of +Section 102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that the Firm willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002, and that Milner caused the Firm’s violation of Section +102(a) of the Act. +4 During the course of the Commission’s investigation, the Firm voluntarily reimbursed Myriad the $7,500 in +audit fees. In view of the Firm’s reimbursement, the Commission is not ordering disgorgement in this matter. +5 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +6 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +7 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +E. UNDERTAKING +Respondents have undertaken not to request, demand, or accept, directly or indirectly, any +compensation from Myriad in connection with the audit work associated with the Myriad audit +report. In determining whether to accept the Offer, the Commission has considered this +undertaking. +IV. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +1. Milner and Brock, CPA’s +A. The Firm shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. + B . The Firm is censured. +C. The Firm may practice before the Commission as an independent accountant +provided that: +1. It is registered with the Board in accordance with the Act, and such +registration continues to be effective; and +2. It has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the Firm that its registration application has been +approved. +2. Stephen D. Milner, CPA +A. Milner shall cease and desist from committing or causing any violations and +any future violations of Section 102(a) of the Act. +B. Milner may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is registered +with the Board in accordance with the Act, and such registration continues to be effective; and +4 + +2. He has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the public accounting firm with which he is +associated that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +5 diff --git a/raw/aaer/2007/AAER-2700.txt b/raw/aaer/2007/AAER-2700.txt new file mode 100644 index 0000000000000000000000000000000000000000..3be5f5eca6f4348b0efc2ee4ff5ae739c8577206 --- /dev/null +++ b/raw/aaer/2007/AAER-2700.txt @@ -0,0 +1,144 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56420 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2700 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12781 +In the Matter of +Norman Stumacher, CPA, +Respondent. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND A CEASE- +AND-DESIST ORDER +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative and cease-and-desist proceedings be, and hereby are, instituted against Norman +Stumacher, CPA (“Respondent” or “Stumacher”) pursuant to Sections 4C1 and 21C of the +Securities Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(iii) of the Commission’s +Rules of Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are +admitted, Respondent consents to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds3 that: +A. RESPONDENT +Norman Stumacher, CPA, 81, of Bellmore, New York, is a certified public accountant +licensed in the state of New York since 1960 and doing business as a sole proprietorship. +Stumacher audited MediaREADY, Inc.’s (“MediaREADY”) financial statements for the +company’s 2003 fiscal year ended December 31, 2003. MediaREADY dismissed Stumacher as its +independent auditor on February 22, 2005. +B. FACTS +1. MediaREADY (known as Video Without Boundaries, Inc. during the relevant time +period) is a Florida corporation with its headquarters in Fort Lauderdale, Florida. MediaREADY’s +common stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act +and is listed on the Pink Sheets under the symbol MRED. For its fiscal year ended December 31, +2003, MediaREADY reported revenues of $191,000 and total assets of $875,000. +2. MediaREADY has at all relevant times been an issuer as defined by the Sarbanes- +Oxley Act of 2002 (the “Act”). +3. Stumacher audited MediaREADY’s 2003 financial statements included in +MediaREADY’s annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission +on April 14, 2004. As part of that audit, Stumacher prepared and issued an audit report dated April +12, 2004 (the “MediaREADY audit report”), which the company included in its 2003 Form 10- +KSB. MediaREADY paid Stumacher $25,000 for the audit work. +The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +2 +3 +4. At the time Stumacher prepared and issued the MediaREADY audit report, he was +not registered with the Public Company Accounting Oversight Board (the “Board”), as required by +Section 102(a) of the Act. +5. By order dated April 26, 2005, the Board disapproved an application for +registration submitted by Stumacher based in part on Stumacher’s violation of Section 102(a) of +the Act in issuing the MediaREADY audit report.4 The order effectively prevented Stumacher +from becoming registered with the Board until after February 15, 2006, approximately one year +from the date the Board issued a notice of hearing on Stumacher’s application.5 Stumacher has +only worked as an accountant through his sole proprietorship and has not otherwise been +associated with a public accounting firm registered with the Board. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”6 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.7 +3. Based on the conduct described above, Respondent willfully8 violated Section +102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that Stumacher willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002. +4 PCAOB Release No. 2005-008 (Apr. 26, 2005). The order also found that Stumacher’s issuance of the +MediaREADY audit report violated Board Rule 2100, which implemented Section 102(a) of the Act. Id. +5 The order states that with respect to any new registration application Stumacher submits after February 15, +2006, the Board will not issue a notice of hearing to determine whether to approve or disapprove such application +based solely on the violations subject to the Board’s order. Id. +6 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +7 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +8 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +E. UNDERTAKING +Respondent has undertaken not to request, demand, or accept, directly or indirectly, any +compensation from MediaREADY in connection with the audit work associated with the +MediaREADY audit report. In determining whether to accept the Offer, the Commission has +considered this undertaking. +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, effective immediately, that: +A. Stumacher shall cease and desist from committing or causing any violations and any +future violations of Section 102(a) of the Act. +B. Stumacher is censured. +C. Stumacher may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is registered with +the Board in accordance with the Act, and such registration continues to be effective; and +2. He has submitted to the Commission staff (attention: Office of the Chief +Accountant) the Board’s letter notifying the public accounting firm with which he is associated that +its registration application has been approved. +D. IT IS FURTHER ORDERED that Respondent shall, within 10 days of the entry of +this Order, pay disgorgement of $25,000 and prejudgment interest of $1,865.60 to the United +States Treasury. Such payment shall be: (A) made by United States postal money order, certified +check, bank cashier’s check, or bank money order; (B) made payable to the Securities and +Exchange Commission; (C) hand-delivered or mailed to the Office of Financial Management, +Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, +Alexandria, VA 22312; and (D) submitted under cover letter that identifies Norman Stumacher as a +Respondent in these proceedings, the file number of these proceedings, a copy of which cover +letter and money order or check shall be sent to Christopher Conte, Division of Enforcement, +Securities and Exchange Commission, 100 F Street N.E., Washington, D.C. 20549. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2701.txt b/raw/aaer/2007/AAER-2701.txt new file mode 100644 index 0000000000000000000000000000000000000000..5aaf14b43085c2a308d5e3cb11102a024c3507f6 --- /dev/null +++ b/raw/aaer/2007/AAER-2701.txt @@ -0,0 +1,148 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56421 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2701 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12782 +In the Matter of +Preferred Accounting Services, +Inc. and Ana Costales, CPA, +Respondents. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND 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 against Preferred Accounting Services, Inc. +and Ana Costales, CPA (collectively “Respondents”) pursuant to Section 21C of the Securities +Exchange Act of 1934 (“Exchange Act”), and that public administrative proceedings be, and +hereby are, instituted against Preferred Accounting Services, Inc. pursuant to Section 4C1 of the +Exchange Act and Rule 102(e)(1)(iii) of the Commission’s Rules of Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondents have submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are +admitted, Respondents consent to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondents’ Offer, the Commission finds3 that: +A. RESPONDENTS +1. Preferred Accounting Services, Inc. (the “Firm”) is a Florida corporation and a +public accounting firm headquartered in Miami, Florida. The Firm audited New Era Trading +Group, Inc.’s (“New Era”) financial statements for the company’s 2003 fiscal year ended +December 31, 2003. +2. Ana Costales, CPA, (“Costales”), 41, of Miami, Florida is a certified public +accountant licensed in the state of Florida since 1982. Costales was the engagement partner in +connection with the Firm’s audit of New Era’s financial statements for the company’s 2003 fiscal +year ended December 31, 2003. Costales has been licensed as a CPA in Florida since 1982. +B. FACTS +1. New Era is a Florida corporation with its headquarters in Pembroke Pines, Florida. +During the relevant period, New Era’s common stock was registered with the Commission +pursuant to Section 12(g) of the Exchange Act. For its fiscal year ended December 31, 2003, New +Era reported no revenues and no assets. +2. New Era has at all relevant times been an issuer as defined by the Sarbanes-Oxley +Act of 2002 (the “Act”). +3. The Firm audited New Era’s 2003 financial statements included in New Era’s +annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission on July 19, 2004. +As part of that audit, the Firm prepared and issued an audit report dated April 17, 2004 (the “New +Era audit report”), which the company included in its 2003 Form 10-KSB. New Era paid the Firm +The findings herein are made pursuant to Respondents’ Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +2 +3 +$100 for the audit work.4 +4. At the time the Firm issued the New Era audit report, it was not registered with the +Public Company Accounting Oversight Board (the “Board”), as required by Section 102(a) of the +Act. +5. Costales was the engagement partner on the Firm’s audit of New Era’s 2003 +financial statements. Costales participated in the preparation and issuance of the New Era audit +report. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”5 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.6 +3. Based on the conduct described above, the Firm willfully7 violated Section 102(a) +of the Act. +4. Based on the conduct described above, Costales caused the Firm’s violation of +Section 102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that the Firm willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002, and that Costales caused the Firm’s violation of Section +102(a) of the Act. +4 During the course of the Commission’s investigation, the Firm voluntarily reimbursed New Era the $100 in +audit fees. In view of the Firm’s reimbursement, the Commission is not ordering disgorgement in this matter. +5 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +6 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +7 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +E. UNDERTAKING +Respondents have undertaken not to request, demand, or accept, directly or indirectly, any +compensation from New Era in connection with the audit work associated with the New Era audit +report. In determining whether to accept the Offer, the Commission has considered this +undertaking. +IV. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +1. Preferred Accounting Services, Inc. +A. The Firm shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. + B . The Firm is censured. +C. The Firm may practice before the Commission as an independent accountant +provided that: +1. It is registered with the Board in accordance with the Act, and such +registration continues to be effective; and +2. It has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the Firm that its registration application has been +approved. +2. Ana Costales, CPA +A. Costales shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. +B. Costales may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which she is associated is +registered with the Board in accordance with the Act, and such registration continues to be +effective; and +4 + +2. She has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the public accounting firm with which she is +associated that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +5 diff --git a/raw/aaer/2007/AAER-2703.txt b/raw/aaer/2007/AAER-2703.txt new file mode 100644 index 0000000000000000000000000000000000000000..83aba19e914236f0711611431b37a472a7a1d046 --- /dev/null +++ b/raw/aaer/2007/AAER-2703.txt @@ -0,0 +1,153 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56423 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2703 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12784 +In the Matter of +Reed & Taylor, CPAs, P.C. and +Robert E. Reed, CPA, +Respondents. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND 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 against Reed & Taylor, CPAs, P.C. and +Robert E. Reed, CPA (collectively “Respondents”) pursuant to Section 21C of the Securities +Exchange Act of 1934 (“Exchange Act”), and that public administrative proceedings be, and +hereby are, instituted against Reed & Taylor, CPAs, P.C. pursuant to Section 4C1 of the Exchange +Act and Rule 102(e)(1)(iii) of the Commission’s Rules of Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondents have submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are +admitted, Respondents consent to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondents’ Offer, the Commission finds3 that: +A. RESPONDENTS +1. Reed & Taylor, CPAs, P.C. (the “Firm”) is a Michigan professional corporation +and a public accounting firm headquartered in Detroit, Michigan. The Firm audited Buckeye +Ventures, Inc.’s (“Buckeye Ventures”) financial statements for the company’s 2003 fiscal year +ended December 31, 2003. Buckeye Ventures dismissed the Firm as its independent auditor on +January 20, 2005. +2. Robert E. Reed, CPA, (“Reed”), 54, of Detroit, Michigan, is a certified public +accountant licensed in the state of Michigan. Reed was the engagement partner in connection with +the Firm’s audit of Buckeye Ventures’s financial statements for the company’s 2003 fiscal year +ended December 31, 2003. +B. FACTS +1. Buckeye Ventures (known as World Wide Motion Pictures Corporation during the +relevant period) is a Michigan corporation with its headquarters in San Diego, California. Buckeye +Ventures’s common stock is registered with the Commission pursuant to Section 12(g) of the +Exchange Act and trades on the OTC Bulletin Board under the symbol BEYV. For its fiscal year +ended December 31, 2003, Buckeye Ventures reported revenues of $16,300 and total assets of +approximately $11 million. +2. Buckeye Ventures has at all relevant times been an issuer as defined by the +Sarbanes-Oxley Act of 2002 (the “Act”). +3. The Firm audited Buckeye Ventures’s 2003 financial statements included in +Buckeye Ventures’s annual report for fiscal year 2003 on Form 10-KSB, filed with the +Commission on March 23, 2004. As part of that audit, the Firm prepared and issued an audit +The findings herein are made pursuant to Respondents’ Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +-2 +- +3 +report dated March 12, 2004 (the “Buckeye Ventures audit report”), which the company included +in its 2003 Form 10-KSB. Buckeye Ventures paid the Firm $500 for the audit work.4 +4. At the time the Firm issued the Buckeye Ventures audit report, it was not registered +with the Public Company Accounting Oversight Board (the “Board”), as required by Section +102(a) of the Act. +5. Reed was the engagement partner on the Firm’s audit of Buckeye Ventures’s 2003 +financial statements. Reed participated in the preparation and issuance of the Buckeye Ventures +audit report. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”5 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.6 +3. Based on the conduct described above, the Firm willfully7 violated Section 102(a) +of the Act. +4. Based on the conduct described above, Reed caused the Firm’s violation of Section +102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that the Firm willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002, and that Reed caused the Firm’s violation of Section +102(a) of the Act. +4 During the course of the Commission’s investigation, the Firm voluntarily reimbursed Buckeye Ventures +the $500 in audit fees. In view of the Firm’s reimbursement, the Commission is not ordering disgorgement in this +matter. +5 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +6 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +7 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +-3 +- +E. UNDERTAKING +Respondents have undertaken not to request, demand, or accept, directly or indirectly, any +compensation from Buckeye Ventures in connection with the audit work associated with the +Buckeye Ventures audit report. In determining whether to accept the Offer, the Commission has +considered this undertaking. +IV. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +1. Reed & Taylor, CPAs, P.C. +A. The Firm shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. + B . The Firm is censured. +C. The Firm may practice before the Commission as an independent accountant +provided that: +1. It is registered with the Board in accordance with the Act, and such +registration continues to be effective; and +2. It has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the Firm that its registration application has been +approved. +2. Robert E. Reed, CPA +A. Reed shall cease and desist from committing or causing any violations and +any future violations of Section 102(a) of the Act. +B. Reed may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is registered +with the Board in accordance with the Act, and such registration continues to be effective; and +-4 +- +2. He has submitted to the Commission staff (attention: Office of the +Chief Accountant) the Board’s letter notifying the public accounting firm with which he is +associated that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +-5 +- \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2704.txt b/raw/aaer/2007/AAER-2704.txt new file mode 100644 index 0000000000000000000000000000000000000000..26b90ea51fbd3dc09fb9bacfb3d89ed0a751c5cb --- /dev/null +++ b/raw/aaer/2007/AAER-2704.txt @@ -0,0 +1,148 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56424 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2704 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12785 +In the Matter of +Sanford H. Feibusch, CPA, PC +and Sanford H. Feibusch, CPA +Respondents. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND A CEASE- +AND-DESIST ORDER +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative and cease-and-desist proceedings be, and hereby are, instituted against Sanford H. +Feibusch, CPA, PC and Sanford H. Feibusch, CPA (collectively “Respondents”) pursuant to +Section 21C of the Securities Exchange Act of 1934 (“Exchange Act”), and that public +administrative proceedings be, and hereby are, instituted against Sanford H. Feibusch, CPA, PC +pursuant to Section 4C1 of the Exchange Act and Rule 102(e)(1)(iii) of the Commission’s Rules of +Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . +to h ave willfully v iolated, or willfu lly aid ed a nd ab etted th e v iolation of, an y provision of the +securities laws or the rules and regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The C ommission m ay censure a pers on or deny , t emporarily or perm anently, t he p rivilege o f +appearing or practicin g b efore it in an y way to an y p erson who is fou nd . . . t o have willfu lly +violated, or willfully aided and abetted the violation of any provision of the Federal securities laws +or the rules and regulations thereunder. +II. +In anticipation of the institution of these proceedings, Respondents have submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are +admitted, Respondents consent to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondents’ Offer, the Commission finds3 that: +A. RESPONDENTS +1. Sanford H. Feibusch, CPA, PC (the “Firm”) is a Nevada professional corporation +and a public accounting firm headquartered in Las Vegas, Nevada. The Firm audited Power-Save +Energy Company’s (“Power-Save”) financial statements for the company’s 2003 fiscal year ended +December 31, 2003. +2. Sanford H. Feibusch, CPA (“Feibusch”), 53, of Las Vegas, Nevada, is a certified +public accountant licensed during the relevant time period in the state of New York and currently +licensed in Nevada. Feibusch was the engagement partner in connection with the Firm’s audit of +Power-Save’s financial statements for the company’s 2003 fiscal year ended December 31, 2003. +B. FACTS +1. Power-Save (known as Safari Associates, Inc. during the relevant time period) is a +Utah corporation with its headquarters in San Luis Obispo, California. Power-Save’s common +stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act and is +traded on the OTC Bulletin Board under the symbol PWSV. For its fiscal year ended December +31, 2003, Power-Save reported revenues of $102,533 and total assets of $113,603. +2. Power-Save has at all relevant times been an issuer as defined by the Sarbanes- +Oxley Act of 2002 (the “Act”). +The findings herein are made pursuant to Respondents’ Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +2 +3 +3. The Firm audited Power-Save’s 2003 financial statements included in Power- +Save’s annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission on March +24, 2004. As part of that audit, the Firm prepared and issued an audit report dated March 22, 2004 +(the “Power-Save audit report”), which the company included in its 2003 Form 10-KSB. Power- +Save never paid the Firm the $3,000 that the Firm invoiced for the audit work. +4. At the time the Firm prepared and issued the Power-Save audit report, it was not +registered with the Public Company Accounting Oversight Board (the “Board”), as required by +Section 102(a) of the Act. +5. Feibusch was the engagement partner on the Firm’s audit of Power-Save’s 2003 +financial statements. Feibusch participated in the preparation and issuance of the Power-Save audit +report. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”4 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.5 +3. Based on the conduct described above, the Firm willfully6 violated Section 102(a) +of the Act. +4. Based on the conduct described above, Feibusch caused the Firm’s violation of +Section 102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that the Firm willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002, and that Feibusch caused the Firm’s violation of +Section 102(a) of the Act. +4 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +5 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +6 “Willfully” as used in this Order means intentionally committing the act that constitutes the violation. +There is no requirement that the actor also be aware that he is violating a rule or statute. See Wonsover v. SEC, 205 +F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). +3 + +E. UNDERTAKING +Respondents have undertaken not to request, demand, or accept, directly or indirectly, any +compensation from Power-Save in connection with the audit work associated with the Power-Save +audit report. In determining whether to accept the Offer, the Commission has considered this +undertaking. +IV. +In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +1. Sanford H. Feibusch, CPA, PC +A. The Firm shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. +B. The Firm is censured. +C. The Firm may practice before the Commission as an independent accountant +provided that: +1. The Firm is registered with the Board in accordance with the Act, +and such registration continues to be effective; and +2. The Firm has submitted to the Commission staff (attention: Office +of the Chief Accountant) the Board’s letter notifying the Firm that its registration application has +been approved. +2. Sanford H. Feibusch, CPA +A. Feibusch shall cease and desist from committing or causing any violations +and any future violations of Section 102(a) of the Act. +B. Feibusch may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is +registered with the Board in accordance with the Act, and such registration continues to be +effective; and +4 + +2. He has submitted to the Commission staff (attention: Office of the Chief +Accountant) the Board’s letter notifying the public accounting firm with which he is associated +that its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +5 diff --git a/raw/aaer/2007/AAER-2706.txt b/raw/aaer/2007/AAER-2706.txt new file mode 100644 index 0000000000000000000000000000000000000000..1ade57932e1317884e86835b3883017e3e7e8a52 --- /dev/null +++ b/raw/aaer/2007/AAER-2706.txt @@ -0,0 +1,128 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56426 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2706 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12787 +In the Matter of +William E. Costello, CPA, +Respondent. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE-AND- +DESIST PROCEEDINGS PURSUANT TO +SECTIONS 4C AND 21C OF THE +SECURITIES EXCHANGE ACT OF 1934 +AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS AND A CEASE- +AND-DESIST ORDER +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative and cease-and-desist proceedings be, and hereby are, instituted against William E. +Costello, CPA (“Respondent” or “Costello”) pursuant to Sections 4C1 and 21C of the Securities +Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(iii) of the Commission’s Rules of +Practice.2 +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, tem porarily or perm anently, +to any person the privilege of appearing or practicing before the Commission in +any way, if that person is found . . . to ha ve willfully violate d, or willfully aided +and abetted the violation of, any provision of the securities laws or the rules and +regulations thereunder. +2 Rule 102(e)(1)(iii) provides, in relevant part, that: +The Commission may censure a person or deny, temporarily or perm anently, the +privilege of appearing or pr acticing before it in any way to any person who is +found . . . to have willfully violated, or willfully aided and abetted the violation of +II. +In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlement (“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, except as +to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are +admitted, Respondent consents to the entry of this Order Instituting Public Administrative and +Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of +1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing +Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds3 that: +A. RESPONDENT +William E. Costello, CPA, 69, of Bakersfield, California, is a certified public accountant +licensed in the state of California since 1965 and doing business as a sole proprietorship. Costello +audited Global Links Corp.’s financial statements for the company’s 2003 fiscal year ended +December 31, 2003. +B. FACTS +1. Global Links Corp. (“Global Links”) is a Nevada corporation with its headquarters +in Las Vegas, Nevada. Global Links’ common stock is registered with the Commission pursuant +to Section 12(g) of the Exchange Act and is quoted in the pink sheets under the symbol GLLK.PK. +For its fiscal year ended December 31, 2003, Global Links reported revenues of $132,000 and total +assets of $1.8 million. Global Links filed a Form 8-K with the Commission on February 2, 2005, +announcing that it had dismissed Costello as its independent auditor on February 1, 2005. +2. Global Links has at all relevant times been an issuer as defined by the Sarbanes- +Oxley Act of 2002 (the “Act”). +3. Costello audited Global Links’ 2003 financial statements included in Global Links’ +annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission on April 14, 2004. +As part of that audit, Costello prepared and issued an audit report dated April 14, 2004 (the +any provision of the Federal securities laws or the rules and regulations +thereunder. +The findings herein are made pursuant to Respondent’s Offer of Settlement and are not +binding on any other person or entity in this or any other proceeding. +2 +3 +“Global Links audit report”), which the company included in its 2003 Form 10-KSB. Global +Links paid Costello $1,250 for the audit work.4 +4. At the time Costello prepared and issued the Global Links audit report, he was not +registered with the Public Company Accounting Oversight Board (the “Board”), as required by +Section 102(a) of the Act. +C. VIOLATIONS +1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +issuance of, any audit report with respect to any issuer.”5 +2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.6 +3. Based on the conduct described above, Respondent willfully7 violated Section +102(a) of the Act. +D. FINDI NGS +Based on the foregoing, the Commission finds that Costello willfully violated Section +102(a) of the Sarbanes-Oxley Act of 2002. +4 During the course of the Commission’s investigation, Costello voluntarily reimbursed +Global Links the $1,250 in audit fees. In view of Costello’s reimbursement, the Commission is +not ordering disgorgement in this matter. +5 A violation of the Act or any rule that the Board issues under the Act is treated for all +purposes in the same manner as a violation of the Exchange Act, including with respect to +penalties. Sarbanes-Oxley Act of 2002, 15 U.S.C.A. § 7202(b)(1) (West 2002). +6 Section 102(a) became effective “[b]eginning 180 days after the date of the determination +of the Commission under Section 101(d)” of the Act that the Board was prepared to undertake its +statutory responsibilities. The Commission made the required determination on April 25, 2003. +See Order Regarding Section 101(d) of the Sarbanes-Oxley Act of 2002, Securities Act Release +No. 8223, Exchange Act Release No. 47746, 2003 WL 1956164 (Apr. 25, 2003). +7 “Willfully” as used in this Order means intentionally committing the act that constitutes +the violation. There is no requirement that the actor also be aware that he is violating a rule or +statute. See Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 +(2d Cir. 1965). +3 + +E. UNDERTAKING +Respondent undertakes not to request, demand, or accept, directly or indirectly, any +compensation from Global Links in connection with the audit work associated with the Global +Links audit report. In determining whether to accept the Offer, the Commission has considered +this undertaking. +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, effective immediately, that: +A. Costello shall cease and desist from committing or causing any violations and any +future violations of Section 102(a) of the Act. +B. Costello is censured. +C. Costello may practice before the Commission as an independent accountant +provided that: +1. The public accounting firm with which he is associated is registered with +the Board in accordance with the Act, and such registration continues to be effective; and +2. He has submitted to the Commission staff (attention: Office of the Chief +Accountant) the Board’s letter notifying the public accounting firm with which he is associated that +its registration application has been approved. + By the Commission. + N ancy M. Morris + S ecretary +4 diff --git a/raw/aaer/2007/AAER-2709.txt b/raw/aaer/2007/AAER-2709.txt new file mode 100644 index 0000000000000000000000000000000000000000..7ac3cbee880bb05c5f5307b72fd5ea9455de2d90 --- /dev/null +++ b/raw/aaer/2007/AAER-2709.txt @@ -0,0 +1,35 @@ +U.S. SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56429 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2709 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No.3-12790 +IN THE MATTER OF CHOI DOW IAN HONG & LEE ACCOUNTANCY +CORPORATION AND ERNEST E. DOW, CPA +The United States Securities and Exchange Commission (Commission) announced the +issuance of an Order Instituting Administrative Proceedings Pursuant to Section 4C of the +Securities Exchange Act of 1934 and Rule 102(e) of the Commission’s Rules of Practice +(Order) against Choi Dow Ian Hong & Lee Accountancy Corporation (Choi Dow) and +Ernest E. Dow, CPA (Dow). +The Order alleges that Choi Dow prepared and issued and Dow participated in the +preparation and issuance of an audit report on the financial statements of a public company +in 2004, without first registering with the Public Company Accounting Oversight Board +(Board). Section 102(a) of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act) +prohibits accounting firms not registered with the Board from preparing or issuing audit +reports with respect to any issuer after October 22, 2003. The Order alleges that, by this +conduct, Choi Dow and Dow lacked the requisite qualifications to represent others and that +Choi Dow willfully violated Section 102(a) of the Sarbanes-Oxley Act. +Based on the above, the Order institutes proceedings against Choi Dow and Dow pursuant +to Section 4C(a)(1) of the Securities Exchange Act of 1934 (Exchange Act) and Rule +102(e)(1)(i) of the Commission’s Rules of Practice, and additionally as to Choi Dow, +Section 4C(a)(3) of the Exchange Act and Rule 102(e)(1)(iii) of the Commission’s Rules of +Practice, to determine whether the allegations in the Order are true, and whether they should +be censured or temporarily or permanently denied the privilege of appearing or practicing +before the Commission as an accountant. +A hearing will be scheduled before an administrative law judge to determine whether the +allegations in the Order are true, to provide Choi Dow and Dow an opportunity to dispute +these allegations, and to determine what sanctions, if any, are appropriate. The Order directs +the Administrative Law Judge to issue an initial decision in this matter no later than 300 +days from the date of service of the Order. \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2711.txt b/raw/aaer/2007/AAER-2711.txt new file mode 100644 index 0000000000000000000000000000000000000000..0995182a944e294fac434c8e0c8b46041bbd918d --- /dev/null +++ b/raw/aaer/2007/AAER-2711.txt @@ -0,0 +1,38 @@ +U.S. SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56431 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2711 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12792 +IN THE MATTER OF HALT, BUZAS & POWELL, LTD. AND WAYNE A. +POWELL, CPA, AND STEVEN R. HALT, CPA +The United States Securities and Exchange Commission (Commission) announced the +issuance of an Order Instituting Administrative and Cease-and-Desist Proceedings +Pursuant to Sections 4C and 21C of the Securities Exchange Act of 1934 and Rule 102(e) +of the Commission’s Rules of Practice (Order) against Halt, Buzas & Powell, Ltd. (Halt +Ltd.), Wayne A. Powell, CPA (Powell), and Steven R. Halt, CPA (Halt). +The Order alleges that Halt Ltd. prepared and issued and Powell and Halt participated in +the preparation and issuance of three audit reports on the financial statements of a public +company in 2004, without first registering with the Public Company Accounting +Oversight Board (Board). Section 102(a) of the Sarbanes-Oxley Act of 2002 (Sarbanes- +Oxley Act) prohibits accounting firms not registered with the Board from preparing or +issuing audit reports with respect to any issuer after October 22, 2003. The Order alleges +that, by this conduct, Halt Ltd., Powell, and Halt lacked the requisite qualifications to +represent others and that Halt Ltd. willfully violated Section 102(a) of the Sarbanes-Oxley +Act. +Based on the above, the Order institutes cease-and-desist proceedings against Halt Ltd. +pursuant to Section 21C of the Securities Exchange Act of 1934 (Exchange Act), as well as +proceedings under Section 4C(a)(1) and 4C(a)(3) of the Exchange Act and Rules +102(e)(1)(i) and 102(e)(1)(iii) of the Commission’s Rules of Practice, and as to Powell and +Halt, Section 4C(a)(1) and Rule 102(e)(1)(i), to determine whether the allegations in the +Order are true, whether a cease-and-desist order should be entered against Halt Ltd., whether +Halt Ltd., Powell, and Halt should be censured or temporarily or permanently denied the +privilege of appearing or practicing before the Commission as an accountant, and whether +Halt Ltd. should be ordered to pay disgorgement. +A hearing will be scheduled before an administrative law judge to determine whether the +allegations in the Order are true, to provide Halt Ltd., Powell, and Halt an opportunity to +dispute these allegations, and to determine what sanctions, if any, are appropriate. The +Order directs the Administrative Law Judge to issue an initial decision in this matter no later +than 300 days from the date of service of the Order. \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2712.pdf b/raw/aaer/2007/AAER-2712.pdf new file mode 100644 index 0000000000000000000000000000000000000000..0e73cdb5bb982a42583a3abfb6c16d6fc79a87b7 Binary files /dev/null and b/raw/aaer/2007/AAER-2712.pdf differ diff --git a/raw/aaer/2007/AAER-2713.pdf b/raw/aaer/2007/AAER-2713.pdf new file mode 100644 index 0000000000000000000000000000000000000000..361ff17818087a3ab7b986d38fec3f49566a4ea5 Binary files /dev/null and b/raw/aaer/2007/AAER-2713.pdf differ diff --git a/raw/aaer/2007/AAER-2714.pdf b/raw/aaer/2007/AAER-2714.pdf new file mode 100644 index 0000000000000000000000000000000000000000..fbe2756beac7e2f957b8312763329b2ddcde79af Binary files /dev/null and b/raw/aaer/2007/AAER-2714.pdf differ diff --git a/raw/aaer/2007/AAER-2714.txt b/raw/aaer/2007/AAER-2714.txt new file mode 100644 index 0000000000000000000000000000000000000000..68295a44b016e89e25182c1ef6a17d1b9b53b129 --- /dev/null +++ b/raw/aaer/2007/AAER-2714.txt @@ -0,0 +1,35 @@ +U.S. SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56434 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2714 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12795 +IN THE MATTER OF SCHUHALTER, COUGHLIN & SUOZZO PC, AND EDWARD +J. SUOZZO, CPA +The United States Securities and Exchange Commission (Commission) announced the +issuance of an Order Instituting Administrative Proceedings Pursuant to Section 4C of the +Securities Exchange Act of 1934 and Rule 102(e) of the Commission’s Rules of Practice +(Order) against Schuhalter, Coughlin & Suozzo PC (Schuhalter PC) and Edward J. +Suozzo, CPA (Suozzo). +The Order alleges that Schuhalter PC prepared and issued and Suozzo participated in the +preparation and issuance of an audit report on the financial statements of a public company +in 2003, without first registering with the Public Company Accounting Oversight Board +(Board). Section 102(a) of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act) +prohibits accounting firms not registered with the Board from preparing or issuing audit +reports with respect to any issuer after October 22, 2003. The Order alleges that, by this +conduct, Schuhalter PC and Suozzo lacked the requisite qualifications to represent others +and that Schuhalter PC willfully violated Section 102(a) of the Sarbanes-Oxley Act. +Based on the above, the Order institutes proceedings against Schuhalter PC and Suozzo +pursuant to Section 4C(a)(1) of the Securities Exchange Act of 1934 (Exchange Act) and +Rule 102(e)(1)(i) of the Commission’s Rules of Practice, and additionally as to Schuhalter +PC, Section 4C(a)(3) of the Exchange Act and Rule 102(e)(1)(iii) of the Commission’s +Rules of Practice, to determine whether the allegations in the Order are true, and whether +they should be censured or temporarily or permanently denied the privilege of appearing or +practicing before the Commission as an accountant. +A hearing will be scheduled before an administrative law judge to determine whether the +allegations in the Order are true, to provide Schuhalter PC and Suozzo an opportunity to +dispute these allegations, and to determine what sanctions, if any, are appropriate. The +Order directs the Administrative Law Judge to issue an initial decision in this matter no later +than 300 days from the date of service of the Order. \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2715.pdf b/raw/aaer/2007/AAER-2715.pdf new file mode 100644 index 0000000000000000000000000000000000000000..de7696a74c16d7686147136679378085653c973c Binary files /dev/null and b/raw/aaer/2007/AAER-2715.pdf differ diff --git a/raw/aaer/2007/AAER-2715.txt b/raw/aaer/2007/AAER-2715.txt new file mode 100644 index 0000000000000000000000000000000000000000..28f005f6a9769f8e77c3f06508f77aa735bdf62d --- /dev/null +++ b/raw/aaer/2007/AAER-2715.txt @@ -0,0 +1,33 @@ +U.S. SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56435 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2715 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12796 +IN THE MATTER OF STORY & COMPANY, P.C. AND BRIAN L. STORY, CPA +The United States Securities and Exchange Commission (Commission) announced the +issuance of an Order Instituting Administrative Proceedings Pursuant to Section 4C of the +Securities Exchange Act of 1934 and Rule 102(e) of the Commission’s Rules of Practice +(Order) against Story & Company (Story & Company) and Brian L. Story (Story). +The Order alleges that Story & Company prepared and issued and Story participated in the +preparation and issuance of an audit report on the financial statements of a public company +in 2004, without first registering with the Public Company Accounting Oversight Board +(Board). Section 102(a) of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act) +prohibits accounting firms not registered with the Board from preparing or issuing audit +reports with respect to any issuer after October 22, 2003. The Order alleges that, by this +conduct, Story & Company and Story lacked the requisite qualifications to represent others +and that Story & Company willfully violated Section 102(a) of the Sarbanes-Oxley Act. +Based on the above, the Order institutes proceedings against Story & Company and Story +pursuant to Section 4C(a)(1) of the Securities Exchange Act of 1934 (Exchange Act) and +Rule 102(e)(1)(i) of the Commission’s Rules of Practice, and additionally as to Story & +Company, Section 4C(a)(3) of the Exchange Act and Rule 102(e)(1)(iii) of the +Commission’s Rules of Practice, to determine whether the allegations in the Order are true, +and whether they should be censured or temporarily or permanently denied the privilege of +appearing or practicing before the Commission as an accountant. +A hearing will be scheduled before an administrative law judge to determine whether the +allegations in the Order are true, to provide Story & Company and Story an opportunity to +dispute these allegations, and to determine what sanctions, if any, are appropriate. The +Order directs the Administrative Law Judge to issue an initial decision in this matter no later +than 300 days from the date of service of the Order. \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2716.txt b/raw/aaer/2007/AAER-2716.txt new file mode 100644 index 0000000000000000000000000000000000000000..c3d0534462f23900d7a22a44bdc2c97f8098ba9f --- /dev/null +++ b/raw/aaer/2007/AAER-2716.txt @@ -0,0 +1,34 @@ +U.S. SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56436 / September 13, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2716 / September 13, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12797 +IN THE MATTER OF RICHARD E. SELLERS, CPA AND LESTER REX +ANDERSEN, CPA +The United States Securities and Exchange Commission (Commission) announced the +issuance of an Order Instituting Administrative and Cease-and-Desist Proceedings +Pursuant to Sections 4C and 21C of the Securities Exchange Act of 1934 and Rule 102(e) +of the Commission’s Rules of Practice (Order) against Richard E. Sellers and Lester Rex +Andersen. +The Order alleges that Richard E. Sellers (Sellers) and Lester Rex Andersen (Andersen), +both certified public accountants, knowingly caused their accounting firm, Sellers & +Andersen, LLC (S&A), to prepare and issue audit reports on the financial statements of +five reporting companies after October 22, 2003, without first registering S&A with the +Public Company Accounting Oversight Board (Board). Section 102(a) of the Sarbanes- +Oxley Act of 2002 (Sarbanes-Oxley Act) prohibits accounting firms not registered with +the Board from preparing or issuing audit reports with respect to any issuer after that +date. The Order alleges that, by their conduct, Sellers and Andersen lacked the requisite +qualifications to represent others and willfully aided and abetted and caused S&A’s +violations of Section 102(a) of the Sarbanes-Oxley Act. +Based on the above, the Order institutes cease-and-desist proceedings against Sellers and +Andersen pursuant to Section 21C of the Securities Exchange Act of 1934 (Exchange Act), +as well as proceedings under Section 4C(a)(1) and (3) of the Exchange Act and Rules +102(e)(1)(i) and (iii) of the Commission’s Rules of Practice, to determine whether the +allegations in the Order are true, whether cease-and-desist orders should be entered against +Sellers and Andersen and whether they should be censured or denied the privilege of +appearing or practicing before the Commission as accountants. The Order directs the +Administrative Law Judge to issue an initial decision in this matter no later than 300 days +from the date of service of the Order. \ No newline at end of file diff --git a/raw/aaer/2007/AAER-2717.pdf b/raw/aaer/2007/AAER-2717.pdf new file mode 100644 index 0000000000000000000000000000000000000000..dbc38e088bda6d1699903b38a37e7b088bbc4d09 Binary files /dev/null and b/raw/aaer/2007/AAER-2717.pdf differ diff --git a/raw/aaer/2007/AAER-2718.txt b/raw/aaer/2007/AAER-2718.txt new file mode 100644 index 0000000000000000000000000000000000000000..66134541d3511debf92bd79cc27b3307546a88b7 --- /dev/null +++ b/raw/aaer/2007/AAER-2718.txt @@ -0,0 +1,85 @@ + UNITED STATES OF AMERICA + before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56445 / September 14, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2718 / September 14, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12801 +: +: +: +In the Matter of : ORDER INSTITUTING ADMINISTRATIVE +: PROCEEDINGS PURSUANT TO RULE +BARRY M. BUDILOV, CPA : 102(e) OF THE COMMISSION’S RULES OF +: PRACTICE, MAKING FINDINGS, AND +Respondent. : IMPOSING REMEDIAL SANCTIONS +: +: +____________________________________ : +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate and in the +public interest that public administrative proceedings be, and hereby are, instituted against Barry +M. Budilov (“Respondent” or “Budilov”) pursuant to Rule 102(e)(3)(i) of the Commission’s Rules +of Practice.1 +1 Rule 102(e)(3)(i) provides, in relevant part, that: +The Commission, with due regard to the public interest and without preliminary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has +been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal securities laws or of the rules and regulations +thereunder. +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, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Sections III.3 below, which are admitted, Respondent +consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) +of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions +(“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds that: +1. Budilov, age 51, has been a certified public accountant licensed to practice in the +Commonwealth of Pennsylvania. His license to practice was issued in March 1981 and it expired +on April 20, 2000. During the period of the conduct alleged in the Commission’s complaint, +discussed more fully below, Budilov was a licensed certified public accountant. In addition, he +served as President and Chief Executive Officer of Ambassador Eyewear Group, Inc. from 1995 +until he was terminated from those positions in 1999. +2. Ambassador Eyewear Group, Inc. (“Ambassador”) was, at all relevant times, a +Delaware corporation with its principal place of business in Philadelphia, Pennsylvania. At all +relevant times, Ambassador’s common stock was registered with the Commission pursuant to +Section 12(b) of the Securities Exchange Act of 1934 (“Exchange Act”), and traded on both the +Chicago Stock Exchange and in the Pink Sheets. +3. On September 26, 2002, the Commission filed a complaint against Budilov in the +United States District Court for the Eastern District of Pennsylvania, SEC v. Barry M. Budilov et +al. (Civil Action No. 02-CV-7479). On September 13, 2007, the Court entered an order +permanently enjoining Budilov, by consent, from future violations of Section 17 of the Securities +Act of 1933, Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 +thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the +Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. + 4. The Commission’s complaint alleged, among other things, that, from at least 1997 +through at least December 1998, Budilov engaged in a fraudulent scheme to artificially inflate +Ambassador's assets, income, and retained earnings. As a result of the scheme, the complaint +alleged that Ambassador falsely claimed, in a registration statement, annual and quarterly reports +filed with the Commission, and in press releases, that it was profitable when, in fact, the +company had incurred substantial losses. In addition, Ambassador overstated its assets by as +much as 35 percent. The Commission's complaint alleged that, as part of the scheme, Budilov +falsified Ambassador's books and records related to income, expense, accounts receivable, +2 + +retained earnings, and inventory, and lied to Ambassador's auditor. The complaint further alleged +that, after others began suspecting the fraud, Budilov attempted to conceal his involvement by +destroying evidence, causing others to destroy evidence, and persuading others to accept +responsibility for the fraud. +IV. +In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent Budilov’s Offer. +Accordingly, it is hereby ORDERED, effective immediately, that Budilov is suspended +from appearing or practicing before the Commission as an accountant. + By the Commission. + N ancy M. Morris + S ecretary +3 diff --git a/raw/aaer/2007/AAER-2719.txt b/raw/aaer/2007/AAER-2719.txt new file mode 100644 index 0000000000000000000000000000000000000000..84579e9bc7b9d58a308966686e687f93590be079 --- /dev/null +++ b/raw/aaer/2007/AAER-2719.txt @@ -0,0 +1,1380 @@ + + + + + + + + + + + + + + + + SEC.gov | Linda Jones and Leslie H. Knox + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/501986","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Knox + + + + + + + + + + + + Linda Jones and Leslie H. Knox + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20285 / September 17, 2007 + + Accounting and Auditing Release No. 2719 / September 17, 2007 + + SEC v. Linda Jones and Leslie H. Knox , 5: 07-Civ-957 (DNH) (N.D.N.Y.) + + SEC Charges Two Former Supermarket Executives With Financial Fraud + + + + The Securities and Exchange Commission today filed civil fraud charges against Leslie H. Knox and Linda J. Jones, two former officers of The Penn Traffic Company, a Syracuse based retail and wholesale food company. + + The Commission's complaint, filed in the United States District Court for the Northern District of New York, alleges that Knox, Penn Traffic's former Senior Vice President and Chief Marketing Officer, and Jones, a former Penn Traffic Vice President, orchestrated a scheme to inflate income and other financial results by prematurely recognizing promotional allowances at Penn Traffic. Promotional allowances - also referred to as rebates, slotting fees, or vendor allowances â€" are fees paid from vendors in exchange for various marketing and promotional activities, such as inclusion in a supermarket's weekly circular. + + According to the complaint, from approximately the second quarter of Penn Traffic's Fiscal Year (FY) 2001 through at least the fourth quarter of FY 2003, Penn Traffic prematurely recognized promotional allowances in advance of Penn Traffic's performance of certain key, contingent activities. Knox and Jones orchestrated, directed, and participated in this scheme in an effort to meet internal budget plans. The complaint further alleges that Knox and Jones lied to and otherwise deceived Penn Traffic accounting personnel in order to carry out their fraudulent scheme. For example, at Knox and Jones' direction, personnel in Penn Traffic's marketing department routinely submitted false invoices and other information to Penn Traffic's accounting department so that promotional allowances were booked before they were actually earned. The complaint alleges that as a result of Knox and Jones' willful misconduct, Penn Traffic pulled forward approximately $10 million in operating income, and these falsified financials were included in Penn Traffic's public filings. + + The Commission's complaint against Knox and Jones alleges that, based on this conduct, they violated Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Exchange Act of 1934, and Rules 10b-5, 13b2-1 and 13b2-2 thereunder. The complaint further alleges that under Section 20(e) of the Exchange Act, Jones and Knox aided and abetted Penn Traffic's violations 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder. The Commission seeks as relief permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, civil money penalties, and officer and director bars. + + The Commission acknowledges the assistance of the United States Attorney's Office for the Northern District of New York and the Federal Bureau of Investigation in this matter. The Commission's investigation is continuing. + + + + + + SEC Complaint in this matter +--> + + +  + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2721.txt b/raw/aaer/2007/AAER-2721.txt new file mode 100644 index 0000000000000000000000000000000000000000..349fbdb2f9ef533b4667f8fde1f0e76a965a3c3f --- /dev/null +++ b/raw/aaer/2007/AAER-2721.txt @@ -0,0 +1,615 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56470 / September 19, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2721 / September 19, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12811 +In the Matter of +PRESS C. SOUTHWORTH, CPA +Respondent. +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE PROCEEDINGS +PURSUANT TO RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative proceedings be, and hereby are, instituted against Press C. Southworth +(“Southworth” or “Respondent”), pursuant to Rule 102(e)(1)(ii) of the Commission’s Rules of +Practice.1 +II. +In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlement (“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, except as +1 Rule 102(e)(1)(ii) provides, in pertinent part, that: +The Commission may . . . deny, temporarily or permanently, the privilege of appearing or practicing before +it . . . to any person who is found . . . to have engaged in unethical or improper professional conduct. +to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are +admitted, Respondent consents to the entry of this Order Instituting Public Administrative +Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and +Imposing Remedial Sanctions (“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds2 that: + A. SUMMARY +1. These proceedings arise out of Press C. Southworth’s improper professional conduct +in connection with the audit of the 1998 consolidated financial statements (“1998 audit”) of +National Century Financial Enterprises, Inc. (“NCFE”). Located in Dublin, Ohio, NCFE was a +private healthcare finance company that ultimately went bankrupt in November 2002. Southworth +was the engagement partner for PricewaterhouseCoopers LLP’s (“PwC”) audits of NCFE for the +years ended 1995 through 1998. Southworth commenced work on the 1998 audit in approximately +the Fall of 1998 and completed the audit in August 1999. +2. NCFE created special purpose subsidiaries to operate separate investment +“programs” under which asset-backed notes were issued to institutional investors in private +offerings. NCFE represented to investors in the notes (“noteholders”) issued by nearly all +programs that the proceeds of those notes would be used exclusively for the purchase of patient- +specific healthcare accounts receivable. Although NCFE used some noteholder funds to purchase +such accounts receivable, NCFE used a substantial portion of the private placement proceeds to +make unsecured loans or loans secured by collateral other than healthcare accounts receivable +(“non-permitted loans”). These loans violated the requirements of the master trust indentures +(“indentures”) that governed NCFE’s note offerings. The quality of the receivables that the +programs purchased was material to noteholders because the pool of purchased receivables was the +sole source from which noteholders would be repaid. NCFE concealed its non-permitted uses of +noteholder funds by, among other things, making false and misleading statements in its annual +financial statements, including the 1998 consolidated financial statements (“1998 Financials”). +3. During the course of the 1998 audit, Southworth was aware that NCFE was making +these non-permitted loans to various providers through the programs, which made up the vast +majority of NCFE’s business. Many of those providers did not have the ability to repay those +loans. The 1998 Financials did not adequately disclose the non-permitted loans, the resultant scope +of the violations of the indentures, or the consequences that such violations had on NCFE’s +liquidity and its ability to continue as a going concern. NCFE’s 1998 Financials also did not +reflect a sufficient reserve for the material impairment of its receivables portfolio that existed as of +December 1998. Yet, Southworth signed an unqualified audit report that erroneously stated that +2 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other +person or entity in this or any other proceeding. +2 + +NCFE’s 1998 Financials were prepared in accordance with Generally Accepted Accounting +Principles (“GAAP”) and that the audit had been conducted in accordance with Generally +Accepted Auditing Standards (“GAAS”). +4. During the course of the 1998 audit, Southworth learned information suggesting +that NCFE was reporting inaccurately aged receivables and including ineligible receivables in +monthly investor reports (“investor reports”) on the performance of the individual programs. In +addition to PwC’s audit of NCFE’s consolidated financial statements, NCFE retained PwC to +perform certain non-audit, agreed–upon procedures on one investor report each year for each +individual program. NCFE distributed the investor reports every month to the indenture trustees +(“trustees” or “indenture trustees”), who in turn provided them to ratings agencies. NCFE also +provided copies of the investor reports to investors upon request. This inaccurate reporting by +NCFE management should have caused Southworth to question management’s integrity and +triggered his obligations under GAAS to address evidence of possible fraud and illegal acts by +NCFE. Southworth failed to do so and instead continued to place undue reliance on management +representations, including representations that non-permitted loans were collectible at the values +ascribed to them by NCFE and that the indenture trustees for the programs and noteholders were +aware of the non-permitted loans. +5. After NCFE fired PwC as its auditor in early 2000, the successor audit firm of +NCFE (the “Successor Auditor”) reviewed PwC’s workpapers and interviewed Southworth by +telephone. In the interview, the Successor Auditor asked Southworth whether he had concerns +about NCFE management’s integrity. Southworth stated that he had no such concerns. +Southworth did not respond fully because Southworth did not also disclose any of the following +matters that were relevant to management integrity: (i) NCFE was making non-permitted loans; (ii) +NCFE was reporting inaccurately aged receivables and including ineligible receivables on investor +reports; and (iii) PwC’s internal risk-assessment system rated NCFE’s integrity and ethics as “high +risk.” +6. After this discussion with Southworth, the Successor Auditor subsequently +accepted NCFE as a client. +7. NCFE’s fraud went undetected until 2002. From early 2000 through 2002, NCFE +raised nearly $2.5 billion from noteholders in continuance of its fraud. +B. RESPONDENT +8. Press C. Southworth, age 59, of Columbus, Ohio, was an audit partner at PwC +(and its predecessor, Coopers & Lybrand, LLP (“Coopers”)) from 1985 until he retired in 2001. +Southworth was the engagement partner on the audits for NCFE’s 1995-1998 financial statements. +Southworth is a certified public accountant, who was licensed in Ohio until his license lapsed in +December 2006, after his retirement from PwC. +3 + +C. OTHER RELEVANT ENTITY +9. PwC is a Delaware limited liability partnership with its principal offices located in +New York, New York. PwC (and its predecessor, Coopers) served as NCFE’s auditor for NCFE’s +financial statements for the years 1995-1998. +D. FACTS +NCFE Background +10. From 1991 through its bankruptcy in November 2002, NCFE acted through its +individual programs to purchase medical accounts receivable from healthcare providers. The +programs raised the funds for the purchase of accounts receivable through private offerings of +notes to institutional noteholders under SEC Rule 144A, which exempts certain offerings to +“qualified institutional buyers” from the Securities Act. Nearly all of the program indentures +required the programs to use the note proceeds exclusively to purchase patient-specific healthcare +accounts receivable from healthcare providers. The programs and note offerings were structured as +asset-backed securitizations, with the notes being fully collateralized by the purchased medical +accounts receivable and cash reserves held in the programs. From 1991 through 2002, NCFE’s +subsidiaries issued more than $17 billion in asset-backed notes through private placements. +11. NCFE’s programs were governed by indenture agreements among NCFE’s +servicing agent, the programs themselves, and the trustees. With the exception of one small +program, the indentures required all of the programs to engage only in one type of business +activity: the purchase of the “eligible” medical accounts receivable of a hospital, physicians’ group, +or other healthcare provider. “Eligible receivables” were defined only to include the insured +portion of a receivable for which medical services had already been rendered. The programs +purchased the receivables at a price equal to 97% of the receivables’ estimated collectible value. +12. The indentures also required the programs to comply with certain requirements +designed to protect noteholders from loss. Failure to comply with certain key provisions of the +indentures constituted an event of default. If NCFE could not cure the defaults within a specified +time period, the indentures required the program indenture trustees to declare a principal +amortization event, which would cause the program to cease purchasing receivables and would +require the trustee to begin distributing cash collections on the healthcare receivables to program +investors in repayment of their principal and interest. For example, to ensure that the programs +always had sufficient collateral to cover the notes, the program agreements required that at all +times the programs have cash reserves and eligible receivables equal to at least 111% of the +amount of notes outstanding (“collateral coverage test”). If the collateral dropped below 111% for +more than seven days, the programs were required to begin repayment of investors’ principal and +interest from the cash received on the repayment of the healthcare receivables. The indentures also +required healthcare providers to immediately replace receivables that became older than 180 days +(“defaulted receivables”) with new eligible receivables. If the provider did not, the value of the +defaulted receivables was to be deducted from the next funding to that provider, and the defaulted +receivables could not be counted as eligible collateral for purposes of the collateral coverage test. +4 + +13. The programs required an annual audit of NCFE’s consolidated financial +statements. NCFE provided those consolidated financial statements to the program indenture +trustees, the rating agencies that rated the notes, and some of the noteholders upon request.3 +NCFE’s Use of Note Proceeds in Violation of the Indentures and Misrepresentations +to Noteholders +14. From at least 1994 until 2002, NCFE used noteholder funds to make non-permitted +loans, which was in violation of the indentures and contrary to NCFE’s representations to +noteholders. NCFE used significant amounts of noteholder funds to provide unsecured loans to +healthcare providers that had already sold all of their medical accounts receivable to NCFE and +had no additional such receivables to sell. Most of these providers had incurred significant +operating losses over a period of years and required additional funding in order to avoid +bankruptcy. NCFE made many of these non-permitted loans to providers that were or became +owned in whole or in part by NCFE’s principals. +15. NCFE’s non-permitted loans were far riskier than purchased eligible accounts +receivable. Because eligible receivables were to be paid by highly rated third-party payors, such as +insurance companies, HMOs, and government programs such as Medicare and Medicaid, for +medical services that had already been rendered and billed to the payors, the eligible receivables +were of high credit quality. By contrast, NCFE’s ability to collect on non-permitted loans was in +many cases speculative, because the non-permitted loans were in substance unsecured loans to +severely financially distressed borrowers or loans secured by collateral other than healthcare +accounts receivable. In fact, NCFE had very poor collection experience on its non-permitted loans, +and in some cases NCFE went more than a year without receiving any payments from certain +providers. +16. The amount and significance of the non-permitted loans, as a percentage of the +gross receivables reported on NCFE’s balance sheet, grew significantly during the period in which +PwC audited NCFE’s financial statements. Non-permitted loans comprised over 50% of NCFE’s +receivables portfolio by the end of 1998. +17. NCFE’s practice of making non-permitted loans caused the programs to be +undercollateralized, with eligible receivables plus cash reserves falling well short of the required +111% value of the notes. This should have caused an immediate acceleration in the maturity of the +notes and early amortization of the programs. +18. NCFE obscured its non-permitted loans and the resulting indenture violations by +making false and materially incomplete disclosures in the 1998 Financials. Footnote 8 to the 1998 +Financials disclosed that “the Company is not in compliance with various provisions of the Trust +Indentures[.]” Nonetheless, the 1998 Financials departed from GAAP because they did not +properly disclose the nature and scope of these indenture violations and that NCFE was in default +3 NCFE’s audited financial statements and PwC’s audit reports were not included in the offering documents for the +notes. However, NCFE provided the audited financial statements and PwC’s audit reports to noteholders upon +request. +5 + +and could not cure many of these violations. To the contrary, NCFE’s 1998 Financials stated that, +in the Company’s opinion, the indenture violations in the programs “can be cured or do not +represent material performance or covenant defaults.” That statement was false and misleading, +notwithstanding NCFE’s statement that “no assurance can be given that violations will be cured.” +19. Footnotes 1 and 3 to the 1998 Financials divided NCFE’s healthcare receivables +into three categories: “provider receivables,” “other provider receivables,” and “provider +advances.” The footnotes provided the following definitions for NCFE’s receivables: (1) +“Provider receivables consist of purchased account receivables including various components of +the client billing process such as third party settlements, disproportionate share, unbilled and +monthly capitation amounts;” and (2) “[o]ther provider receivables, notes receivable, and +equipment lease receivables represent advances against various forms of collateral including +accounts receivable, real property and equipment.” The term “provider advances” was not defined. +NCFE’s quantification and description of these three categories was inadequate to inform the +reader of the existence or extent of any non-permitted loans in any particular program. The +disclosures: (1) did not state that any of these categories of receivables contained non-permitted +loans or the amount of the non-permitted lending; and (2) did not clearly define “provider +receivables,” “other provider receivables,” or “provider advances” so that a reader could +understand the nature and substance of each of those categories of receivables. +20. Further, NCFE failed to evaluate the impairment present in its receivables portfolio +resulting from NCFE’s non-permitted loans to severely financially distressed providers. NCFE’s +allowance for loan losses was inadequate given its non-permitted lending activity. +21. Noteholders eventually uncovered NCFE’s fraud in October 2002, by which time +NCFE’s notes outstanding had grown to $2.9 billion from $1.25 billion in 1998, the year of PwC’s +last audit. The noteholders called their notes, which drove NCFE into bankruptcy in November +2002. By that point, however, most of NCFE’s outstanding receivables were unsecured or backed +by collateral that was virtually worthless. As a result, noteholders lost more than $2 billion from +NCFE’s fraudulent scheme. +Southworth Knew That NCFE Was Using Investor Funds in +Violation of the Indentures +22. Through PwC’s audits of NCFE, Southworth knew about NCFE’s widespread +violations of the indenture agreements and also should have recognized the threats those violations +posed to the noteholders’ interests. The amount of the non-permitted loans was material to the +programs’ assets and to the 1998 Financials. +23. Southworth’s concerns about NCFE’s business practices were highlighted in a June +25, 1999 memorandum to NCFE management entitled, “Open Items and Additional Audit +Procedures for NCFE As of June 25, 1999” (the “June 25 memo”). That memorandum was +prepared by Southworth and others after NCFE’s principals revealed to Southworth their (later- +withdrawn) plans to take NCFE public in the near future. The June 25 memo stated the need to +“[m]eet with the Trustees and Investors to discuss the Indenture issues that we have noted in our +6 + +audit. We need to ensure that all parties are aware of the items noted below and do not consider +them to be material breaches, which could result in an Event of Default.” In the June 25 memo, +several “Indenture issues” were identified, including: +• “Not forcing providers to repurchase all receivables that have aged out past 180 +days”; +• “Inaccurately aged receivables being included on the Investor Reports (Location +99)” +• “Ineligible receivables brought on as collateral included in the Investor Reports +(Location 99)”; and +• “Whether the proformas, advances, and other items that are out of the ‘norm’ meet +the definition of a purchased receivable pursuant to the sales and subservicing +agreement.” +Southworth did not communicate with the trustees or noteholders about these issues before +completing the audit of NCFE’s 1998 Financials, based on his assumption, unsupported by +sufficient competent evidential matter, that the trustees and noteholders were already aware of +NCFE’s violations. +24. As reflected in the June 25 memo, Southworth was aware that NCFE management +included inaccurately aged and ineligible receivables on investor reports provided to the indenture +trustees and noteholders. This inaccurate reporting allowed NCFE to show compliance with the +collateral coverage requirements of the indentures and conceal events of default from the indenture +trustees. Southworth should have known that the investor reports failed to reflect NCFE’s +indenture defaults as a result of its non-compliance with the collateral coverage test. Southworth +also was aware that NCFE management had recorded on its books and records $175 million of +“Location 99” receivables. PwC’s work papers documented that these Location 99 receivables +lacked any detailed information, generally were over one year old, and that the agings of these +receivables were “frozen.” Southworth therefore was aware that NCFE was not forcing providers +to repurchase receivables that had aged out past 180 days, as required by the indentures. +Southworth also learned that NCFE entered into its system accounts receivable amounts that +represented “pro forma” revenues for medical services that providers might render in the future, +assuming that the providers continued to remain in business. The pro forma receivables frequently +represented periods of four to six months of operating revenues for a particular healthcare provider; +these pro forma receivables inflated the medical accounts receivable and NCFE’s purported +collateral amounts. Southworth should have known that the indentures did not permit the +programs to purchase “pro forma” receivables. All of these facts should have indicated to +Southworth that there were serious questions about NCFE management’s integrity, the possibility +that NCFE management engaged in fraud or illegal acts, and whether NCFE’s 1998 financial +statements were in conformity with GAAP. +7 + +NCFE’s Departures from GAAP and Incomplete and Misleading Financial Statement +Disclosures +25. In August 1999, Southworth signed an unqualified audit report on NCFE’s 1998 +Financials, stating among other things, that NCFE’s financial statements were fairly presented in +all material respects in conformity with GAAP. This statement was incorrect. NCFE’s 1998 +Financials included an allowance for losses at December 31, 1998 of $22.2 million against a +portfolio of provider receivables totaling $1.223 billion, more than half of which was comprised of +non-permitted loans to financially distressed healthcare providers. The programs required NCFE +to establish holdback reserves from provider fundings that could be available to absorb up to 17% +of each provider’s credit and collection losses.4 However, the credit and collection losses far +exceeded 17% of the receivables portfolio for many providers. The financial statements were not +in conformity with GAAP because the holdback reserves and NCFE’s allowance for losses were +insufficient to cover the material losses arising from the impairment of unsecured loans that NCFE +had made to healthcare providers. The financial statements also were not in conformity with +GAAP because, although they disclosed the fact of indenture violations, they provided incomplete +and misleading disclosure about the nature and significance of those violations, as discussed above. +NCFE’s violations of the indenture collateral coverage test constituted an event of default requiring +NCFE to engage in early amortization of the programs in which there were violations. +26. More than half of NCFE’s receivables portfolio consisted of non-permitted loans. +Many of NCFE’s customers had experienced significant operating losses over a period of several +years and were experiencing severe liquidity problems. GAAP required NCFE to evaluate these +facts and the degree to which these unsecured loans were impaired so that an appropriate provision +for loss could be recorded in accordance with Statements of Financial Accounting Standards No. 5, +“Accounting for Contingencies,” and Statements of Financial Accounting Standards No. 114, +“Accounting by Creditors for the Impairment of a Loan.” NCFE did not perform an impairment +evaluation in accordance with these accounting standards. Instead, NCFE fabricated collateral and +ascribed excessive value to the collateral in order to avoid recognition of impairment losses. +Southworth failed to perform sufficient audit procedures to identify the impairment in NCFE’s +receivables portfolio. +27. In footnote 8 to NCFE’s 1998 Financials, NCFE provided additional detail on what +was by far the most significant liability on NCFE’s balance sheet -- “Notes Payable” -- and +discussed the indenture violations in the programs. Although NCFE caused the programs to be in +violation of the core provisions of the indentures which prohibited nearly all of the programs from +engaging in any business other than the purchase of eligible healthcare receivables, NCFE’s +footnote description of the indenture violations minimized the significance of the indenture +violations and failed to describe or provide any additional substantive information about the nature +4 NCFE’s programs withheld 17% of the amount funded to providers as cash reserves primarily to provide additional +collateral for noteholders, and secondarily to absorb credit or collection losses in the portfolio. These reserves +totaled $237 million at the end of 1998. These reserves could be used on a provider-by-provider basis to absorb the +first 17% of losses incurred for a particular provider. However, the reserves for one provider could not be used to +absorb losses in another provider’s portfolio. Furthermore, in the event of early amortization of NCFE’s programs, +the cash reserves were to serve as collateral to guard against noteholder losses rather than to absorb losses in specific +provider accounts or to be used as a receivables valuation account. +8 + +and dollar magnitude of the indenture violations or the programs in which the violations were +occurring. Instead, NCFE’s footnote misleadingly included management’s false “opinion” that the +violations “can be cured or do not represent material performance or covenant defaults.” That +footnote disclosure stated in pertinent part: +The Company is not in compliance with various provisions of the +Trust Indentures, however, no Event of Default as defined in the +Trust Indentures has been declared by any of the noteholders or +trustees. The Company does not expect that an Event of Default +will be declared in the near-term under current circumstances +because among other matters the Programs are current as to all +required interest payments and the Company has successfully +concluded six previous Programs. Furthermore, in the opinion of +the Company, the violations can be cured or do not represent +material performance or covenant defaults, however, the +determination of whether a violation is material is not entirely +within the discretion of the Company and no assurance can be given +that violations will be cured or that a Principal Amortization Event, +as described below will not be declared by the trustees or +noteholders. +Should an Event of Default be declared with respect to any of the +Programs, a Principal Amortization Event would occur under which +the respective program would be required to cease purchasing new +eligible receivables and to apply all cash received to the principal +and interest due on the related notes. This could negatively affect +the Company’s ability to fund its operations and Programs as well as +its ability to fund new programs and enter into relationships with +new providers. +28. The footnote 8 disclosure was incomplete and misleading because it failed to +disclose information essential to an understanding of the nature of the indenture violations and that +those violations constituted events of default. While the footnote stated that in the opinion of the +Company the indenture violations in the programs “can be cured or do not represent material +performance or covenant defaults,” in fact many of the indenture violations could not be cured and +were significant violations of the indentures. The disclaimer that “no assurance can be given that +violations will be cured or that a Principal Amortization Event . . . will not be declared by the +trustees or noteholders” did not adequately remedy that misleading statement. Absent the ability +by NCFE to cure the program defaults resulting from these violations or obtain a waiver of these +defaults, the indentures required the indenture trustees for the programs to commence a principal +amortization event for the particular programs in which the defaults occurred. +9 + +NCFE Terminates PwC as NCFE’s Auditor, and Southworth Communicates With +the Successor Auditor +29. After PwC completed the 1998 audit, the engagement team performed its annual +client continuance evaluation of NCFE to determine whether PwC should continue with NCFE as a +client. As part of this review, Southworth participated in preparing a computer-generated audit risk +assessment report for NCFE. During this post-1998 audit assessment process, the risk rating +generated by PwC’s risk rating system for NCFE’s “Integrity and Ethics” increased from a mid- +risk rating in 1998 to the highest risk rating as a result of the answers Southworth and others gave +to questions in the report-generation process. Based in part on Southworth’s answers on the risk +assessment report and on the 1998 audit, PwC placed NCFE into a “high risk” category for +purposes of PwC’s risk assessment analysis. +30. In approximately February 2000, NCFE terminated PwC as NCFE’s auditor, citing +a litigation conflict between one of NCFE’s largest customers and PwC as the reason for +termination. +31. Upon PwC’s termination as auditor, NCFE hired the Successor Auditor in April +2000. As part of the Successor Auditor’s new client acceptance process, the Successor Auditor +reviewed PwC’s workpapers and interviewed Southworth by telephone. In this conversation, the +engagement partner asked Southworth, among other things, whether PwC had concerns about the +integrity of NCFE’s management. Southworth responded that there were no such issues. +Southworth did not respond fully because Southworth did not also disclose any of the following +matters that were relevant to management integrity: (i) NCFE was making non-permitted loans; (ii) +NCFE was reporting inaccurately aged receivables and including ineligible receivables on investor +reports; and (iii) PwC’s internal risk-assessment system rated NCFE’s integrity and ethics as “high +risk.” +32. After this discussion with Southworth, the Successor Auditor subsequently +accepted NCFE as a client. +E. Southworth’s Departures From GAAS +Failure to Properly Plan and Perform the Audit to Obtain Reasonable Assurance About +Whether the Financial Statements Were Free of Material Misstatement +33. GAAS requires that the auditor “plan and perform the audit to obtain reasonable +assurance about whether the financial statements are free of material misstatement, whether caused +by error or fraud.” (AU § 110, Responsibilities and Functions of the Independent Auditor, at AU +110.02) In addition, the risk assessment process should “be ongoing throughout the audit” and +should consider whether the “nature of audit procedures performed may need to be changed to +obtain evidence that is more reliable or to obtain additional corroborative information.” (AU § +316, Consideration of Fraud in a Financial Statement Audit5, at AU 316.33 & .28 (pre- +5 AU 316 was modified by Statement on Auditing Standards No. 99, Consideration of Fraud in a Financial +Statement Audit, which was integrated into AU 316 in October 2002 and applied to audits of financial statements for +10 + +amendment), AU 316.68 & .52 (post-amendment)) Among the actions available to an auditor who +uncovers evidence of possible fraud or illegal acts are: (1) considering whether the misstatements +are indicative of fraud (AU 316.34 (pre-amendment), AU 316.75 (post-amendment)) or illegal acts +(AU § 317, Illegal Acts by Clients, at AU 317.07); (2) evaluating the effect and considering +implications for other aspects of the audit (AU 316.35 (pre-amendment), AU 316.77 (post- +amendment)); (3) attempting to obtain additional evidential matter (AU 316.35 (pre-amendment), +AU 316.77 (post-amendment)); (4) confirming significant information concerning the matter with +the other party to the transaction or with intermediaries, such as banks or lawyers (AU 317.11); (5) +informing the Audit Committee (AU 316.38 (pre-amendment), AU 316.79 (post-amendment)) or +equivalent authority (AU 317.17); (6) considering whether to withdraw from the engagement and +communicating the reasons to the Audit Committee (AU 316.36 (pre-amendment), AU 316.78 +(post-amendment)); (7) consulting with the client’s legal counsel (AU 317.10) and the auditor’s +own legal counsel (AU 317.22); and (8) issuing an audit report that is not unqualified (AU § 508, +Reports on Audited Financial Statements, at AU 508.20-.63) +34. Contrary to GAAS, Southworth failed to adequately plan and perform the 1998 +audit after learning of numerous facts that, either standing alone or in the context of other facts +learned during the audit, warranted heightened scrutiny that should have alerted him to the +possibility that NCFE’s financial statements were materially misleading in that they contained +insufficient disclosure of the nature and extent of NCFE’s indenture violations, including non- +permitted loans to financially troubled borrowers, and were not in conformity with GAAP. In +auditing the 1998 Financials, Southworth failed to properly consider the implications of the scope +and significance of the indenture violations. He also failed to probe NCFE’s basis for asserting in +footnote 8 that, in the Company’s opinion, the violations were curable or immaterial. +35. Additionally, as described above, during the 1998 audit, Southworth became aware +of information that should have suggested to him that NCFE had falsely reported in monthly +investor reports that NCFE was using investor funds exclusively for the purchase of eligible +receivables. Such information triggered Southworth’s obligations under GAAS to inquire further +into possible fraud and illegal acts. +36. If Southworth had exercised due care and professional skepticism, he would have +taken significant steps to assess whether NCFE management was engaged in fraud or illegal acts. +This failure to properly plan and perform the audit violated AU 316 and AU 317. +Failure to Obtain Sufficient Competent Evidential Matter, Exercise Due Care, and Exercise +Professional Skepticism +37. Auditors need to obtain sufficient competent evidence “to afford a reasonable basis +for an opinion regarding the financial statements under audit.” (AU § 326, Evidential Matter, at +AU 326.01) The validity and sufficiency of required evidence depends on the circumstances and +the auditors’ judgment, but the evidence should be competent, sufficient, and persuasive. (AU +periods beginning on or after December 15, 2002. These amendments did not apply to the 1998 NCFE audit. +Therefore, all citations to AU 316 will include the pre-amendment citation in effect at the time of the audit, as well +as the post-amendment citation to the current AU 316. +11 +326.02 & .21-.22) Further, GAAS requires that auditors exercise due professional care in planning +and performing an audit and in preparing the audit report. (AU § 230, Due Professional Care in the +Performance of Work, at AU 230.01) Due professional care requires that the auditor exercise +professional skepticism in performing audit procedures and gathering and analyzing audit +evidence. (AU 230.07-.08) “In exercising professional skepticism, the auditor should not be +satisfied with less than persuasive evidence because of a belief that management is honest.” (AU +230.09) “Professional skepticism is an attitude that includes a questioning mind and a critical +assessment of audit evidence.” (AU 230.07; see also AU 316.27 (pre-amendment), AU 316.13 +(post-amendment)) +38. As set forth above, during the course of the 1998 audit, Southworth was aware that +a substantial portion of NCFE’s finance receivables consisted of non-permitted loans instead of +purchased eligible healthcare receivables. The non-permitted loans consisted of unsecured loans +and loans secured by collateral such as real estate, equipment, and artwork. The audit workpapers +documented that many of NCFE’s customers had incurred substantial operating losses over a +period of years and were not capable of meeting or honoring their business obligations without +continued financial support from NCFE; they were severely financially distressed and were +dependent on NCFE to fund their negative operating cash flows. These providers did not possess +eligible receivables to sell to NCFE, nor did they generally possess other assets of value that could +serve as collateral. +39. Southworth did not properly assess the adequacy of NCFE’s allowance for losses. +Southworth failed to properly evaluate how the providers’ negative operating cash flows, negative +working capital, and negative net worth impaired their ability to repay the non-permitted loans made +to them. Based on the evidence available to him, Southworth should have known that NCFE’s +financial statements failed to reflect a sufficient reserve for material losses arising from the +unsecured loans made to healthcare providers. +40. Southworth improperly accepted overvalued collateral such as pro forma +receivables and the Location 99 receivables as an alternative to the purchased accounts receivable +required by the indentures. Southworth did not exercise due care or professional skepticism in +accepting fabricated collateral proffered by NCFE as an appropriate substitute for purchased +accounts receivable. He failed to exercise appropriate professional skepticism or obtain sufficient +competent evidence in support of the values that NCFE ascribed to the alternative collateral. +41. Southworth failed to properly evaluate the risk posed to the collectibility of NCFE’s +finance receivables by the indenture violations in the programs. Southworth knew or should have +known that if the indenture trustees for the programs declared a principal amortization event for the +programs, NCFE’s ability to continue to fund the providers who owed money to NCFE would +cease. Southworth failed to properly consider these matters when evaluating the adequacy of +NCFE’s allowance for loan losses. +12 + +Issuance of an Unqualified Audit Report +42. GAAS requires that the auditor’s report contain an opinion on the financial +statements taken as a whole and contain a clear-cut indication of the character of the auditor’s +work. (AU 508.04) The auditor can determine that he is able to issue an audit report containing an +unqualified opinion only if he has conducted his audit in accordance with GAAS and the financial +statements comply with GAAP. (AU 508.07 & .22) +43. GAAS further requires that “[t]he [audit] report shall state whether the financial +statements are presented in accordance with generally accepted accounting principles.” (AU § +410, Adherence to Generally Accepted Accounting Principles, at AU 410.01) An auditor’s report +that financial statements are presented in accordance with GAAP should be based on, among other +things, whether the financial statements “are informative of matters that may affect their use, +understanding, and interpretation.” (AU § 411, The Meaning of “Present Fairly in Conformity +with Generally Accepted Accounting Principles”, at AU 411.04) +44. Under GAAS, “[i]nformative disclosures in the financial statements are to be +regarded as reasonably adequate unless otherwise stated in the report.” (AU § 431, Adequacy of +Disclosure in Financial Statements, at AU 431.01) “The presentation of financial statements in +conformity with generally accepted accounting principles includes adequate disclosure of material +matters. These matters relate to the form, arrangement, and content of the financial statements and +their appended notes, including, for example, the terminology used, the amount of detail given, the +classification of items in the statements, and the bases of amounts set forth. An independent +auditor considers whether a particular matter should be disclosed in light of the circumstances and +facts of which he is aware at the time.” (AU 431.02) +45. In auditing NCFE’s 1998 Financials, Southworth acted unreasonably in rendering an +audit report containing an unqualified audit opinion stating that the audit complied with GAAS and +the financial statements comported with GAAP. As described above, NCFE’s 1998 Financials did +not comport with GAAP because they failed to reflect a sufficient reserve for the impairment of +unsecured loans that NCFE had made to healthcare providers and made materially misleading +disclosures regarding the NCFE program violations. As described above and below, Southworth +did not comply with GAAS in conducting the audit. +Failure to Perform an Adequate Going Concern Analysis +46. AU § 341, The Auditor’s Consideration of an Entity’s Ability to Continue As a +Going Concern, states in pertinent part that “[t]he auditor has a responsibility to evaluate whether +there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable +period of time, not to exceed one year beyond the date of the financial statements being audited.” +(AU 341.02) Among the conditions and events that may indicate substantial doubt about the +entity’s ability to continue as a going concern is “default on loan or similar agreements.” (AU +341.06) “The auditor’s evaluation is based on his knowledge of relevant conditions and events that +exist at or have occurred prior to the completion of fieldwork.” (AU 341.02) If “the auditor +13 + +concludes that substantial doubt about the entity’s ability to continue as a going concern for a +reasonable period of time remains, the audit report should include an explanatory paragraph . . . to +reflect that conclusion.” (AU 341.12) +47. Southworth mistakenly concluded that NCFE could continue as a going concern, +despite the material defaults in NCFE’s programs. In doing so, he failed to adequately evaluate +whether there was a substantial doubt about NCFE’s ability to continue as a going concern for a +reasonable period of time when NCFE had acquired a substantial portion of the assets on its +balance sheet in violation of the indentures. +48. Moreover, to the extent that Southworth relied on management’s representations +that the indenture trustees and noteholders were aware of the indenture violations, such reliance +itself was a departure from GAAS, which states in pertinent part that “representations from +management are part of the evidential matter the independent auditor obtains, but they are not a +substitute for the application of those auditing procedures necessary to afford a reasonable basis for +an opinion regarding the financial statements under audit.” (AU § 333, Management +Representations, at AU 333.02) +49. The significant and material indenture violations in the programs, and the +significant impairment of NCFE’s receivables, created a substantial doubt about NCFE’s ability to +continue as a going concern for a reasonable period of time, and Southworth’s analysis of NCFE’s +ability to continue as a going concern constituted a departure from GAAS. +Communications with the Successor Auditor +50. Under GAAS, a predecessor auditor “should respond promptly and fully, on the +basis of known facts, to the successor auditor’s reasonable inquiries. However, should the +predecessor auditor decide, due to unusual circumstances such as impending, threatened, or +potential litigation; disciplinary proceedings; or other unusual circumstances, not to respond fully to +the inquiries, the predecessor auditor should clearly state that the response is limited.” (AU § 315, +Communications Between Predecessor and Successor Auditors, at AU 315.10) +51. Southworth failed to respond fully to the Successor Auditor’s reasonable inquiries +about NCFE’s management. In response to the Successor Auditor’s inquiries about NCFE +management’s integrity, Southworth told the Successor Auditor that there were no issues with +management integrity. Southworth did not respond fully because Southworth did not also disclose +any of the following matters that were relevant to management integrity: (i) NCFE was making +non-permitted loans; (ii) NCFE was reporting inaccurately aged receivables and including +ineligible receivables on investor reports; and (iii) PwC’s internal risk-assessment system rated +NCFE’s integrity and ethics as “high risk.” Southworth’s failure to respond fully to the Successor +Auditor’s inquiries constituted a departure from GAAS. +14 + +F. VIO LATIONS +52. Rule 102(e)(1)(ii) of the Commission’s Rules of Practice provides, in pertinent part, +that, “[t]he Commission may . . . deny, temporarily or permanently, the privilege of appearing or +practicing before it in any way to any person who is found . . . to have engaged in unethical or +improper professional conduct.” +53. With respect to persons licensed to practice as accountants, such as Southworth, +“improper professional conduct” under Rule 102(e)(1)(ii) includes, inter alia: +(B) negligent conduct, consisting of (1) a single instance of highly unreasonable conduct +that results in a violation of applicable professional standards in circumstances in which an +accountant knows, or should know, that heightened scrutiny is warranted, or (2) repeated +instances of unreasonable conduct, each resulting in a violation of applicable professional +standards, that indicate a lack of competence to practice before the Commission. +54. The conduct described above constitutes highly unreasonable conduct that resulted +in a violation of applicable professional standards in circumstances in which Southworth knew, or +should have known, that heightened scrutiny was warranted. +G. FINDINGS +55. Based on the foregoing, the Commission finds that Southworth engaged in improper +professional conduct pursuant to Rule 102(e)(1)(ii) of the Commission’s Rules of Practice. +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, effective immediately, that: +A. Southworth is denied the privilege of appearing or practicing before the +Commission as an accountant. +B. After two (2) years from the date of this order, Southworth may request that +the Commission consider his reinstatement by submitting an application (attention: Office of +the Chief Accountant) to resume appearing or practicing before the Commission as: +1. a preparer or reviewer, or a person responsible for the preparation or +review, of any public company’s financial statements that are filed with the Commission. Such +an application must satisfy the Commission that Southworth’s work in his practice before the +Commission will be reviewed either by the independent audit committee of the public company +for which he works or in some other acceptable manner, as long as he practices before the +Commission in this capacity; and/or +15 + +2. an independent accountant. Such an application must satisfy the +Commission that: +(a) Southworth, or the public accounting firm with which he is +associated, is registered with the Public Company Accounting Oversight Board (“Board”) in +accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; +(b) Southworth, or the registered public accounting firm with which he +is associated, has been inspected by the Board and that inspection did not identify any criticisms +of or potential defects in Southworth’s or the firm’s quality control system that would indicate +that Southworth will not receive appropriate supervision; + (c) Southworth has resolved all disciplinary issues with the Board, and +has complied with all terms and conditions of any sanctions imposed by the Board (other than +reinstatement by the Commission); and +(d) Southworth acknowledges his responsibility, as long as he appears +or practices before the Commission as an independent accountant, to comply with all +requirements of the Commission and the Board, including, but not limited to, all requirements +relating to registration, inspections, concurring partner reviews and quality control standards. +C. The Commission will consider an application by Southworth to resume appearing +or practicing before the Commission provided that his state CPA license is current and he has +resolved all other disciplinary issues with the applicable state boards of accountancy. However, +if state licensure is dependent on reinstatement by the Commission, the Commission will +consider an application on its other merits. The Commission’s review may include consideration +of, in addition to the matters referenced above, any other matters relating to Southworth’s +character, integrity, professional conduct, or qualifications to appear or practice before the +Commission. + By the Commission. + N ancy M. Morris + S ecretary +16 diff --git a/raw/aaer/2007/AAER-2724.pdf b/raw/aaer/2007/AAER-2724.pdf new file mode 100644 index 0000000000000000000000000000000000000000..e2f635f97f3bc14427ea28ce22460cc2a27e0496 Binary files /dev/null and b/raw/aaer/2007/AAER-2724.pdf differ diff --git a/raw/aaer/2007/AAER-2725.txt b/raw/aaer/2007/AAER-2725.txt new file mode 100644 index 0000000000000000000000000000000000000000..23b2b5d1ce9ef5b2650e9536c12c766b786fbfc0 --- /dev/null +++ b/raw/aaer/2007/AAER-2725.txt @@ -0,0 +1,348 @@ + UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56519 / September 25, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2725 / September 25, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12825 +In the Matter of +ELECTRONIC DATA +SYSTEMS CORPORATION, +Respondent. + ORDER INSTITUTING CEASE-AND- +DESIST PROCEEDINGS, MAKING +FINDINGS AND IMPOSING A CEASE- +AND-DESIST ORDER PURSUANT TO +SECTION 21C OF THE SECURITIES +EXCHANGE ACT OF 1934 +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 Electronic Data Systems Inc. (“Respondent” or +“EDS”). +II. +In anticipation of the institution of these proceedings, EDS has submitted an Offer of +Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purposes +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, except as +to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are +admitted, Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings, +Making Findings and Imposing a Cease-and-Desist Order Pursuant to Section 21C of the +Exchange Act (“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds that:1 +A. RESPONDENT +EDS is a Delaware corporation headquartered in Plano, Texas. EDS is in the business of +providing information technology services. Its common stock is registered with the Commission +pursuant to Section 12(b) of the Exchange Act and trades on the New York Stock Exchange. In +1995, EDS acquired A.T. Kearney, Inc., a management consulting firm with operations in 37 +countries (“ATK”). In January 2006, EDS completed the sale of ATK. +B. SUMMARY +This matter concerns reporting and books and records violations by EDS. In the first +quarter of 2002, EDS failed to disclose the cost of certain derivatives contracts. In the second +quarter of 2002, EDS failed to disclose adequately the cost of those contracts. In the third quarter +of 2002, EDS selectively disclosed to certain analysts the cost and early settlement of the +outstanding derivatives contracts. In addition, EDS failed to disclose adequately an extraordinary +transaction with a major customer that increased its reported cash flow by $200 million in the +second quarter of 2002. Moreover, EDS maintained inaccurate books and records by employing +certain inaccurate assumptions in accounting models used to estimate revenues and expenses for +one of its largest contracts. EDS also maintained inaccurate books and records between 2001 and +2003 as a result of a false invoicing scheme discovered by EDS and reported by EDS to the +Commission in early 2004, by which a former employee at a former subsidiary made improper +payments to officials of Indian government-owned customers. +C. FACTS +1. EDS’s Derivatives Transactions +In December 2001, EDS began entering into derivatives contracts with a financial +institution to reduce the expected cost of its employee stock option program in the event that +EDS’s share price increased. These transactions involved EDS buying “capped collar contracts,” +which obligated EDS to purchase its shares on future dates at predetermined prices, and selling put +contracts, which gave the financial institution the option of selling EDS shares to the company on +future dates at predetermined prices if EDS’s share price fell below certain levels. The transactions +included “trigger” provisions linked to EDS’s share price. These provisions allowed the financial +institution to force immediate settlement of a contract if EDS’s share price fell below 50 percent of +the exercise price of that contract. +1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other +person or entity in this or any other proceeding. +2 + +In December 2001, EDS disclosed in a press release that “it may occasionally repurchase +common shares in 2002 and 2003 to be held for reissuance under the company’s equity based +incentive and benefit plans . . . in the open market or in other transactions.” +In its Form 10-K for the year ended December 31, 2001, EDS disclosed the extent of its +obligations under its stock incentive plans, including the fact that options for 15.1 million shares +were presently exercisable. EDS also disclosed the derivatives contracts as follows: +During 2001, the Company initiated a program to manage the +future stock issuance requirements of the stock incentive plans +described in Note 10 by utilizing equity investment contracts for +EDS common stock. At December 31, 2001, the Company owned +equity contracts to purchase 539,000 shares of EDS common stock +at a weighted-average price of $70.14. The Company also had put +obligations covering 821,000 shares of EDS common stock at a +weighted-average price of $70.73. All of these instruments expire +in 2002. These contracts permit cash or net share settlement at the +Company’s option. +a. The First Quarter of 2002 +By March 31, 2002, EDS had entered into capped collar and put contracts to buy over four +million shares of its stock from the financial institution at an expected cost of over $265 million, an +increase of about $170 million from the expected cost at the end of 2001. EDS did not include any +mention of these derivatives transactions in its Form 10-Q for the quarter ended March 31, 2002. +b. The Second Quarter of 2002 +During the second quarter of 2002, EDS entered into additional derivatives contracts with +the financial institution. As of June 30, 2002, EDS had outstanding derivatives contracts to buy +over 5.1 million shares of its stock from the financial institution at an expected cost of over +$317 million. +EDS made some limited disclosures regarding these derivatives contracts in its Form 10-Q +for the quarter ended June 30, 2002. The filing states that EDS “owned equity contracts to +purchase” 2.6 million shares of its stock at a weighted average price of $61.58 and “had put +obligations covering” 2.5 million shares at a weighted average price of $62.90. EDS intended at +all times to physically settle the transactions. When EDS filed this Form 10-Q on July 26, 2002, its +share price was about $32. The only disclosure regarding the timing of settlement was the phrase +“all of these instruments expire in 2002.” +c. Selective Disclosures of the $225 Million Derivatives Settlement +After announcing on September 18, 2002 that its earnings and cash flow would fall far +short of prior guidance, EDS’s share price fell over 50 percent, causing the trigger provisions in all +3 + +of EDS’s remaining derivatives contracts to go into effect. Although all of the derivatives +contracts were required by their terms to be settled by year-end in the ordinary course of business, +the financial institution demanded that EDS immediately settle the outstanding transactions. The +settlement occurred on September 20, 2002 and cost EDS over $225 million. +EDS personnel disclosed this $225 million payment to securities analysts from one broker- +dealer on September 19, 2002 and to analysts from two other broker-dealers on September 23, +2002. EDS disclosed publicly on September 24, 2002 that it had closed out its position in these +obligations through the issuance of commercial paper, but did not publicly disclose the +$225 million cost of settlement until November 14, 2002 when it filed its Form 10-Q for the +quarter ended September 30, 2002. +2. EDS’s Failure to Disclose the Basis for Its Improving Cash Flow +EDS did not adequately disclose the basis that led it to report a large one-time boost to its +free cash flow, a financial metric that was closely followed by EDS analysts.2 +Between April and mid-June, 2002, EDS and a major customer negotiated a $200 million +prepayment by the customer in return for monthly credits against EDS invoices for services +totaling approximately $221 million over 24 months. Concurrently, EDS and the customer +negotiated a modification and a one-year extension of their computer outsourcing agreement. +In its Form 10-Q for the quarter ended June 30, 2002, EDS included the prepayment as +deferred revenue on the statement of cash flows and included the following in the description of +“Liquidity and Capital Resources” in its Management Discussion and Analysis: +Net cash provided by operating activities increased $178 million to +$759 million for the six months ended June 30, 2002 compared with +$581 million during the corresponding period of the prior year. The +increase in cash flow from operating activities was primarily due to +increases in earnings, excluding depreciation, amortization and +changes in accounting for derivatives, and changes in working +capital items. The increase in the usage of cash for total receivables +in 2002 as compared to 2001 was primarily due to unbilled revenue +attributable to certain large government clients, somewhat offset by +a decrease in trade receivables. This increase of receivables was +more than offset by an increase in deferred revenue due to an +increase in customer prepayments as well as lower payments on +current liabilities. +The reference to “an increase in deferred revenue due to an increase in customer +prepayments” was insufficient to convey the unusual nature of the $200 million prepayment. +Although EDS recorded several much smaller prepayments in the period, the Form 10-Q failed to +2 Free cash flow is a non-GAAP measure that EDS defines as operating cash flow minus capital expenditures. +4 + +disclose that a $200 million prepayment came from a single, existing customer and did not +represent additional business from a new customer. The $200 million amount was unprecedented +to EDS, and comprised over 90 percent of EDS’s free cash flow in the second quarter of 2002, and +over one-quarter of its operating cash flow during the first six months of the year. The +$200 million prepayment transaction included $21 million in discounts from future sales, as well as +a credit rating trigger found in no previous EDS prepayment agreement, that could require EDS to +refund the prepayment if EDS’s credit rating dropped by five levels. At the time that the Form 10- +Q for the second quarter of 2002 was filed, EDS’s credit rating was under review for possible +downgrade. +3. The NMCI Contract +In October 2000, the U.S. Department of Defense awarded EDS a five year $6.9 billion +contract to build an intranet for the Navy and the Marine Corps (the “NMCI contract”). Over the +term of the NMCI contract, EDS expected to deploy over 360,000 “seats,” or computer +workstations. The contract required EDS to make a large up-front investment to build a secure and +highly-advanced infrastructure capable of supporting the 360,000 seat intranet. +In accounting for the NMCI contract over the course of performance, Generally Accepted +Accounting Principles required EDS to prepare reasonably dependable estimates of revenues and +expenses over the life of the contract in order to determine whether the NMCI contract was in a +loss position. EDS’s internal policies and procedures required preparation of quarterly accounting +models that conformed to the terms of the NMCI contract and that reflected the most likely +outcome of the contract’s key assumptions, such as seat deployment levels. In the first and second +quarters of 2002, EDS prepared NMCI contract accounting models reflecting that it would deploy +160,000 seats during the five-year contract term. +At the time these models were employed, EDS had an insufficient basis to assume that only +160,000 seats would be deployed over the life of the contract, because that seat level assumption +was inconsistent with the higher seat levels contemplated by the NMCI contract and anticipated by +EDS. +4. EDS’s Recording of Payments on False Invoices at its A.T. Kearney, Inc. Subsidiary +Beginning in September 2003, EDS discovered that the head of the ATK branch in India +(“ATKI”) was diverting cash by causing ATKI to pay false invoices from dummy vendors. +Between 2001 and 2003, the employee used some of the cash to pay numerous bribes totaling at +least $720,000 to high level employees of two Indian state-owned enterprises, who threatened to +cancel their contracts with ATKI after issues arose with those contracts’ implementation. These +payments took the form of cash transfers, gifts and services and continued until discovered by EDS +in September 2003. The Indian state-owned enterprises did not cancel the contracts, and ATKI +derived revenues from those contracts. EDS investigated and reported this matter to the +Commission in February 2004. +5 + +By reason of this false invoicing scheme, EDS incorrectly recorded these amounts in its +accounting books and records. +D. LEGAL ANALYSIS +1. Violations of the Reporting Provisions of the Exchange Act +Section 13(a) of the Exchange Act and Rule 13a-13 thereunder require issuers with +securities registered under Section 12 of the Exchange Act to file quarterly reports with the +Commission on Form 10-Q. These reports must be complete and accurate in all material respects. +See, e.g., SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1165 (D.C. Cir. 1978), cert. denied sub nom. +Zimmerman v. SEC, 440 U.S. 913 (1979). No showing of scienter is necessary to establish a +violation of Section 13(a). Savoy Indus., Inc., 587 F.2d at 1167. +Exchange Act Rule 12b-20 requires an issuer to include in its periodic reports any “material +information . . . necessary to make the required statements, in the light of the circumstances under +which they were made[,] not misleading.” +Exchange Act Rule 13a-13 requires issuers’ quarterly reports to comply with the disclosure +requirements of Regulation S-K Item 303. Item 303 requires issuers to include a “Management’s +Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) section in +their periodic public filings. Item 303(b) requires issuers’ filings to discuss material changes in the +items enumerated in Item 303(a). Among other things, Item 303(a) requires issuers to discuss in +the MD&A sections of their public filings their financial condition, changes in their financial +condition, any known “commitments, events or uncertainties that will result in or that are +reasonably likely to result in the registrant’s liquidity increasing or decreasing in a material way” +(Item 303(a)(1)) and “any known trends or uncertainties that . . . the registrant reasonably expects +will have a material favorable or unfavorable impact on net sales or revenues or income from +continuing operations” (Item 303(a)(3)). The instructions to Rule 303(a) specify that “liquidity” +for purposes of the rule “refers to the ability of an enterprise to generate adequate amounts of cash +to meet the enterprise’s needs for cash.” +To comply with the Commission’s disclosure requirements, an issuer’s filings must be +understandable to ordinary investors. See, e.g. Virginia Bankshare, Inc. et al. v. Sandberg, 501 +U.S. 1083, 1097 (1991) (“The point of a proxy statement, after all, should be to inform, not to +challenge the reader’s critical wits.”) While “[c]orporations are not required to address their +stockholders as if they were children in kindergarten,” Richard v. Crandall, 262 F. Supp. 538, 554 +(S.D.N.Y. 1967), “it is not sufficient that overtones might have been picked up by the sensitive +antennae of investment analysts.” Gerstle v. Gamble-Skohmo, Inc., 478 F.2d 1281, 1297 (2nd Cir. +1973). +Exchange Act Rule 13a-13 also requires issuers to file quarterly reports that comply with +the Commission's Regulation S-X. This mandates that financial statements be presented in +conformity with GAAP. Consensus positions on accounting issues by the Emerging Issues Task +Force (“EITF”) of the FASB are GAAP. See In the Matter of Robert D. Potts, Release No. 34- +6 + +39126 (September 24, 1997). Financial statements not prepared in accordance with GAAP are +presumed to be “misleading or inaccurate.” See Regulation S-X, Section 4-01(a). +On March 21, 2002, the EITF issued a revised consensus position that imposes various +disclosure requirements on issuers, like EDS, engaged in derivatives transactions indexed to their +own stock. Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, +a Company’s Own Stock, EITF Issue No. 00-19 (“EITF 00-19”). EITF 00-19 requires issuers to +disclose, inter alia, the contracts’ current fair values, how changes in the price of the issuer’s stock +affects the fair values of the contracts, and the maximum number of shares that the company may +be required to issue in a net share settlement. +a. EDS’s Failure to Disclose Material +Information Regarding Its Derivatives Contracts +i. EDS’s Failure to Disclose the Status of the Derivatives Contracts in its +Form 10-Q for the Quarter Ended March 31, 2002 +EDS’s Form 10-Q for the quarter ended March 31, 2002 failed to comply with the +disclosure requirements of Item 303(b) of Regulation S-K by failing to include any mention of the +derivatives contracts. At the time that EDS filed its first quarter Form 10-Q, it expected the +aggregate cost of EDS shares to be purchased under these derivatives contracts to be over +$265 million. This was material to EDS’s financial condition, including its liquidity, at that time. +By failing to disclose the status of its derivatives contracts in this filing, EDS violated Exchange +Act Section 13(a) and Rule 13a-13 thereunder. +ii. EDS’s Failure to Disclose the Status of the Derivatives Contracts in its +Form 10-Q for the Quarter Ended June 30, 2002 +EDS’s Form 10-Q for the quarter ended June 30, 2002 also failed to comply with the +disclosure requirements of Item 303(b) of Regulation S-K. At the time that EDS filed its second +quarter Form 10-Q, it expected the cost of shares to be purchased under these derivatives contracts +to be $317 million. Though EDS included some disclosures regarding the derivatives contracts in +that filing, they were ambiguous and incomplete in that they failed to disclose adequately EDS’ +$317 million obligation under the derivatives contracts; the manner in which EDS intended to +settle the derivatives contracts; and that it could be accelerated due to a precipitous drop in EDS’s +share price. By failing to comply with Item 303(b) of Regulation S-K, EDS violated Exchange Act +Section 13(a) and Rule 13a-13 thereunder. +EDS’s Form 10-Q for the quarter ended June 30, 2002 also failed to comply with EITF 00- +19’s disclosure requirements. EDS did not disclose adequately the derivatives contracts’ current +fair values or the maximum number of shares it could be required to issue in a net share settlement. +In addition, by failing to make any mention of the trigger provisions, EDS failed to disclose how +changes in its stock price would affect its contracts’ current fair values. EDS’s failures to include +this information as required by EITF 00-19 caused it to violate Exchange Act Section 13(a) and +Rule 13a-13 thereunder. +7 + +b. EDS’s Failure to Comply with Regulation FD +Regulation FD prohibits the selective disclosure of material nonpublic information to +securities professionals. Issuers violate Regulation FD when they, or a person acting on their +behalf, disclose material nonpublic information to securities analysts or other enumerated persons +without making public disclosure of that information, simultaneously for intentional disclosures, or +promptly for non-intentional disclosures. 17 C.F.R. § 243.100. See also Final Rule: Selective +Disclosure and Insider Trading, Exchange Act Release No. 34-43154, 65 Fed. Reg. 51,716 (Aug. +15, 2000) (“Adopting Release”). An issuer’s failure to make a required public disclosure pursuant +to Regulation FD constitutes violations of both Regulation FD and Section 13(a) of the Exchange +Act. See Adopting Release, 65 Fed. Reg. at 51726. +Information is nonpublic if it has not been disseminated in a manner making it available to +investors generally. See, e.g., SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 854 (2d Cir. 1968), +cert. denied, 394 U.S. 976 (1969). “Information becomes public when disclosed ‘to achieve a +broad dissemination to the investing public generally and without favoring any special person or +group.’” SEC v. Mayhew, 121 F.3d 44, 50 (2d Cir. 1997) (citations omitted). +Although the $225 million payment to settle the derivatives contracts did not directly affect +EDS’s earnings, it was nevertheless material to EDS at that time. EDS personnel disclosed the +$225 million payment to settle the derivatives contracts to securities analysts on September 19, +2002 and September 23, 2002. EDS did not disclose publicly until September 24, 2002 that it had +closed out its position in these obligations through the issuance of commercial paper, and did not +publicly disclose the $225 million cost of the settlement until November 14, 2002. Consequently, +EDS violated Regulation FD and Section 13(a) of the Exchange Act. +c. EDS’s Failure to Disclose Material Information Regarding its +Cash Flow in its Form 10-Q for the Quarter Ended June 30, 2002 +In its Form 10-Q for the quarter ended June 30, 2002, EDS did not adequately disclose the +basis that led it to report a large one-time boost to its free cash flow. The reference to “an increase +in deferred revenue due to an increase in customer prepayments” was insufficient to convey the +extraordinary nature of the $200 million prepayment. By not providing additional information +regarding the terms of the advance, this disclosure suggested that EDS’s improving cash flow was +a consequence of ordinary business operations. EDS consequently violated Exchange Act Section +13(a) and Rules 12b-20 and 13a-13 thereunder. +2. Violations of the Books and Records Provisions of the Exchange Act +Section 13(b)(2)(A) of the Exchange Act requires every Section 12 registrant to “make and +keep books, records, and accounts which, in reasonable detail, accurately and fairly reflect” the +issuer’s transactions. The Commission need not prove scienter to establish violations of Exchange +Act Section 13(b)(2). See “Promotion of the Reliability of Financial Information and Prevention of +the Concealment of Questionable or Illegal Corporate Payments and Practices,” Exchange Act Rel. +8 + +No. 34-15570 (Feb. 15, 1979). “[A]ccurate recordkeeping is an essential ingredient in promoting +management responsibility and is an affirmative requirement for publicly held American +corporations to strengthen the accuracy of corporate books and records, which are ‘the bedrock +elements of our system of corporate disclosure and accountability.’” SEC v. World-Wide Coin +Investments, Ltd., et al., 567 F. Supp. 724, 746 (N.D. Ga. 1983) (citations omitted). +a. EDS’s Books and Records Violations Relating to the NMCI Contract +In the first and second quarters of 2002, EDS prepared NMCI contract accounting models +reflecting that it would deploy 160,000 seats during the five-year contract term. At the time these +models were employed, EDS had an insufficient basis to assume that only 160,000 seats would be +deployed over the life of the contract. For this reason, EDS’s books, records and accounts did not, +in reasonable detail, accurately and fairly reflect the status of the NMCI contract. Consequently, +EDS violated Exhange Act Section 13(b)(2)(A). +b. EDS’s Books and Records Violations Relating to ATKI +The false invoicing scheme described above caused ATKI to make and keep inaccurate +books, records and accounts, and consequently caused EDS to violate Exchange Act Section +13(b)(2)(A). +EDS’s Remedial Efforts +In determining to accept the Offer, the Commission considered remedial acts promptly +undertaken by Respondent and cooperation afforded the Commission staff in connection with its +books and records violations related to ATKI. +IV. +In view of the foregoing, the Commission deems it appropriate to accept EDS’s Offer. +Accordingly, it is hereby ORDERED: + Respondent EDS cease and desist from committing or causing any violations and any future +violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act, and Rules 12b-20, 13a-13, and +Regulation FD thereunder. +Respondent, in connection with its books and records violations related to ATKI, shall, +within fifteen (15) days of the entry of this Order, pay disgorgement in the amount of $358,800, and +prejudgment interest thereon in the amount of $132,102, for a total payment of $490,902 to the +United States Treasury. This payment shall be: (A) made by United States postal money order, +certified check, bank cashier's check or bank money order; (B) made payable to the Securities and +Exchange Commission; (C) hand-delivered or mailed to the Office of Financial Management, +Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, +9 + +Alexandria, VA 22312; and (D) submitted under cover letter that identifies EDS as a Respondent +in these proceedings and the file number of these proceedings. A copy of the cover letter and +money order or check shall be sent to Kenneth R. Lench, Assistant Director, Division of +Enforcement, Securities and Exchange Commission, 100 F Street N.E., Washington, DC 20549- +6041. + By the Commission. + N ancy M. Morris + S ecretary +10 diff --git a/raw/aaer/2007/AAER-2728.txt b/raw/aaer/2007/AAER-2728.txt new file mode 100644 index 0000000000000000000000000000000000000000..c9a09cde7aea03ce3c3208d8b79730e1c6d66ae9 --- /dev/null +++ b/raw/aaer/2007/AAER-2728.txt @@ -0,0 +1,1396 @@ + + + + + + + + + + + + + + + + SEC.gov | Federal Home Loan Mortgage Corporation, et al. + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/502081","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Federal Home Loan Mortgage Corporation, et al. , Case No. 07-CV-1728 (U.S.D.C., D.D.C) (filed September 27, 2007) + + Freddie Mac and Four Former Executives Settle SEC Enforcement Action in Connection With Multi-Billion Dollar Accounting Fraud + + + + On September 27, 2007, the Securities and Exchange Commission filed a settled enforcement action charging the Federal Home Loan Mortgage Corporation ("Freddie Mac"), a shareholder-owned government-sponsored enterprise, with securities fraud in connection with improper earnings management that occurred from at least the second quarter of 1998 through and including the third quarter of 2002. The SEC's settled action also charged the following former Freddie Mac executives: David W. Glenn ("Glenn"), its former President, Chief Operating Officer, and Vice-Chairman of the Board; Vaughn A. Clarke ("Clarke"), its former CFO; Robert C. Dean ("Dean"), a former Senior Vice President; and Nazir G. Dossani ("Dossani"), a former Senior Vice President. + + The SEC's Complaint alleges that Freddie Mac engaged in a fraudulent scheme that deceived investors about its true performance, profitability, and growth trends, and that in 2000, 2001 and 2002 the Company misreported its net income in each of those years by 30.5%, 23.9% and 42.9%, respectively. As outlined in the Commission's Complaint, Freddie Mac's senior management exerted consistent pressure to have the Company report smooth and dependable earnings growth and to present investors with the image of a company that would continue to generate predictable and growing earnings. The Company's violations were the direct result of this corporate culture that placed great emphasis on steady earnings, and a senior management that fostered a corporate image that was touted as "Steady Freddie" to the marketplace + + Among the violative conduct alleged in the Complaint was the use of certain transactions to nullify the transitional effects of the Company's implementation of accounting standard SFAS 133(which relates to accounting for derivative instruments and hedging activities); the improper change in valuing the Company's "swaptions" portfolio at year-end 2000; the improper use of derivatives to shift earnings between periods; the improper use of a reserve in connection with the Company's application of SFAS 91 (which relates to accounting for loan origination costs); the use of certain transactions to nullify the effects of an accounting pronouncement known as Emerging Issues Task Force Issue 99-20; and the maintenance and reporting of a reserves for losses on loans materially in excess of probable losses. + + In its settlement with the Commission, Freddie Mac agreed, without admitting or denying the allegations, to the entry of a final judgment that permanently enjoins the Company from violations of Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act, which are anti-fraud provisions of the federal securities laws. Freddie Mac also agreed to pay a $50 million civil penalty, which is expected to be distributed to injured investors through a Fair Fund. Without admitting or denying the allegations in the Commission's Complaint, Glenn, Clarke, and Dossani agreed to the entry of a final judgment that permanently enjoins them from violating Sections 17(a)(2) and (3) of the Securities Act. In a separate proceeding, Dean consented to the entry of a Commission Order requiring the he cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and (3) of the Securities Act. Additionally, Glenn, Clarke, Dossani and Dean agreed to respectively pay civil penalties of $250,000, $125,000, $75,000, and $65,000, as well as $150,000, $29,227, $61, 663, and $34,658 in disgorgement. + + + + + SEC Complaint in this matter ; Administrative Proceeding 33-8850 + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + Administrative Proceedings Release + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2730.txt b/raw/aaer/2007/AAER-2730.txt new file mode 100644 index 0000000000000000000000000000000000000000..a725b83a47bb0e26c9dec39e6b2ad6a49ba791f2 --- /dev/null +++ b/raw/aaer/2007/AAER-2730.txt @@ -0,0 +1,291 @@ +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT of 1934 +Release No. 56557 / September 27, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2730 / September 27, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12845 +In the Matter of : +: ORDER INSTITUTING CEASE-AND- +TIDEWATER INC., and : DESIST PROCEEDINGS, MAKING +JAMES KEITH LOUSTEAU, : FINDINGS, AND IMPOSING A CEASE- +CPA : AND-DESIST ORDER PURSUANT TO : SECTION 21C OF THE SECURITIES +Respondents. : +: EXCHANGE ACT OF 1934 +: +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 Tidewater Inc. and +James Keith Lousteau (“Lousteau”) (collectively “Respondents”). +II. +In anticipation of the institution of these proceedings, Respondents have +submitted Offers of Settlement (“Offers”), 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, except as to the Commission’s jurisdiction over +them and the subject matter of these proceedings, which are admitted, Respondents +consent to the entry of this Order Instituting Cease-and-Desist Proceedings, Making +Findings, and Imposing a Cease-and-Desist Order Pursuant to Section 21C of the +Securities Exchange Act of 1934 (“Order”), as set forth below. +III. +On the basis of this Order and Respondents’ Offers, the Commission finds that: +RESPONDENTS +1. Tidewater Inc. operates offshore service ve ssels designed a nd outfitted to +support the energy industry. Tidewater is a Delaware corporation with its headquarters in +New Orleans, Louisiana. Tidewater’s securities are reg istered with the Commission +under Section 12(b) of the Exchange Act and its shares are listed on the N ew York Stock +Exchange. Tidewater’s fiscal year ends on March 31. +2. James Keith Lousteau, age 59, has been Tidewater’s Executive Vice +President and Chief Financial Officer (“CFO”) since September 2000 and has been with +Tidewater in various positions since 1977. +FACTS + Background +3. Tidewater operates a worldwide fleet of vessels that provide services +supporting all phases of offshore exploration, development, and production. For internal +operational purposes, at all times relevant, Tidewater classified the status of its vessels as +either active or withdrawn. Active vessels include vessels that are “working,” “warm- +stacked,” or “cold-stacked.” A working vessel is one that is being used actively in +service. A warm-stacked vessel is a readily available vessel, although not in use, with +crews assigned and current certifications that comply with Coast Guard requirements. +4. In contrast, a “cold-stacked” vessel is a vessel that has been removed from +service with its crew released. Coast guard certifications necessary to operate cold- +stacked vessels have frequently expired, and significant expenditures are necessary to +refurbish these vessels in order to return them to certified status. +5. A “withdrawn” vessel is one that is retired from the fleet and therefore is +intended only to be sold or scrapped. Tidewater withdrew from its fleet older, +infrequently used vessels that were not marketable due to obsolescence or were +economically prohibitive to operate due to excessive repair costs, and before 2002, placed +such vessels on a list it referred to as the “Vessels For Sale List.” Historically, once +Tidewater placed these withdrawn vessels on the for-sale list, Tidewater would either sell +the vessels or periodically scrap them. Vessels placed on this for-sale list rarely return to +working status. +6. Tidewater’s accounting department and its external auditors review +withdrawn vessels for impairment purposes at least quarterly to ensure that the carrying +value of these assets does not exceed their fair value. Moreover, Tidewater’s quarterly +2 + +reports on Form 10-Q and annual reports on Form 10-K disclose the number of vessels +the company has withdrawn from service. +Tidewater’s Corporate Directive Prohibiting the +Withdrawal of Cold-Stacked Vessels +7. In or about April 2002, which coincided with the beginning of Tidewater’s +fiscal year-ended March 31, 2003, Tidewater’s newly-appointed Chief Executive Officer +(“CEO”) reaffirmed a corporate directive of his predecessor that explicitly prohibited the +addition of any vessels to Tidewater’s withdrawn fleet. Prior to this directive, from fiscal +year 2000 through the first half of fiscal year 2002, Tidewater undertook a regular +analysis of all cold-stacked vessels and withdrawn vessels. This analysis included +identifying which cold-stacked vessels would not return to service, even in an improved +market. As a result, during that time Tidewater withdrew from service 77 vessels. +8. Even though Tidewater’s CEO’s directive suspended all vessel +retirements, many towing-supply vessels were becoming obsolete in terms of their age +and outdated specifications. Between April 2002 and March 2004, certain of Tidewater’s +senior operations personnel on several occasions informed senior management, including +Lousteau, that in their view a significant number of cold-stacked vessels were unlikely to, +or would not, return to service. For example, in April 2002, Tidewater’s Senior Vice +President of Operations identified 25 cold-stacked vessels that the operations division +deemed “will not return to work.” +9. The senior operations personnel usually sought approval to have these +vessels withdrawn from service and subsequently either sold or scrapped. This typically +occurred when the costs to return the vessels to service made them economically +prohibitive to operate and there was little or no chance that many of these vessels would +ever return to service. In those situations, the vessels involved were usually older than +Tidewater’s active vessels and required high repair and recertification costs. For +example, Tidewater estimated in July 2002 that the total repair and recertification cost to +return to service 45 of its cold-stacked domestic towing-supply vessels was about $24 +million. +10. At other times, the operations personnel recommended withdrawal of +vessels that were unmarketable because they were obsolete and had been cold-stacked for +several years. For instance, in April 2003, a Tidewater engineer requested approval from +senior management, including Lousteau, to offer for sale 18 vessels that had been cold- +stacked since at least 1999. In June 2003, that same engineer sent Tidewater’s senior +management an updated list that included 21 cold-stacked vessels and recommended that +Tidewater attempt to sell these vessels. In recommending that these vessels be sold, the +engineer stated that he believed these vessels had “almost no chance of ever coming out +for service again.” +11. Certain of Tidewater’s senior operations personnel communicated similar +recommendations to senior management on many occasions throughout the relevant +3 + +period. In addition, at the same time as Tidewater was accumulating these obsolete +vessels, it initiated a fleet replacement program that involved the acquisition of newer or +refurbished vessels from competitors as well as the construction of new and +technologically modernized vessels, thereby decreasing even further the likelihood that +its idle vessels would ever be used again. +Tidewater Accumulated Numerous Cold-Stacked Vessels +That Were Unlikely to Return to Service +12. Because of the corporate directive prohibiting the withdrawal of vessels, +Tidewater began marketing for sale unofficially certain of the vessels that the operations +personnel recommended be withdrawn. Functionally, these vessels that were marketed +for sale unofficially were no different from other vessels that Tidewater had historically +withdrawn from service and put on the for-sale list prior to the corporate directive closing +that list. In other words, all had been identified as unlikely to return to service at +Tidewater and were marketed for sale or scrapping. +13. Although functionally the same as vessels that had been withdrawn, these +vessels for sale unofficially did not receive the same level of review by Tidewater’s +accounting department, and these vessels did not individually proceed through the formal +quarterly review for potential impairment that Tidewater’s accounting department and +external auditors normally performed on each vessel in the withdrawn fleet. Moreover, +they were not included in Tidewater’s disclosures related to its withdrawn fleet. +14. Ultimately, because Tidewater did not withdraw any vessels from its cold- +stacked fleet during the period from September 2001 through March 2004, by the end of +its 2004 fiscal year Tidewater had accumulated a fleet of 137 cold-stacked vessels +(representing almost 25% of its worldwide fleet of 575 vessels at March 2004), of which +at least 70 vessels should have been classified as withdrawn. Of these more than 70 +vessels, 67 vessels had not been used for over two years, and 21 vessels had been out of +service for more than five years. Following eight consecutive quarters of domestic +operating losses during fiscal years 2003 and 2004, the number of cold-stacked vessels +escalated to almost 70% of the domestic towing-supply vessels operating in the U.S. +Gulf, as disclosed in Tidewater’s Form 10-K for the fiscal year-ended March 31, 2004. +15. Tidewater did not review these vessels individually for possible +impairment until March 2004, and at that time the company recognized an impairment +charge of $26.5 million ($17.2 million after-tax, or $.30 per share) related to 83 vessels, +the majority of which had been cold-stacked for at least two years and were unlikely to +return to service. The details of the write-off were disclosed in Tidewater’s Form 10-K +for the fiscal year-ended March 31, 2004, wherein the Company stated that it was +unlikely that these vessels would ever return to service due to “average age, their +outdated specifications relative to competing equipment and significant costs to repair +and return these vessels to service.” The $26.5 million impairment charge reduced +Tidewater’s net income for fiscal year 2004 by almost 30%. +4 + +Tidewater Failed to Perform the Proper +Impairment Analysis on Its Vessels +16. Generally Accepted Accounting Principles (“GAAP”) requires companies +such as Tidewater to assess its accounting and reporting for long-lived assets such as its +cold-stacked vessels. Specifically, Statement of Financial Accounting Standards No. +144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), +states that a long-lived asset (or asset group) shall be tested for recoverability whenever +events or changes in circumstances indicate that its carrying amount may not be +recoverable. SFAS 144 lists examples of such events or changes in circumstances, one of +which is a significant adverse change in the extent or manner in which a long-lived asset +(or asset group) is being used or in its physical condition. +17. When Tidewater’s operations personnel identified certain cold-stacked +vessels that, in their view, would not return to service, and thus were functionally +withdrawn, this constituted a significant adverse change in the extent or manner in which +these long-lived assets were being used. Due to their physical condition or costs to +reactivate and recertify them, these vessels should have been separately reviewed for +impairment in order to ascertain whether their book values were recoverable. Therefore, +Tidewater, through Lousteau, should have had the cold-stacked vessels reviewed +individually for impairment throughout the time period that the vessels were in idle +status. +18. In addition, because Tidewater did not withdraw these vessels from +service and place them on a list of withdrawn vessels, the vessels were not individually +subject to the formal review for potential impairment that Tidewater’s external auditors +normally performed on withdrawn vessels, which would have likely led to questions +concerning the carrying value of those vessels. +Tidewater Failed to Review Its Depreciation Estimates +19. As part of its impairment review, Tidewater should have also reviewed its +depreciation estimates to evaluate whether they needed to be revised given the high +uncertainty surrounding the remaining service life of these vessels. Specifically, pursuant +to GAAP, estimates of remaining service lives and salvage values of depreciable assets +should be reviewed and revised to recognize changes in conditions. In addition, SFAS +144 states that when a long-lived asset (or asset group) is tested for recoverability, it also +may be necessary to review depreciation estimates and methods as required by certain +provisions of GAAP. Thus, issuers must continually evaluate the appropriateness of the +useful life and salvage value estimates assigned to long-lived assets as facts and +circumstances change. This type of evaluation may result in depreciation of the +remaining book value over a shorter period of time. +20. Between September 2001 and March 2004, Tidewater failed to review +adequately depreciation for the cold-stacked vessels that were unlikely to return to +service. These unused vessels instead continued to be depreciated for several years +5 + +according to their historical depreciation schedule. However, because they would not +return to service, Tidewater, through Lousteau, should have reviewed the depreciation on +these vessels to evaluate whether its estimates needed to be revised. +Tidewater Filed Inaccurate Periodic Reports +With the Commission +21. The vessels that should have been treated as withdrawn and marketed for +sale from Tidewater’s active fleet were not included in Tidewater’s Form 10-K for the +fiscal year-ended March 31, 2003 as vessels withdrawn from service. In fact, +Tidewater’s Form-10-K for fiscal year 2003 inaccurately stated that the Company “did +not withdraw any vessel from active service during fiscal 2003.” As mentioned +previously, the vessels that had been identified as unlikely to return to service by certain +operations personnel and were marketed for sale or scrapping were no different than the +historically withdrawn vessels that were on the for sale list. Lousteau signed Tidewater’s +annual and quarterly filings with the Commission and certified the disclosures contained +in those filings. Lousteau should have known that the disclosure contained in the filing +was materially inaccurate given the fact that Tidewater was marketing for sale cold- +stacked vessels that were unlikely to return to service. +22. Further, the fact that Tidewater had dozens of vessels that it knew required +significant repair and recertification expenditures, were unlikely to return to service, may +have been impaired, and could have required a revision of depreciation estimates, +constituted known trends or uncertainties of the type that should have been disclosed in +the Management’s Discussion and Analysis (“MD&A”) section of the Company’s +periodic filings with the Commission because it was reasonably likely to, and ultimately +did, have a material impact on Tidewater’s income from continuing operations. +However, Tidewater’s Form 10-K for fiscal year 2003 and quarterly filings on Forms 10- +Q for the quarters ended June 30, 2002, September 30, 2002, December 31, 2002, June +30, 2003, September 30, 2003, and December 31, 2003 did not contain any disclosures +about these known uncertainties. Lousteau should have known that this information +should have been disclosed in the MD&A section of the Company’s periodic filings. +Tidewater Had Inadequate Internal Controls +23. Between September 2001 and March 2004, Tidewater’s internal control +environment was characterized by insufficient documentation and formal processes, +policies, and procedures for dealing with impairment issues for its worldwide fleet or +accounting for cold-stacked vessels. Tidewater did not have an appropriate process in +place at the time to ensure that the vessels that were for-sale unofficially received the +same level of accounting scrutiny as officially withdrawn vessels. Because of +Tidewater’s inadequate internal controls, the vessels that were for-sale unofficially were +not reviewed periodically for impairment and depreciation purposes, and their effectively +withdrawn status was not disclosed to the public. +6 + +24. Lousteau signed certifications for Tidewater’s Form 10-K for fiscal year +2003 and quarterly filings on Forms 10-Q for the quarters ended September 30, 2002, +December 31, 2002, June 30, 2003, September 30, 2003, and December 31, 2003. +Lousteau should have known that Tidewater’s controls were inadequate as to the +impairment review and disclosures related to vessels unlikely to return to operations. +25. In January 2005, Tidewater adopted new impairment testing policies in an +effort to timely and more thoroughly review its vessel fleet for impairment. +VIOLATIONS +26. Section 13(a) of the Exchange Act requires issuers of registered securities, +like Tidewater, to file periodic reports with the Commission containing information +prescribed by specific Commission rules. Rules 13a-1 and 13a-13 require, respectively, +the filing of annual and quarterly reports. Implicit in these provisions is the requirement +that the reports accurately reflect the issuer’s financial condition and operating results. +Rule 12b-20 requires, in addition to information required in periodic reports by +Commission rules, such further material information as may be necessary to make the +required statements not misleading. +27. Additionally, Regulation S-K Item 303 requires registrants to disclose in +the MD&A sections of required periodic filings “any known trends or uncertainties that +have had or that the registrant reasonably expects will have a material…u nfavorable +impact on net sales or revenues or income from continuing operations.” The failure to +comply with Regulation S-K constitutes a violation under Section 13(a) of the Exchange +Act. +28. Section 13(b)(2)(B) of the Exchange Act requires issuers to devise and +maintain a system of internal accounting controls sufficient to provide reasonable +assurances that transactions are recorded as necessary to permit the preparation of +financial statements in conformity with GAAP and to maintain accountability for assets. +29. Rule 13a-14 of the Exchange Act requires an issuer’s CFO to certify the +information contained in the issuer’s quarterly and annual reports. +30. As a result of the above, Tidewater violated Sections 13(a) and +13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. +31. As a result of the above, Lousteau caused Tidewater’s violations of +Sections 13(a) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 +thereunder, and violated Rule 13a-14. +7 + +REMEDIAL EFFORTS +32. In determining to accept the Offers, the Commission considered the +remedial efforts that Tidewater initiated prior to and during the Commission staff’s +investigation. +IV. +In view of the foregoing, the Commission deems it appropriate to impose the +sanctions agreed to in Respondents’ Offers. +Accordingly, pursuant to Section 21C of the Exchange Act, it is hereby ORDERED +that: +A. Tidewater cease and desist from committing or causing any violations and +any future violations of Sections 13(a) and 13(b)(2)(B) of the Exchange Act, and Rules +12b-20, 13a-1, and 13a-13 thereunder. +B. Lousteau cease and desist from causing any violations and any future +violations of Sections 13(a) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a- +1, and 13a-13 thereunder, and from committing or causing any violations and any future +violations of Exchange Act Rule 13a-14. +By the Commission. +Nancy M. Morris +Secretary +8 diff --git a/raw/aaer/2007/AAER-2731.txt b/raw/aaer/2007/AAER-2731.txt new file mode 100644 index 0000000000000000000000000000000000000000..6c2bd3eaee0317985e16f163df396bec28d51f12 --- /dev/null +++ b/raw/aaer/2007/AAER-2731.txt @@ -0,0 +1,48 @@ +______________________________ +UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56560 / September 27, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2731 / September 27, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12847 +: +In the Matter of : + : ORDER OF SUSPENSION PURSUANT +HOR CHONG (DAVID) BOEY, : TO RULE 102(e)(2) OF THE +CPA : COMMISSION’S RULES OF PRACTICE +: +Respondent. : +______________________________: +I. +The Securities and Exchange Commission deems it appropriate to issue an order of +forthwith suspension of Hor Chong (David) Boey (“Boey”) pursuant to Rule 102(e)(2) of the +Commission’s Rules of Practice [17 C.F.R. §200.102(e)(2)].1 +Rule 102(e)(2) provides in pertinent part: “Any ... person who has been convicted of a felony or a +misdemeanor involving moral turpitude shall be forthwith suspended from appearing or practicing before the +Commission.” +1 +II. +The Commission finds that: +1. From March 2004 through July 2, 2007, Boey was a certified public accountant in +Kentucky. +2. On July 3, 2007, a judgment of conviction was entered against Boey in United +States v. Gagalis, et al, No. 1:04-cr-00126-PB-5, in the United States District Court for the +District of New Hampshire, finding him guilty of two counts of securities fraud, one count of +falsifying books and records of Enterasys Networks, Inc. (“Enterasys”), a public company, one +count of making false statements to auditors of Enterasys, two counts of wire fraud, and one +count of conspiracy to commit wire and securities fraud. +3. As a result of this conviction, Boey was sentenced to 36 months imprisonment in +a federal penitentiary. +III. +In view of the foregoing, the Commission finds that Boey has been convicted of a felony +within the meaning of Rule 102(e)(2) of the Commission’s Rules of Practice. +Accordingly, it is ORDERED, that Hor Chong (David) Boey is forthwith suspended from +appearing or practicing before the Commission pursuant to Rule 102(e)(2) of the Commission’s +Rules of Practice. +By the Commission. +Nancy M. Morris +Secretary +2 diff --git a/raw/aaer/2007/AAER-2732.pdf b/raw/aaer/2007/AAER-2732.pdf new file mode 100644 index 0000000000000000000000000000000000000000..bb96373bbf3d03d168046167cc250aa6f41d06c9 Binary files /dev/null and b/raw/aaer/2007/AAER-2732.pdf differ diff --git a/raw/aaer/2007/AAER-2732.txt b/raw/aaer/2007/AAER-2732.txt new file mode 100644 index 0000000000000000000000000000000000000000..16c35d89921978c2b51eb202a061fc0ee7cfdc52 --- /dev/null +++ b/raw/aaer/2007/AAER-2732.txt @@ -0,0 +1,46 @@ +______________________________ +UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56561 / September 27, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2732 / September 27, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12848 +: +In the Matter of : + : ORDER OF SUSPENSION PURSUANT +ROBERT J. GAGALIS, CPA : TO RULE 102(e)(2) OF THE +: COMMISSION’S RULES OF PRACTICE +Respondent. : +______________________________: +I. +The Securities and Exchange Commission deems it appropriate to issue an order of +forthwith suspension of Robert J. Gagalis (“Gagalis”) pursuant to Rule 102(e)(2) of the +Commission’s Rules of Practice [17 C.F.R. §200.102(e)(2)].1 +II. +The Commission finds that: +1. From May 1981 through June 1984, Gagalis was a certified public accountant in +Massachusetts. +Rule 102(e)(2) provides in pertinent part: “Any ... person who has been convicted of a felony or a +misdemeanor involving moral turpitude shall be forthwith suspended from appearing or practicing before the +Commission.” +1 +2. On July 5, 2007, a judgment of conviction was entered against Gagalis in United +States v. Gagalis, et al, No. 1:04-cr-00126-PB-5, in the United States District Court for the +District of New Hampshire, finding him guilty of two counts of securities fraud, one count of +making false statements to auditors of Enterasys Networks, Inc., a public company, two counts +of wire fraud, and one count of conspiracy to commit wire and securities fraud. +3. As a result of this conviction, Gagalis was sentenced to eleven years and six +months imprisonment in a federal penitentiary. +III. +In view of the foregoing, the Commission finds that Gagalis has been convicted of a +felony within the meaning of Rule 102(e)(2) of the Commission’s Rules of Practice. +Accordingly, it is ORDERED, that Robert J. Gagalis is forthwith suspended from +appearing or practicing before the Commission pursuant to Rule 102(e)(2) of the Commission’s +Rules of Practice. +By the Commission. +Nancy M. Morris +Secretary +2 diff --git a/raw/aaer/2007/AAER-2733.pdf b/raw/aaer/2007/AAER-2733.pdf new file mode 100644 index 0000000000000000000000000000000000000000..0c626c9f6dbaa7b2bf2e0d1eabdbdeadfdf3fcf8 Binary files /dev/null and b/raw/aaer/2007/AAER-2733.pdf differ diff --git a/raw/aaer/2007/AAER-2733.txt b/raw/aaer/2007/AAER-2733.txt new file mode 100644 index 0000000000000000000000000000000000000000..18d101a086652f53884064319dff590dd81ab918 --- /dev/null +++ b/raw/aaer/2007/AAER-2733.txt @@ -0,0 +1,47 @@ +______________________________ +UNITED STATES OF AMERICA + Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56562 / September 27, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2733 / September 27, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12849 +: +In the Matter of : + : ORDER OF SUSPENSION PURSUANT +BRUCE D. KAY, CPA : TO RULE 102(e)(2) OF THE +: COMMISSION’S RULES OF PRACTICE +Respondent. : +______________________________: +I. +The Securities and Exchange Commission deems it appropriate to issue an order of +forthwith suspension of Bruce D. Kay (“Kay”) pursuant to Rule 102(e)(2) of the Commission’s +Rules of Practice [17 C.F.R. §200.102(e)(2)].1 +II. +The Commission finds that: +1. From August 1999 through September 2000, Kay was a certified public +accountant in Maine. +Rule 102(e)(2) provides in pertinent part: “Any ... person who has been convicted of a felony or a +misdemeanor involving moral turpitude shall be forthwith suspended from appearing or practicing before the +Commission.” +1 +2. On July 5, 2007, a judgment of conviction was entered against Kay in United +States v. Gagalis, et al, No. 1:04-cr-00126-PB-5, in the United States District Court for the +District of New Hampshire, finding him guilty of two counts of securities fraud, one count of +conspiracy to commit wire and securities fraud, one count of falsifying books and records of +Enterasys Networks, Inc. (“Enterasys”), a public company, one count of making false statements +to auditors of Enterasys, and three counts of wire fraud. +3. As a result of this conviction, Kay was sentenced to nine years and six months +imprisonment in a federal penitentiary. +III. +In view of the foregoing, the Commission finds that Kay has been convicted of a felony +within the meaning of Rule 102(e)(2) of the Commission’s Rules of Practice. +Accordingly, it is ORDERED, that Bruce D. Kay is forthwith suspended from appearing +or practicing before the Commission pursuant to Rule 102(e)(2) of the Commission’s Rules of +Practice. +By the Commission. +Nancy M. Morris +Secretary +2 diff --git a/raw/aaer/2007/AAER-2734.pdf b/raw/aaer/2007/AAER-2734.pdf new file mode 100644 index 0000000000000000000000000000000000000000..5f1d2b4cafa5e211a4c88245433937cdeee53b32 Binary files /dev/null and b/raw/aaer/2007/AAER-2734.pdf differ diff --git a/raw/aaer/2007/AAER-2735.txt b/raw/aaer/2007/AAER-2735.txt new file mode 100644 index 0000000000000000000000000000000000000000..adb17b26ec412d838f27725c78c3fe0c1a4498b2 --- /dev/null +++ b/raw/aaer/2007/AAER-2735.txt @@ -0,0 +1,81 @@ +_______________________________ + UNITED STATES OF AMERICA + B efore the + SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 56575 / September 28, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2735 / September 28, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12856 +: +In the Matter of : ORDER INSTITUTING +: ADMINISTRATIVE PROCEEDINGS + : PURSUANT TO RULE 102(e) OF THE +Helen C. Sharkey, CPA, : COMMISSION’S RULES OF PRACTICE, +: MAKING FINDINGS, AND IMPOSING +Respondent. : REMEDIAL SANCTIONS +: +I. +The Securities and Exchange Commission (“Commission”) deems it appropriate and in the +public interest that public administrative proceedings be, and hereby are , instituted against Helen +C. Sharkey (“Sharkey” or “Respondent”) pursuant to Rule 102(e) of the Commission’s Rules of +Practice.1 +II. +In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlem ent (the “Offer”), wh ich the Comm ission has determ ined to accept. Solely for the +purpose of these pro ceedings and any other proceedings brought by or on behalf of the +Commission, or to which the Commission is a party, and w ithout ad mitting or denying the +findings herein, except as to the C ommission’s jurisdiction over her and the subject m atter of +these p roceedings, and the f indings conta ined in Sec tion II I.E. belo w, which a re adm itted, +Respondent consents to the en try of this Orde r Instituting Administrative Proceedings Pursuant +Rule 102(e)(3)(i) provides in relevant part: +The Commission, with due regard to t he public interest and without prelim inary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has +been by name . . . per manently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action bro ught by the Commission, from violating or aiding and abetting +the violation of any pro vision of the Federal s ecurities laws or of the rules and regulations +thereunder. +1 +to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial +Sanctions (“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds that: +A. Sharkey, age 34, was a certified public accountant in the State of Texas. +During the relevant tim e period, Sharkey was a m ember of t he deal structure group of Dynegy +Inc. (“Dynegy”), and substantially participat ed in a Dynegy financing transaction known as +Project Alpha. +B. Dynegy is an Illinois corporation headquartered in Hou ston, Texas . +Dynegy’s shares are registered with the Comm ission under Section 12(b) of the Securities +Exchange Act of 1934 and trade on the New York Stock Exchange. +C. On Septe mber 24, 2002, the Comm ission entered an order by consent +against Dynegy, on a neither-adm it-nor-deny basis, resulting from the com pany’s im proper +accounting and m isleading disclosures relating to Project A lpha. The Order found that Dynegy +used Project Alpha to enhance cash flow from operations by $300 million in 2001 and to achieve +a related $79 million tax benefit. The Order f ound that D ynegy failed to dis close properly the +financing transactions underlying Project Alpha, and failed to clar ify that the cash flow reported +on its 2001 Statement of Cash Flows derived from financing activities, not operations. See Order +Instituting Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of +the Securities Exchange Act of 1934, Making Find ings and Imposing a Cease-And-Desist Order, +Admin. File 3-10897 (S ept. 24, 2002). Dynegy fu rther consented to pay a $3 million civil +penalty. SEC v. Dynegy Inc., Civil Action H-02-3623 (S.D. Tex. Sept. 30, 2002). +D. On June 11, 2003, the Comm ission filed a complaint against Sharkey in +SEC v. Foster et al. , (Civil Ac tion H-03-204 4), in the Unite d States District Court for the +Southern D istrict of Texas. The Comm ission’s com plaint alleged that Shark ey willf ully +disregarded accounting advice from Dynegy’s outside auditor on Project Alpha and concealed +critical transaction details from the auditor in violation of the federal securities laws. +E. On September 7, 2007, the court entered an order perm anently enjoining +Sharkey from future violations of Section 17(a) of the Securities Act of 1933, and Sections 10(b) +and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13b2-1 thereunder. +2 + +IV. +In view of the foregoing, the Commission deems it appropriate and in the public interest to +accept Respondent’s Offer. +Accordingly, it is hereby ORDERED, effective immediately, that: +Sharkey i s sus pended fr om a ppearing or practicing before th e Commi ssion a s an +accountant. + By the Commission. + N ancy M. Morris + S ecretary +3 diff --git a/raw/aaer/2007/AAER-2738.pdf b/raw/aaer/2007/AAER-2738.pdf new file mode 100644 index 0000000000000000000000000000000000000000..0adb7c0bf3d637e4b4fe6787503f31f8b2d0db42 Binary files /dev/null and b/raw/aaer/2007/AAER-2738.pdf differ diff --git a/raw/aaer/2007/AAER-2742.txt b/raw/aaer/2007/AAER-2742.txt new file mode 100644 index 0000000000000000000000000000000000000000..c73e11f26937ef108694ff8dbdb436af4b78e1da --- /dev/null +++ b/raw/aaer/2007/AAER-2742.txt @@ -0,0 +1,1371 @@ + + + + + + + + + + + + + + + + SEC.gov | Cedric Kushner Promotions, Inc., et al. + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/502246","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Cedric Kushner Promotions, Inc., et al. + + + + + + + + + + + + Cedric Kushner Promotions, Inc., et al. + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20337 / October 17, 2007 + + Accounting and Auditing Enforcement Release No. 2742 / October 17, 2007 + + SEC v. Cedric Kushner Promotions, Inc., et al. , Civil Action No. 04-CV-2324 (TPG) (S.D.N.Y.) + + James DiLorenzo, Former Executive and Principal Financial and Accounting Officer of Boxing Promoter Cedric Kushner Promotions, Inc. Agrees to Permanent Injunction, Time Limited Officer and Director Bar, and Civil Penalty in Settlement of SEC Fraud Charges + + + + The Securities and Exchange Commission ("Commission") announced today that James DiLorenzo ("DiLorenzo"), the former Executive Vice President and Principal Financial and Accounting Officer of New York-based boxing promoter Cedric Kushner Promotions, Inc. ("CKP"), has agreed to settle the Commission's civil injunctive action pending against him in U.S. District Court for the Southern District of New York. The Commission's March 24, 2004 Complaint charged DiLorenzo and others with fraud and other federal securities law violations for their conduct in connection with the filing of an annual report and amended annual report in 2003 without the consent of the company's auditors. The Complaint also alleged that DiLorenzo and others knew, or were reckless in not knowing, that the company's financial statements included in its fiscal year 2002 filings were materially false and misleading. See Litigation Release No. 18638 . DiLorenzo has agreed to settle all of the Commission's charges against him. + + Without admitting or denying the allegations of the Commission's Complaint, DiLorenzo consented to the entry of an order: (1) permanently enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rules 10b-5 and 13a-14, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20 and 13a-1; (2) barring him from serving as an officer or director of any public company for a period of three years; and (3) ordering him to pay a civil penalty of $25,000. Exchange Act Rule 13a-14, added by the Sarbanes-Oxley Act, required DiLorenzo, as CKP's Principal Financial and Accounting Officer, to certify the accuracy and completeness of the company's financial reports. + + Previously, in 2005, also without admitting or denying the allegations in the Commission's Complaint, CKP, currently doing business as CKRUSH, Inc., and Cedric Kushner ("Kushner"), CKP's former Chairman, President, CEO and Founder, each settled with the Commission in 2005 for their alleged roles in the fraudulent filings. Both defendants consented to the issuance of orders imposing, among other things, anti-fraud injunctions. Kushner also consented to a civil penalty and officer and director bar. CKP also consented to certain required remedial undertakings. 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Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Fred Gold, et al + + + + + + + + + + + + Fred Gold, et al + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20342 / October 19, 2007 + + Accounting and Auditing Enforcement Release No. 2745 / October 19, 2007 + + SEC v. Fred Gold, et al , Civil Action No. 05 CV 4713 (JS) (E.D.N.Y.) + + Former Arthur Andersen Audit Partner Fred Gold Agrees to Permanent Anti-Fraud Injunction, $100,000 Civil Penalty, and SEC Practice Suspension in Settlement of SEC Litigation Relating to American Tissue Audit + + + + The Securities and Exchange Commission (Commission) announced today that Fred Gold, a former partner at Arthur Andersen, LLP., has agreed to settle the Commission's civil injunctive action pending against him in the U.S. District Court for the Eastern District of New York. Without admitting or denying the allegations in the complaint, Gold consented to entry of a final judgment entered by the Court on October 16, 2007, that permanently enjoins him from violating Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and from aiding and abetting violations of Section 15(d) of the Exchange Act and Exchange Act Rules 12b-20 and 15d-1, and orders him to pay a civil money penalty of $100,000. As part of the settlement, Gold has consented, without admitting or denying the Commission's findings, to the issuance of an administrative order suspending him from appearing or practicing before the Commission as an accountant pursuant to Rule 102(e)(3) of the Commission's Rules of Practice. + + The Commission's complaint alleged that: + + During its fiscal year 2000, American Tissue fraudulently and materially inflated reported assets and earnings by improperly capitalizing $15.6 million of previously expensed supplies and overvaluing its finished goods inventory by at least $12.5 million;   + + Gold supervised, reviewed and approved Andersen's audit of American Tissue's fiscal year 2000 financial statements;   + + Gold knew or was reckless in not knowing that American Tissue's finished goods inventory was overstated and that supplies American Tissue used in its manufacturing processes had been improperly classified as inventory instead of as expenses;   + + In July 2001, when he learned the fiscal 2000 American Tissue audit had been selected for a peer review by another accounting firm, Gold directed others to alter audit work papers in an attempt to conceal audit work failures; and   + + In September 2001, when he learned that another accounting firm had discovered that American Tissue had overvalued inventory and would have to restate financial results for fiscal 2000, Gold destroyed documents and e-mails in a further attempt to conceal the audit failures. + For additional information, see Litigation Release No. 19417 / October 6, 2005 + + + + +  + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Brooks + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/502286","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Brooks + + + + + + + + + + + + David H. Brooks + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20345 / October 25, 2007 + + Accounting and Auditing Enforcement Release No. 2746 / October 25, 2007 + + Securities and Exchange Commission v. David H. Brooks , (U.S. District Court for the Southern District of Florida, Civil Action No. 07-61526-CIV-Altonaga/Turnoff (filed October 25, 2007) + + The Securities and Exchange Commission today announced the filing of securities fraud charges against David H. Brooks, the former Chief Executive Officer and Chairman of the Board at DHB Industries, Inc., a major supplier of body armor to the U.S. military and law enforcement agencies. The SEC alleges that Brooks engaged in a pervasive accounting fraud at DHB between 2003 and 2005, violated insider trading laws in 2004, and used millions of dollars in corporate funds to pay personal expenses. + + The SEC's complaint alleges that Brooks, with the assistance of DHB's former chief financial officer and chief operating officer, manipulated the company's gross profit margin and net income by overstating inventory values, falsifying journal entries, and failing to include appropriate charges for obsolete inventory. + + According to the SEC's complaint, Brooks also funneled millions of dollars out of DHB through fraudulent transactions with a related entity he controlled. The complaint further alleges that Brooks used company credit cards and checks to pay millions of dollars in personal expenses, including luxury cars, jewelry, art, real estate, extravagant vacations, personal aircraft usage, and horse training. As a result of the misconduct by Brooks, DHB filed false and misleading financial documents with the SEC and made false statements in company press releases. + + The complaint also alleges that Brooks sold his personal DHB stock for proceeds of about $186 million at the end of 2004 at the height of DHB's stock price, and did so while in possession of material, non-public information - a violation of insider trading laws. + + The SEC's complaint charges Brooks with violating Section 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b), 13(b)(5), and 14(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13a-14, 13b2-1, 13b2-2, and 14a-9 thereunder, and aiding and abetting DHB's 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. In its complaint, the SEC seeks a permanent injunction, disgorgement, civil penalties, insider trading penalties, and an officer and director bar. In addition, the complaint seeks reimbursement by Brooks to DHB of bonuses and profits from stock sales pursuant to Section 304 of the Sarbanes-Oxley Act. + + The United States Attorney's Office for the Eastern District of New York conducted a parallel investigation of this matter. Simultaneous with the SEC's announcement of this action, the United States Attorney's Office announced the filing of charges against Brooks for securities fraud, conspiracy to commit securities fraud, insider trading, and obstructing the SEC's investigation, among other charges. + + The staff's investigation is continuing. + + + + + + + + SEC Complaint in this matter + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Ramoil Management Ltd. et al. + + + + + + + + + + + + Ramoil Management Ltd. et al. + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20350 / October 30, 2007 + + Accounting and Auditing Enforcement Release No. 2748 / October 30, 2007 + + Securities and Exchange Commission v. Ramoil Management Ltd. et al. , Case No. 01 CIV 9057 (SC) S.D.N.Y + + Court Orders Civil Penalty, Injunctions Against Corporate Attorney Who Submitted False Filings to Commission + + The Securities and Exchange Commission announced that on October 25, 2007, the United States District Court for the Southern District of New York issued a Decision and Order finding Defendant Moneesh K. Bakshi, former corporate counsel to Ramoil Management Ltd., liable for securities fraud for having submitted false and misleading documents to the Commission. Following a trial, the Court found Bakshi violated the federal securities laws, and aided and abetted Ramoil's violation of the securities laws, by (1) submitting a false and misleading Form10-KSB for the year ended December 31, 1999, which included a phony audit opinion; and (2) filing four false and misleading Forms S-8, which fraudulently issued shares of Ramoil stock to four offshore consulting firms in exchange for non-existent "consulting services," and included false attorney opinion letters by Bakshi. These filings were available to the public on the Commission's EDGAR database. + + In the filings, the Court found that Bakshi "was intentionally misrepresenting material information." The Court ruled that Bakshi violated Sections 17(a), 5(a) and 5(c) of the Securities Act of 1933; Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and aided and abetted Ramoil's violation of Section 15(d) of the Securities Exchange Act and Rule 15d-1 thereunder. + + The Court enjoined Bakshi from future violations of the securities laws, ordered him to pay a $100,000 civil penalty, and enjoined Bakshi from representing clients before the Commission and filing any documents with the Commission. "Bakshi knowingly violated numerous securities laws, and did so repeatedly," the Court concluded. "While he testified that he has no intention of practicing in the securities field in the future, he did not acknowledge the wrongfulness of what he has already done. The Court therefore finds injunctive relief appropriate." + + + + + + + + + SEC Complaint in this matter --> + +   + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Cash + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/502361","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Stanard, Martin J. Merritt and Michael W. Cash + + + + + + + + + + + + James N. Stanard, Martin J. Merritt and Michael W. Cash + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20360 / November 8, 2007 + + Accounting and Auditing Enforcement Release No. 2750 / November 8, 2007 + + SEC v. James N. Stanard, Martin J. Merritt and Michael W. Cash , Civil Action No. 06 Civ. 7736 (GEL) (S.D.N.Y.) + + SEC Settles Accounting Fraud Case Against Former Senior Executive of RenaissanceRe Subsidiary For Sham Reinsurance Transaction + + On November 2, 2007, the Hon. Gerald E. Lynch of the United States District Court for the Southern District of New York entered a final consent judgment against defendant Michael W. Cash, a former senior executive of a wholly-owned subsidiary of RenaissanceRe Holdings Ltd. Cash, without admitting or denying the Commission's allegations, consented to the final judgment that (i) enjoins him from violating the antifraud and internal controls provisions of the federal securities laws and from aiding and abetting violations of the record-keeping and reporting provisions; (ii) requires him to pay a civil penalty of $130,000; and (iii) bars him from serving as an officer or director of a public company for five years. + + The Commission's amended complaint alleges that Cash, along with the other defendants, committed fraud in connection with a sham transaction that they concocted to smooth RenaissanceRe's earnings. Cash and the other defendants used two seemingly separate, unrelated contracts that were, in fact, intertwined. Together, the contracts created a round trip of funds. In the first contract, RenaissanceRe purported to assign at a discount $50 million of its recoverables to Inter-Ocean Reinsurance Company, Ltd. in exchange for $30 million in cash, for a net transfer to Inter-Ocean of $20 million. RenaissanceRe recorded income of $30 million upon executing the assignment agreement. The net $20 million was held by Inter-Ocean as a "bank" or "cookie jar" that RenaissanceRe used in later periods to bolster income. Cash and the co-defendants designed and executed a second contract in the guise of a "reinsurance" agreement with Inter-Ocean. In fact, this second contract was a complete sham and was only a vehicle to refund to RenaissanceRe the $20 million from the "bank" or "cookie jar" plus the purported insurance premium paid under the "reinsurance" agreement. Not only was RenaissanceRe certain to meet the conditions for coverage, it also would receive back all of the money paid to Inter-Ocean under the two agreements plus investment income earned on the money in the interim, less transactional fees and costs. + + RenaissanceRe accounted for the sham transaction as if it involved a real reinsurance contract that transferred risk from RenaissanceRe to Inter-Ocean, when in fact, the amended complaint alleges, Cash knew that this was not true. As a result of RenaissanceRe's accounting treatment for this transaction, the amended complaint alleges, RenaissanceRe materially understated income in 2001 and materially overstated income in 2002, at which time it made a "claim" under the "reinsurance" agreement. It then received as apparent reinsurance proceeds the funds it had paid to Inter-Ocean and that Inter-Ocean held in a trust for RenaissanceRe's benefit. + + Previously, RenaissanceRe's former controller, defendant Martin J. Merritt, without admitting or denying the Commission's allegations, consented to a partial final consent judgment that, among other things, deferred the determination of civil penalties and disgorgement to a later date. In a related civil action, RenaissanceRe without admitting or denying the Commission's allegations, also consented to a final judgment + + The Commission's case against defendant James Stanard, RenaissanceRe's former chief executive officer, remains pending. +For additional information, see: + + SEC First Amended Complaint in this matter. --> + + Litigation Release No. 19847 / September 27, 2006. + + Administrative Proceeding No. 3-12462 / October 27, 2006. + + For additional information on a related Commission action, see Litigation Release No. 19989 / February 6, 2007. + + + + + + + SEC Complaint in this matter --> + +   + + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Chancellor Corporation, et. al. , 03-CV-10762-PBS (D. Mass.) + + Jury Rules in SEC's Favor, Finds Former Chairman/CEO of Chancellor Corporation Liable for Securities Fraud + + The Securities and Exchange Commission announced that a federal court jury returned a verdict on November 16, 2007 in the SEC's favor on all securities fraud charges against Brian M. Adley, who was the former chairman, chief executive officer and controlling shareholder of Chancellor Corporation, a defunct Boston-based transportation equipment-leasing company. + + Adley was accused of orchestrating a scheme to inflate Chancellor's reported assets, revenue and profits, and to pay unwarranted fees to entities that he controlled by using fabricated documents and fraudulent accounting from1998 through 2000. The jury verdict followed a three-week trial in Boston before the Honorable Patti B. Saris, U.S. District Court Judge for the District of Massachusetts. + + The Commission's complaint alleged that Adley caused Chancellor to file false financial statements in 1999 and 2000 by directing the wholesale fabrication of corporate documents, instructing that the fabricated documents be given to the company's auditors, and coordinating the filing of false financial statements with the SEC. + + The jury found Adley liable for violating the antifraud and record-keeping provisions of the federal securities laws, for making false statements to its accountants, and for aiding and abetting Chancellor's reporting and recordkeeping provisions of the securities laws. The district court will determine the appropriate sanctions and remedies at a later date. + + The Commission had previously settled with 10 other defendants: Chancellor Corporation; the former President and Chief Operating Officer; the former acting Chief Financial Officer; the former treasurer; two former Chancellor directors and audit committee members; Chancellor's outside auditing firm and three members of its audit team. + + For further information, please see Litigation Release Nos. 18104 (April 24, 2003), 19177 (April 11, 2005) and 20177 (July 2, 2007). + + + + + + + SEC Complaint in this matter --> + +   + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Vargas + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/502416","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Monterosso and Luis E. Vargas + + + + + + + + + + + + Joseph J. Monterosso and Luis E. Vargas + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20371 / November 26, 2007 + + Accounting and Auditing Enforcement Release No. 2753 / November 26, 2007 + + Securities and Exchange Commission v. Joseph J. Monterosso and Luis E. Vargas , Civil Action No. 07-61693 (S.D. Fla., filed on November 21, 2007) + + SEC Charges Two Former Globetel Executives With Creating $119 Million in False Invoices + + The Securities and Exchange Commission today announced it has filed securities fraud charges against Joseph J. Monterosso and Luis E. Vargas, former executives at GlobeTel Communications Corp. of Fort Lauderdale, Fla. The Commission's complaint, filed in the Southern District of Florida on November 21, 2007, alleges that Monterosso and Vargas created $119 million in fake invoices and caused GlobeTel to overstate its revenue for two years. + + The complaint alleges that Monterosso and Vargas created hundreds of false invoices that made it appear that GlobeTel's three wholly-owned subsidiaries, Centerline Communications, LLC ("Centerline"), Volta Communications, LLC ("Volta"), and Lonestar Communications, LLC ("Lonestar") bought and sold telecom "minutes" with other wholesale telecom companies. In reality, there were no transactions under the program that GlobeTel executives described as the "off-net" revenue program. Two of GlobeTel's subsidiaries - Volta and Lonestar - actually did no business. The third subsidiary, Centerline, reported millions of dollars in business with Monterosso's and Vargas' own private company, Carrier Services Inc. ("CSI"), which did not occur. + + The Commission alleges that Monterosso and Vargas created hundreds of false invoices from technical data they obtained from their friends in the telecom industry. Those invoices - and the technical data that Monterosso and Vargas provided to the company's auditors - caused GlobeTel to report $119 million in false revenue. This so-called "off-net" revenue accounted for approximately 80 percent of the revenue GlobeTel reported between the third quarter of 2004 and the second quarter of 2006 - four out of every five dollars that the company reported. + + The complaint alleges that Monterosso and Vargas received hundreds of thousands of dollars in payments from GlobeTel - including about $300,000 in cash that Vargas withdrew from CSI's bank accounts and gave to Monterosso. + + GlobeTel has not filed a quarterly or annual statement for any period after the second quarter of 2006. On May 8 and June 29, 2007, GlobeTel filed Forms 8-K announcing that it will restate its financials for 2004 through 2006 to eliminate about $120 million in revenue. On November 2, 2007, the company filed a restated Form 10-KSB for 2004 in which the company reduced its annual revenue by $17.68 million. + + In its complaint, the Commission alleges that Monterosso and Vargas violated Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5, 13b2-1 and 13b2-2 thereunder and that they aided and abetted violations of Sections 10(b), 13(a), and 13(b)(2)(A) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder. The Commission seeks permanent injunctions, disgorgement with prejudgment interest and civil penalties. The Commission also seeks to bar permanently Monterosso and Vargas from acting as an officer or director of a public company. + + The Commission's investigation continues. + + + + + + + SEC Complaint in this matter + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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McGuire, M.D. + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/502496","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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McGuire, M.D. + + + + + + + + + + + + William W. McGuire, M.D. + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20387 / December 6, 2007 + + Accounting and Auditing Enforcement +Release No. 2754 / December 6, 2007 + + Securities and Exchange Commission v. William W. McGuire, M.D., Civil Action No. 07-CV-4779-JMR/FLN (D. Minn. 2007) (filed December 6, 2007) + + FORMER UNITED HEALTH GROUP CEO/CHAIRMAN SETTLES STOCK OPTIONS BACKDATING CASE FOR $468 MILLION + + Settlement is Largest to Date in an Options Backdating Case + + The Securities and Exchange Commission today announced a record $468 million settled enforcement action in an options backdating case against William W. McGuire, M.D., the former Chief Executive Officer and Chairman of the Board of UnitedHealth Group Inc. The settlement is the first with an individual under the "clawback" provision (Section 304) of the Sarbanes-Oxley Act to deprive corporate executives of their stock sale profits and bonuses earned while their companies were misleading investors. + + The Commission's complaint alleges that during a 12-year period, McGuire repeatedly caused the company to grant undisclosed, in-the-money stock options to himself and other UnitedHealth officers and employees without recording in the company's books and disclosing to shareholders material amounts of compensation expenses as required by applicable accounting rules. Without admitting or denying the SEC's charges, McGuire agreed to a $468 million settlement that includes a $7 million civil penalty and reimbursement to the Minneapolis-based health care company for all incentive- and equity-based compensation he received from 2003 through 2006. + + The Commission's complaint alleges that from at least 1994 through 2005, McGuire looked back over a window of time and picked grant dates for UnitedHealth options that coincided with dates of historically low quarterly closing prices for the company's common stock, resulting in grants of in-the-money options. According to the complaint, McGuire signed and approved backdated documents falsely indicating that the options had actually been granted on these earlier dates when UnitedHealth's stock price was at or near these low points. These inaccurate documents caused the company to understate compensation expenses for stock options, and were routinely provided to the company's external auditors in connection with their audits and reviews of UnitedHealth's financial statements. + + According to the SEC's complaint, UnitedHealth filed with the Commission quarterly and annual reports, proxy statements, and registration statements that McGuire knew, or was reckless in not knowing, contained materially false and misleading statements concerning the true grant dates and proper exercise prices of stock options. Because of McGuire's misconduct, investors were misled to believe that stock options were granted with strike prices not less than the fair market value of UnitedHealth's stock on the date of grant and in accordance with the terms of the company's stock option plans. In March 2007, UnitedHealth restated its financial statements for each year from 1994 through 2005, and disclosed material cumulative pre-tax errors in stock-based compensation accounting that totaled $1.526 billion for that period. + + The Commission's complaint further alleges that from 1994 through 2005, McGuire personally received more than 44 million split-adjusted UnitedHealth options, most or all of which were backdated. McGuire exercised and sold more than 11 million of these backdated options for an in-the-money gain of more than $6 million. McGuire also received nearly $5 million of incentive-based cash bonuses in 2005 and 2006 tied to earnings per share targets that UnitedHealth would not have achieved under financial statements restated due to errors in stock-based compensation accounting. + + Without admitting or denying the allegations of the Commission's complaint, McGuire consented to the entry of an order permanently enjoining him from violating or aiding and abetting violations of the antifraud, reporting, record-keeping, internal controls, proxy statement, certification, and securities ownership reporting provisions of the federal securities laws, and barring him from serving as an officer or director of a public company for a period of 10 years. McGuire will (i) disgorge ill-gotten gains of $10,997,596 with $1,697,492 in prejudgment interest, (ii) pay a $7 million civil penalty, and (iii) pursuant to Section 304 of the Sarbanes-Oxley Act, reimburse UnitedHealth for all incentive- and equity-based compensation he received from 2003 through 2006, totaling approximately $448 million in cash bonuses, profits from the exercise and sale of UnitedHealth stock, and unexercised UnitedHealth options. + + Under the terms of the settlement, McGuire's disgorgement plus prejudgment interest and his Section 304 reimbursement would be deemed satisfied by his return to UnitedHealth of approximately $600 million in cash and UnitedHealth options pursuant to the terms of his separate settlement with the company, also announced today, resolving employment claims and shareholder derivative lawsuits filed against McGuire in state and federal courts in Minnesota. McGuire's settlement with the SEC is subject to the approval of the U.S. District Court for the District of Minnesota. + + The Commission acknowledges the assistance of the U.S. Attorney's Office for the Southern District of New York and the U.S. Postal Inspection Service. The Commission's investigation is continuing. + + + + + SEC Complaint in this matter + + +  + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Nolan + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/502541","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Share sensitive information only on official, secure websites. + + + + + + + + + + + + + + + + + SEC homepage + + + + + + + Menu + + + + + + + + + + + + + + Close + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + Search Filings + + + + + + + + + Search Filings + + + + + + + + + Full Text Search + + + + + + Latest Filings + + + + + + Mutual Fund Search + + + + + + Variable Insurance Products Search + + + + + + SIC Codes + + + + + + CIK Lookup + + + + + + Public Dissemination Service (PDS) + + + + + + Search Assistance + + + + + + + + + + + + + Submit Filings + + + + + + + + + Submit Filings + + + + + + + + + EDGAR Filer Management Portal + + + + + + EDGAR Filing Portal + + + + + + Online Forms Management Portal + + + + + + EDGAR Next + + + + + + Forms Index + + + + + + Filer Support & Resources + + + + + + + + + + + + + Data & Research + + + + + + + + + Data & Research + + + + + + + + + Data Library + + + + + + Statistics & Data Visualizations + + + + + + Structured Data + + + + + + Investment Management Data + + + + + + Open Data at the SEC + + + + + + + + + + + + + Rules, Enforcement, & Compliance + + + + + + + + + + + + + + + + + + + + Rules & Regulations + + + + + + + + + Rulemaking Activity + + + + + + Submit Public Comments + + + + + + Staff Guidance + + + + + + No-Action, Interpretive, and Exemptive Letters + + + + + + Self-Regulatory Organization Rulemaking + + + + + + Public Petitions for Rulemaking + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + + + Litigation Releases + + + + + + Administrative Proceedings + + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + + Trading Suspensions + + + + + + Distributions to Harmed Investors + + + + + + Receiverships + + + + + + + + + + + + + + + + + Compliance + + + + + + + + + Examination Priorities + + + + + + Risk Alerts + + + + + + Compliance Outreach Program + + + + + + + + + + + + + + + + + + + + + + + Proposed Rules + + + + + + What's New + + + + + + Whistleblower Program + + + + + + + + + + + + + + + + + + + Featured Topics + + + + + + + + + Featured Topics + + + + + + + + + Crypto Task Force + + + + + + Cybersecurity + + + + + + Market Structure Analytics + + + + + + Saving and Investing for Military Personnel + + + + + + Saving and Investing for Teachers + + + + + + SEC-CFTC Harmonization Initiative + + + + + + Treasury Clearing Implementation + + + + + + + + + + + + + About + + + + + + + + + About + + + + + + + + + Mission + + + + + + Commissioners + + + + + + Divisions & Offices + + + + + + Division & Office Directors + + + + + + Advisory Committees + + + + + + Budget & Performance + + + + + + Reports & Publications + + + + + + Commission Votes + + + + + + Contact the SEC + + + + + + Careers + + + + + + + + + + + + + Submit a Tip or Complaint + + + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + More in this Section + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Michael J. Nolan + + + + + + + + + + + + Michael J. Nolan + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20396 / December 12, 2007 + + Accounting and Auditing Enforcement Release No. 2757 / December 12, 2007 + + SEC v. Michael J. Nolan , Civil Action No. 07-CV-1833 (AVC) (D.Ct.) + + SEC Files Settled Financial Fraud Charges Against Michael J. Nolan, Former CFO of United Rentals, Inc. + + The Securities and Exchange Commission announced today that it filed securities fraud charges against Michael J. Nolan, a former Chief Financial Officer of United Rentals, Inc. ("URI"). + + The Commission's complaint, filed in the United States District Court for the District of Connecticut, alleges that, from 2000 through 2002, Nolan engaged in a series of fraudulent transactions undertaken in order to meet URI's earnings forecasts and analyst expectations. The complaint alleges that Nolan and others carried out the fraud through a series of interlocking three-party transactions, structured as "minor sale-leasebacks," to allow URI to recognize revenue prematurely and to inflate profits generated from the sales. As a result of the fraud, URI 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 in other public releases. + + The complaint further alleges that shortly after URI announced 2001 and 2002 year-end results, Nolan sold approximately $11 million of URI stock that he owned, knowing that the company's announced financial results were materially overstated. + + Nolan has consented, without admitting or denying the allegations in the complaint, to the entry of a Final Judgment, subject to the Court's approval, permanently enjoining him from violations of Section 17(a) of the Securities Act of 1933, and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934, and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting 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, imposing a permanent officer and director bar, and ordering disgorgement and prejudgment interest in an amount to be determined by the Court. Nolan, who was a Certified Public Accountant at the time of the alleged fraudulent conduct, has further agreed to a Commission order suspending him from appearing or practicing before the Commission pursuant to Commission Rule 102(e). + + In a parallel criminal action, the U.S. Attorney's Office for the District of Connecticut also announced today that Nolan has entered a guilty plea to one count of making false filings with the Securities and Exchange Commission, in violation of Title 15 United States Code, Sections 78m(a) and 77ff. + + The Commission acknowledges the assistance of the U.S. Attorney's Office for the District of Connecticut and the New Haven Field Office of the Federal Bureau of Investigation in the investigation of this matter. + + The Commission's investigation is continuing. + + + + + + SEC Complaint in this matter + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Maggio + + + + + + + + + + + + Santo C. Maggio + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20405 / December 19, 2007 + + Accounting and Auditing Enforcement Release No. 2758 / December 19, 2007 + + U.S. Securities and Exchange Commission v. Santo C. Maggio , 07 CV 11388 (S.D.N.Y. filed December 19, 2007) + + SEC Files Settled Action Against Former Refco Senior Executive For Role In Company's Disclosure Fraud + + The U.S. Securities and Exchange Commission (the Commission) today announced that it filed a settled civil injunctive action in the U.S. District Court for the Southern District of New York against Santo C. Maggio, a former senior executive of Refco Inc. and its corporate predecessor, Refco Group Ltd. (together, Refco). Maggio was an executive vice president at Refco and headed Refco's registered broker-dealer subsidiary. The Commission's complaint alleges that Maggio played a significant role in concealing hundreds of millions of dollars of related party receivables. The complaint also alleges that Maggio participated in certain practices that inflated Refco's financial results. As a result, the complaint alleges, Maggio violated Section 17(a) of the Securities Act of 1933 (Securities Act), Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act), and Exchange Act Rules 10b-5, 13b2-1, and 13b2 2(a), and aided and abetted violations of Sections 13(b)(2)(A) and 15(d) of the Exchange Act and Exchange Act Rules 15d-2 and 15d-13. Maggio has consented to the entry of a proposed final judgment that would settle the injunctive action against him. + + The Commission's complaint alleges that, from at least 1998 to October 2005, Phillip R. Bennett, Refco's chairman and chief executive officer, implemented a fraudulent scheme that periodically concealed receivables owed to Refco by Refco Group Holdings, Inc. (RGHI), a non-Refco entity that Bennett controlled. These related party receivables were primarily the result of trading losses and operating expenses that Refco transferred over time to RGHI. Refco utilized a series of short-term loans that temporarily transferred the receivables to third parties immediately prior to the ends of Refco fiscal periods. A few days after the fiscal periods ended, the transactions were reversed, and the receivables were transferred back to RGHI. The Commission's complaint alleges that Maggio oversaw these fiscal period-end transactions. Maggio discussed the transactions with Bennett, made arrangements with many of the third parties that temporarily assumed the receivables, executed some of the documents involved in the transactions, and provided false and misleading information about the receivables to Refco's public accountant. + + The Commission's complaint also alleges that Bennett instituted practices that inflated Refco's reported financial results in 2005. Maggio helped Bennett carry out those practices. They involved Refco recording fictitious interest income purportedly earned on the RGHI receivables and income from sham foreign exchange transactions. The inflation of financial results was undertaken to make Refco more attractive to potential investors. + + The Commission's complaint further alleges that, in 2005, Refco filed with the Commission and provided to investors registration statements and periodic reports that provided false and misleading information about the receivables and Refco's revenue and income. The filings failed to disclose the receivables and the period end transactions, and some of the filings reported income that had been fraudulently inflated. + + Without admitting or denying the allegations in the Commission's complaint, Maggio has consented to the entry of a proposed final judgment that would enjoin him from violating Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act, and Exchange Act Rules 10b-5, 13b2-1, and 13b2 2(a), and from aiding and abetting violations of Sections 13(b)(2)(A) and 15(d) of the Exchange Act and Exchange Act Rules 15d-2 and 15d-13. The proposed final judgment also would prohibit him from serving as an officer or director of a public company. + + Maggio also agreed to settle proposed administrative proceedings against him pursuant to Section 15(b)(6) of the Exchange Act and Section 203(f) of the Investment Advisers Act of 1940, to be based on the entry of the proposed injunction. Pursuant to his offer of settlement, Maggio would consent to the issuance of a Commission order barring him from association with any broker, dealer, or investment adviser. + + In a related action, the U.S. Attorney's Office for the Southern District of New York announced today that Maggio has pleaded guilty to felony charges arising from his role in the Refco fraud. + + The Commission acknowledges the assistance and cooperation of the Office of the United States Attorney for the Southern District of New York, the United States Postal Inspection Service, and the Commodity Futures Trading Commission. + + The Commission's investigation is continuing. + + See also Litigation Release No. 19716 (June 5, 2006); Litigation Release No. 20402 (December 18, 2007). + + + + + + SEC Complaint in this matter + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2007/AAER-2761.txt b/raw/aaer/2007/AAER-2761.txt new file mode 100644 index 0000000000000000000000000000000000000000..5b24cf60ba733ba959356e6cf9887740ebb76998 --- /dev/null +++ b/raw/aaer/2007/AAER-2761.txt @@ -0,0 +1,170 @@ +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 57053 / December 27, 2007 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 2761 / December 27, 2007 +ADMINISTRATIVE PROCEEDING +File No. 3-12797 +In the Matter of + RICHARD E. SELLERS, CPA, +and +LESTER REX ANDERSEN, CPA +Respondents. +ORDER MAKING FINDINGS AND IMPOSING +REMEDIAL SANCTIONS AND A CEASE-AND- +DESIST ORDER PURSUANT TO SECTIONS 4C +AND 21C OF THE SECURITIES EXCHANGE +ACT OF 1934 AND RULE 102(e) OF THE +COMMISSION’S RULES OF PRACTICE +I. +On September 13, 2007, the Securities and Exchange Commission (“Commission”) issued +an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 4C 1 +and 21C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission’s Rules of +Practice 2 (“OIP”) against Richard E. Sellers, CPA (“Sellers”) and Lester Rex Andersen, CPA +(“Andersen”) (collectively, “Respondents”). +1 Section 4C provides, in relevant part, that: +The Commission may censure any person, or deny, temporarily or permanently, to any person the privilege +of appearing or practicing before the Commission in any way, if that person is found . . . (1) not to possess the +requisite qualifications to represent others . . . or (3) to have willfully violated, or willfully aided and abetted the +violation of, any provision of the securities laws or the rules and regulations thereunder. +2 Rules 102(e)(1)(i) and (iii) provide, in pertinent part, that: +The Commission may censure any person or deny, temporarily or permanently, the privilege of appearing +or practicing before it in any way to any person who is found…(i) no t to possess the requisite qualifications to +represent others; . . . or (iii) to have willfully violated, or willfully aided and abetted the violation of any provision of +the Federal securities laws or the rules and regulations thereunder. +II. +Respondents have each submitted an Offer of Settlement (“Offers”) 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, except as to the Commission’s jurisdiction over them and +the subject matter of these proceedings, which are admitted, Respondents consent to the entry of +this Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order +Pursuant to Sections 4C and 21C of the Securities Exchange Act of 1934 and Rule 102(e) of the +Commission’s Rules of Practice (“Order”), as set forth below. +III. +On the basis of this Order and Respondents’ Offers, the Commission finds that: +Respondents +A. Respondent Richard E. Sellers, CPA, is a resident of the State of Nevada and has +been a licensed CPA for over 37 years; he is currently licensed in Nevada and New York. From +February 2003 until in or about February 2004 Sellers was affiliated with the public accounting +firm of Sellers & Andersen, LLC (“S&A”). Sellers and Andersen were the only members of S&A +and it had no other employees. As of June 2007, S&A’s legal existence was terminated by the +State of Utah for nonpayment of annual fees. Since February 2004, Sellers has been affiliated with +a registered public accounting firm for purposes of conducting audits of public reporting +companies, while operating under his own name for other professional engagements. +B. Respondent Lester Rex Andersen, CPA, is a resident of Utah and has been a +licensed CPA for over 48 years; he is currently licensed as a CPA in the State of Utah. From +February 2003 until in or about February 2004 Andersen was affiliated with S&A. Since February +2004, he has been affiliated with a registered public accounting firm for purposes of conducting +audits of public reporting companies, while operating under his own name for other professional +engagements. +Facts +1. S&A’s Failure to Register with the Public Company Accounting Oversight Board +C. Section 102(a) of the Sarbanes-Oxley Act of 2002 (the “Act”), prohibits any person +that is not a registered public accounting firm with the Public Company Accounting Oversight +Board (“Board”) from preparing or issuing, or participating in the preparation or issuance of, any +audit report with respect to any public reporting company after October 22, 2003. S&A did not +register with the Board on or before October 22, 2003. +D. Both Sellers and Andersen were aware of the October 22, 2003 deadline for S&A’s +registration with the Board. Sellers took it upon himself to be the person in the firm to make an +2 + +application for registration with the Board on behalf of S&A. S&A ultimately filed a completed +application for registration with the Board on December 9, 2003, but never became registered. +E. Even though S&A had failed to register with the Board, it issued reports after the +October 22, 2003 deadline on the financial statements of five clients required to file periodic +reports with the Commission. These reports were included in filings made by those issuers with +the Commission on Form 10-KSB or Form 10-K. Both Sellers and Andersen prepared, issued, or +participated in the preparation or issuance, of the five audit reports issued by S&A after October +22, 2003. +F. S&A was paid an aggregate of $9,615 by the issuers in audit fees for conducting +audits of the financial statements of the five companies for which S&A filed audit reports after +October 22, 2003. +2. S&A’s Proceeding Before the Board +G. The Board prepared and sent a Notice of Hearing on the Registration Application of +Sellers & Andersen, LLC, to S&A on January 20, 2004, to determine whether to accept or reject +that application. In a response letter to the Board dated January 22, 2004, S&A stated it had +released only two audit reports after October 22, 2003, when in fact, by that date it had released +five audit reports. +H. In a subsequent letter to the Commission’s Division of Corporation Finance, dated +February 10, 2004, S&A stated that it had found two additional clients for which it had released +audit reports after October 22, 2003. Even then, S&A did not admit to having issued a fifth report +dated November 26, 2003. +I. S&A justified its actions to the Board by stating the firm had decided to issue the +audit reports without being registered because its clients might be harmed if the filings were not +made in a timely fashion. Ultimately, an agreement was reached whereby S&A withdrew its +application for registration. +J. Sellers and Andersen referred their audit reporting clients to another Salt Lake City, +Utah, public accounting firm that was registered with the Board. They also became employees of +that firm for purposes of continuing to conduct audits of those companies, while operating under +their own individual names for other non-audit professional engagements. +K. The registered public accounting firm with which Sellers and Andersen became +affiliated performed re-audits of, and issued new reports on, all five issuers for which S&A had +improperly issued reports. S&A paid the accounting firm $2,000 for these reaudits. +Violations +L. Section 102(a) of the Act provides that “it shall be unlawful for any person that is +not a registered public accounting firm to prepare or issue, or to participate in the preparation or +3 + +issuance of, any audit report with respect to any issuer.” 3 +M. The provisions of Section 102(a) of the Act became effective on October 22, 2003.4 +N. Because S&A had not registered with Board, it lacked “the requisite qualifications” +to issue audit reports after October 22, 2003. By participating in the preparation of five audit reports +after October 22, 2003, by an audit firm that was not registered with the Board, Sellers and +Andersen lacked “the requisite qualifications to represent others.” +O. Although Sellers and Andersen were aware of the registration requirement, they +nevertheless knowingly or recklessly caused S&A to prepare and issue five audit reports after +October 22, 2003, on the financial statements of companies required to file periodic reports with +the Commission without first registering S&A with the Board. In so doing, S&A violated Section +102(a) of the Act. +P. Sellers and Andersen knowingly rendered substantial assistance to S&A in its +primary violations of the Act, because they failed to register it with the Board before the October +22, 2003 deadline although they were aware of the registration requirement. They knew that their +actions would result in the violation by S&A of Section 102(a) of the Act if S&A issued audit +reports, without having been registered with the Board, with respect to the financial statements of +issuers whose securities were registered with the Commission. +Findings +Q. As a result of the conduct described above, Sellers and Andersen willfully aided +and abetted and caused violations of Section 102(a) of the Act. +R. As a result of the conduct described above, Sellers and Andersen did not possess +the requisite qualifications to represent others. +IV. +In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanctions agreed to in Respondents’ Offers. +3 A violation of the Act or any rule that the Board issues under the Act is treated for all purposes in the same +manner as a violation of the Exchange Act, including with respect to penalties. Sarbanes-Oxley Act of 2002, 15 +U.S.C.A. § 7202(b)(1) (West 2002). +4 Section 102(a) became effective “[b]eginning 180 days after the date of the determination of the +Commission under Section 101(d)” of the Act that the Board was prepared to undertake its statutory responsibilities. +The Commission made the required determination on April 25, 2003. See Order Regarding Section 101(d) of the +Sarbanes-Oxley Act of 2002, Securities Act Release No. 8223, Exchange Act Release No. 47746, 2003 WL +1956164 (Apr. 25, 2003). +4 + +Accordingly, it is hereby ORDERED, effective immediately, that: +A. Respondents shall cease and desist from committing or causing any violations and +any future violations of Section 102(a) of the Act. +B. Respondents are censured. +C. Respondents may practice before the Commission as independent accountants +provided that: +1. The public accounting firm with which they are associated is registered with +the Board in accordance with the Act, and such registration continues to be effective; and +2. They have submitted to the Commission staff (attention: Office of the Chief +Accountant) the Board’s letter notifying the public accounting firm with which they are associated +that its registration application has been approved. +D. Respondents shall, jointly and severally, within 20 days of the entry of this Order, +pay disgorgement of $7,615 to the United States Treasury. Such payment shall be: (A) made by +United States postal money order, certified check, bank cashier's check or bank money order; (B) +made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the +Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 +General Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that +identifies Richard E. Sellers and Lester Rex Andersen as Respondents in these proceedings and +includes the file number of these proceedings, a copy of which cover letter and money order or +check shall be sent to Kenneth D. Israel, Regional Director, Securities and Exchange Commission, +Salt Lake Regional Office, 15 West South Temple Street, Suite 1800, Salt Lake City, Utah 84101. + By the Commission. + N ancy M. Morris + Secretary +5 diff --git a/raw/aaer/2007/AAER-2762.txt b/raw/aaer/2007/AAER-2762.txt new file mode 100644 index 0000000000000000000000000000000000000000..ccdf35b953563e2be8f5b694f72315af3d3a63d3 --- /dev/null +++ b/raw/aaer/2007/AAER-2762.txt @@ -0,0 +1,1396 @@ + + + + + + + + + + + + + + + + SEC.gov | Joseph F. Apuzzo + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/502651","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Apuzzo + + + + + + + + + + + + Joseph F. Apuzzo + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 20418 / December 31, 2007 + + Accounting and Auditing Enforcement Release No. 2762 / December 31, 2007 + + SEC v. Joseph F. Apuzzo , Civil Action No. 07-CV-1910 (CFD) (D.Ct.) + + SEC Charges Second CFO in Connection With Financial Fraud at United Rentals, Inc. + + Joseph F. Apuzzo, Former CFO of Terex Corporation, Charged With Aiding and Abetting Fraudulent Scheme + + The Securities and Exchange Commission announced that on December 27, 2007, it filed a complaint against Joseph F. Apuzzo, former Chief Financial Officer ("CFO") of Terex Corporation, for aiding and abetting securities law violations of United Rentals, Inc. ("URI") and Michael J. Nolan ("Nolan"), a former CFO of URI. Apuzzo is the second CFO charged in connection with the alleged violations. On December 12, 2007, the Commission filed settled financial fraud charges against Nolan. + + The Commission's complaint, filed in the United States District Court for the District of Connecticut, alleges that Apuzzo aided and abetted a fraudulent accounting scheme involving two sale-leaseback transactions, carried out between 2000 and 2002 by URI, Nolan and others. The transactions were structured to improve URI's 2000 and 2001 financial results by allowing URI to recognize revenue prematurely and to inflate the profit generated from the sales. The complaint further alleges that Apuzzo substantially assisted URI and Nolan in implementing the fraudulent scheme by, among other things, signing agreements with URI that he knew or was reckless in not knowing were designed to hide URI's continuing risks and financial obligations relating to the sale-leaseback transactions, and directing or approving the issuance of inflated invoices that he knew or was reckless in not knowing URI, through Nolan and others, would use to inflate URI's gain on the transactions As a result of the fraudulent transactions, URI materially overstated its financial results in its Forms 10-K for fiscal years 2000 and 2001, as well as in other filings and public releases. + + The Commission's complaint alleges, as a result of his actions, that Apuzzo aided and abetted URI's violations of Sections 10(b), 13(a) and 13(b)(2)(A) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5 and 13a-1 thereunder, and Nolan's violations of Section 13(b)(5) of the Exchange Act and Exchange Act Rule 13b2-1. As part of this action, the Commission seeks a permanent injunction prohibiting Apuzzo from future violations of the federal securities laws, an officer and director bar, disgorgement plus prejudgment interest, civil penalties, and other equitable relief. + + The Commission acknowledges the assistance of the U.S. Attorney's Office for the District of Connecticut and the New Haven Field Office of the Federal Bureau of Investigation in the investigation of this matter. + + The Commission's investigation is continuing. + + For further information, see Litigation Release No. 20396 (December 12, 2007). + + + + + + + SEC Complaint in this matter + +   + + + + + + + + + + + Resources + + + + + Complaint in this matter + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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