diff --git a/raw/aaer/2000/AAER-1216.txt b/raw/aaer/2000/AAER-1216.txt
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+              LITIGATION RELEASE NO. 16409 / January 14, 2000 
+
+ ACCOUNTING AND AUDITING ENFORCEMENT 
+
+ RELEASE NO. 1216 / January 14, 2000 
+
+ Securities and Exchange Commission v. Lynne K. Mercer, Civil Action No. 1:99 CV 00029S (USDC D. Utah) 
+
+ The Commission announced that on January 5, 2000, Lynne K. Mercer, a Bountiful, Utah, accountant, was permanently enjoined and ordered to pay disgorgement and civil penalties.  The Commission's action charged Mercer with forging the signature of his former partner on audit opinions for the financial statements of three publicly-held companies:  Computerized Thermal Imaging, Inc., Son-Tech, Inc., and Technology Selection, Inc.  In issuing these audit opinions Mercer signed the name of Ted H. Pierce & Associates, an American Fork, Utah, accounting firm, without the firm's knowledge or authorization.  The State of Utah revoked Mercer's license as a certified public accountant in 1992.  The permanent injunction prohibits Mercer from committing future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  Mercer was also ordered to disgorge $5,855, representing the fees he received from the wrongful audits, and a penalty of $5,855.  Mercer consented to the injunction and monetary remedies without admitting or denying the Commission's allegations. 
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diff --git a/raw/aaer/2000/AAER-1222.txt b/raw/aaer/2000/AAER-1222.txt
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index 0000000000000000000000000000000000000000..f7da03a69f9ffdd6c765ebae9639a333bf38e820
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+              Robert L. Norton
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+                        
+              UNITED STATES OF AMERICA
+ Before the
+ SECURITIES AND EXCHANGE COMMISSION
+
+  SECURITIES ACT OF 1933
+ Release No.  7797 / February 7, 2000
+
+  SECURITIES EXCHANGE ACT OF 1934
+ Release No. 42399 / February 7, 2000 
+
+  ACCOUNTING AND AUDITING ENFORCEMENT
+ Release No.  1222 / February 7, 2000
+
+  Administrative Proceeding
+ File No. 3-10143
+
+  
+
+
+     In the Matter of   ROBERT L. NORTON, 
+  
+Respondent.	 
+   
+
+
+  
+ORDER INSTITUTING CEASE- 
+AND-DESIST PROCEEDINGS 
+PURSUANT TO SECTIONS 8A 
+OF THE SECURITIES ACT OF  
+1933 AND 21C OF THE 
+SECURITIES EXCHANGE ACT 
+OF 1934 AND FINDINGS AND 
+ORDER OF THE COMMISSION 
+ 
+    I. 
+
+    The Commission deems it appropriate that public administrative proceedings be, and they hereby are, instituted pursuant to Sections 8A of the Securities Act of 1933 ("Securities Act") and 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Robert L. Norton  ("Respondent").
+
+   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 proceeding brought by or on behalf of the Commission or to which the Commission is a party, Respondent, without admitting or denying the matters set forth herein, consents to the issuance and entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Sections 8A of the Securities Act of 1933 and 21C of the Securities Exchange Act of 1934 and Findings and Order of the Commission ("Order").  1     III. 
+
+    On the basis of this Order and Respondent's Offer, the Commission finds  2   the following:
+
+     A.  Respondent  
+
+    Respondent, age 53, is the former executive vice president and Chief Financial Officer ("CFO") of Fabri-Centers of America, Inc. ("Fabri-Centers"), now known as Jo-Ann Stores, Inc.  At all relevant times, Respondent was an executive vice president, CFO and board member of Fabri-Centers; his employment with Fabri-Centers ended effective in June 1996.
+
+     B.  The Issuer  
+
+    Jo-Ann Stores, Inc. ("Jo-Ann Stores"), an Ohio corporation with principal executive offices in Hudson, Ohio, is now the largest national category-dominant retailer serving the retail fabric and craft industry, operating approximately 1,050 retail stores in 49 states primarily under the names Jo-Ann Fabrics and Crafts and Jo-Ann etc.  These stores feature a broad line of apparel, quilting and craft fabrics and sewing-related products, home decorating fabrics, floral, craft and seasonal products.  Jo-Ann Stores' common stock is registered with the Commission pursuant to Section 12(b) of the Exchange Act and is listed on the New York Stock Exchange.  3     C.  Background  
+
+    This matter stems from Fabri-Centers' application of the "gross profit method" of accounting during periods immediately before and after a $74.75 million debt offering in March 1992.  Under the gross profit method, Fabri-Centers estimated its store inventory levels, gross profit and earnings by applying pre-determined margin estimates, referred to as "pegs," against reported sales.  The peg estimates were based on historical operating results for each store and were accurate predictors of future profits only insofar as operating results did not change. Under the gross profit method, actual operating results for any given store could only be determined by the taking of a physical inventory and then reconciling those results against the peg estimates.  Fabri-Centers' policy was to conduct store physical inventories on a cycle basis, endeavoring to inventory each store once per fiscal year.  At the beginning of each month, Fabri-Centers began comparing the previous month's physical inventory counts with amounts predicted by the pegs; this reconciliation resulted in either an inventory "shrink" or "pick-up" for each store.  The merchandise cost of this variance was then determined and recorded in the company's books and records for the following fiscal month.  In periods between physical inventories, Fabri-Centers reported a store's financial performance based on these margin/cost estimates.
+
+    Fabri-Centers maintained a gross profit reserve account to offset the difference between the pegged inventory levels carried on its books and records and management's best estimate of actual inventory present in the company's stores.  At the end of each accounting period (quarterly), Fabri-Centers typically reviewed the gross profit reserve by comparing current inventory results and margin trends against the pegged cost/margin estimates.
+
+     D.  Events Leading to the Debt Offering  
+
+    In the fourth quarter of the fiscal year ended February 1, 1992 ("Fiscal 1992"), Fabri-Centers employed more aggressive pricing strategies than it had during the same period in the prior fiscal year.  Fabri-Centers' policy was to meet or beat competitive price points and not to lose market share.  In November and December, 1991 (i.e., in the fourth quarter of Fiscal 1992), during its busy holiday season, Fabri-Centers took and recorded only eight store physical inventories.  Accordingly, and because the company's business was seasonal, for the fiscal year ended February 1, 1992, 72.6 percent of Fabri-Centers' sales were uninventoried.
+
+    In January 1992, Fabri-Centers resumed taking inventories on a cycle basis, and completed physical inventories at 67 of the company's 664 stores in operation at the time.  On February 18, 1992, Fabri-Centers' independent auditors issued a "clean" opinion on the company's year-end financial statements without having reviewed results from the January 1992 physical store inventories.  On February 19, 1992, less than three weeks after its fiscal year end, Fabri-Centers issued an earnings announcement.  On February 20, 1992, the company filed with the Commission its Annual Report on Form 10-K.  Both the February earnings announcement and Form 10-K reported record sales and earnings for the fiscal year and fourth quarter ended February 1, 1992.  Fabri-Centers also reported a significant improvement in gross profit margins.  Simultaneously, Fabri-Centers filed an S-3 registration statement for $65 million in convertible subordinated debentures with an over-allotment option of $9.75 million.
+
+    In February 1992, Fabri-Centers' personnel began receiving negative results from the January physical inventories.  Respondent should have known that, by March 2, 1992, Fabri-Centers' accounting personnel had summaries of all 67 January inventories that identified a gross profit shortfall, or shrink, of approximately $1.1 million for just those stores.  On March 4, 1992, Fabri-Centers requested that the SEC accelerate the effective date of the S-3 registration statement to March 5, 1992.  The SEC granted that acceleration request, and on the same day, March 5, 1992, Fabri-Centers recorded in its general ledger results from the 67 January inventories, realizing a gross profit shortfall, or shrink, of $1,102,363.
+
+    These January inventory results were significant because of the seasonably higher fourth quarter sales and the limited number of inventories taken during that period.  Had the company taken into consideration the $1.1 million shortfall shown in the January 1992 store physical inventories and extrapolated those results to all uninventoried sales, it would have been clear that the year-end gross profit reserve was materially inadequate.  The failure to adjust the gross profit reserve caused the company's fourth quarter operating results and financial statements for the just-ended fiscal year to be erroneous and thus to be materially misstated.
+
+     E.  Statements to Auditors  
+
+    In connection with the registration statement for the debt offering, Fabri-Centers issued representation letters to its independent auditors on March 5, 1992 (the effective date of the registration statement), on March 13, 1992 (settlement for the initial $65 million offering) and on March 26, 1992 (settlement for the $9.75 million over-allotment).  Each of these letters was signed by the Respondent and Fabri-Centers' CEO and contained the following certification:
+
+    [T]o the best of our knowledge and belief . . .
+
+   . . .
+
+    Since February 1, 1992, there have been no events or transactions, other than those reflected or fully disclosed in the Registration Statement, that have a material effect on the financial statements included therein or that should be disclosed in order to make those statements not misleading.
+
+  The January physical store inventory results, and the confirmatory results from February inventories that showed similar declining margins, were fiscal year 1992 events that should have been disclosed to the auditors when these representation letters were issued.
+
+       F. Fabri-Centers' Operating Results Continue to  
+
+        Worsen in First Quarter of Fiscal 1993        
+
+    In February 1992, Fabri-Centers completed physical inventories at another 65 retail stores. On April 9, Fabri-Centers recorded results of the 65 February physical store inventories in its general ledger, recognizing another $1.29 million of inventory shrink.  These most recent 132 January and February physical store inventories had by this time identified a $2.4 million disparity between actual inventory levels and the peg estimates carried on the company's books.
+
+    On or about April 7, 1992, Respondent met with other members of senior management to discuss how to respond to lower-than-expected gross profit margins.  In preparation for the meeting, Respondent prepared a financial model projecting $14 million in shrink in Fiscal 1993 if the current rate of shrink continued.
+
+    Fabri-Centers took physical inventories at another 76 stores in March 1992.  Results of these inventories were summarized on a rolling basis throughout April 1992.  On May 7, 1992, Fabri-Centers recorded results of the 76 March physical store inventories in its general ledger, recognizing another $1.66 million of inventory shrink.  By May 7, 1992, the company had identified a variance between actual inventory levels and the peg estimates carried on the company's books of over $4 million for the 208 stores inventoried in January, February and March 1992.
+
+    Fabri-Centers' first quarter of Fiscal 1993 ended on May 2, 1992.  On or about May 12, 1992, Respondent and others directed Fabri-Centers' merchandise accounting department to record a $2.0 million reduction to the company's gross profit reserve.  This reduction, coming at a time when the shrink information should have indicated that the company should have estimated a higher gross profit reserve to account for the difference between pegged estimates and anticipated results, caused the company to overstate gross profit, inventory levels and earnings in its books and records for the first quarter of fiscal 1993.
+
+    On May 16, 1992, Respondent prepared a hand-written memo to Fabri-Centers' Chief Executive Officer and others stating that:  (1) inventory variances were averaging $20,000 per store, and (2) the company should have seen the percentage shortfall at Fiscal 1992 year-end.  On the same day, May 16, 1992, in a meeting with the chairman of Fabri-Centers' audit committee, Respondent indicated that the underlying problem was that Fabri-Centers had become much more promotional in October 1991 through January 1992; Respondent also concluded that it had been a mistake for Fabri-Centers not to take store physical inventories in November and December 1991. 
+
+     G. Fabri-Centers' Materially False  
+
+        and Misleading First Quarter Form 10-Q  
+
+    On June 16, 1992, Fabri-Centers filed with the Commission its Form 10-Q for the first quarter of Fiscal 1993. Due to the company's continuing failure to record appropriate amounts in the gross profit reserve, the financial statements contained in the first quarter Form 10-Q materially misstated inventory levels, gross profit and pre-tax earnings.  Respondent signed the first quarter Form 10-Q.
+
+     H. Fabri-Centers' Materially False  
+
+    and Misleading Second Quarter Form 10-Q  
+
+  On September 15, 1992, Fabri-Centers filed with the Commission its Form 10-Q for the second quarter of Fiscal 1993.  Due to the company's continuing failure to record appropriate amounts in the gross profit reserve, the financial statements contained in the second quarter Form 10-Q materially misstated inventory levels, gross profit and pre-tax earnings.  Respondent signed the second quarter Form 10-Q.
+
+     IV.
+
+      OPINION 
+
+     A.  Applicable Law  
+
+    Section 17(a)(2) of the Securities Act prohibits an issuer from obtaining money by means of an untrue statement or material omission in connection with the offer or sale of securities.  Section 17(a)(3) prohibits any transaction, practice or course of business which would operate as a fraud or deceit upon actual or potential purchasers.  Violations of Sections 17(a)(2) and (3) do not require proof of scienter and can be proven by negligent conduct.   Aaron v. SEC , 446 U.S. 680, 694 (1980).
+
+    Section 13(a) of the Exchange Act requires that issuers with securities registered pursuant to Section 12 of the Exchange Act file periodic and other reports with the Commission containing such information as the Commission prescribes by rule.  Rule 13a-1 requires issuers to file annual reports and Rule 13a-13 requires issuers to file quarterly reports.  Implicit within the reporting requirements of Section 13(a), Rules 13a-1 and 13a-13 is an obligation that the information reported be true and correct.  See,   e.g. ,  SEC v. Savoy Industries, Inc. , 587 F.2d 1149, 1165 (D.C. Cir. 1978),  cert. denied , 440 U.S. 913 (1979).  Additionally, Rule 12b-20 requires issuers to include such further material information necessary to make these periodic reports not misleading under the circumstances they were made. 
+
+    Rule 13b2-1 under the Exchange Act prohibits the direct or indirect falsification, or causing to be falsified, of any book, record or account that issuers are required to maintain pursuant to the Exchange Act.  Rule 13b2-2 under the Exchange Act prohibits officers and directors from making false or misleading statements, or omitting to state material facts necessary in order to make the statements made not misleading, to an accountant in connection with the preparation or filing of any document required to be filed with the Commission.
+
+    Evidence of negligence is sufficient to establish that a person caused a violation of Section 13(a), or violated Rules 13b2-1 and 13b2-2.
+
+     B.  Violations by Respondent  
+
+    Respondent violated Sections 17(a)(2) and (3) of the Securities Act, and caused violations of Section 13(a) of the Exchange Act and Exchange Act Rules 13a-1 and 12b-20 in connection with the Form 10-K and the S-3 Registration Statement. Respondent violated Rule 13b2-1 of the Exchange Act by permitting the company's gross profit reserve and earnings to be recorded without properly increasing the gross profit reserve in the first and second quarters of Fiscal 1993.  Respondent violated Rule 13b2-2 of the Exchange Act by signing representation letters to the company's auditors without making adequate inquiry into the adverse results of the recent store inventories in connection with the registration statement for the March 1992 debt offering. Respondent caused the company to violate Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 12b-20 thereunder by signing and approving the company's Form 10-K for the year end Fiscal 1992, and Forms 10-Q for the first and second quarters of Fiscal 1993.
+
+     V.
+
+      FINDINGS 
+
+    The Commission finds that Respondent violated Sections 17(a)(2) and (3) of the Securities Act and Exchange Act Rules 13b2-1 and 13b2-2 and caused violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder.
+
+     VI.
+
+      OFFER OF SETTLEMENT 
+
+    Respondent has submitted an Offer in this proceeding which the Commission has determined to accept.  Respondent, in his Offer, consents to this Order making findings, as set forth above, and ordering Respondent to cease and desist from committing or causing any violation of, and committing or causing any future violation of, Sections 17(a)(2) and (3) of the Securities Act, Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, 13b2-1 and 13b2-2 thereunder.
+
+     VII.
+
+      ORDER 
+
+    Accordingly,  IT IS HEREBY ORDERED , pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, that Respondent cease and desist from committing or causing any violation of, and committing or causing any future violation of, Sections 17(a)(2) and (3) of the Securities Act, Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, 13b2-1 and 13b2-2 thereunder.
+
+    By the Commission.
+
+                
+
+                  Jonathan G. Katz
+                 Secretary
+
+  
+   Footnotes 
+ 
+
+
+
+    1     Respondent also consented to the entry of an order requiring him to pay a $50,000 civil penalty, $46,916.68 in disgorgement and $41,630.29 in prejudgment interest thereon.   SEC v. Fabri-Centers of America, Inc. Robert L. Norton and Joseph E. Williams , Case No. 5:97CV1216 (N.D. Ohio)
+
+    2     The findings herein are made pursuant to Norton's Offer of Settlement and are not binding on anyone other than Norton.
+
+    3     On February 18, 1997, the Commission filed a complaint in the United States District Court for the District of Columbia against Fabri-Centers, the Respondent, and Fabri-Centers' former controller alleging violations of Section 17(a) of the Securities Act and Sections 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-13, 13b2-1 and 13b2-2 thereunder.  Fabri-Centers consented, without admitting or denying the allegations of the complaint, to the entry of a final judgment of permanent injunction and an order that the company disgorge $3.28 million.   See   SEC v. Fabri-Centers of America, Inc., et. al. , Civ. Act. No. 1:97CV00319. (February 18, 1997).  The action was subsequently transferred to the United States District Court for the Northern District of Ohio, Case No. 5:97CV1216.
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diff --git a/raw/aaer/2000/AAER-1227.txt b/raw/aaer/2000/AAER-1227.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c331a2f295f7b7a6a98047661b1dc66c947df9b3
--- /dev/null
+++ b/raw/aaer/2000/AAER-1227.txt
@@ -0,0 +1,1363 @@
+
+
+ 
+ 
+   
+     
+ 
+ 
+ 
+ 
+ 
+ 
+
+     
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+     SEC.gov | Fabri-Centers of America, Inc., Robert L. Norton and Joseph E. Williams 
+     
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+              Fabri-Centers of America, Inc., Robert L. Norton and Joseph E. Williams
+           
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+        Fabri-Centers of America, Inc., Robert L. Norton and Joseph E. Williams
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+              SECURITIES AND EXCHANGE COMMISSION
+  LITIGATION RELEASE NO.16433 / February 11, 2000 
+
+ ACCOUNTING AND AUDITING ENFORCEMENT 
+
+ RELEASE NO.  1227 / February 11, 2000 
+
+  SECURITIES AND EXCHANGE COMMISSION v. FABRI-CENTERS OF AMERICA, INC., ROBERT L. NORTON and JOSEPH E. WILLIAMS , Civil Action No. 5:97CV1216 (N.D. Ohio) (filed February 18, 1997) 
+
+   On February 7, 2000, the Commission issued an Order pursuant to Sections 8A of the Securities Act of 1933 (Securities Act) and 21C of the Securities Exchange Act of 1934 (Exchange Act) against Robert L. Norton, requiring him to cease-and-desist from committing or causing violations of, or future violations of Sections 17(a)(2) and (3) of the Securities Act, Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, 13b2-1 and 13b2-2 thereunder.  Norton is the former executive vice president and Chief Financial Officer of Fabri-Centers of America, Inc. (Fabri-Centers), now known as Jo-Ann Stores, Inc.  He left Fabri-Centers in June 1996. 
+
+   This matter stems from Fabri-Centers' application of the "gross profit method" of accounting during periods immediately before and after a $74.75 million debt offering in March 1992.  Norton, without admitting or denying the allegations in the Commission's Order, consented to the entry of the Order finding that he:  (1) violated Sections 17(a)(2) and 17(a)(3) of the Securities Act in connection with Fabri-Centers' 1992 year-end Form 10-K and the S-3 Registration Statement for the debt offering; (2) violated Rule 13b2-1 of the Exchange Act by permitting the company's gross profit reserve and earnings to be recorded without properly increasing the gross profit reserve in the first and second quarters of Fiscal 1993; (3) violated Rule 13b2-2 of the Exchange Act by signing representation letters to the company's auditors without making adequate inquiry into the adverse results of the recent store inventories in connection with the registration statement for the March 1992 debt offering; and (4) caused the company to violate Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 12b-20 thereunder by signing and approving the company's Form 10-K for the year-end Fiscal 1992, and Forms 10-Q for the first and second quarters of Fiscal 1993. 
+
+   As part of the settlement, the district court will enter an order requiring Norton to pay a $50,000 civil penalty, $46,916.68 in disgorgement and $41,630.29 in prejudgment interest thereon.   
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diff --git a/raw/aaer/2000/AAER-1248.txt b/raw/aaer/2000/AAER-1248.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0e2dbc72dfb87c5c81d1151fec875aef46d89fc8
--- /dev/null
+++ b/raw/aaer/2000/AAER-1248.txt
@@ -0,0 +1,1508 @@
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+              The City of Miami, Florida, Cesar Odio and Manohar Surana; Brenda P. Murray, Chief Administrative Law Judge
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+        The City of Miami, Florida, Cesar Odio and Manohar Surana; Brenda P. Murray, Chief Administrative Law Judge
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+ SECURITIES ACT OF 1933
+
+ Release No.    7851 / April 14, 2000
+
+ SECURITIES EXCHANGE ACT OF 1934
+
+ Release No.  42690 / April 14, 2000 
+
+ ACCOUNTING AND AUDITING ENFORCEMENT
+
+ Release No.  1248 / April 14, 2000 
+
+ ADMINISTRATIVE PROCEEDING
+
+ File No. 3-10022 
+
+   In the Matter of  CESAR ODIO Respondent.  
+	 ORDER MAKING FINDINGS AND IMPOSING A CEASE- AND-DESIST ORDER 
+   I. 
+
+   The Securities and Exchange Commission ("Commission") instituted public cease-and-desist proceedings 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 Respondent Cesar Odio ("Odio") on September 22, 1999. 
+
+               II. 
+
+   Respondent Odio has submitted an Offer of Settlement ("Offer") to the Commission, which the Commission has determined to accept.  Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings herein, except as to the jurisdiction of the Commission over Respondent and over the subject matter of this proceeding and as to Section III.A., which is admitted, Respondent Odio by his Offer consents to the entry of findings and cease-and-desist order set forth below. 
+
+               III. 
+
+   On the basis of this Order Making Findings and Imposing Cease-and-Desist Order ("Order") and the Offer submitted by Respondent Odio the Commission finds  1   that: 
+
+ A. At all relevant times, the City of Miami ("the City") was the largest municipality in Miami-Dade County, Florida.  The City was governed by a five member commission and run by a chief administrative officer, known as the City Manager, who reported to the commission.    
+
+ B. At all relevant times, Odio was the City Manager.  As City Manager, Odio had full authority over the City's financial operations and the preparation of its annual budget. 
+
+ The Fraudulent Offer and Sale of
+
+ the Bonds  
+
+ C. In June 1995, the City offered and sold, on a competitive bid basis, $22.5 million in general obligation bonds to pay for the cost of certain sanitary sewer improvements (the "Sewer Bond Offering" or "Sewer Bonds").  In August 1995, the City offered and sold, on a negotiated basis, $22 million in non-ad valorem revenue bonds to principally finance the City's acquisition of a new administration building, and to acquire and to pay for certain capital improvements to a City park (the "FPL Offering" or "FPL Bonds").  In December 1995, the City offered and sold, on a negotiated basis, $72 million in non-ad valorem revenue bonds to pay for certain of its annual pension and employee compensated absences obligations (the "Pension Bond Offering" or "Pension Bonds"). 
+
+ D. The Official Statements for all three offerings (collectively referred to as the "Bond Offerings") contained the City's fiscal year 1994 audited general purpose financial statements. Also contained in the Official Statements, by incorporation, was a certification located in the Closing Documents (the "anti-fraud certification") stating that the Official Statements were free of misstatements and omissions of material fact, and that there had been no material adverse change in the City's financial condition since the close of the prior fiscal year.  Odio executed the anti-fraud certifications for the Sewer, FPL, and Pension Bond Offerings.  Contained in the Sewer and FPL Offering Official Statements was the adopted fiscal year 1995 general fund budget.  
+
+ E. On or about September 1995, the City mailed its Comprehensive Annual Financial Report for fiscal year 1994 ("1994 CAFR") to broad segments of the investing public. In mailing the 1994 CAFR, the City targeted the investment community, including government and municipal securities dealers, investment banking firms, credit rating agencies, bond insurers and individuals.  The City also provided the 1994 CAFR to federal, state and local governments, as well as to public and university libraries.  The 1994 CAFR contained a Letter of Transmittal dated February 28, 1995, which was signed by Odio. The 1994 CAFR also contained the City's fiscal year 1994 audited general purpose financial statements. 
+
+ F. The City's financial condition began to materially decline after the close of fiscal year 1994 and continued to worsen through December 1995.  Specifically, the City's cash position had deteriorated to the point where the City faced the very credible prospect of being unable to meet its operating expenses through fiscal year 1995.  Odio was keenly aware of the City's dire economic situation.  
+
+ G. The Official Statements failed to disclose the City's financial condition to investors at the time of the Bond Offerings.  Specifically, the City omitted to state that its cash position had materially declined since the close of fiscal year 1994 and that serious consequences could result, including being unable to pay its operating expenses and debt service in fiscal year 1995, if its cash position did not significantly improve.  The Official Statements also failed to disclose that Operation Right-Size, a program designed to significantly reduce City expenditures, while necessary, might not have been sufficient to remedy the City's immediate economic problems.  In addition, the Pension Bond Offering Official Statement failed to disclose that the Pension Bonds were issued in order to address the City's "immediate cash flow requirements." Absent these disclosures, the Official Statements did not reveal the City's true financial condition to investors. 
+
+ H. The statements made in the anti-fraud certifications contained in the Closing Documents, and by incorporation, in the Official Statements, that no material adverse change in the City's finances had occurred since the close of the prior fiscal year, and that the Official Statements contained no omissions or misrepresentations of material fact, are false in light of the City's true financial situation at the time of the Bond Offerings.   
+
+ I. The only discussion in the Official Statements, which even alludes to the City's cash problems, is found in a footnote to the financial statements.  That footnote states that as of September 30, 1994 the City "experienced cash deficits in several of its operating funds which were temporarily remedied by loans from other funds", and that the City intended to replenish these cash deficits through the anticipated savings to be generated by Operation Right-Size.  The footnote also states that "[t]he implementation of the [Operation Right-Size] proposals ... are expected to strengthen the City's financial condition."  This footnote, located in a section principally addressing the City's proprietary funds, does not sufficiently disclose to investors the nature and gravity of the City's financial situation. Specifically, it omits to state that: (a) the City's cash position had materially declined since the close of fiscal year 1994, (b) the City faced the prospect of being unable to meet its operating expenses in fiscal year 1995 absent significant improvement in its cash position and (c) Operation Right-Size -- a direct result of the City's deteriorating finances -- although necessary, may have been insufficient to remedy the City's immediate cash flow problems.    
+
+ J. The City's 1994 CAFR also failed to disclose the City's deteriorating financial condition to the market place about previously issued City debt.  Besides the same footnote to the financial statements, which was also contained in the Official Statements, the only disclosure contained in the 1994 CAFR that arguably addresses the City's financial problems is found in the Letter of Transmittal.  In the Letter of Transmittal, the City merely repeats verbatim that portion of the footnote, which discusses Operation Right-Size and its anticipated savings.  Like the footnote contained in the financial statements, the Letter of Transmittal does not disclose the true nature and gravity of the City's financial situation. 
+
+  The Fiscal Year 1995 Budget Fraud  
+
+ K. In formulating its fiscal year 1995 budget in the summer of 1994, the City faced a $15.8 million general fund budget deficit.  Through increases in property taxes, and additional revenues from licenses and permits and the sale of landfill, the City was able to reduce partially the budget deficit by $6.8 million.  However, not having sufficient revenues to solve the remaining $9 million budget deficit, and not wanting to take the politically unpopular move of cutting expenses, the City, through Odio, balanced the fiscal year 1995 budget by including approximately $9 million in revenues from the Violent Crime Control and Law Enforcement Act of 1994 (the "Crime Bill"), federal legislation which authorized funding to local, state and federal governments to fight crime.  The City's approximate $9 million Crime Bill revenue projection was based upon a municipal lobbying group report issued in May of 1994 indicating that Miami could expect to receive $9,003,862 from the Local Partnership Act, a block grant provision of the Crime Bill. At that time, the Crime Bill legislation being considered by Congress provided that all the block grant monies under the Local Partnership Act would be paid in a lump sum in fiscal year 1995.  However, the final version of the Crime Bill, signed into law by the President on September 13, 1994, reduced funding under the Local Partnership Act and provided that payments would be made over five years commencing in fiscal year 1996. Notwithstanding these material changes which made it certain that the City would not receive the $9 million in fiscal year 1995, the City passed the fiscal year 1995 budget, which included the $9 million in Crime Bill revenues, on September 22, 1994,  nine days after  the President had signed the Crime Bill into law.   
+
+ L. Odio knew, or was reckless in not knowing, prior to the City's adoption of the fiscal year 1995 budget, that the block grant funding provisions of the Crime Bill had changed and, as a consequence, the City would not receive the $9 million -- representing approximately 57% of the $15.8 million general fund budget deficit -- in fiscal year 1995 and therefore did not have a balanced budget.  The Crime Bill projected revenues were included in the general fund budget figures (breakdown of revenues and expenditures) contained in the Official Statements in both the Sewer and FPL Offerings, which were provided to investors.  Thus, the Sewer and FPL Offering Official Statements falsely represented that the City had achieved a balanced budget for fiscal year 1995.  
+
+  Odio's Participation in the Fraudulent Bond Offerings  
+
+ M. Odio, acting through the City, knowingly and/or recklessly failed to disclose the City's deteriorating financial condition in the Official Statements.  Odio knew that the City's cash position had materially declined from the close of the prior fiscal year and that there was a very credible possibility that the City would not meet its operating expenses in fiscal year 1995, yet approved the Official Statements which failed to disclose this fact.  Odio also knew that the anti-fraud certifications he executed were false. Further, Odio signed the Letter of Transmittal contained in the 1994 CAFR which failed to disclose the City's true financial condition. Moreover, Odio knew or should have known prior to the passage of the proposed fiscal year 1995 budget that the City would not receive the $9 million from the Crime Bill in fiscal year 1995 and thus did not have a balanced budget.   
+
+  Violations  
+
+ N. Based upon the aforesaid conduct, Odio committed or caused, violations of, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in that, in connection with the purchase and sale of certain securities, namely the Sewer Bonds, FPL Bonds and Pension Bonds, as well as the City's other previously issued and outstanding bonds, by use of the means and instrumentalities of interstate commerce and by use of the mails, Odio, directly and indirectly, employed devices, schemes, and artifices to defraud; made untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and engaged in acts, practices and a course of business which would and did operate as a fraud and deceit. 
+
+ O. Based upon the aforesaid conduct, Odio committed or caused, violations of, Section 17(a)(1) of the Securities Act, in that, in the offer and sale of certain securities, namely the Sewer Bonds, FPL Bonds and Pension Bonds, by the use of the means and instruments of transportation and communication in interstate commerce and by use of the mails, Odio, directly and indirectly, employed devices, schemes and artifices to defraud. 
+
+ P. Based upon the aforesaid conduct, Odio committed or caused, violations of, Sections 17(a)(2) and 17(a)(3) of the Securities Act, in that, in the offer and sale of certain securities, namely the Sewer Bonds, FPL Bonds and Pension Bonds, by the use of the means and instruments of transportation and communication in interstate commerce and by use of the mails, Odio, directly and indirectly, obtained money or property by means of untrue statements of material facts and omissions to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and engaged in transactions, practices and a course of business which would and did operate as a fraud and deceit upon the purchasers and prospective purchasers of such securities. 
+
+ IV. 
+
+   In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Odio and impose the following cease-and-desist order: 
+
+    IT IS ORDERED , pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") that Respondent cease and desist from committing or causing any violation and any future violation of Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act and Section 10(b) of the Exchange Act, and Rule 10b-5, thereunder. 
+
+   For the Commission, by its Secretary, pursuant to delegated authority.
+  Jonathan G. Katz
+  Secretary 
+ 
+   Footnotes 
+
+    1  
+	 The findings herein are not binding on anyone other than Odio. 
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diff --git a/raw/aaer/2000/AAER-1253.txt b/raw/aaer/2000/AAER-1253.txt
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+
+
+ 
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+              Albert Adamczak, CPA
+           
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+        Albert Adamczak, CPA
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+ SECURITIES EXCHANGE ACT OF 1934
+ Release No.  42743 / May 2, 2000
+
+  ACCOUNTING AND AUDITING ENFORCEMENT
+ Release No.    1253 / May 2, 2000        
+
+  ADMINISTRATIVE PROCEEDING
+ File No.  3-10196
+
+  
+
+
+     __________________________________    
+       : ORDER INSTITUTING  
+    In the Matter of              : PROCEEDINGS PURSUANT TO   
+       : SECTION 21C OF THE   
+      : SECURITIES EXCHANGE ACT   
+    ALBERT ADAMCZAK, C.P.A.,     : OF 1934 AND RULE 102(e) OF   
+         : THE COMMISSION'S RULES   
+        : OF PRACTICE, MAKING   
+    Respondent.       : FINDINGS, IMPOSING   
+      : SANCTIONS AND IMPOSING  
+       : A CEASE-AND-DESIST ORDER  
+    __________________________________     :  
+    I. 
+
+    The Securities and Exchange Commission deems it appropriate that proceedings be, and hereby are, instituted against Albert Adamczak pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 102(e) of the Commission's Rules of Practice.  1     II. 
+
+    In anticipation of the institution of these proceedings, Adamczak has submitted an Offer of Settlement ("Offer") 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 in which the Commission is a party, Adamczak, without admitting or denying the findings contained herein, except that he admits the jurisdiction of the Commission over him and over the subject matter of these proceedings, consents to the entry of the findings and the issuance of this Order Instituting Proceedings, Making Findings, Imposing Sanctions and Imposing a Cease-and Desist Order (the "Order").
+
+    Accordingly, IT IS ORDERED that proceedings against Adamczak be, and hereby are, instituted. 
+
+   III. 
+
+    On the basis of this Order and the Offer submitted by Adamczak, the Commission finds that:  2    A. Albert Adamczak, age 40, is a certified public accountant licensed in Pennsylvania.  He became Vice President of Corporate Support Services (the "Accounting Department") for Allegheny Health Education and Research Foundation ("AHERF") in June 1997, reporting directly to AHERF's Chief Financial Officer ("CFO").  Prior to his promotion in June 1997, he served as a senior director of accounting for AHERF and AHERF's western subsidiaries.  Adamczak worked as an accountant for a large accounting firm for eight years prior to joining AHERF.  In that position Adamczak participated in one or more audits of the financial statements of public companies, which were included in filings with the Commission.  
+
+  B. AHERF is a Pennsylvania nonprofit healthcare organization formed in 1983.  Until recently, it was the parent holding company and sole member or owner of numerous subsidiaries.  3    On July 21, 1998, AHERF instituted bankruptcy proceedings under Chapter 11 of the United States Bankruptcy Code on behalf of itself and four of these subsidiaries in the U.S. District Court for the Western District of Pennsylvania.
+
+  C. From 1987 to 1997, AHERF expanded rapidly, acquiring other non-profit healthcare organizations, including several in the Philadelphia metropolitan area: the Medical College of Pennsylvania, United Hospitals, Inc., Hahnemann University Hospital and the Graduate Health System ("Graduate").  The acquired entities became direct or indirect subsidiaries of AHERF.  
+
+  D. As an umbrella holding company, AHERF managed and provided centralized corporate support services for the acquired entities, but did not assume liability for their pre-existing debt.  The obligation to repay debt within AHERF was placed on collections of one or more of its non-profit subsidiaries known as "obligated groups."  By 1997, AHERF had five obligated groups :   Allegheny General Hospital ("Allegheny General"),   Allegheny University Medical Centers, Delaware Valley, Allegheny Hospitals, Centennial ("Centennial"), and Allegheny Hospitals, New Jersey.
+
+  E. By the time of the bankruptcy in July 1998, AHERF's obligated groups were responsible for, at least, thirteen bond issues, with outstanding debt of more than $900 million.  
+
+  F. Pursuant to contractual obligations, the obligated groups, through AHERF as their agent, provided to nationally recognized repositories annual Secondary Market Disclosure Reports ("Disclosure Reports") containing audited financial statements prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), debt coverage ratios and other information with respect to certain of its obligated groups.  These Disclosure Reports were made available to the public through these repositories and were the most easily accessible source of information for investors and potential investors in AHERF bonds.  
+
+  G. From at least June 1997 through July 21, 1998, AHERF's financial reporting function, including the initial preparation of financial statements, was primarily handled by the Accounting Department, which reported to Adamczak.  Significant aspects of the financial reporting function also were the responsibility of other departments or entities within AHERF.    H. As a member of AHERF management, Adamczak participated in most, if not all, significant decisions affecting the financial statements of AHERF and its subsidiaries.  Subject to AHERF's chief financial officer, he oversaw AHERF's accounting department.  He further was responsible for the accuracy of the numbers in the financial statement, and received and reviewed drafts of AHERF's 1997 consolidated Disclosure Report.   I. On or about February 6, 1998, AHERF distributed its 1997 audited consolidated financial statements with consolidating schedules and consolidated Disclosure Report to the nationally recognized repositories and numerous other third parties. 
+
+
+  J. AHERF's audited consolidated financial statements with consolidating schedules for the year ended June 30, 1997, purportedly prepared in accordance with GAAP, were materially false and misleading and failed to comply with GAAP in that:
+
+    1. they materially overstated AHERF's 1997 consolidated net income; and
+
+    2. they materially overstated Delaware Valley's 1997 net income. 
+
+  K. AHERF's 1997 consolidated Disclosure Report was materially false and misleading in that:
+
+    1. it mirrored the numerical misstatements in the AHERF 1997 audited consolidated financial statements and consolidating schedules;
+
+    2. it materially misrepresented the condition of Delaware Valley accounts receivable; and
+
+    3. it materially misrepresented the financial condition of Centennial.
+
+  L. From at least June 1997 through July 21, 1998, Adamczak willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder in that he, directly or indirectly, in connection with the purchase or sale of securities, namely, AHERF bonds, by use of the means or instrumentalities of interstate commerce, or the mails:  (1) employed devices, schemes or artifices to defraud; (2) made untrue statements of material fact and omitted to state material facts necessary to make the statements made, in light of the circumstances under which they were made, not misleading; and (3) engaged in acts, practices and courses of business which operated as a fraud and deceit upon persons, including the purchasers and prospective purchasers of such securities.  Such violations include Adamczak's deliberate and/or reckless misrepresentation or failure to disclose, directly or indirectly, to investors: 
+
+    1. the overstatement of AHERF's consolidated net income at June 30, 1997 because of the failure to adjust Delaware Valley's reserve and expense accounts related to uncollectible receivables in accordance with GAAP;
+
+    2. the overstatement of Delaware Valley's net income at June 30, 1997 because of the failure to adjust Delaware Valley's reserve and expense accounts related to uncollectible receivables in accordance with GAAP;
+
+    3. the overstatement of AHERF's consolidated net income at June 30, 1997 because of the misclassification of certain restricted funds;
+
+    4. the misrepresentation of the condition of Delaware Valley accounts receivable in AHERF's 1997 consolidated Disclosure Report, including the misrepresentation of the reason for the decrease in net patient accounts receivable; and 
+
+    5. the misrepresentation of Centennial's financial condition in AHERF's 1997 consolidated Disclosure Report, including the misrepresentation of the reasons for certain Centennial restructuring costs and for the change in Centennial intercompany account balances from a receivable position to a payable position.
+
+   IV. 
+
+    On the basis of this Order and the Offer submitted by Adamczak, the Commission finds that Adamczak willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.  
+
+   V. 
+
+    In view of the foregoing, the Commission deems it appropriate to accept the Offer submitted by Adamczak. 
+
+    Accordingly, IT HEREBY IS ORDERED pursuant to Section 21C of the Exchange Act, that Adamczak cease and desist from committing or causing any violations and any future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and
+
+    IT IS FURTHER ORDERED, effective immediately, that:
+
+    A.    Adamczak is denied the privilege of appearing or practicing before the Commission as an accountant.
+
+    B.    After three years from the date of this Order, Adamczak may request that the Commission consider his reinstatement by submitting an application to the 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 Adamczak'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) Adamczak, or the firm with which he is associated, is a member of the SEC Practice Section of the American Institute of Certified Public Accountants Division for CPA Firms ("SEC Practice Section");
+
+        (b) Adamczak, or the firm, has received an unqualified report relating to his, or the firm's, most recent peer review conducted in accordance with the guidelines adopted by the SEC Practice Section; and 
+
+        (c) As long as Adamczak appears or practices before the Commission as an independent accountant he will remain either a member of the SEC Practice Section or associated with a member firm of the SEC Practice Section, and will comply with all applicable SEC Practice Section requirements, including all requirements for periodic peer reviews, concurring partner reviews, and continuing professional education.
+
+  C. The Commission's review of an application by Adamczak to resume appearing or practicing before the Commission may include consideration of, in addition to the matters referenced above, any other matters relating to Adamczak's character, integrity, professional conduct, or qualifications to appear or practice before the Commission.
+
+  D. Adamczak shall comply with his cooperation agreement, as set forth in paragraph IV.C. of his Offer. 
+
+    By the Commission.
+
+                Jonathan G. Katz
+
+               Secretary
+  
+   Footnotes 
+ 
+
+
+    1     Paragraph 1 of Rule 102(e) provides in relevant 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... (iii) [t]o have willfully violated ... any provision of the Federal securities laws or the rules and regulations thereunder.
+
+    2     The findings herein are made pursuant to Adamczak's Offer and are not binding on any other person or entity in this or any other proceeding.
+
+    3     AHERF's underlying entities are referred to as "subsidiaries," although technically AHERF was their sole "member", not a shareholder.
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diff --git a/raw/aaer/2000/AAER-1265.txt b/raw/aaer/2000/AAER-1265.txt
new file mode 100644
index 0000000000000000000000000000000000000000..74321b731fe605e936419d4d2d6eb3926b35731c
--- /dev/null
+++ b/raw/aaer/2000/AAER-1265.txt
@@ -0,0 +1,1488 @@
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+           
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+        Danny R. Auerbach, Michael L. Glaser, and James Montgomery, II
+       
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+
+ SECURITIES EXCHANGE ACT OF 1934
+ Release No. 42881 / June 1, 2000 
+
+ ACCOUNTING AND AUDITING ENFORCEMENT
+ Release No. 1265 / June 1, 2000 
+
+ ADMINISTRATIVE PROCEEDING
+ File No. 3-10042 
+ 
+  
+      
+In the Matter of   
+ 
+James D. Montgomery, II,  Danny R. Auerbach, and  Michael L. Glaser   
+Respondent.  
+   
+
+  : : : : : : :    
+   
+  ORDER MAKING FINDINGS 
+AND IMPOSING A 
+CEASE-AND-DESIST  
+ORDER AS TO  
+MICHAEL L. GLASER     I. 
+
+ On September 28, 1999, the Securities and Exchange Commission ("Commission") deemed it appropriate that public administrative cease-and-desist proceedings be instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Michael L. Glaser ("Glaser").   
+
+   Following the institution of those proceedings, Glaser submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission or in which the Commission is a party, Glaser consents to the entry of this Order Making Findings and Imposing a Cease-and-Desist Order ("Order") without admitting or denying the findings set forth herein, except as to the jurisdiction of the Commission over him and over the subject matter of these proceedings, which are admitted. 
+
+   The Commission has determined that it is appropriate to accept Glaser's Offer and accordingly is issuing this Order.  
+
+ II. 
+
+   On the basis of this Order and the Offer, the Commission finds the following:  1   
+
+   A. Computone Corporation ("Computone") is a company headquartered in Alpharetta, Georgia that designs, manufactures and sells computer hardware and software products. Computone's common stock is registered pursuant to Section 12(g) of the Exchange Act. 
+
+   B. Computone filed with the Commission its April 7, 1995 Form 10-K on July 6, 1995. 
+
+   C. Glaser, of Tempe, Arizona, is president of CYMA Systems ("CYMA"), a Tempe, Arizona company that develops and markets accounting software. 
+
+   D. In or about March 1995, Glaser and the Chief Executive Officer ("CEO") of  Computone had discussions which resulted in a draft Distributor Agreement between CYMA and Computone during April 1995. 
+
+ E. On or about March 31, 1995, Glaser sent a letter to the CEO of Computone in which he made clear that CYMA would not purchase or take ownership of the products that Computone would be shipping to it, that CYMA would pay for the products only after it had sold them, and that title and risk would not pass to CYMA because it was accepting the products on consignment. On April 4, 1995, Glaser received a memorandum from Computone entitled "Clarification of Issues Related to the Distribution Agreement Between Computone and CYMA" which confirmed that CYMA would only be obligated to pay for the goods upon resale. 
+
+   F. On or about April 5 and 6, 1995, Computone and CYMA, respectively, executed a Distributor Agreement, which stated that it was deemed effective as of April 3, 1995.  The Distributor Agreement among other things: (1) characterized Computone and CYMA as "Seller and Buyer"; (2) provided that Computone was to sell its products to CYMA for subsequent sale; and (3) provided that title and associated risk of loss or damage of the shipped products was to pass to CYMA when it accepted the products at its Tempe, Arizona location. 
+
+   G. On or about April 6, 1995, CYMA issued a purchase order to Computone for products invoiced at $206,005. 
+
+ H. On or about April 21, 1995, Glaser instructed a subordinate to sign and return a confirmation request to Computone's auditors which stated that, among other things, with regard to the product shipped to CYMA pursuant to the April 6, 1995, purchase order, "[t]he balance of $206,005 due Computone Corporation for invoice #39480-I agrees with our records, except as follows:_________." 
+
+ I. Glaser knew or should have known that the representation in the confirmation request was false because, notwithstanding the Distributor Agreement, CYMA was not obligated to pay Computone until CYMA resold the products.   
+
+ J. In part as the result of CYMA's response to Computone's auditor's confirmation request, Computone recognized the CYMA/Computone transaction described above as a sale which caused Computone to overstate its FY 1995 reported income from continuing operations by approximately $124,684.  In part, this caused Computone to report $126,000 of income from continuing operations for FY 1995 rather than a loss of approximately $435,107.  
+
+   K. Glaser caused Computone to violate Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5 and 13a-1, thereunder, as more particularly described in paragraphs II.A through J, above. 
+
+ III. 
+
+   In view of the foregoing, it is appropriate to impose the sanction agreed to in the Offer. Accordingly, IT IS HEREBY ORDERED that Glaser cease and desist from committing or causing any violation and any future violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and from causing any violation and any future violation of Section 13(a) of the Exchange Act and Rule 13a-1 thereunder.   
+
+   By the Commission. 
+
+           Jonathan G. Katz
+           Secretary 
+  Footnote 
+   1     The findings herein are made pursuant to the Offer of Settlement of Glaser and are not binding on any other person or entity named as a respondent in this or any other proceeding. 
+
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diff --git a/raw/aaer/2000/AAER-1272.txt b/raw/aaer/2000/AAER-1272.txt
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index 0000000000000000000000000000000000000000..3973536701fd8fbdfc0f277be9021cd113df1a16
--- /dev/null
+++ b/raw/aaer/2000/AAER-1272.txt
@@ -0,0 +1,1676 @@
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+              Cendant Corporation
+           
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+        Cendant Corporation
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+ SECURITIES EXCHANGE ACT OF 1934
+ Release No.   42933 / June 14, 2000 
+
+ ACCOUNTING AND AUDITING ENFORCEMENT
+ Release No.   1272 / June 14, 2000 
+
+ ADMINISTRATIVE PROCEEDING
+ File No.  3-10225
+
+
+      
+ In the Matter of 
+   
+CENDANT CORPORATION,   
+  Respondent.   
+   
+
+    : : : : : : : :   
+   
+   
+ORDER INSTITUTING PUBLIC 
+ADMINISTRATIVE PROCEEDINGS 
+PURSUANT TO SECTION 21C  
+OF THE SECURITIES EXCHANGE ACT OF 
+1934, MAKING FINDINGS, AND IMPOSING 
+A CEASE-AND-DESIST ORDER
+      I.  
+
+   The Securities and Exchange Commission ("Commission") deems it appropriate that public administrative proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against CENDANT Corporation ("CENDANT" or "Respondent"). 
+
+    II.  
+
+   In anticipation of the institution of these administrative proceedings, Cendant has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings, and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, without admitting or denying the findings set forth below, except as to jurisdiction of the Commission over it and over the subject matter of these proceedings, which Respondent admits, Respondent consents to the entry of this Order Instituting Public Administrative Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order ("Order") set forth below. 
+
+   Accordingly, it is ordered that proceedings pursuant to Section 21C of the Exchange Act be, and hereby are, instituted. 
+
+    III.  
+
+   FACTS   
+
+   The Commission makes the following findings:  1   
+
+  A.  RESPONDENT   
+
+   Cendant, a Delaware corporation with its headquarters in New York City, was created through the December 17, 1997, merger of HFS Incorporated ("HFS") and CUC International Inc. ("CUC").  Cendant provides certain membership-based and Internet-related consumer services and controls franchise brand names in the hotel, residential real estate brokerage, car rental, and tax preparation businesses.  As of March 1, 2000, Cendant's common stock, Income PRIDES, and Growth PRIDES were registered pursuant to Section 12(b) of the Exchange Act and traded on the New York Stock Exchange ("NYSE").  Cendant's 6.45% Trust Originated Preferred Securities, 7 3/4% Notes due 2003, and 3% Convertible Subordinate Notes due 2002 were registered pursuant to Section 12(g) of the Exchange Act. 
+
+  B.  OTHER RELEVANT ENTITIES   
+
+    1.  HFS Incorporated   
+
+   HFS, a Delaware corporation that had its headquarters in Parsippany, New Jersey, was principally a controller of franchise brand names in the hotel, real estate brokerage, and car rental businesses.  Its securities were registered pursuant to Section 12(b) of the Exchange Act and traded on the NYSE.   
+
+    2.  CUC International Inc.   
+
+   CUC, a Delaware corporation that had its headquarters in Stamford, Connecticut, was principally engaged in membership-based consumer services, such as auto, dining, shopping, and travel "clubs."  CUC's largest division, Comp-U-Card, marketed individual memberships in these clubs.  CUC's securities were registered pursuant to Section 12(b) and traded on the NYSE.   
+
+  C.  THE CENDANT MERGER   
+
+   Pursuant to the Agreement and Plan of Merger between CUC and HFS, on December 17, 1997, HFS was merged with and into CUC, with CUC continuing as the surviving corporation and changing its name to Cendant Corporation.  The transaction was structured as a "merger of equals."  Moreover, upon consummation of the merger, Cendant attempted to conduct its business with parallel, but separate, financial reporting structures for the legacy HFS operations in New Jersey and the legacy CUC operations in Connecticut.  2   
+
+  D.  SUMMARY   
+
+   This proceeding involves a massive fraudulent financial reporting scheme that caused dramatic investor losses.  For more than twelve years, until its exposure in 1998, certain members of CUC's senior and middle management devised and operated a systemic, systematic scheme to inflate operating income at CUC.  3    The scheme was driven by senior management's determination that CUC would always meet the earnings expectations of Wall Street analysts and fueled by disregard for any obligation that the earnings reported needed to be "real."   
+
+   CUC senior management overseeing the scheme maintained an annual schedule listing revenue and operating income for each of the company's divisions for its current fiscal year and coming fiscal year and setting forth the so-called "opportunities" or means available for inflating the company's operating income during the coming year.  At the beginning of each fiscal year, management decided which of these opportunities to use for that fiscal year and the amount needed from each such opportunity.  Accordingly, the schedule served as management's "cheat sheet" for any given year.   
+
+   CUC management utilized four principal categories of opportunities to inflate the company's income and earnings.  Two of those categories involved the company's sales of membership products.  First, management manipulated recognition of the company's membership sales revenues.  Second, management improperly utilized two liability accounts related to membership sales, consistently maintaining inadequate balances in the accounts and on occasion reversing the accounts directly into operating income.  To hide the inadequate balances, management periodically kept certain membership sales transactions off-books.   
+
+   The remaining two categories of opportunities involved the company's merger and purchase reserves.  4    In what was the most significant category quantitatively, CUC management intentionally overstated merger and purchase reserves and subsequently reversed those reserves directly into operating expenses and revenues.  Finally, management improperly wrote off assets -- including assets that were unimpaired -- and improperly charged the write-offs against the company's merger reserves.  The improper write-offs inflated operating income in various ways.  CUC management directed some of the write-offs to improper reporting periods, thereby manipulating results by avoiding charges in the period in which the write-offs should have been taken.  In some instances, write-offs should have been taken against operating income but instead were improperly charged against merger reserves.  In other cases, the assets were not impaired, and by taking the write-offs management avoided continuing depreciation or amortization costs.  Together, the four categories of opportunities added an aggregate of more than $500 million to the company's pre-tax operating income during the fiscal years ended January 31, 1996; January 31, 1997; and December 31, 1997.  5    Of that amount, more than half -- approximately $260 million -- was added to the fiscal year ended December 31, 1997.  6   
+
+   CUC senior management supervised the scheme over the course of each fiscal year.  Beginning in at least 1988, management regularly made certain aggregate changes to CUC's reported quarterly financial results.  Accordingly, at the end of each of the company's first three fiscal quarters, senior managers took the company's actual results for the quarter and compared them with the quarterly expectations of analysts.  The senior managers then directed mid-level financial reporting managers at CUC corporate headquarters to add whatever amounts were needed in order to bring CUC's quarterly income up to analysts' expectations.  Thus, for each of the first three quarters of a CUC fiscal year, the managers artificially inflated revenues and decreased operating expenses.  In conjunction with these income statement changes, the managers also cosmetically altered certain CUC balance sheet items. 
+
+   The fraudulent and artificial income statement and balance sheet alterations were simply inserted quarterly into a spreadsheet kept at CUC's financial reporting operations at Stamford, Connecticut.  The quarterly changes were made solely as top-side adjustments in the spreadsheet -- that is, no journal entries were made, the company's general ledger was not altered, and the changes were not carried down to the books of the company's divisions.  The spreadsheet was then used to generate consolidated financial statements for the company, and those consolidated financial statements were used for the company's press releases and quarterly reports.  Accordingly, the company's quarterly reports filed with the Commission and released to investors did not accurately reflect the company's books and records.  Moreover, quarter by quarter, the discrepancy between the company's quarterly reports and its books and records grew wider and wider.  For example, the quarterly top-side alterations aggregated $31 million for the company's fiscal year ended January 31, 1996; an additional $87 million for its fiscal year ended January 31, 1997; and another $176 million for its fiscal year ended December 31, 1997. 
+
+   At the end of each fiscal year, the CUC managers implementing the scheme utilized the previously targeted opportunities to inflate the company's annual results as recorded on its books and records, so that the books and records would be consistent with the financial results already released and so that CUC's reported annual income would, in fact, meet the expectations of Wall Street analysts.  As the scheme progressed over the course of several years, larger and larger opportunities were required.  Eventually, only massive merger-related opportunities could sustain the scheme, and the need for such opportunities ultimately led CUC to seek a merger with HFS.   
+
+   In furtherance of their scheme, CUC managers falsified the company's books and records and failed to implement a system of internal accounting controls.  In general, the managers simply created whatever entries were needed to accomplish their goals, regardless of whether the entries were in any way grounded in the fiscal or business realities of CUC.  Moreover, to conceal the scheme, at year-end they repeatedly and regularly used unsupported post-closing journal entries carrying effective dates spread retroactively over prior months.  7    At times, an unsupported entry would be broken into smaller component entries to make the adjustments less noticeable.  Other entries were intentionally created in odd amounts to hide the fact that the entries were completely fictitious.  When merger reserves were initially established, amounts were routinely and intentionally overstated.  At times, reversals of merger reserves were designated as revenues.  As noted, the quarterly consolidated financial statements were largely fictional.  Membership sales cancellations and rejects were intentionally kept off-books for extended periods of time.  At times, intercompany transactions were used to hide the offsets to specific entries.  The scheme was designed to inflate CUC's income and earnings, and it did just that:  as a result of the scheme, CUC filed periodic reports and other filings that overstated income, earnings, and certain of its assets.  In sum, those reports and filings misrepresented the company's true financial condition and results of operations.   
+
+  E.  THE SCHEME   
+
+    1.   Ensuring That Results Will Be What the Street Expects   
+
+   Beginning as early as 1985, certain members of CUC's senior management implemented a scheme designed to ensure that CUC always met the financial results anticipated by Wall Street analysts.  Analysts were led to expect gradual, constantly increasing earnings growth at CUC, with increases of about a penny per share each quarter.  Senior management utilized a variety of means -- or so-called opportunities -- to achieve their goals.  In the earlier years of the scheme, senior management relied in large part on manipulating recognition of the company's membership sales revenue.  An additional set of procedures involved understating the membership sales cancellation reserve and the commissions payable liability, as well as an annual manipulation of the balance in the membership sales cancellation reserve.  As time went on, however, CUC became increasingly dependent on acquisitions and mergers to sustain the scheme.  Purchase and merger reserves were intentionally overstated at the time they were established, and the inflated amounts were used in subsequent periods to inflate operating income at CUC.  When it suited management's purposes, assets were written off against these overstated reserves.  In short, each year, senior CUC management would review the opportunities available for inflating the company's income and would determine how much would be needed from each opportunity that year.  The result was an annual cheat sheet that assured senior management that that year's results were under control. 
+
+    2.  Simply Inflating Quarterly Results to What the Street Expects   
+
+   The process of consolidating CUC's quarterly results took place at the company's financial reporting operations in Stamford, Connecticut.  Each month, each of CUC's divisions would send its financial results to Stamford.  At the end of each fiscal quarter, the financial reporting personnel in Stamford would enter all the divisions' results into an electronic spreadsheet.  Once the data had been entered into the spreadsheet, the financial reporting personnel would print preliminary consolidated quarterly financial results.   
+
+   Beginning in at least 1988, certain members of CUC's senior management started the process of directing unsupported top-side adjustments to the company's quarterly results.  The senior managers would compare CUC's preliminary consolidated quarterly results with the published earnings expectations of analysts at brokerage firms and would direct that consolidated quarterly income be adjusted to correspond with those expectations.  Specific lump-sum amounts were simply added to reported revenues or deducted from reported expenses to accomplish the desired result. 
+
+   Once income had been adjusted, the managers would make additional alterations among the line items for marketing, general and administrative, and operating expenses.  The managers had specific percentage targets, which required that each of these expense categories be set at approximately the same percentage of revenues as that particular category had held in the previous quarter.  From quarter to quarter, therefore, each of these expense line items, after adjustment, would remain at a fairly constant percentage level relative to revenues.  These profit-and-loss adjustments were almost always made exclusively in the spreadsheet column devoted to the results of CUC's largest division, Comp-U-Card.   
+
+   In addition to these adjustments to income statement items, the CUC managers implementing the scheme would make cosmetic alterations to certain balance sheet items, most notably directing that cash be adjusted upward to whatever level the managers believed was desirable.  Once all the quarterly adjustments had been made, the managers would sometimes tweak the numbers slightly a second time, making small additional adjustments.  These additional adjustments, for example, might be made if a comparison with the previous quarter or with the same quarter from the previous year revealed that a particular line item would stand out as a result of the contemplated adjustments.  The Stamford financial reporting personnel would enter all the quarterly adjustments into the electronic spreadsheet and then use the spreadsheet to generate the consolidated quarterly results that CUC issued in its quarterly earnings press release and filed with the Commission in its quarterly Report on Form 10-Q.   
+
+   In sum, for any given fiscal quarter at CUC, CUC's reported quarterly results matched the consensus quarterly expectations of analysts on Wall Street.  The company's operating income was what it had been expected to be -- and each major expense category bore approximately the same percentage relationship to revenues as in the quarter before.  These changes were directed by management in a deliberate, top-down process of "reverse engineering," virtually divorced from whatever fiscal and business realities actually had transpired that quarter at CUC.  Accordingly, the quarterly reports that CUC filed with the Commission and released to investors were equally divorced from those realities.   
+
+   The unsupported quarterly adjustments to income were made entirely as top-side adjustments.  Although the adjustments were entered into the spreadsheet at Stamford, no journal entries were created, no entries were made to CUC's general ledger, and the adjustments were not carried down to the books and records of any of the company's divisions.  8    Accordingly, the gap that existed between CUC's reported quarterly results and the company's actual results was mirrored in the disparity between CUC's reported results and the books and records of CUC.  From quarter to quarter, this gap continued to grow, and from fiscal year to fiscal year, the aggregate of each year's unsupported quarterly adjustments also increased.  The quarterly top-side alterations aggregated $31 million for the company's fiscal year ended January 31, 1996; an additional $87 million for its fiscal year ended January 31, 1997; and another $176 million for its fiscal year ended December 31, 1997. 
+
+   At each fiscal year-end, the CUC managers overseeing the scheme had to make certain that the opportunities targeted for that year were, in fact, utilized.  Moreover, since most of the artificial CUC income had simply been added top-side at the quarters, and did not appear on the company's books and records, corrective measures were needed prior to the company being audited by its outside auditors.  One area, however, almost never involved year-end entries -- that of revenue recognition.   
+
+    3.  Revenue Recognition:  CUC's Starting Point for 
+Making the Numbers Work   
+
+   In the earliest years of the scheme, membership sales revenue recognition was the principal means of inflating CUC results.  The Comp-U-Card division, where most membership sales took place, marketed a variety of membership products, with membership terms varying from twelve to thirty-six months.  Moreover, Comp-U-Card did not always recognize, or amortize, revenue from the sales of its membership products over the same period of time as it amortized solicitation costs related to those products' sales.  Accordingly, Comp-U-Card used certain grids or matrices to project the amortization of its membership sales revenue and costs.  In connection with those calculations, the grids also made deductions from certain membership product revenues to account for expected cancellations by individuals who had purchased the membership products.  Ostensibly, and perhaps originally, the grids were created to match membership revenue more precisely with corresponding membership sales expense.  The grids, however, soon came to be used for additional, less laudable tasks.  
+
+   In CUC's early years, the membership sales products were relatively few in number, and the grids were not complex.  In each of those years, members of CUC senior management would review projected membership sales figures and calculate the additional amount of revenue needed to inflate CUC income to the level desired.  The required amounts were then simply entered manually into the appropriate cells of the membership grid spreadsheets.  Because the grids were used to generate operating results of the Comp-U-Card division, the resulting membership revenue recognition opportunity would be embedded in that division's results.  Accordingly, the opportunity did not require a separate line item on management's annual schedule or cheat sheet for the scheme.  9   
+
+   Over time, the Comp-U-Card division membership sales business grew, and Comp-U-Card began to market a considerable variety of membership products.  For purposes of revenue recognition, these membership products were divided into two types:  those for which revenues from new membership sales were recognized immediately in their entirety, with the corresponding solicitation costs spread over a trailing period of several months or years; and those for which both the revenues from and the costs of new membership sales were recognized on a deferred basis over a multi-month period.  10   
+
+   The increasing variety of membership products resulted in increasingly more complex amortization grids.  The increased complexity of the grids and the difficulty of tracking the manually entered adjustments led to a change in how management manipulated the grids.  Beginning in about 1994, specific "allocation" columns were added to the grids and replaced the manually entered adjustments as the means for shifting revenue.  For any given year, management would determine the amount of revenue that needed to be moved between the revenue categories and would calculate the multipliers required to accomplish that task.  The multipliers were then added to the allocation columns in the grids.  These allocation columns skewed the membership cancellation and membership sales revenue calculations in two ways -- they moved revenue from the deferred recognition membership products to the immediate recognition membership products, and they moved revenue from earlier months to months near the end of the fiscal year.  Moreover, the allocations weighted these revenue shifts in a manner that increased income dramatically as the end of the fiscal year approached.  11    The allocation alterations resulted in the company overstating income by $26.7 million for its fiscal year ended January 31, 1996; by $22.7 million for its fiscal year ended January 31, 1997; and by $41.4 million for its fiscal year ended December 31, 1997.  12   
+
+   Because the revenue recognition opportunity was embedded in the reported results of the Comp-U-Card division, it inflated CUC operating income annually without additional action being taken by CUC management at fiscal year-end.  The remaining opportunities required more active intervention on the part of those overseeing the scheme. 
+
+    4.  Utilizing the Membership Cancellation Reserve and the Commissions Payable Liability:  A Seasonal Approach to Inflating Income                  
+
+   Another category of opportunities involved the company's reserve for membership sales cancellations and its liability account for commissions payable on membership sales.  By posting certain fictitious entries, periodically keeping membership sales rejects off-books, intentionally understating CUC's membership cancellation reserve, and occasionally simply reversing the cancellation reserve or the commissions payable liability directly into revenue or operating expense accounts, the managers established an ongoing and systematic procedure for inflating CUC's operating income annually.  
+
+   Certain Comp-U-Card membership products were processed through various financial institutions that billed their members' credit cards for new sales and charges related to the various membership products.  When Comp-U-Card recorded membership sales revenue from such a sale, it would allocate a percentage of the recorded revenue to cover estimated cancellations of the specific membership product being sold, as well as allocating a percentage to cover estimated rejects and chargebacks.  Rejects resulted when the credit card to be charged was over its limit, closed, or reported as lost or stolen.  Chargebacks resulted when a credit card holder disputed specific charges related to a particular membership program.  The result of these Comp-U-Card percentage allocations was the Comp-U-Card membership cancellation reserve.   
+
+   In the late 1980s, senior management at CUC encountered a sudden, unexpected spike in membership chargebacks from one financial institution.  Faced with this exigency, CUC management refused to take the required, one-time charge to the membership cancellation reserve, instead electing to hold the chargebacks off-books for one month and smooth out the impact to the reserve.  That decision served as precedent, and the off-books lag was increased in future reporting periods when management was looking for additional opportunities to inflate income and further its scheme.  Eventually, CUC developed a policy of keeping rejects and cancellations off the Comp-U-Card general ledger during the last three months of each fiscal year.  Instead, those rejects and cancellations appeared only on cash account bank reconciliations compiled by the Comp-U-Card accounting personnel in Trumbull, Connecticut.  Because the rejects and cancellations for the final three months were not recorded against the membership cancellation reserve, the policy allowed CUC to hide the fact that the reserve was dramatically understated at each fiscal year-end.  13   
+
+   Holding rejects and cancellations off-books in the fourth quarter each year was just one step in an annual ritual that CUC management used to exploit the membership cancellation reserve.  In the first three months of each ensuing fiscal year, the previously held rejects and cancellations were booked against the reserve.  Because the reserve was significantly understated, however, those bookings required simultaneous remedial entries designed to inflate the reserve.  Accordingly, at the same time the CUC managers were booking the rejects and cancellations, they also were creating fictitious accounts receivable and crediting the cancellation reserve.  Finally, as each fiscal year drew to a close, the annual cycle would begin to repeat itself:  the fictitious accounts receivable would be reversed and the company would begin to hold rejects and cancellations off its books.   
+
+   This annual ritual allowed the company to avoid the charges needed to bring the cancellation reserve up to the proper amount.  Moreover, in some years, the membership cancellation reserve was depleted even further at year-end by post-closing entries that reversed amounts from the reserve directly into revenue and operating expense accounts.  Combined, these membership cancellation reserve opportunities resulted in the company overstating income by $48 million for its fiscal year ended January 31, 1996; by $19 million for its fiscal year ended January 31, 1997; and by $12 million for its fiscal year ended December 31, 1997.  14   
+
+   CUC paid commissions to certain institutions on sales of Comp-U-Card membership products sold through those institutions.  Accordingly, at the time that it recorded revenue from those sales, CUC created a liability to cover its commissions payable obligation.  As with the cancellation reserve, Comp-U-Card used false schedules and other devices to support its understating of the commissions payable liability and to avoid the impact that would have resulted if the liability had been properly calculated.  Furthermore, on occasion, CUC management utilized this liability account by directing post-closing entries moving amounts from the liability directly into revenue.  In connection with the January 31, 1997, fiscal year-end, CUC managers directed post-closing entries moving $9.12 million from the commissions payable liability to revenue. 
+
+   By the mid-1990s, opportunities related to CUC's membership sales could no longer sustain the scheme.  Increases in the company's business meant greater and greater dollar amounts of artificial income were needed each year just to keep artificial income at the same percentage level of overall "reported" income as in previous years.  Moreover, the overall scheme called for prepping analysts to expect increased earnings every quarter.  Management directing the scheme agreed that the membership-related opportunities probably had been maximized.  The managers therefore decided to keep membership-related opportunities at approximately the same percentage of company income going forward and to look to other opportunities to fuel needed growth in the scheme.  Those growth requirements forced CUC management to look increasingly to another area of opportunities -- the company's merger and purchase reserves.   
+
+    5.  Manipulating Merger and Purchase Reserves:  Turning 
+Unusual Charges into an Ordinary Income Source   
+
+   In what was quantitatively the most significant category of opportunities utilized by CUC managers, reserves established in connection with the company's mergers and purchase acquisitions were regularly but improperly reversed directly into operating expense accounts and revenue accounts.  This practice grew in magnitude over time as the company became increasingly acquisitive and did larger and larger deals.  Larger mergers presented the opportunity for larger merger reserves, and by the latter years of the scheme only large reserves could keep management's income scheme on track.  In 1996, CUC established a large merger reserve for several new acquisitions, and management envisioned years of benefit.  Those hopes were short-lived.  Operating shortfalls at CUC's new software division forced the CUC managers to deplete this new opportunity much more quickly than they had planned.  By 1997, CUC management was desperate for a major business combination, and, early in 1997, that desperation led management to renew previously ended merger discussions with HFS.  By May of 1997, those discussions had resulted in the Cendant merger agreement, and the possibility of a merger reserve large enough to keep the scheme alive.   
+
+   Generally Accepted Accounting Principles ("GAAP") allow companies undertaking business combinations to account for certain preacquisition contingencies and for liabilities for certain costs associated with a business combination, provided that the contingencies meet certain specified criteria and the costs fall within specific, delineated categories of expenses, are properly planned for, and are properly documented.  15    In the event that an acquiring entity meets these criteria, GAAP allows the entity to establish appropriate liabilities -- what issuers sometimes refer to as "reserves."  The charges for a reserve so established in connection with a business combination accounted for as a pooling of interests appear in the entity's income statement as a separate expense item designated as unusual or transaction-related charges, to distinguish them from the entity's usual operating expenses.  16    For example, in CUC's Report on Form 10-K for its fiscal year ended January 31, 1997, this line item was designated "[m]erger, integration, restructuring and litigation charges associated with business combinations," while in Cendant's Report on Form 10-K for its fiscal year ended December 31, 1997, the line item was designated "[m]erger-related costs and other unusual charges."  17   
+
+   At CUC, however, accounting for such liabilities in business combinations went far beyond what GAAP permitted.  Acquisitions were viewed in large part as opportunities to ensure the viability of future "earnings" at CUC.  Reserves were established to stockpile future income, and the reserves were subsequently reversed to bring those future earnings to fruition.  
+
+   During the period 1995 through 1997, CUC completed a series of mergers and purchase acquisitions, and, in undertaking these transactions, CUC recognized as liabilities certain transactional costs, including legal and investment bankers' fees, severance payments, and business line termination costs.  As a regular part of CUC's accounting for these business combinations, however, the CUC managers implementing the scheme arbitrarily determined the amounts that CUC would reserve for certain of these liabilities.  18    At times, the managers simply doubled the amounts that had been calculated as CUC's true costs.  On other occasions, when various CUC divisions were involved, the CUC managers would summarily inform controllers at those divisions of the aggregate amounts that they should reserve, without bothering to consult the controllers on what, if any, actual costs had been, or would be, incurred.  In order to help plan reserve reversals, the financial reporting personnel at Stamford regularly canvassed the divisions throughout the year, keeping track of what reserves each division had and whether the division anticipated having an "excess" balance in the reserve at year-end.  References to the "real" and the "cushion" parts of reserves became part of the vernacular at CUC. 
+
+   Each fiscal year, at year-end, the CUC managers utilized the opportunities of these inflated reserves.  In large part, the managers simply directed entries that reversed the reserves directly into revenue or operating expense accounts.  The majority of those direct reversals took place at the Comp-U-Card division, or at subsidiaries of Comp-U-Card.  19    The arbitrary nature of the reversals was evidenced by the manner in which they were made:  at times, the responsible CUC managers would summarily direct subordinates to reverse a specific aggregate amount out of merger reserves and to increase revenue or to decrease operating expenses, as the case may be, leaving it to the subordinates to decide arbitrarily which accounts should benefit and in what amounts.  On occasion, the CUC managers used direct reversals of acquisition reserves to increase operating income at divisions other than Comp-U-Card.  In some cases, divisions carrying relatively small acquisition reserves on their books were directed by CUC managers to reverse those reserves directly into income on the divisions' own books.  Some of those reserves had been established only a short time before, at the insistence of CUC managers.   
+
+   The CUC managers also used these reserves in a less direct manner, channeling reserve reversals through CUC's intercompany accounts.  In some transactions, the managers would first transfer part of an acquisition reserve to a specific CUC intercompany account, essentially creating an intercompany payable for a specific division.  The managers would then inform the specific division of the intercompany transfer and direct the division to move the intercompany credit to income accounts on that division's books.  On other occasions, the managers directed Stamford financial reporting personnel to reverse a merger reserve into a division's CUC intercompany payable account and then immediately transfer the reversal back out of that intercompany account and into income accounts at Comp-U-Card.  Finally, in a method used to inflate income for the fiscal year ended December 31, 1997, the CUC managers transferred amounts from a merger reserve to a specific division's CUC intercompany account and then increased the division's operating income on a top-side basis only, in the electronic spreadsheet kept by the financial reporting personnel in Stamford.  The division was not informed of the transfer or the top-side increase.  Once the annual audit was completed, however, Stamford personnel directed the division to make journal entries decreasing its intercompany receivable and crediting the division's retained earnings account.  20    For these transactions, the managers generally selected divisions that they knew would not be fully audited.  21   
+
+   Improper reversals of merger and purchase reserves resulted in the company overstating income by $11 million for its fiscal year ended January 31, 1996; by $59 million for its fiscal year ended January 31, 1997; and by $147 million for its fiscal year ended December 31, 1997.  22    More than $135 million of this income effect came from one CUC merger reserve, the so-called "Ideon reserve," established in connection with business combinations undertaken by CUC in 1996 and early 1997.  23    It was the rapid depletion of the Ideon reserve that drove CUC's need for the Cendant merger.  Approximately $37 million of improper reserve reversals for the December 31, 1997, fiscal year came from the Cendant merger reserve.   
+
+    6.  Writing-Off Assets Against the Cendant Merger Reserve:
+    Pushing the Balance Sheet over the Edge   
+
+   Another category of reserve-related opportunities was utilized principally in connection with the Cendant merger and Cendant's December 31, 1997, year-end close.  In fiscal years immediately prior to the Cendant merger, the CUC managers implementing the scheme had failed to write off impaired assets held by CUC.  Then, in connection with the December 31, 1997, year-end close, the managers directed that millions of dollars of CUC assets -- both impaired and unimpaired -- be written off against the Cendant reserve.  
+
+   GAAP requires that long-lived assets and certain identifiable intangibles that are held and used by a company be reviewed whenever events or changes in circumstances call into question the company's ability to recover the carrying amounts for those assets.  24     If the carrying amount for such an asset is not recoverable, the company must recognize an impairment loss equal to the amount by which the carrying amount exceeds the fair value of the asset.  Moreover, the impairment loss so calculated must be recognized in the fiscal period in which the asset became impaired, and the charge for such a loss must be reported as a component of the company's income from continuing operations.   
+
+   For CUC management, these principles were little more than convenient justifications -- to be trotted out when it served their purposes and to be ignored when it did not.  For the fiscal years ended January 31, 1996, and January 31, 1997, the managers ignored the impairment of certain CUC assets.  In so doing, they inflated CUC operating income for those years by avoiding required charges that would have been incurred if CUC had properly recognized its impairment loss.  
+
+   In the December 1997 Cendant merger reserve, the CUC managers perceived an opportunity to take massive asset-related charges without impacting income from continuing operations.  The managers availed themselves of the opportunity by directing that goodwill, receivables, and other assets, impaired and unimpaired, be written off against the Cendant reserve.  Accordingly, in connection with the close for Cendant's December 31, 1997, year-end, CUC management transmitted a memorandum to various CUC divisional controllers directing the controllers to transmit approximately $75 million in assets to CUC Corporate through the CUC intercompany accounts.  The managers then directed that these assets be written off against the Cendant reserve.  In addition, the managers directed that other assets, not itemized in the memorandum, also be written off against the reserve.   
+
+   These transactions inflated CUC operating income in various ways.  As noted, some of the assets written off against the merger reserve had become impaired in previous fiscal years.  For those assets, the CUC managers already had avoided an impact to operating income in the previous years by failing to write off the assets as required.  By subsequently writing the assets off against the Cendant reserve, the managers ensured that the charges would appear under the rubric of unusual charges rather than as charges to income from operations.  For those assets that were not impaired, but written off anyway, the transactions allowed the managers to avoid the ongoing depreciation or amortization charges that Cendant would have recognized for these assets in future years, while, again, reporting the present charges as unusual ones.  Overall, the write-off of assets to the Cendant merger reserve at year-end December 31, 1997, and the concomitant failure to recognize certain asset impairments in the proper fiscal year, artificially inflated the company's income by $6 million for its fiscal year ended January 31, 1996; by $12 million for its fiscal year ended January 31, 1997; and by $29 million for its fiscal year ended December 31, 1997.  25   
+
+  F.  FALSE FILINGS   
+
+   From 1985 until Cendant management's discovery of the accounting fraud in April 1998, the company filed with the Commission false and misleading periodic reports and other filings.  Those reports and filings included, directly or by incorporation, financial statements that misrepresented the company's financial results, massively overstating its income from operations and its earnings.  Because the misstatements covered such a long period of time, it is not always possible to quantify the precise impact of the irregularities for any given year.  Nevertheless, for some periods, the misstatement of income was of historic proportions.   
+
+   For the last three fiscal years of the scheme, pre-tax income was artificially overstated by nearly one-third, an aggregate misstatement of approximately one-half billion dollars.  During those years, the company's Reports on Form 10-Q reported income reflecting the scheme's top-side quarterly adjustments.  Those adjustments alone caused the company's reported quarterly pre-tax income to be misstated by an aggregate amount of $31 million for the first three quarters of the company's fiscal year ended January 31, 1996; by an aggregate amount of $87 million for the first three quarters of the company's fiscal year ended January 31, 1997; and by an aggregate amount of $176 million for the first three quarters of the company's fiscal year ended December 31, 1997.  During that same period, the company's Reports on Form 10-K misstated annual pre-tax income from operations by $127 million for its fiscal year ended January 31, 1996; by $122 million for its fiscal year ended January 31, 1997; and by $262 million for its fiscal year ended December 31, 1997.  The consequences for the company's shareholders were devastating.  26   
+
+                      IV.  
+
+  VIOLATIONS OF THE EXCHANGE ACT REPORTING, 
+
+   RECORD-KEEPING, AND INTERNAL CONTROLS PROVISIONS   
+
+   Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder require issuers with securities registered under Section 12 of the Exchange Act to file annual and 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),  cert. denied , 440 U.S. 913 (1979).  Exchange Act Rule 12b-20 further requires the inclusion of any additional material information that is necessary to make 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).   
+
+   As discussed above, from 1985 until Cendant management's discovery of the accounting fraud in April 1998, the company filed false and misleading periodic reports with the Commission that misrepresented the financial results of the company, overstating operating income and earnings and failing to disclose that the financial results were falsely represented.   
+
+   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.  Rule 13b2-1 prohibits the falsification of any book, record, or account subject to Section 13(b)(2)(A).  Section 13(b)(2)(B) of the Exchange Act requires Section 12 registrants to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are properly executed and recorded, that access to assets is properly controlled, and that accountability for assets is properly recorded and analyzed.   
+
+   From 1985 until April 1998, the company's books and records reflecting the transactions and dispositions of its assets were inaccurate and had been falsified.  The company intentionally failed to devise and maintain an adequate system of internal accounting controls.   
+
+   For the foregoing reasons, CENDANT violated Section 13(a) and (b) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, and 13b2-1 thereunder.   
+
+                      V.  
+
+   Based on the foregoing, the Commission finds that: 
+
+   CENDANT committed violations of Section 13(a) and (b) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, and 13b2-1 thereunder. 
+
+    VI.  
+
+   In view of the foregoing, the Commission deems it appropriate to accept Cendant's Offer and to impose the sanctions agreed to therein.  In determining to accept the Offer, the Commission considered remedial acts promptly undertaken by Cendant and cooperation afforded the Commission and other authorities.   
+
+   Accordingly,  IT IS HEREBY ORDERED  that 
+
+   CENDANT, pursuant to Section 21C of the Exchange Act, cease and desist from committing or causing any violation, and any future violation, of Section 13(a) and (b) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-13, and 13b2-1 thereunder. 
+
+   By the Commission. 
+
+                 Jonathan G. Katz
+
+                 Secretary 
+  Footnotes 
+
+
+   1        The Commission's findings herein are made pursuant to Cendant's Offer and are not binding upon any other person or entity in these or any other proceedings. 
+
+   2     In April 1998, Cendant senior management, consisting primarily of legacy HFS officials, learned of facts which led to the discovery of the massive financial fraud conducted by former management of CUC.  Cendant management promptly reported the discovery of the fraud and its attendant accounting irregularities to the Commission staff; conducted a thorough internal investigation and compiled an extensive report thereon; waived privileges as to the report and filed the report, and the accompanying exhibits, as Exhibits to a Report on Form 8-K; and cooperated with the staff in its investigation of this matter.  As noted in Section VI., below, the Commission, in fashioning the remedial sanction in this matter, considered Cendant's prompt remedial acts and cooperation.   
+
+   3     "Operating income" here denotes income from operations, prior to any one-time or unusual charges or gains.   
+
+   4     Although the term "reserve" is not formal accounting terminology, the term is used in this Order because the term was used by CUC and Cendant and is used commonly by issuers. 
+
+   5     CUC's fiscal year ended on January 31.  After the December 17, 1997, merger, Cendant adopted a fiscal year ending December 31. 
+
+   6     Due to a variety of factors, such as changes in accounting methodology or comparability issues related to acquisitions or to dispositions of discontinued business operations, income impact figures used in this Order may not necessarily tie to figures set forth in CUC and Cendant financial statements included in filings with the Commission.   
+
+   7     Post-closing journal entries at CUC were entries made after a reporting period had ended and the books were closed, but with effective dates spread retroactively over prior weeks or months. 
+
+   8     Although the quarterly adjustments to income were made almost exclusively to the Comp-U-Card division results, they did not appear on the books and records of Comp-U-Card.  The allocation of adjustments to Comp-U-Card meant only that the adjustments would be placed in that column of the Stamford spreadsheet that was used for Comp-U-Card results. 
+
+   9     In the early years of the scheme, the schedule might include a footnote reminding management that the revenue recognition benefit was embedded in Comp-U-Card's results, but any such note became unnecessary over time. 
+
+   10     From the late 1980s to October 1996, the solicitation costs for all products were recognized over a twelve-month period.  After October 1996, the solicitation costs for thirty-six-month memberships were amortized over the entire thirty-six-month membership term. 
+
+   11     Given CUC's policy of recognizing the solicitation costs of "immediate" membership products on a deferred basis, sales revenues of the immediate recognition type were especially valuable when the sales were recognized during the company's fiscal fourth quarter.  In such situations, the new sales revenue would be recognized entirely in the current fiscal year, while the corresponding costs would be expensed over the ensuing multi-month period.  Moreover, beginning in at least 1995, recognition of new sales solicitation costs was further delayed by a CUC policy dictating a one-month lag between the initial recognition of new membership sales revenues and the recognition of the corresponding solicitation costs. 
+
+   12     The increased impact for the 1997 calendar year resulted, in part, from certain post-closing journal entries that were used to alter membership income to an even greater degree than that achieved by the grids.  Thus, in connection with 1997 year-end procedures, the CUC managers implementing the scheme used journal entries to move an additional $6.5 million of deferred recognition membership revenues into immediate recognition membership revenues and to move $3 million of solicitation costs from immediate recognition products to deferred recognition products.  These entries created an additional $9.5 million in CUC operating income for the year. 
+
+   13     Failing to book cancellations and rejects at each fiscal year-end had the added effect of overstating the company's cash position on its year-end balance sheet.  In fact, Cendant's Report on Form 10-Q for the quarter ended March 31, 1998, stated that the company had discovered that its balance sheet as of December 31, 1997, had "an approximate $100 million overstatement in cash."  This reported overstatement equaled approximately two-thirds of the $149.5 million in "cash and cash equivalents" set forth on the company's balance sheet as of December 31, 1997, and included in its Report on Form 10-K for the year then ended. 
+
+   14     The reduced income impact for the fiscal year ended December 31, 1997, reflects the fact that no post-closing entries reversing the cancellation reserve directly into income were used in conjunction with that year-end. 
+
+   15     Applicable criteria are set forth in the relevant accounting literature, including:  (i)  Accounting for Contingencies , Statement of Financial Accounting Standards ("FAS") No. 5 (Fin. Accounting Standards Bd. ("FASB") 1975); (ii)  Accounting for Preacquisition Contingencies of Purchased Enterprises , FAS No. 38 (FASB 1980); (iii)  Business Combinations , Accounting Principles Bd. Opinion No. 16 (American Inst. of Certified Pub. Accountants 1970); (iv)  Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring) , Emerging Issues Task Force ("EITF") Issue 94-3 (FASB EITF 1995); and (v)  Recognition of Liabilities in Connection with a Purchase Business Combination , EITF Issue 95-3 (FASB EITF 1995). 
+
+   16     For business combinations accounted for under the purchase method, an amount equal to the reserves is added to goodwill.  
+
+   17     In recent years, financial analysts have increasingly focused on issuers' operating income -- that is, income from an issuer's ongoing business operations, prior to any one-time or unusual charges -- largely applauding, or at worst ignoring, an issuer's announcement of large one-time or unusual charges.   
+
+   18     In addition, the liabilities established at CUC, in large part, included amounts that did not meet the criteria set forth in the applicable accounting literature.   See ,  e . g ., EITF Issue 94-3; EITF Issue 95-3. 
+
+   19     Because the Comp-U-Card division general ledger served as the general ledger for CUC, entries made at Comp-U-Card could reverse the largest CUC merger reserve accounts directly into income accounts at Comp-U-Card.  
+
+   20     Divisions were specifically informed that the off-setting entry should be to their retained earnings in order to avoid opening their books for the previous fiscal year.   
+
+   21     For some of CUC's smaller divisions, CUC's outside auditors conducted only limited review procedures, forgoing a full-scope audit.  CUC management knew which divisions would be subjected to such reviews and intentionally directed intercompany merger reversals to those divisions.   
+
+   22     The aggregate amount of merger and purchase reserves improperly reversed into income by the CUC managers in connection with the December 31, 1997, fiscal year-end close was actually only $115 million.  However, the December 31, 1997, year-end income overstatement included an additional $32 million of reserve reversals as a result of CUC's change from a January 31 fiscal year-end to a Cendant fiscal year-end of December 31.  As a function of that change, CUC's January 1997 financial results were reported in both the CUC fiscal year ended January 31, 1997, and the Cendant fiscal year ended December 31, 1997.  Because $32 million of the improper January 31, 1997, year-end reserve reversals had been allocated to CUC's January 1997 books, that $32 million also inflated Cendant's income for the fiscal year ended December 31, 1997. 
+
+   23     These business combinations included CUC's acquisitions of Davidson & Associates, Inc.; Sierra On-Line, Inc.; Ideon Group, Inc.; and Plextel Telecommunications, Inc.  The CUC reserve for these charges is referenced here as the "Ideon reserve."  In fact, that reserve encompassed two CUC general ledger accounts, generally referred to as the "Ideon Reserve Account" and the "Accrued Other Account." 
+
+   24    See Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of , FAS No. 121 (FASB 1995). 
+
+   25     Two other transactions directed by the CUC managers utilized the balance sheet in another way.  Those transactions increased income for CUC's fiscal year ended January 31, 1996, by approximately $18 million and for its fiscal year ended January 31, 1997, by approximately $2 million, by improperly capitalizing certain operating expenses, essentially moving the expenses from the income statement to the balance sheet. 
+
+   26     On April 15, 1998, after the markets closed, the company announced that accounting irregularities had been uncovered and that a restatement of the company's financial statements would be necessary.  On the day of the announcement, Cendant common stock closed at $35 5/8.  The trading day after the announcement, the stock closed at $19 1/16.  On July 14, 1998, the company announced that the accounting irregularities were more extensive than had been anticipated originally and that the company would restate its consolidated financial statements for the previous three fiscal years.  After the July news, Cendant common stock fell to a closing price of $14 5/8 on July 16.  
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diff --git a/raw/aaer/2000/AAER-1276.txt b/raw/aaer/2000/AAER-1276.txt
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+              U.S. SECURITIES AND EXCHANGE COMMISSION
+ WASHINGTON, D.C.
+
+  LITIGATION RELEASE NO.   16587 / June 14, 2000
+
+  ACCOUNTING AUDITING ENFORCEMENT RELEASE NO. 1276
+  
+Securities And Exchange Commission v. Cosmo Corigliano, Anne M. Pember, Casper Sabatino, and Kevin Kearney, Civil Action No. 00-2873  (AJL)  (D.N.J. June 14, 2000)
+  
+Securities And Exchange Commission v. Steven Speaks, Civil Action No. 00-2875 (WHW) 
+(D.N.J. June 14, 2000)
+  
+Securities And Exchange Commission v. Mary Sattler Polverari, Civil Action No. 00-2874           (WHW) (D.N.J. June 14, 2000)
+  
+  In the Matter of Cendant Corporation, Administrative Proceeding File No. 3-10225                             .
+  In the Matter of Steven Speaks, CPA, Administrative Proceeding File No. 3-10227                              .
+  In the Matter of Mary Sattler Polverari, CPA, Administrative Proceeding File No. 3-10228                 .
+  In the Matter of Paul Hiznay, Administrative Proceeding File No. 3-10226                                          .
+
+   SEC INSTITUTES ENFORCEMENT ACTION AGAINST FORMER TOP FINANCIAL OFFICERS AND MANAGERS AT CUC INTERNATIONAL IN CONNECTION WITH MASSIVE FINANCIAL FRAUD AT CUC AND CENDANT CORPORATION - FINANCIAL REPORTING ACTION BROUGHT AGAINST CENDANT 
+
+    The U.S. Securities and Exchange Commission ("Commission") today initiated civil litigation in the U.S. District Court for the District of New Jersey against four former officers or managers of CUC International Inc. ("CUC").  The Commission also instituted and simultaneously settled administrative proceedings against Cendant Corporation and three former managers of CUC.  Cendant was created through the December 17, 1997, merger of CUC and HFS Incorporated.  The proceedings and litigation resulted from the Commission's continuing investigation of a long-running financial fraud that began at CUC in the 1980s and continued until its discovery and disclosure by Cendant in April 1998.  Upon disclosure of the fraud, the price of Cendant common stock plummeted, causing billions of dollars in losses for investors.  
+
+   SEC CHARGES COSMO CORIGLIANO AND ANNE M. PEMBER, FORMER CUC OFFICERS, WITH MAJOR ROLES IN MASSIVE FRAUD 
+
+    In the first of three separate complaints filed by the Commission today with the U.S. District Court, the Commission alleged violations of the federal securities laws by Cosmo Corigliano, Anne M. Pember, Casper Sabatino, and Kevin Kearney, all former officers or managers of CUC.  Corigliano and Pember are contesting the Commission's action. 
+
+    The Commission's complaint alleges that Corigliano, the Chief Financial Officer of CUC, was one of the CUC senior officers who helped to engineer the fraud.  Among other things, the complaint alleges that during the last several years of the fraud, Corigliano was the CUC officer responsible for creating and maintaining a schedule that management used to track the progress of their fraud.  Corigliano regularly directed CUC financial reporting managers to make unsupported alterations to the company's quarterly and annual financial results.  The Commission alleges, moreover, that Corigliano profited from his own wrong-doing by selling CUC securities and a large number of Cendant securities at inflated prices while the fraud he helped engineer was underway and undisclosed.  The complaint alleges that Corigliano, by his actions in furtherance of the fraud, violated, or aided and abetted violations of, the antifraud, periodic reporting, corporate record-keeping, internal controls, and lying to auditors provisions of the federal securities laws.  The Commission's complaint seeks an injunction enjoining Corigliano from future violations of those provisions, disgorgement of his ill-gotten gains (plus prejudgment interest thereon), payment of a civil money penalty, and an order permanently barring him from acting as an officer or director of a public company.
+
+    The Commission's complaint alleges that Pember, the former CUC Controller, was the CUC officer most responsible for implementing directives received from Corigliano in furtherance of the fraud.  Among other things, the complaint alleges that, in January 1998 alone, Pember was responsible for implementing directives that inflated Cendant's annual income by more than $100 million, primarily through improper use of the company's reserves.  The Commission alleges that Pember too profited from her own wrong-doing by selling CUC and Cendant stock at inflated prices while the fraud she helped implement was underway and undisclosed.  The complaint alleges that Pember, by her actions in furtherance of the fraud, violated, or aided and abetted violations of, the antifraud, periodic reporting, corporate record-keeping, internal controls, and lying to auditors provisions of the federal securities laws.  The Commission's complaint seeks an injunction enjoining Pember from future violations of those provisions, disgorgement of her ill-gotten gains (plus prejudgment interest thereon), payment of a civil money penalty, and an order permanently barring her from acting as an officer or director of a public company.  
+
+   SEC SETTLES WITH CASPER SABATINO AND KEVIN KEARNEY, FORMER CUC FINANCIAL REPORTING MANAGERS, REGARDING CHARGES ARISING FROM THE CUC FRAUD 
+
+    Sabatino and Kearney, without admitting or denying the Commission's allegations, have each consented to the entry of Final Judgments settling the Commission's action against them.  The Commission's complaint alleges that Sabatino, a former CUC Vice President of Accounting and Financial Reporting, implemented directives from Corigliano in furtherance of the fraud.  Among other things, the Commission's complaint alleges that Sabatino was the CUC officer most responsible for directing lower-level CUC financial reporting managers to make Corigliano's alterations to the company's quarterly financial results.  The complaint alleges that Sabatino, by his actions in furtherance of the fraud, violated, or aided and abetted violations of, the antifraud, periodic reporting, corporate record-keeping, internal controls, and lying to auditors provisions of the federal securities laws.  Sabatino has consented to entry of a Final Judgment that would enjoin him from future violations of those provisions and permanently bar him from acting as an officer or director of a public company.  
+
+    The Commission's complaint alleges that Kearney, a former CUC Director of Financial Reporting, also instructed lower-level CUC financial reporting managers to carry out directives received from Corigliano in furtherance of the fraud.  Among other things, the Commission alleges that Kearney was regularly present when Corigliano would calculate unsupported alterations to CUC's quarterly results and that, while he was part of the CUC financial reporting operations, Kearney supervised the lower-level managers who actually entered Corigliano's quarterly alterations.  The complaint alleges that Kearney also profited from his own wrong-doing, selling CUC and Cendant stock at prices inflated by the fraud he had knowingly assisted.  The Commission's complaint alleges that Kearney, by his actions in furtherance of the fraud, violated, or aided and abetted violations of, the antifraud, periodic reporting, corporate record-keeping, and lying to auditors provisions of the federal securities laws.  Kearney has consented to entry of a Final Judgment that would enjoin him from future violations of those provisions, order him to pay disgorgement of $32,443 in ill-gotten gains (plus prejudgment interest of $8,234), and order him to pay a civil money penalty of $35,000.  
+
+    Kearney has also agreed to the issuance of a Commission administrative Order that would be issued subsequent to entry of the Final Judgment and that would bar Kearney from practicing before the Commission as an accountant, with the right to reapply after five years.  
+
+   U.S. ATTORNEY'S OFFICE FOR THE DISTRICT OF NEW JERSEY ANNOUNCES PLEA AGREEMENTS WITH CORIGLIANO, PEMBER, AND SABATINO 
+
+    The U.S. Attorney's Office ("USAO") for the District of New Jersey today announced that Corigliano, Pember, and Sabatino had each pleaded guilty to Informations in the U.S. District Court for the District of New Jersey, pursuant to plea agreements between those three individuals and the USAO.  Pursuant to his agreement, Corigliano pleaded guilty to a two-count Information charging him with wire fraud and with conspiracy to commit mail fraud, wire fraud, and causing false statements to be made in documents required to be filed with the Commission.  Similarly, pursuant to her agreement, Pember pleaded guilty to a one-count Information charging her with conspiracy to commit mail fraud and wire fraud.  Sabatino, pursuant to his agreement, pleaded guilty to a one-count Information charging him with aiding and abetting wire fraud.  
+
+   SEC SETTLES WITH STEVEN SPEAKS, MARY SATTLER POLVERARI, AND PAUL HIZNAY, FORMER LOWER-LEVEL CUC FINANCIAL REPORTING OR ACCOUNTING MANAGERS, REGARDING CHARGES ARISING FROM THE CUC FRAUD 
+
+    The Commission today also issued administrative Orders instituting settled administrative proceedings against three lower-level financial reporting or accounting managers at CUC.  In the first of the three separate administrative Orders, the Commission found that Steven Speaks, the former Controller of CUC's largest division, violated the corporate record-keeping provisions of the federal securities laws, and aided and abetted violations of the antifraud, periodic reporting, and corporate record-keeping provisions, in connection with actions that he took at the direction of Pember and in furtherance of the fraud.  Among other things, the Commission's complaint alleges that Speaks made, or instructed others to make, journal entries that effectuated much of the January 1998 income inflation directed by Pember.  Simultaneous with the institution of the administrative proceeding, and without admitting or denying the findings contained therein, Speaks consented to the issuance of the Commission Order, which orders Speaks to cease and desist from future violations of the provisions and bars Speaks from practicing before the Commission as an accountant, with the right to reapply after three years.  
+
+    The Commission also today filed a complaint in U.S. District Court for the District of New Jersey against Speaks, alleging that Speaks violated, or aided and abetted violations, of the antifraud, periodic reporting, and corporate record-keeping provisions of the federal securities laws and seeking an order requiring Speaks to pay a civil money penalty.  Without admitting or denying the Commission's allegations, Speaks has consented to the entry of a Final Judgment that would order Speaks to pay a civil money penalty of $25,000.  
+
+    In a second separate administrative Order, the Commission found that Mary Sattler Polverari, a former CUC Supervisor of Financial Reporting, violated the corporate record-keeping provisions of the federal securities laws, and aided and abetted violations of the antifraud, periodic reporting, and corporate record-keeping provisions, in connection with actions that she took in furtherance of the fraud.  Among other things, the Commission alleges that Polverari, at the direction of Sabatino and Kearney, regularly and knowingly made unsupported alterations to CUC's quarterly financial results.  Simultaneous with the institution of the administrative proceeding, and without admitting or denying the findings contained therein, Polverari consented to the issuance of the Commission Order, which orders Polverari to cease and desist from future violations of the provisions and bars her from practicing before the Commission as an accountant, with the right to reapply after three years.  
+
+    The Commission also today filed a complaint in U.S. District Court for the District of New Jersey against Polverari, alleging that she violated, or aided and abetted violations, of the antifraud, periodic reporting, and corporate record-keeping provisions of the federal securities laws and seeking an order requiring her to pay a civil money penalty.  Without admitting or denying the Commission's allegations, Polverari has consented to the entry of a Final Judgment that would order her to pay a civil money penalty of $25,000.  
+
+    In a third administrative Order, the Commission found that Paul Hiznay, a former Accounting Manager at CUC's largest division, aided and abetted violations of the periodic reporting provisions of the federal securities laws, in connection with actions that he took at the direction of his superiors at CUC.  Among other things, the Commission alleges that Hiznay made unsupported journal entries that Pember had directed.  Simultaneous with the institution of the administrative proceeding, and without admitting or denying the findings contained therein, Hiznay consented to the issuance of the Commission Order, which orders him to cease and desist from future violations of the provisions.  
+
+   SEC SETTLES WITH CENDANT CORPORATION REGARDING CHARGES ARISING FROM THE CUC FRAUD 
+
+    In a fourth and separate administrative Order issued today, the Commission found that Cendant violated the periodic reporting, corporate record-keeping, and internal controls provisions of the federal securities laws, in connection with the CUC fraud.  Among other things, the Commission's Order finds that the company's books, records, and accounts had been falsely altered, and materially false periodic reports had been filed with the Commission, as a result of the long-running fraud at CUC.  Simultaneous with the institution of the administrative proceeding, and without admitting or denying the findings contained therein, Cendant consented to the issuance of the Commission Order, which orders Cendant to cease and desist from future violations of the provisions.  In fashioning its Order, the Commission recognized remedial acts promptly undertaken by Cendant and cooperation afforded the Commission and other authorities.  
+
+    The Commission's investigation is continuing.
+  
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diff --git a/raw/aaer/2000/AAER-1302.txt b/raw/aaer/2000/AAER-1302.txt
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@@ -0,0 +1,1369 @@
+
+
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+     
+     
+     SEC.gov | Itex Corporation, Terry L. Neal, Michael T. Baer, Graham H. Norris, Cynthia Pfaltzgraff and Joseph M. Morris 
+     
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+              Itex Corporation, Terry L. Neal, Michael T. Baer, Graham H. Norris, Cynthia Pfaltzgraff and Joseph M. Morris
+           
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+        Itex Corporation, Terry L. Neal, Michael T. Baer, Graham H. Norris, Cynthia Pfaltzgraff and Joseph M. Morris
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+                        
+              SECURITIES AND EXCHANGE COMMISSION
+ Washington, DC 
+
+ LITIGATION RELEASE NO. 16708 /  September 18, 2000 
+ 
+  ACCOUNTING AND AUDITING ENFORCEMENT 1302 /  September 18, 2000 
+
+ SEC V. ITEX CORPORATION, TERRY L. NEAL, MICHAEL T. BAER, GRAHAM H. NORRIS, CYNTHIA PFALTZGRAFF AND JOSEPH M. MORRIS,  CV 99-1361 BR (D. Ore. September 27, 1999) 
+
+ SEC SETTLES FRAUD CASE AGAINST TERRY L. NEAL 
+
+   The Securities and Exchange Commission today announced that on September 13, 2000, the United States District Court for the District of Oregon permanently enjoined Terry L. Neal from committing securities fraud and violating certain other provisions of the federal securities laws, barred him from serving as an officer or director of a public company, and ordered him to disgorge $2,300,000 in ill-gotten gains, including prejudgment interest, and a $200,000 civil penalty.   
+
+ The Complaint alleged that, among other things, Neal devised a comprehensive scheme to materially overstate Itex's financial condition and results of operations.  Neal caused Itex to enter into sham barter transactions, which inflated assets, revenues and earnings during fiscal 1994, 1995 and 1996.  Neal caused press releases to be issued touting Itex's extraordinary gains in financial condition and results of operation, causing the price of the stock to rise from $1.25 per share to $12.50 per share in eighteen months.  The fraudulent scheme included the issuance of unregistered Itex stock to Neal-related entities and family members at substantial discounts or in exchange for grossly overvalued assets, after which the stock was then resold in the U.S. public market for an estimated $1.6 million in profits. 
+
+   Neal consented to the entry of the judgment without admitting or denying the allegations against him.  In addition to the disgorgement and civil penalty, the judgment permanently enjoined Neal from violating Sections 5 and 17(a) of the Securities Act, Sections 10(b), 13(d) and 16(a) of the Exchange Act and Rules 10b-5, 13b2-1, 13d-1, 13d-3, 16a-2 and 16a-3 thereunder 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.   
+
+   With the entry of this judgment, five of the six defendants in this proceeding have settled with the Commission.  At the time of this release, Michael T. Baer is the only defendant who has not yet settled with the Commission. 
+
+  For further information, see LR-16305 (announcing complaint), LR-16430 (settlement with Morris), LR-16437 (settlement with Itex), and LR-16536 (settlements with Norris and Pfaltzgraff).   All of these releases are available at the Commission's website at http://www.sec.gov/enforce/litig.htm 
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diff --git a/raw/aaer/2000/AAER-1306.txt b/raw/aaer/2000/AAER-1306.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1eb2b6e8c832e80e8338455e870cfec0d36d7fba
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@@ -0,0 +1,1481 @@
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+              Rudy Wann
+           
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+
+ SECURITIES EXCHANGE ACT OF 1934
+ Release No.  43326 / September 22, 2000
+
+  ACCOUNTING AND AUDITING ENFORCEMENT
+ Release No.   1306 / September 22, 2000 
+
+ ADMINISTRATIVE PROCEEDING
+ File No. 3-10296 
+
+   In the Matter of
+		 RUDY WANN,
+		  Respondent.
+		  
+		 ORDER INSTITUTING PUBLIC ADMINISTRATIVE PROCEEDINGS PURSUANT TO RULE 102(e) OF THE COMMISSION'S RULES OF PRACTICE, MAKING FINDINGS AND IMPOSING REMEDIAL SANCTION  
+	    I.  
+
+   The Securities and Exchange Commission ("Commission") deems it appropriate that a public administrative proceeding be instituted against Rudy Wann ("Wann") pursuant to Rule 102(e) /  of the Commission's Rules of Practice. 
+
+   Accordingly,  IT IS HEREBY ORDERED  that said proceeding be, and hereby is, instituted. 
+
+  II.  
+
+   In anticipation of the institution of this public administrative proceeding, Wann has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept.  Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings contained in this Order, except that Wann admits the jurisdiction of the Commission over him and over the subject matter of this proceeding and the entry of a Final Judgment of Permanent Injunction and Other Relief against him as set forth in paragraph III.D., Wann consents to the entry of this Order Instituting Public Administrative Proceeding Pursuant to Rule 102(e) 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 the Offer, the Commission finds that: 
+
+   A. Wann, age 42, was the Chief Financial Officer for IDB Communications Group, Inc. during the relevant period.  Previously, Wann was licensed as a certified public accountant by the State of California from December 1981 to February 1991.  Both Wann's license as a certified public accountant and his certification were canceled on or about February 1996 by the State of California.  Wann's license and certificate were canceled when the Board notified Wann they would be canceled based upon his failure to pay his renewal fees since 1991 and Wann instead elected to notify the Board of his intention to retire. 
+
+   B. IDB Communications Group, Inc. ("IDB") is a telecommunications company that during the relevant period was based in the Los Angeles, California area.  Until IDB was acquired in 1995, its common stock was registered with the Commission under Section 12(g) of the Securities Exchange Act of 1934 ("Exchange Act") and traded on the over-the-counter market through NASDAQ. 
+
+   C. On September 30, 1997, the Commission filed a Complaint in the United States District Court for the Central District of California alleging that three IDB officers, including Wann, had engaged in a scheme to fraudulently inflate IDB's 1994 first quarter earnings from $9 million to $15 million.  Securities and Exchange Commission v. Jeffrey P. Sudikoff, Edward Cheramy and Rudy Wann, Civil Action No. 97-7207 DDP (RCx) (C.D. Cal.).  The Complaint further alleged that Wann, among other things, made false statements to securities analysts and IDB's auditors, made false adjusting entries on IDB's books in circumvention of IDB's internal controls in order to inflate IDB's earnings, and publicly disseminated IDB's inflated earnings through an IDB press release and IDB Form 10-Q and Form 8-K filings with the Commission. 
+
+   D. On August 21, 2000, the United States District Court for the Central District of California entered a Final Judgment Of Permanent Injunction And Other Relief Against Defendant Rudy Wann ("Judgment"), which:  (1) permanently enjoins Wann from future violations of Sections 10(b), 13(a) and 13(b)(5) of the Exchange Act and Rules 10b-5, 12b-20, 13a-11, 13a-13, 13b2-1 and 13b2-2 thereunder; and(2) orders Wann to pay a $50,000 civil penalty to the U.S. Treasury under Section 21(d)(3) of the Exchange Act.  Wann consented to the entry of the Judgment without admitting or denying any of the allegations in the Complaint. 
+
+  IV.  
+
+   Based on the foregoing, the Commission deems it appropriate to accept the Offer submitted by Wann and to impose the remedial sanction specified in the Offer. 
+
+   Therefore,  IT IS HEREBY ORDERED , effective immediately, that: 
+
+     Wann is denied the privilege of appearing or practicing before the Commission as an accountant.
+
+         After five years from the date this Order, Wann 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:
+
+     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 Wann'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
+
+                 an independent accountant.  Such an application must satisfy the Commission that:
+
+     Wann, or the firm with which he is associated, is a member of the SEC Practice Section of the American Institute of Certified Public Accountants Division for CPA Firms ("SEC Practice Section");
+
+                         Wann, or the firm, has received an unqualified report relating to his, or the firm's, most recent peer review conducted in accordance with the guidelines adopted by the SEC Practice Section; and
+
+                         As long as Wann appears or practices before the Commission as an independent accountant, he will remain either a member of the SEC Practice Section or associated with a member firm of the SEC Practice Section, and will comply with all applicable SEC Practice Section requirements, including all requirements for periodic peer reviews, concurring partner reviews, and continuing professional education.         The Commission's review of an application by Wann to resume appearing or practicing before the Commission may include consideration of, in addition to matters referenced above, any other matters relating to Wann's character, integrity, professional conduct, or qualifications to appear or practice before the Commission.   By the Commission. 
+
+               Jonathan G. Katz
+               Secretary 
+
+
+ 
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diff --git a/raw/aaer/2000/AAER-1310.txt b/raw/aaer/2000/AAER-1310.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7663d36f92c2fcfcdd8d9dac25a6f6e31822ddd6
--- /dev/null
+++ b/raw/aaer/2000/AAER-1310.txt
@@ -0,0 +1,1373 @@
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+              James Murphy, Robert Lockwood and Gilboa Peretz; Emanuel Pinez
+           
+     
+ 
+
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+             
+        James Murphy, Robert Lockwood and Gilboa Peretz; Emanuel Pinez
+       
+
+             
+   
+
+
+        
+                   
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+  
+    
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+                        
+              Litigation Release No. 16725 / September 26, 2000
+    Accounting and Auditing Enforcement 1310 / September 26, 2000 
+
+  SEC v. James Murphy, Robert Lockwood and Gilboa Peretz, Civ. Action No. 00CV11981-PBS (D. Mass., filed September 26, 2000);  SEC v. Emanuel Pinez, Civ. Action No.97cv10353-PBS (D. Mass. D. Mass.,  3 rd  Amended Complaint filed September 26, 2000)  
+
+  EMANUEL PINEZ, FORMER CEO OF CENTENNIAL TECHNOLOGIES, AGREES TO PAY $5.3 MILLION FROM ILLEGAL TRADING IN CENTENNIAL STOCK DURING COURSE OF $40 MILLION FINANCIAL FRAUD AT COMPANY; CENTENNIAL AGREES TO CEASE AND DESIST FROM VIOLATING ANTIFRAUD AND RECORD KEEPING PROVISIONS OF THE SECURITIES LAWS   
+
+ The Securities and Exchange Commission announced today that it filed civil and administrative actions in connection with the $40 million financial fraud at Centennial Technologies, Inc., a high-technology manufacturer based in Wilmington, Massachusetts.  Emanuel Pinez, the founder and former chief executive officer of Centennial, agreed to pay $5.3 million to settle the Third Amended Complaint the Commission filed against him today.  In that action, and in a related action the Commission filed today against James Murphy, Centennial's former CFO, and two associates of Pinez's, Gilboa Peretz and Robert Lockwood, the Commission alleged that the defendants participated in a fraud designed to artificially inflate the value of Centennial and its stock.  The Commission also alleged that Pinez and Murphy illegally sold Centennial stock while in possession of material nonpublic information that Centennial's earnings, assets and revenue had been significantly overstated.  In addition to the injunctive actions, the Commission filed and simultaneously settled an administrative cease-and-desist proceeding against Centennial, charging it with violations of the antifraud, record keeping and internal controls provisions of the federal securities laws.
+
+  The civil injunctive actions allege that between April 1994 and January 1997, Pinez and Murphy orchestrated a massive fraud which made Centennial appear significantly more successful than it was. Among other things, they caused Centennial to recognize revenue from invalid or nonexistent sales, to include fake items in inventory and overvalue it in other ways, to make false additions to fixed assets, and to overvalue loans and investments resulting from less-than arms' length transactions.  As a result of these improper activities, Centennial overstated its earnings for this period by approximately $40 million: it reported approximately $12 million in profits when, in fact, it actually incurred losses of approximately $28 million.  Based upon the false statements about the company's profitability, the stock price increased significantly.  It rose 451% in 1996 alone, to $55.50 a share at the end of December, making it the best-performing issue on the NYSE for year.  On February 11, 1997, upon discovery of the financial irregularities at Centennial, the company announced that Pinez had been fired and Murphy relieved of his duties. Trading was halted in the company's stock; when it resumed on February 18, 1997, the price of Centennial stock had plunged to slightly over $3 a share. 
+
+ As part of their fraudulent activities, Pinez and Murphy orchestrated sales of nonexistent products to friends of Pinez's, including sales of a fake product called "Flash 98."   Between February and May of 1996, Centennial sold $1.6 million worth of  "Flash 98" to a company owned by Robert Lockwood. Despite the fact that the product did not exist, Lockwood paid $1.5 million for the "Flash 98" product that his company had purportedly received.  Moreover, he made these payments with funds funneled to him from Pinez, via other intermediate companies.   
+
+ Centennial improperly recognized an additional $2 million in revenue for December 1996 when Pinez and Murphy directed Centennial employees to ship fruit baskets to various Centennial customers, and to create fake sales documentation to make it appear as if Centennial had actually sold and shipped $2 million of Centennial product.  One of the customers who assisted in this scheme was Gilboa Peretz, who accepted a fruit basket delivery as if it were really Centennial product, and falsely acknowledged that his company had purchased and received Centennial products.  Another customer was Bond Fletcher, who caused his company, Media Jet, to also accept deliveries of fruit baskets and treated them as if they were real deliveries of Centennial products.  In October 1997, the Commission sued Fletcher and Media Jet for aiding and abetting Centennial's violations of the antifraud and record keeping provisions of the federal securities laws.  This action was settled in July 1998, when Fletcher and Media Jet consented to the injunctive relief sought by the Commission and agreed to pay approximately $3.2 million of ill-gotten gains received from participating in the fraud.  ( 
+
+SEC v. Fletcher and Media Jet
+
+, Civil Action No. 97cv12443 (PBS)(D. Mass.). 
+
+ In parallel criminal proceedings, Pinez pleaded guilty to one count of securities fraud and on May 17, 2000, the Hon. Joseph L. Tauro, a U.S. District Court Judge in Boston, sentenced Pinez to 5 years imprisonment, which he is currently serving.  On June 30, 1998, James Murphy pleaded guilty to eight counts of securities fraud and one count of conspiracy to commit securities fraud.  He is currently serving 18 months in a halfway house. After a federal trial, Lockwood was convicted by a jury of one count of conspiracy to commit securities fraud.  He is currently serving a 2 year, 3 month prison sentence.  
+
+  In addition to the civil actions, the Commission announced that it filed and simultaneously settled an administrative proceeding against Centennial, charging it with violations of the antifraud, books and records, and recording provisions of the federal securities laws.  The Commission's Order finds that as a result of the practices described above, and others, Centennial materially misrepresented its financial condition and earnings in its public announcements and periodic filings with the Commission for the period of April 1994 through December 31, 1996; failed to make and keep books, records and accounts that accurately and fairly reflected its transactions and dispositions of its assets; and failed to implement procedures designed to provide reasonable assurances that accounting errors would not occur.  Simultaneously with the issuance of the Order, the Commission accepted Centennial's Offer of Settlement, in which it agreed, without admitting or denying the findings, to an Order requiring it to cease-and-desist from committing or causing 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 ExchangeAct and Rules 10b-5, 12b-20, 13a-1, 13a-13 and 13b2-1 thereunder.  In determining to accept the Offer of Settlement, the Commission considered remedial action promptly undertaken by Centennial and cooperation afforded the Commission staff.   
+
+ For further information, please see, Litigation Release Nos. 16170, 15818, 15605, 15548, 15405, 15399, 15295 and 15258. 
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diff --git a/raw/aaer/2000/AAER-1318.txt b/raw/aaer/2000/AAER-1318.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6f283ec3c86d136f24bf783bfd438e264bba8e43
--- /dev/null
+++ b/raw/aaer/2000/AAER-1318.txt
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+     SEC.gov | Craig Consumer Electronics, Inc. 
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+        Craig Consumer Electronics, Inc.
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+ SECURITIES AND EXCHANGE ACT OF 1934
+ Release No.  43362 / September 27, 2000
+
+  ACCOUNTING AND AUDITING ENFORCEMENT
+ Release No.  1318 / September 27, 2000
+
+  ADMINISTRATIVE PROCEEDING
+ File No.  3-10315 
+
+ COMMISSION INSTITUTES ADMINISTRATIVE PROCEEDING AGAINST CRAIG CONSUMER ELECTRONICS, INC. TO DETERMINE WHETHER TO REVOKE THE REGISTRATION OF ITS COMMON STOCK
+
+    The Securities and Exchange Commission ("Commission") announced today the institution of an administrative proceeding against Craig Consumer Electronics, Inc. ("Craig") seeking to revoke registration of Craig's common stock.  In the Order Instituting Proceeding, the Division of Enforcement alleges that Craig failed to comply with the federal securities laws by making no periodic filings with the Commission subsequent to its filing of a Form 10-Q for the fiscal quarter ended March 31, 1997.  Further, the staff alleges that Craig materially misrepresented its precarious financial position and severe liquidity problems in its second and third quarter 1996 Forms 10-Q, 1996 Form 10-K, and first quarter 1997 Form 10-Q. 
+
+    Craig Consumer Electronics, Inc., a Delaware corporation, was a marketer of consumer electronics products before it ceased operations.  Craig's common stock is registered with the Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 and is quoted on the OTC Bulletin Board.  On August 1, 1997, Craig filed for protection under Chapter 11 of the Bankruptcy Code
+
+    A public hearing will be held to determine whether the allegations contained in the Order Instituting Proceeding are true, to offer Craig an opportunity to establish any defenses to the allegations, and to determine whether its registration should be revoked.
+
+    In a related but separate enforcement action, on September 27, 2000, the Commission filed a civil complaint against two of the former officers of Craig in federal district court in Los Angeles, California.  Simultaneous with the filing of the Commission's complaint, Craig's former CEO, Richard I. Berger consented to the issuance of a permanent injunction, without admitting or denying the allegations contained in the Commission's complaint, agreed to pay a civil penalty of $25,000, and be barred from serving as an officer or director for five years.  See Litigation Release No. 16731 (Sept. 27, 2000).
+
+    In a related administrative cease-and-desist proceeding, the Commission found that Bonnie K. Metz, the former Vice President/Managing Director for its Hong Kong office, knowingly circumvented Craig's internal controls by falsifying bills of lading.  Without admitting or denying the Commissions' findings, Metz agreed to cease-and-desist from knowingly circumventing internal controls and falsifying books and records.  See Administrative Proceeding No. 3-10316 (Sept. 27, 2000).
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diff --git a/raw/aaer/2000/AAER-1320.txt b/raw/aaer/2000/AAER-1320.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0c9b6a8eafa9e10a81464112007dae2ca7492879
--- /dev/null
+++ b/raw/aaer/2000/AAER-1320.txt
@@ -0,0 +1,1369 @@
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+              Leah Industries, Inc., Birte Boock, and Irwin Boock
+           
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+        Leah Industries, Inc., Birte Boock, and Irwin Boock
+       
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+
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+              UNITED STATES SECURITIES AND EXCHANGE COMMISSION
+
+  Litigation Release No. 16738 / September 28, 2000
+
+  Accounting and Auditing Enforcement Release No. 1320 / September 28, 2000
+
+   SECURITIES AND EXCHANGE COMMISSION v. LEAH INDUSTRIES, INC., BIRTE BOOCK, and IRWIN BOOCK, U.S. Dist. Court, D. Colo. 00-B-1921 
+
+    The Securities and Exchange Commission today charged Leah Industries, Inc. ("Leah"), its Chief Executive Officer, Birte Boock, and Irwin Boock, a controlling person of Leah, with violating the antifraud provisions of the federal securities laws.  The Commission's complaint alleged that during 1998, Leah, a corporation publicly traded on the Over-the-Counter Bulletin Board, made various material misrepresentations regarding its relationships with prominent international accounting firms.
+
+    The Complaint alleges the following:
+
+    On December 10, 1998, Birte Boock and Irwin Boock directed Leah to issue a press release stating that Leah had engaged Deloitte & Touche ("D&T") to serve as its auditor.  On December 23, 1998, Leah issued a follow-up press release reporting earnings for the first nine months of 1998.  This release further stated that D&T concurred with Leah's reporting of earnings and with its decision to report a "conservative" financial picture for its investors.  These representations were false.  D&T never served as Leah's auditor.
+
+    Earlier in 1998, Birte Boock had made a similar misrepresentation regarding the accounting firm PriceWaterhouseCoopers.  On August 20, 1998, Birte Boock informed investors during a conference call that the Moscow office of "Coopers'"  was conducting an audit of Leah's books.   She added that she expected Leah to be listed on the American Stock Exchange by the end of 1998, because by then, Leah would have the audit "in hand."  These representations were also false.  PriceWaterhouseCoopers never served as Leah's auditor.
+
+    While Leah was disseminating this materially false information, Irwin Boock sold 537,500 shares of Leah stock, and obtained approximately $319,050 in proceeds from these sales.  Leah sold approximately 56,000 shares of its stock and obtained approximately $30,724 from these sales.
+
+    The Commission charged that Leah, Birte Boock, and Irwin Boock violated 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 is seeking permanent injunctions against all of the defendants.  The Commission is also seeking disgorgement and prejudgment interest from Leah and Irwin Boock, and civil penalties against Irwin Boock and Birte Boock.
+
+    On March 12, 1999, the Commission suspended trading in Leah securities because of questions about the accuracy of information that Leah was disseminating.
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diff --git a/raw/aaer/2000/AAER-1321.txt b/raw/aaer/2000/AAER-1321.txt
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--- /dev/null
+++ b/raw/aaer/2000/AAER-1321.txt
@@ -0,0 +1,1473 @@
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+  SECURITIES EXCHANGE ACT OF 1934 
+  Release No.  43388/ September 29, 2000 
+
+   ACCOUNTING AND AUDITING ENFORCEMENT 
+  Release No.  1321 / September 29, 2000 
+
+   ADMINISTRATIVE PROCEEDING 
+  File No.  3-10332  
+
+
+   In the Matter of
+		 DREW BERGMAN, CPA,
+		  Respondent.
+		  
+		 ORDER INSTITUTING PUBLIC PROCEEDINGS PURSUANT TO RULE 102(e) OF THE COMMISSION'S RULES OF PRACTICE, MAKING FINDINGS AND IMPOSING SANCTIONS 
+	    I.  
+
+   The Securities and Exchange Commission ("Commission") deems it appropriate that public administrative proceedings be, and hereby are, instituted against Drew Bergman ("Bergman") pursuant to Rule 102(e) of the Commission's Rules of Practice.  1    In anticipation of the institution of these proceedings, Bergman has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept.  Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings contained herein, except for those set forth below in Section II, paragraph C., which is admitted, Bergman, by his Offer, consents to the entry of the findings and imposition of sanctions contained in this Order Instituting Public Proceedings, Making Findings and Imposing Sanctions ("Order").
+
+    Accordingly, IT IS ORDERED that proceedings against Bergman be, and hereby are, instituted.
+
+   II.  
+
+   On the basis of this Order and the Offer submitted by Bergman, the Commission finds that:
+
+    A.  Health Management, Inc.  ("Health Management") is a former Delaware Corporation, which ceased to exist after it was purchased in October 1997.  Health Management was headquartered in Holbrook, New York, and was in the business of providing outpatient drug therapies and management services to individuals, hospitals and insurance companies.  Health Management's stock was registered with the Commission pursuant to Section 12(g) of the Exchange Act and traded on the National Association of Securities Dealers Automated Quotation System ("NASDAQ").
+
+    B.  Drew Bergman , age 43, is a resident of Merrick, New York, and was the Chief Financial Officer of Health Management, Inc. until December 26, 1995, at which time he was appointed Treasurer and Chief Development Officer.  Bergman resigned his positions at Health Management, Inc. on February 16, 1996.  Bergman has been licensed by the state of New York as a certified public accountant since 1982. 
+
+    C. On September 26, 2000, a Final Judgment and Order was entered against Bergman by the United States District Court for the Eastern District of New York, in Securities and Exchange Commission v. Clifford E. Hotte, et al., Civil Action No. CV00-5704 (E.D. NY), pursuant to his consent.  The Final Judgment and Order permanently enjoined Bergman from future violations of Sections 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; and Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-1 and 13b2-2 thereunder; ordered him to disgorge the sum of $23,775, together with prejudgment interest; ordered him to pay a civil penalty in the amount of $53,775; and barred Bergman from serving as an officer or director of any reporting company.
+
+    D. The Commission's Complaint alleged that, throughout fiscal 1995, beginning May 1, 1994, and continuing through the first two quarters of fiscal 1996, Health Management issued false and misleading quarterly and annual financial statements and press releases in which it materially overstated its revenues, earnings and financial condition.
+
+  E. The Complaint alleged, among other things, that as the Chief Financial Officer of Health Management, Bergman conceived and executed the fraudulent accounting scheme at the company and directed others in carrying out the scheme.  Bergman prepared and signed Health Management's false financial statements and participated in the preparation of false press releases.  In order to conceal the scheme, Bergman also actively misled Health Management's independent auditors and the independent counsel appointed by a Special Committee of the board of Health Management to investigate accounting irregularities.
+
+   III.  
+
+   On the basis of the foregoing, the Commission deems it appropriate to accept the Offer submitted by Bergman and to impose the sanctions specified therein.
+
+    Accordingly, IT IS HEREBY ORDERED, effective immediately, that Bergman is suspended from appearing or practicing before the Commission as an accountant.  
+
+   By the Commission 
+
+             Jonathan G. Katz
+
+             Secretary 
+
+  Footnotes 
+
+
+   1     Rule 102(e)(3)(i), in relevant part, provides that the Commission may suspend from appearing or practicing before it any accountant who by name has been permanently enjoined, by a court of competent jurisdiction in an action brought by the Commission, from violating any provision of the federal securities laws or the rules and regulations thereunder.  17 C.F.R. 201.102(e)(3)(i).
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diff --git a/raw/aaer/2000/AAER-1336.txt b/raw/aaer/2000/AAER-1336.txt
new file mode 100644
index 0000000000000000000000000000000000000000..620c70c80ac92587ffb2128343ed9e8ed54b00cd
--- /dev/null
+++ b/raw/aaer/2000/AAER-1336.txt
@@ -0,0 +1,1477 @@
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+           
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+        Robert G. Herndon
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+  SECURITIES EXCHANGE ACT OF 1934 
+  Release No.  43446 / October 16, 2000 
+
+   ACCOUNTING AND AUDITING ENFORCEMENT 
+  Release No.  1336 / October 16, 2000 
+
+   ADMINISTRATIVE PROCEEDING 
+  File No. 3-10348  
+
+   In the Matter of
+		 ROBERT G. HERNDON,
+		  Respondent.  
+		 ORDER INSTITUTING A PUBLIC PROCEEDING AND OPINION AND ORDER PURSUANT TO RULE 102(e) OF 		THE COMMISSION'S RULES OF PRACTICERespondent. 
+	    I.  
+
+ The Securities and Exchange Commission (Commission) deems it appropriate and in the public interest that a public administrative proceeding be, and hereby is, instituted against Robert G. Herndon ("Herndon") pursuant to Rule 102(e) of the Commission's Rules of Practice.  1     II.  
+
+       In anticipation of the institution of this proceeding, Herndon has submitted an Offer of Settlement (Offer), which the Commission has determined to accept.  Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, Herndon consents to the issuance of this Order, the entry of the findings, and the imposition of   the sanction set forth below without admitting or denying the findings or conclusions contained   herein except that he admits: (1) the Commission's jurisdiction over him and the subject matter of this proceeding; and (2) the entry of the permanent injunction against him described in Section III. C. below.
+
+   III.  
+
+ The Commission makes the following findings:
+
+     A. Respondent  
+
+   Robert G. Herndon, age 66, resides in Fort Worth, Texas.  Herndon was an audit partner with Arthur Andersen from about 1969 to 1980.  He was an executive vice-president and Chief Operating Officer with two other public companies and the Chief Financial Officer ("CFO") of a third public company before he became Pier 1's CFO in August 1985.  Herndon was a licensed Certified Public Accountant throughout his career until he allowed his license to lapse in April 1995.  On February 9, 1996 Pier 1 terminated Herndon for fraudulently concealing an investment loss of $20 million and various other facts about the company's investments.
+
+     B. Pier 1 Imports, Inc.  
+
+   Pier 1 Imports, Inc. is a Delaware corporation with headquarters in Fort Worth, Texas.  It is a retailer of home furnishings.  Pier 1'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.  Its fiscal year ends annually on the Saturday closest to the last day of February.
+
+     C. Facts  
+
+   By judgment of the United States District Court for the Northern District of Texas, Herndon has been permanently enjoined from violating Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1, and 13b2-2 thereunder and from aiding and abetting or causing 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 Court also permanently barred Herndon from serving as an officer or director of any issuer that has a class of securities registered with the Commission or that is required to file reports with the Commission and ordered him to pay a civil penalty in the amount of $75,000.  SEC v. Robert G. Herndon, Civil Action No. 4:00-CV-1564-A (N.D. Tex. Oct. 3, 2000).  
+
+    The Commission's complaint, filed on September 19, 2000, alleged, among other things, the following:
+
+    Herndon, Pier 1's former CFO, fraudulently concealed a $20 million loss and various other material facts about the company's investments from Pier 1's senior management, its outside auditors, and the public.  Pier 1's loss involved two interrelated frauds, one by Pier 1's outside money manager, and the other by Herndon.  First, from at least 1986 through most of 1995, S. Jay Goldinger ("Goldinger"), a Beverly Hills-based bond specialist, engaged in fraudulent trading that eventually left his clients with losses totaling $100 million.  One of his clients was Pier 1, which lost nearly $20 million.  Second, Herndon concealed Pier 1's $20 million loss and various other facts about the company's investments with Goldinger.  Herndon's and Goldinger's conduct caused material misrepresentations and omissions in Pier 1's financial statements and other disclosures in its 1993, 1994, 1995, and 1996 Forms 10-Q, and its 1995 Form 10-K.
+
+    Herndon's concealment began in 1986 with the first trade Goldinger placed for Pier 1, and ended in 1995 when Goldinger and his clients suffered catastrophic losses after interest rates rose dramatically.  By engaging in this conduct, Herndon violated the antifraud provisions of the federal securities laws and the books and records and internal accounting control provisions of the Exchange Act.  Herndon also aided and abetted Pier 1's violations of the periodic reporting, books and records, and internal accounting controls provisions of the federal securities laws.
+
+   IV.  
+
+ Based on the foregoing, the Commission deems it appropriate and in the public interest to impose the sanction specified in Herndon's Offer.
+
+    Accordingly, it is ordered that, effective immediately, Herndon is suspended from appearing or practicing before the Commission as an accountant. 
+
+By the Commission.
+
+ Jonathan G. Katz 
+Secretary 
+
+  Footnotes 
+
+   1    Rule 102(e)(3)(i), in relevant part, provides that the Commission may suspend from appearing or practicing before it any accountant who by name has been permanently enjoined, by a court of competent jurisdiction in an action brought by the Commission, from violating any provision of the federal securities laws or the rules and regulations thereunder.  17 C.F.R. §201.102(e)(3)(i).
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diff --git a/raw/aaer/2000/AAER-1341.txt b/raw/aaer/2000/AAER-1341.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e6f2ddde09f3d6f8efc0567bcdd65775678c538d
--- /dev/null
+++ b/raw/aaer/2000/AAER-1341.txt
@@ -0,0 +1,1494 @@
+
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+              Luis R. Hidalgo Jr., CPA
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+ SECURITIES EXCHANGE ACT OF 1934
+ Release No. 43531 / November 8, 2000   
+
+ ACCOUNTING AND AUDITING ENFORCEMENT
+ Release No.  1341 / November 8, 2000 
+
+ ADMINISTRATIVE PROCEEDING
+ File No. 3-10357 
+
+   In the Matter of
+		 LUIS R. HIDALGO, JR., CPA,
+		  Respondent.
+		  
+		 ORDER INSTITUTING A PUBLIC ADMINISTRATIVE PROCEEDING PURSUANT TO RULE 102(e) OF THE 	COMMISSION'S RULES OF PRACTICE, MAKING FINDINGS, AND IMPOSING SANCTIONS 
+	    I.   
+
+   The Securities and Exchange Commission ("Commission") deems it appropriate that a public administrative proceeding be and hereby is instituted pursuant to Rule 102(e)(3)(i)(A)  1   of the Commission's Rules of Practice against Respondent Luis R. Hidalgo, Jr., CPA ("Hidalgo"). 
+
+  II.   
+
+   In anticipation of the institution of this proceeding, Hidalgo has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept.  Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings contained herein, except that Hidalgo admits the jurisdiction of the Commission over him and over the subject matter of this proceeding, and that a Judgment of Permanent Injunction and Other Relief Against Defendant Luis R. Hidalgo, Jr. as set forth in paragraph III.C. has been entered against him, Hidalgo consents to the entry of this Order Instituting a Public Proceeding and Opinion and Order Pursuant to Rule 102(e) of the Commission's Rules of Practice ("Order") as set forth below. 
+
+   Accordingly, IT IS HEREBY ORDERED that a proceeding pursuant to Rule 102(e)(3)(i)(A) be, and hereby is, instituted. 
+
+  III.   
+
+   On the basis of this Order and the Offer of Settlement submitted by Hidalgo, the Commission finds that:  2   
+
+  A. RESPONDENT  
+
+   Luis R. Hidalgo, Jr., CPA, age 64, is and has been a certified public accountant licensed to practice in California since 1981.  Since 1993, Hidalgo has been the auditor for Countryland Wellness Resorts, Inc. ("Countryland").  Pertinent to this Order, Hidalgo audited Countryland's financial statements for the fiscal years ended October 31, 1996, October 31, 1997, December 31, 1997 and December 31, 1998.  
+
+  B. RELATED PARTY  
+
+ Countryland (formerly Continental Wellness Casinos, Inc.), most recently incorporated in Delaware in 1999, maintains its offices in Las Vegas, Nevada.  Countryland claims to be engaged in the mining and electrical contracting industries, and plans to operate a longevity center at a wellness resort and casino in Las Vegas, Nevada.  Countryland's stock is registered with the Commission pursuant to Section 12(b) of the Securities Exchange Act of 1934 ("Exchange Act") and is quoted on the OTC Bulletin Board but is not actively trading. 
+
+   C. FACTS  
+
+ 1.  On September 26, 2000, the Commission filed a complaint against Hidalgo and others in SEC v. Countryland Wellness Resorts, Inc., Fred Cruz (a.k.a. Federico Cruz Gonzalez), Luis R. Hidalgo, Jr., and Donald E. Studer, CV-S-00-1160-PMP-RJJ (D. Nev.) (the "Complaint").  On October 23, 2000, the United States District Court for the District of Nevada entered a Judgment of Permanent Injunction and Other Relief Against Defendant Luis R. Hidalgo, Jr. ("Judgment"), which, among other things: (1) permanently enjoins Hidalgo from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and (2) does not assess a civil penalty based on Hidalgo's demonstrated inability to pay.  Hidalgo consented to the entry of the judgment without admitting or denying any of the allegations in the Complaint. 
+
+   2.  The Commission's Complaint, among other things, alleges that: (1) beginning in 1996 or earlier and continuing into 1999, Countryland reported non-existent assets, including "gold in storage," "proven gold and silver mining reserves," and Indonesian bank guarantees, which ranged in value from $19 million (gold in storage) to over $2 billion (proven mining reserves); (2) Hidalgo made materially false and misleading statements when he rendered audit reports containing unqualified opinions for 1996 and 1997, and a qualified opinion for 1998, that represented Countryland's financial statements to be in conformity with Generally Accepted Accounting Principles and that his audits were conducted in accordance with Generally Accepted Auditing Standards ("GAAS"); (3) Hidalgo knew or was reckless in not knowing that Countryland's financial statements were materially false and misleading; and (4) Hidalgo's audits were not conducted in accordance with GAAS.  
+
+  IV.   
+
+   Hidalgo has submitted an Offer of Settlement in which, without admitting or denying the findings herein, he consents to the Commission's entry of this Order, which:  (1) makes findings, as set forth above; and (2) suspends Hidalgo from appearing or practicing before the Commission, except that after five years from the date of this Order, Hidalgo may request permission to resume appearing or practicing before the Commission.  As set forth in Hidalgo's Offer of Settlement, Hidalgo undertakes to cooperate with the Commission staff in preparing for and presenting any civil litigation or administrative proceeding concerning any transaction that is the subject of this Order. 
+
+  V.   
+
+   In view of the foregoing, the Commission deems it appropriate to accept the Offer of Settlement submitted by Hidalgo. 
+
+    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 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 firm with which he is associated, is a member of the SEC Practice Section of the American Institute of Certified Public Accountants Division for CPA Firms ("SEC Practice Section"); (b) Respondent, or the firm, has received an unqualified report relating to his, or the firm's, most recent peer review conducted in accordance with the guidelines adopted by the SEC Practice Section; and (c) as long as Respondent appears or practices before the Commission as an independent accountant he will remain either a member of the SEC Practice Section or associated with a member firm of the SEC Practice Section, and will comply with all applicable SEC Practice Section requirements, including all requirements for periodic peer reviews, concurring partner reviews, and continuing professional education. 
+
+   C.  The Commission's review of an application by Respondent to resume appearing or practicing before the Commission 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.
+
+ Jonathan G. Katz
+ Secretary 
+
+  Footnotes 
+
+   1     Rule 102(e)(3)(i)(A) provides, in pertinent 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    The findings herein are made pursuant to the Offer of Settlement of Luis R. Hidalgo, Jr., CPA and are not binding on any other person or entity in this or any other proceeding. 
+
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diff --git a/raw/aaer/2000/AAER-1351.txt b/raw/aaer/2000/AAER-1351.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0f58b9950a29a98c2a3e4db7f50b8deb9423e240
--- /dev/null
+++ b/raw/aaer/2000/AAER-1351.txt
@@ -0,0 +1,1497 @@
+
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+ 
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+              Antoinette A. Parsons and Stacy L. Hamm
+           
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+        Antoinette A. Parsons and Stacy L. Hamm
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+ SECURITIES EXCHANGE ACT OF 1934
+ Release No.   43725 / December 14, 2000    
+
+ ACCOUNTING AND AUDITING ENFORCEMENT
+ Release No.   1351 / December 14, 2000    
+
+ ADMINISTRATIVE PROCEEDING
+ File No.  3-10389 
+
+   In the Matter of
+		 Antoinette A. Parsons and
+		 Stacy L. Hamm,
+		  Respondents.
+		  
+		 ORDER INSTITUTING PUBLIC PROCEEDINGS PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS AND IMPOSING A CEASE-AND-DESIST ORDER 
+	   I. 
+
+   The Securities and Exchange Commission ("Commission") deems it appropriate  that public administrative proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") to determine whether Antoinette A. Parsons and Stacy L. Hamm ("Respondents") violated or were a cause of violations of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 13b2-1 thereunder.  1   
+
+ II. 
+
+   In anticipation of the institution of these administrative proceedings, Respondents each submitted an Offer of Settlement ("Offer") that 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 contained herein, except as to jurisdiction over Respondents and over the subject matter of these proceedings, which Respondents admit, Respondents consent to the entry of this Order Instituting Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings and Imposing a Cease-and-Desist Order ("Order").  The Commission has determined that it is appropriate to accept the Respondents' Offers and accordingly is issuing this Order.   
+
+ III. 
+
+ FACTS 
+
+ Based on the foregoing, the Commission finds that:  2    A. Respondents and MicroStrategy 
+
+ Antoinette A. Parsons, age 34, began working at MicroStrategy Incorporated in September 1997, and served as corporate controller, director of finance and accounting and vice president of finance.  
+
+   Stacy L. Hamm, age 28, began working at MicroStrategy in March 1998, reporting to Parsons as accounting manager. 
+
+ MicroStrategy, Inc. is a Delaware corporation with its principal place of business in Vienna, Virginia.  MicroStrategy's common stock was at all relevant times registered with the Commission pursuant to Section 12(g) of the Exchange Act and listed on the NASDAQ National Market System. 
+
+ B. Summary 
+
+ From the time of its initial public offering in June 1998 through March 2000, MicroStrategy materially overstated its revenues and earnings contrary to Generally Accepted Accounting Principles ("GAAP").  The company's public financial reports during this time showed a growing software and information services company enjoying positive net income.  In fact, as investors later learned after MicroStrategy's restatement announcements in March and April 2000, the company should have reported net losses from 1997 through the present. 
+
+   MicroStrategy's restatement primarily arose from its premature recognition of revenue arising from the misapplication of AICPA Statement of Position  97-2 ("SOP 97-2") in connection with multiple element deals.  A lesser portion of the restatements resulted from deals in which MicroStrategy had not properly executed contracts in the same fiscal period that revenue was recorded from those deals.  The revenue from these contracts should have been recognized in subsequent periods.  Respondents were aware of the company's practice of recording revenue from these improperly executed contracts.   
+
+ C. Contract Signing 
+
+   As is common in the software industry, the majority of MicroStrategy's transactions closed in the final days of the fiscal period.  As a result, at the end of a quarter MicroStrategy's contracts department received numerous contracts signed by customers that needed (according to company policy) to be signed by MicroStrategy. 
+
+   To maintain maximum flexibility to achieve the desired quarterly financial results, MicroStrategy held in abeyance, until after the close of the quarter, contracts that had been signed by customers but had not yet been signed by MicroStrategy.  Only after MicroStrategy determined the desired financial results were the unsigned contracts apportioned between the just-ended quarter and the then-current quarter, signed and given an "effective date."  In some instances, the contracts were signed without affixing a date allowing the company further flexibility to assign a date at a later time. 
+
+   Respondents were responsible for drafting the company's revenue recognition policy.  That policy, which as drafted was consistent with SOP 97-2, required the signature of both MicroStrategy and the customer prior to recognizing revenue. After joining the company, both respondents became aware that MicroStrategy routinely recognized revenue from contracts executed by the customers within the reporting period, but executed by MicroStrategy subsequent to the period.  Despite the inconsistency of this practice with the company's stated policy and with GAAP, neither respondent raised questions about contract execution with the company's executive officers or with the company's audit committee. 
+
+ IV. 
+
+ LEGAL DISCUSSION 
+
+   Section 13(a) of the Exchange Act requires issuers to file such annual and quarterly reports as the Commission may prescribe and in conformity with such rules as the Commission may promulgate.  Rules 13a-1 and 13a-13 require the filing of annual and quarterly reports that comply with the Commission's Regulation S-X, which requires that financial statements be presented in conformity with GAAP.  Rule 13b2-1 prohibits any person from, directly or indirectly, falsifying or causing to be falsified, any book, record or account subject to Section 13(b)(2)(A) of the Exchange Act.  
+
+   The periodic reports filed by MicroStrategy between June 1998 and January 2000 were not in conformity with GAAP.  Consequently, MicroStrategy violated Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder.  Respondents had important, albeit subordinate, roles in the company's financial reporting process and were aware of the contract signing practices discussed above. Respondents should have known that MicroStrategy's financial reports contained in its public filings were not accurate as a result of that practice.  Thus, Respondents were a cause of MicroStrategy's violations of Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder.  Respondents also violated Rule 13b2-1 by permitting the company's books and records to inaccurately reflect the date on which contracts were fully executed.  
+
+ V. 
+
+   The Commission finds that Respondents violated Exchange Act Rule 13b2-1 and were a cause of violations of Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder. 
+
+ VI. 
+
+   ACCORDINGLY, IT IS HEREBY ORDERED, pursuant to Section 21C of the Exchange Act, that Respondents cease-and-desist from committing or causing any violations and any future violations of Exchange Act Rule 13b2-1 and from causing any violations and any future violations of Section 13(a) of the Exchange Act and Rules   13a-1 and 13a-13 thereunder. 
+
+ By the Commission. 
+
+               Jonathan G. Katz
+               Secretary 
+
+  Footnotes 
+
+   1     The Commission simultaneously filed settled proceedings against the company,   In the Matter of MicroStrategy, Inc.   (Admin. Proc. No. 3-10388), and against certain of the company's executive officers,   SEC v. Michael Jerry Saylor, Sanjeev Kumar Bansal and Mark Steven Lynch  , (Civ. Action No. 1:00CV02995). 
+
+   2     The findings herein are made pursuant to the Respondents' Offers and are not binding on any other person or entity in this or any other proceeding. 
+
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diff --git a/raw/aaer/2000/AAER-1354.txt b/raw/aaer/2000/AAER-1354.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f879c117ed1362b9fade266d2c402fc865fcd086
--- /dev/null
+++ b/raw/aaer/2000/AAER-1354.txt
@@ -0,0 +1,1382 @@
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+              Franklin W. Brooks and John L. Gardner
+           
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+        Franklin W. Brooks and John L. Gardner
+       
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+  U.S. Securities and Exchange Commission
+
+ Washington, D.C. 
+
+ Litigation Release No. 16835 / December 20, 2000 
+
+   Accounting and Auditing Enforcement Release No. 1354 
+
+ SEC v. Franklin W. Brooks and John L. Gardner (Civil Action No. 00-9110-CIV-Ryskamp) (S.D. Fla.).   
+
+ FLORIDA-BASED GUN LOCK MANUFACTURER AND TWO CORPORATE OFFICERS SETTLE SEC FRAUD CHARGES 
+
+   The Securities and Exchange Commission today filed a settled civil complaint in the United States District Court for the Southern District of Florida against Franklin W. Brooks, 66, and John L. Gardner, 64.  Brooks is the current Chairman, and Gardner is the former president and CEO, of Saf T Lok, Inc., a manufacturer of gun safety locks headquartered in West Palm Beach, Florida.  The complaint alleges that Brooks and Gardner violated the antifraud provisions of the federal securities laws and that Gardner aided and abetted Saf T Lok's violations of the periodic reporting provisions.  In a related matter, today the Commission also issued a cease-and-desist order against the company, In the Matter of Saf T Lok, Inc. 
+
+   The complaint alleges that at various times in 1997 and 1998, Brooks and/or Gardner caused Saf T Lok to publish various press releases and to make periodic filings with the Commission that falsely described certain sales, consulting and development contracts to which Saf T Lok was a party.   These false disclosures described agreements that, if bonafide, would have resulted in the sale of millions of dollars of Saf T Lok's products or otherwise materially enhanced Saf T Lok's business.  Among the false or misleading statements alleged in the complaint are the following: 
+
+    That Saf T Lok had entered into a consulting agreement to pay another entity $250,000 for a variety of business services, when in fact the entity was a shell with no ability to provide any services, and the contract was entered into at the demand of Shalom Weiss, an individual who was otherwise assisting Saf T Lok in a capital-raising transaction;
+
+      That Saf T Lok had entered into a distribution agreement that would result in the sale of at least $20 million in Saf T Lok's products, when in fact the distributor was a newly-formed entity that lacked financing, was unable to perform, and was contractually obligated to purchase only $1 million of Saf T Lok's products;
+
+      That Saf T Lok had entered into a contract to develop a fingerprint-sensitive trigger lock that would be available by the end of 1998, when Saf T Lok was unwilling to provide the financing required to develop the product.    Additionally, the complaint alleges that Brooks and Gardner authorized Saf T Lok in 1998 to pay for a research report that included materially false and misleading financial projections.  Brooks and/or Gardner provided misleading information to the author, edited a draft of the report, represented that the report was consistent with the company's views, and then released the report for public distribution.   
+
+   Simultaneously with the filing of the complaint, Brooks and Gardner each consented, without admitting or denying the allegations in the complaint, to the entry of final judgments enjoining both of them from future violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and, enjoining Gardner from future violations of Section 13(a) of the Exchange Act and Rules 13a-11, 13a-13 and 12b-20 thereunder.  Brooks and Gardner also each agreed to pay a $55,000 civil penalty.    
+
+   In a related matter, the Commission also instituted public administrative proceedings against Sat T Lok and simultaneously accepted Saf T Lok's offer to consent to entry of a Commission Order finding that it violated Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 13a-11, 13a-13 and 12b-20 thereunder and directing it to cease and desist from further violations of those provisions.    
+
+   The Commission's investigation in this matter is continuing. 
+
+   This enforcement action is part of the Commission's four-pronged approach to attacking Microcap abuses:  enforcement, inspections, investor education and regulation.  For information about the SEC's response to Microcap fraud, visit the SEC's Microcap Fraud Information Center at http://www.sec.gov/news/extra/microcap.htm. 
+	 http://www.sec.gov/litigation/litreleases/lr16835.htm        Home  |  Previous Page  
+	  Modified:12/27/2000  
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diff --git a/raw/aaer/2000/AAER-1357.txt b/raw/aaer/2000/AAER-1357.txt
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+              Itex Corporation, Terry L. Neal, Michael T. Baer, Graham H. Norris, Cynthia Pfaltzgraff and Joseph M. Morris
+           
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+        Itex Corporation, Terry L. Neal, Michael T. Baer, Graham H. Norris, Cynthia Pfaltzgraff and Joseph M. Morris
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+                        
+              SECURITIES AND EXCHANGE COMMISSION
+ Washington, DC 
+
+ LITIGATION RELEASE NO. 16841 / December 26, 2000  
+ 
+  ACCOUNTING AND AUDITING ENFORCEMENT
+  RELEASE NO. 1357 
+
+ SEC V. ITEX CORPORATION, TERRY L. NEAL, MICHAEL T. BAER, GRAHAM H. NORRIS, CYNTHIA PFALTZGRAFF AND JOSEPH M. MORRIS,  CV 99-1361 BR (D. Ore. September 27, 1999) 
+
+ SEC SETTLES FRAUD CASE AGAINST MICHAEL T. BAER 
+
+   The Securities and Exchange Commission today announced that on December 15, 2000 the United States District Court for the District of Oregon permanently enjoined Michael T. Baer from committing securities fraud, barred him from serving as an officer or director of a public company, and ordered him to disgorge $1.4 million in ill-gotten gains, including prejudgment interest, but waived payment of all such disgorgement and prejudgment interest, and did not impose a civil penalty, based on his demonstrated financial condition.   
+
+ In its complaint, filed September 27, 1999, the Commission alleged, among other things, that Baer, as president, chief executive officer and chairman of Itex from July 1990 until his resignation in August 1996, knowingly or recklessly participated in the material overstatement of Itex's assets, revenues and earnings in its financial statements, and failed to disclose numerous barter deals between Itex and various related parties.  The complaint also alleged that Baer knowingly circumvented and failed to implement internal accounting controls and made materially false and misleading statements and omissions to Itex's auditors. In addition, the complaint alleged that Baer failed to properly report his beneficial ownership of more than 5% of Itex's common stock.  The complaint alleged that Baer's conduct was part of a larger scheme in which defendant Terry Neal, Itex's founder and control person, orchestrated and implemented a broad-ranging fraudulent scheme to make materially false and misleading disclosures about the company's business and to conceal numerous suspect and in many cases sham barter deals between Itex and various mysterious offshore entities related to or controlled by Neal.  
+
+ Baer consented, without admitting or denying the Commission's allegations, to the entry of a final judgment permanently enjoining him from violating the antifraud, internal accounting controls, recordkeeping, and securities reporting provisions of the federal securities laws (Section 17(a) of the Securities Act, Sections 10(b), 13(b)(5), and 13(d) of the Exchange Act and Rules 10b-5, 13b2-1, 13b2-2, 13d-1, and 13d-3 thereunder) and barring him from serving as an officer or director of a public company.  The judgment also orders Baer to pay $1.4 million in disgorgement and prejudgment interest, but waives payment of such disgorgement and prejudgment interest, and does not assess a civil penalty, based on his financial condition.   
+
+   With the entry of this judgment, all six defendants in this proceeding have settled with the Commission. 
+
+    For further information, see LR-16305 (announcing complaint), LR-16430 (settlement with Joseph Morris), LR-16437 (settlement with Itex), LR-16536 (settlements with Graham Norris and Cynthia Pfaltzgraff); and LR-16708 (settlement with Terry Neal).   All of these releases are available at the Commission's website at http://www.sec.gov/enforce/litig.htm.  
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diff --git a/raw/aaer/2011/AAER-3223.txt b/raw/aaer/2011/AAER-3223.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b2ee00d1b4fdef296b6384daa8c8222ebfe9f89d
--- /dev/null
+++ b/raw/aaer/2011/AAER-3223.txt
@@ -0,0 +1,1392 @@
+
+
+ 
+ 
+   
+     
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+ 
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+     SEC.gov | Joseph M. Braas and Michael J. Schlager 
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+              Joseph M. Braas and Michael J. Schlager
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+        Joseph M. Braas and Michael J. Schlager
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+                   U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 21797 / January 6, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3223 / January 6, 2011 
+
+ Securities and Exchange Commission v. Joseph M. Braas and Michael J. Schlager, Case No. 11-cv-0087-PD (E.D. Pa.) 
+
+ SEC CHARGES FORMER OFFICERS OF STERLING FINANCIAL CORP. SUBSIDIARY FOR CONDUCTING FINANCIAL FRAUD 
+
+ The Securities and Exchange Commission announced that, on January 6, 2011, it filed a civil action in the United States District Court for the Eastern District of Pennsylvania against Joseph M. Braas, of Lititz, Pennsylvania, and Michael J. Schlager, of Lancaster, Pennsylvania.  The Commission's complaint alleges that Braas and Schlager, two senior officers at Equipment Finance, LLC ("EFI"), formerly a commercial lender to the soft pulp logging industry and wholly-owned subsidiary of Sterling Financial Corp. ("Sterling"), conducted a financial fraud that lasted over five years.  Sterling was a publicly traded bank holding company based in Lancaster, Pennsylvania.  Without admitting or denying the Commission's allegations, Braas and Schlager have agreed to settle the matter.  The settlements are pending final approval by the court. 
+
+ The Commission's complaint alleges that, from at least February 2002 until April 2007, Braas, EFI's Vice President and Chief Operating Officer, and Schlager, EFI's Executive Vice President, orchestrated a pervasive and wide-ranging scheme using fraudulent underwriting and reporting practices to hide mounting losses and defaults within EFI's commercial loan portfolio from Sterling's senior management and auditors. 
+
+ The Commission further alleges that Braas and Schlager were able to subvert virtually every aspect of EFI's loan process and internal controls.  They created fictitious loans for the purpose of making monthly payments on delinquent loans, altered loan documents to hide delinquent and fictitious loans, granted excessive deferrals and resets of delinquent loans to make them appear current, reassigned loan payments to unrelated accounts to fund payments on delinquent loans, and used aliases for borrowers to circumvent EFI's maximum lending limitations.  They also deceived Sterling's internal and independent auditors through fraudulent accounting entries, false collateral descriptions and appraisals, fabricated UCC filings, and by recruiting vendors to assist in the circumvention of loan confirmation procedures. 
+
+ As alleged in the complaint, Braas and Schlager caused EFI to report false financial information to Sterling which, in turn, from 2002 through 2006, filed quarterly and annual reports with the Commission containing materially false and misleading financial statements.  As a result of the fraud, Sterling ultimately charged off $281 million of EFI finance receivables, which represented a large majority of EFI's loan portfolio, and approximately 13 percent of Sterling's total loan portfolio during the period of the fraud. 
+
+ Braas and Schlager have consented to the entry of orders permanently enjoining them 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 ("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 and 13a-13 thereunder.  The orders will bar Braas and Schlager from serving as officers or directors of a public reporting company.  Braas will also be ordered to pay disgorgement and prejudgment interest of $1,489,024, and Schlager ordered to pay disgorgement and prejudgment interest of $1,121,302.  In view of each defendant's agreement to pay restitution in conjunction with his guilty plea in a related criminal case filed by the U.S. Attorney's Office for the Eastern District of Pennsylvania [USA v. Braas, et al., Crim. No. 10-cr-00753-PD (E.D. Pa. Nov. 18, 2010)], the ordered amounts shall be deemed satisfied upon the entry of a restitution order in the criminal case that is equal to or greater than the amounts ordered in the Commission's case. 
+
+ The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Eastern District of Pennsylvania and the Federal Bureau of Investigation. 
+
+   SEC Complaint in this matter  
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diff --git a/raw/aaer/2011/AAER-3224.pdf b/raw/aaer/2011/AAER-3224.pdf
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@@ -0,0 +1,229 @@
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+                    
+   
+ 
+ 
+ 
+ 
+                                                 
+   
+ 
+  
+  
+   
+ 
+UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 63674 / January 7, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3224 / January 7, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14177 
+In the Matter of
+ CARL W. JASPER, CPA 
+             Respondent. 
+ORDER INSTITUTING PUBLIC 
+ADMINISTRATIVE PROCEEDINGS AND 
+IMPOSING TEMPORARY SUSPENSION 
+PURSUANT TO RULE 102(e)(3) OF THE 
+COMMISSION’S RULES OF PRACTICE 
+I. 
+The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
+public interest that public administrative proceedings be, and hereby are, instituted pursuant to 
+Rule 102(e)(3)
+1 of the Commission’s Rules of Practice against Carl W. Jasper (“Respondent” or 
+“Jasper”). 
+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 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+  
+   
+ 
+ 
+  
+    
+ 
+ 
+ 
+ 
+  
+II. 
+The Commission finds that: 
+A. RESPONDENT 
+1. Jasper, age 54, is and has been a certified pub lic accountant (“CPA”) 
+licensed to practice in the State of California.  From April 1999 through January 2007, Respondent 
+served as Vice President, Chief Financial Offi cer, and Principal Accounting Officer of Maxim 
+Integrated Products, Inc. (“Maxim”), a San Jose  semiconductor company.  From 1983 to 1995, 
+Respondent worked as an auditor for Ernst & Young, LLP.  Respondent’s CPA license was inactive 
+during his tenure at Maxim.       
+B. CIVIL INJUNCTION 
+2. On November 5, 2010, the United States District Court for the Northern 
+District of California entered an amended final judgment against Respondent.  SEC v. Jasper, C-
+07-6122 JW (N.D. Cal. Dec. 4, 2007).  The Amended Final Judgment followed a jury trial in 
+which the jury found that Respondent violated Section 17(a)(1) of the Securities Act of 1933 
+(“Securities Act”) and Section 10(b) of the Securities and Exchange Act of 1934 (“Exchange 
+Act”), and Rules 10b-5, 13a-14, 13b2-1, and 13b2-2 thereunder, and aided and abetted Maxim’s 
+violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules12b-20, 
+13a-1, 13a-11, and 13a-13 thereunder. 
+3. The Amended Final Judgment against Respondent, among other things, 
+permanently enjoins him from future violations, direct or indirect, of Section 17(a)(1) of the 
+Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5, 13a-14, 13b2-1, and 13b2-
+2 thereunder, and from aiding and abetting any 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.  It also 
+bars Respondent, for a period of two years, from acting as an officer or director for any issuer that 
+has a class of securities registered pursuant to Section 12 of the Exchange Act, 15 U.S.C. § 781, 
+or that is required to file reports pursuant to Section 15(d) of the Exchange Act, 15 U.S.C. § 
+78o(d), and requires Respondent to reimburse Maxim $1,869,639 and pay a civil penalty of 
+$360,000. 
+4. The Commission’s first amended complaint alleged that Respondent, from 
+at least 2000 through 2005, engaged in a scheme to illegally backdate stock options granted to 
+Maxim’s employees and directors, concealing millions of dollars in expenses from investors and 
+significantly overstating Maxim’s income.  It further alleged that Respondent was aware that 
+Maxim granted options on purported dates that had been selected with hindsight and that he knew, 
+or was reckless in not knowing, that Maxim was failing to report expenses for those in-the-money 
+options and was falsely reporting that it only granted options at fair market value.  It further 
+alleged that Respondent signed several of Maxim’s public filings, including annual, quarterly, and 
+current reports and registration statements that were materially false and misleading.   
+2
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+ 
+  
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+III. 
+Based upon the foregoing, the Commission finds that a court of competent jurisdiction has 
+permanently enjoined Respondent, a CPA, from violating the Federal securities laws within the 
+meaning of Rule 102(e)(3)(i)(A) of the Commission’s Rules of Practice.  In view of these findings, 
+the Commission deems it appropriate and in the public interest that Respondent be temporarily 
+suspended from appearing or practicing before the Commission. 
+IT IS HEREBY ORDERED that Respondent be, and hereby is, temporarily suspended 
+from appearing or practicing before the Commission.  This Order shall be effective upon service 
+on the Respondent. 
+IT IS FURTHER ORDERED that Respondent may within thirty days after service of this 
+Order file a petition with the Commission to lift the temporary suspension.  If the Commission 
+within thirty days after service of the Order receives no petition, the suspension shall become 
+permanent pursuant to Rule 102(e)(3)(ii). 
+If a petition is received within thirty days after service of this Order, the Commission shall, 
+within thirty days after the filing of the petition, either lift the temporary suspension, or set the 
+matter down for hearing at a time and place to be designated by the Commission, or both.  If a 
+hearing is ordered, following the hearing, the Commission may lift the suspension, censure the 
+petitioner, or disqualify the petitioner from appearing or practicing before the Commission for a 
+period of time, or permanently, pursuant to Rule 102(e)(3)(iii). 
+This Order shall be served upon Respondent personally or by certified mail at his last 
+known address. 
+ By the Commission.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+3
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+   
+ 
+ 
+   
+   
+    
+ 
+ 
+     
+      
+    
+ 
+             
+ 
+  
+ 
+   
+ 
+Service List 
+Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the Order Instituting Public 
+Administrative Proceedings and Imposing Temporary Suspension Pursuant to Rule 102(e)(3) of the 
+Commission’s Rules of Practice (“Order”) on the Respondent and his legal agent. 
+The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge
+ 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Mark P. Fickes, Esq.  
+San Francisco Regional Office
+ 
+Securities and Exchange Commission 
+44 Montgomery Street, 26
+th Floor
+ 
+San Francisco, CA 94104 
+Mr. Carl W. Jasper
+ 
+6922 Serenity Way 
+San Jose, CA 95120 
+Steven M. Bauer, Esq. 
+Robert E. Sims, Esq. 
+Margaret A. Tough, Esq. 
+Latham & Watkins LLP 
+505 Montgomery Street, Suite 2000 
+San Francisco, CA 94111 
+(Counsel for Carl W. Jasper) 
+4
+ 
\ No newline at end of file
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@@ -0,0 +1,258 @@
+ 
+ 
+ 
+ 
+ 
+ 
+      
+ 
+      
+ 
+  
+ 
+      
+  
+      
+    
+       
+       
+  
+   
+ 
+ 
+ 
+ 
+  
+   
+                                                
+ 
+ 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 63682 / January 7, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3225 / January 7, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14181 
+: 
+: 
+: 
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+: PROCEEDINGS PURSUANT TO RULE 
+ERIC SIERACKI (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 Eric 
+Sieracki (“Respondent” or “Sieracki”) 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. 
+As stated below, Sieracki was permanently enjoined on the basis of his consent as part of a 
+settlement without any finding of misconduct. 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+  
+ 
+ 
+ 
+ 
+ 
+  
+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 Paragraph 3 of Section III 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. Sieracki, age 54, has been a certified public accountant licensed to practice in 
+the State of California, which license has been canceled upon non-renewal.  He served as Chief 
+Financial Officer of Countrywide Financial Corporation (“Countrywide”) from 2005 until July 
+2008. 
+2. Countrywide, a Delaware corporation, was at all relevant times, a mortgage 
+lender based in Calabasas, California.  Its stock was registered pursuant to Section 12(b) of the 
+Securities Exchange Act of 1934 (“Exchange Act”) and was listed on the New York Stock 
+Exchange.  On July 1, 2008, Countrywide merged with Bank of America and is now a wholly 
+owned subsidiary of Bank of America.  On July 1, 2008, the NYSE filed a Form 25 to deregister 
+and delist Countrywide’s common stock, and on July 22, 2008 Countrywide filed a Form 15 
+deregistering its common stock under Section 12(g) of the Exchange Act. 
+3. On June 4, 2009, the Commission filed a complaint against Sieracki in SEC 
+v. Angelo Mozilo, et al. (Civil Action No. CV 09-3994 (JFW) (MANx), in the United States 
+District Court for the Central District of California.  By consent, on October 15, 2010, the court 
+entered a judgment permanently enjoining Sieracki from future violations of Sections 17(a)(2) and 
+17(a)(3) of the Securities Act of 1933, ordering him to pay a $130,000 civil money penalty, and 
+fully and finally disposing of all claims asserted in the complaint against Sieracki. 
+4. The Commission’s complaint alleged, among other things, that Sieracki 
+was aware of increasing credit risk at Countrywide caused by expanded loan underwriting 
+guidelines and loans written as exceptions to those guidelines.  The complaint also alleged that 
+Sieracki was aware of concerns expressed internally, including by Countrywide’s chief 
+executive officer, regarding the expected performance of Countrywide’s Pay-Option ARM loan 
+portfolio. The complaint alleged that at the same time, Countrywide made representations 
+regarding its underwriting and credit risk in periodic filings with the Commission, signed by 
+Sieracki, which were false or rendered misleading by the omission of material information 
+regarding underwriting guidelines, exceptions, and attendant credit risk.   
+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 Sieracki’s Offer. 
+Accordingly, it is hereby ORDERED, effective immediately, that: 
+A. Sieracki is suspended from appearing or practicing before the Commission as an 
+accountant.  
+B. After one year 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. 
+3
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+   
+ 
+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.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+4
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+   
+ 
+ 
+ 
+ 
+ 
+      
+ 
+             
+ 
+ 
+ 
+Service List 
+Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the Order Instituting Administrative 
+Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and 
+Imposing Remedial Sanctions ("Order"), on the Respondent and his legal agents. 
+The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Spencer E. Bendell, Esq. 
+Los Angeles Regional Office 
+Securities and Exchange Commission 
+5670 Wilshire Boulevard, 11
+th Floor 
+Los Angeles, CA 90035 
+Erik Sieracki, CPA 
+c/o Shirli Fabbri Weiss, Esq. 
+DLA Piper 
+401 B Street, Suite 1700 
+San Diego, CA 92101-4297 
+Shirli Fabbri Weiss, Esq. 
+DLA Piper 
+401 B Street, Suite 1700 
+San Diego, CA 92101-4297 
+5
+ 
\ No newline at end of file
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@@ -0,0 +1,256 @@
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 63688 / January 10, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3226 / January 10, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14182 
+In the Matter of 
+Hudson Highland Group, Inc. 
+Respondent. 
+ORDER INSTITUTING CEASE-AND-DESIST 
+PROCEEDINGS PURSUANT TO SECTION 
+21C OF THE SECURITIES EXCHANGE ACT 
+OF 1934, MAKING FINDINGS, AND 
+IMPOSING A CEASE-AND-DESIST ORDER 
+AND A PENALTY 
+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 Hudson Highland Group, Inc. (“Hudson” 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 Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
+Findings, and Imposing a Cease-and-Desist Order and a Penalty (“Order”), as set forth below.   
+ 
+ 
+ 
+ 
+ 
+ 
+  
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+                                                 
+   
+    
+   
+III. 
+On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 
+Summary 
+This matter involves Hudson’s failures to maintain appropriate internal controls and books 
+and records relating to its sales tax liabilities. From the time of Hudson’s spin-off in 2003 until 
+2007, Hudson’s North America segment (“HNA”) failed to consistently comply with tax laws that 
+required the company to collect sales taxes from its customers and to remit them to the taxing 
+jurisdictions. The reason for these failures is that HNA did not have accounting software capable 
+of calculating the amounts of sales taxes owed.  The sales tax laws mandated that if HNA failed to 
+collect and remit the taxes as required, and if HNA’s customers did not otherwise pay the taxes, 
+HNA became liable for the outstanding sales taxes, plus potential interest and penalties.  HNA’s 
+failures to consistently collect and remit the required taxes ultimately required Hudson to pay 
+substantially all of the uncollected taxes ($3.9 million) itself. 
+Respondent 
+1. Hudson Highland Group, Inc. was incorporated in Delaware on January 6, 2003.  
+The company was spun off from Monster Worldwide, Inc. on March 31, 2003.  Hudson’s principal 
+place of business is in New York, NY.  Hudson provides professional staffing and talent 
+management services worldwide.  Hudson’s common stock is registered with the Commission 
+pursuant to Section 12(b) of the Exchange Act and trades on the NASDAQ. 
+Background 
+2. From the time of Hudson’s spin-off from Monster Worldwide, Inc. in March 2003 
+until January 2007, HNA failed to consistently comply with tax laws that required it to collect sales 
+taxes from its customers, and to remit them to the taxing jurisdictions as their fiduciary.2  If HNA’s 
+customers did not pay the required sales taxes, either at the time of sale or subsequently, HNA 
+became liable for its customers’ tax liabilities, as well as potential interest and penalties. 
+3. HNA failed to consistently collect and remit the sales taxes as required because its 
+accounting software was inadequate.  The sales tax rates and the types of HNA services that were 
+taxable varied by jurisdiction, and not all jurisdictions in which HNA did business applied sales tax 
+to services. HNA’s accounting software, however, was incapable of automatically applying these 
+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.  
+Hudson had contracted with a third party to prepare HNA’s sales tax returns from the 
+time of the spin-off until the end of 2004.  Nevertheless, such arrangement did not relieve 
+Hudson of its responsibility to maintain adequate books and records and internal accounting 
+controls with respect to HNA’s sales tax obligations. 
+2
+ 
+2 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+variables to calculate the taxes owed.  Moreover, HNA’s staffing contracts were frequently 
+executed with customers located in one taxing jurisdiction for work to be performed in one or more 
+other taxing jurisdictions. Although the sales taxes required to be paid are based on the location of 
+the work performed, HNA’s accounting software did not track this information.  HNA also did not 
+track adequately which customers had “direct pay” permits with the taxing jurisdictions, pursuant 
+to which the customers paid the required sales taxes directly rather than through HNA, and which 
+customers had obtained specific exemptions from state sales tax. 
+4. In September 2003, Hudson’s former Assistant Director of Tax began raising 
+concerns to Hudson executives about the company’s compliance with sales tax laws in various 
+jurisdictions. Hudson’s former Corporate Controller, HNA’s General Counsel, and HNA’s former 
+CFO and Controller were all informed over the next few months of the issue. 
+5. HNA’s failure to collect sales taxes from its customers resulted in the company 
+itself having to pay the unpaid sales taxes.  In January 2004, Hudson’s former Assistant Director of 
+Tax suggested to HNA’s former CFO and to Hudson’s former Corporate Controller that they 
+discuss “accruing roughly $150,000 - $200,000 for various sales tax exposures” in at least four 
+states. HNA had previously recorded a sales tax reserve, but the reserve was not allocated to 
+specific states.  HNA did not record any additional reserves in response to the suggestion by the 
+former Assistant Director of Tax.  At the time, HNA did not have systems that accurately recorded 
+reserves for sales tax liabilities, nor did it change its systems to begin, as required, charging sales 
+taxes to its clients and remitting them to the taxing jurisdictions.    
+6. In April 2004, the company hired a Big Four accounting firm (“accounting firm”) 
+to undertake a multi-phase review to assist HNA in determining its sales tax liabilities and to help 
+HNA comply with the sales tax laws.  The accounting firm did not, however, make meaningful 
+progress on these efforts. The accounting firm was only able to prepare a preliminary report due to 
+a high rate of staff turnover at HNA, which hindered the accounting firm’s ability to get the 
+documents it needed for the project, and problems with HNA’s implementation of a new 
+PeopleSoft accounting and management reporting system.   
+7. In November 2005, a pending state sales tax audit led HNA to assign its National 
+Tax Manager, who was the company’s own sales tax expert, to provide an estimate to HNA’s 
+accounting staff of HNA’s sales tax liabilities and to implement an effective process for tracking 
+HNA’s sales tax obligations.  The sales tax expert found this new assignment difficult because 
+HNA’s records were incomplete, requiring her team to reconstruct manually the sales data required 
+to calculate the taxes owed.  Even after quantifying the amount of sales taxes that HNA might owe 
+to each taxing jurisdiction, to determine HNA’s own potential exposure, the company had to 
+determine whether any of its clients had already paid the required sales tax to the taxing 
+jurisdiction through “direct pay” permits with the taxing authorities or had obtained specific 
+exemptions from sales tax from the taxing authorities.    
+8. Hudson’s CFO, who joined the company in December 2005, learned of HNA’s 
+possible sales tax deficiencies in February 2006.  Starting in February 2006, Hudson’s CFO, its 
+former Corporate Controller, its former Director of Tax, and HNA’s former CEO and current and 
+former CFOs, closely monitored the company’s efforts to quantify its sales tax liabilities.      
+3
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+    
+   
+9. As HNA completed the quantification of its historical sales tax liabilities, it 
+recorded expenses during the period Q2FY06 through Q3FY07 to settle virtually all of its sales tax 
+liabilities. Before Q2FY06, Hu dson’s books and records failed to accurately reflect the 
+company’s sales tax liabilities in any of the jurisdictions in which the company had failed to 
+comply with the sales tax laws.  Hudson’s books and records did not accurately reflect the 
+company’s sales tax liabilities until Q2FY08.  During the period 2006 through the first quarter of 
+2009, Hudson paid approximately $3.9 million to various jurisdictions to settle its sales tax 
+liabilities incurred during the period 2001 to 2007.  HNA recovered from its customers about 
+$450,000 of the required sales taxes. 
+10. Although HNA hired a tax manager in September 2006 to work exclusively on 
+completing the quantification of sales tax exposures and developing accounting systems to ensure 
+timely payments of sales taxes, the manual system he developed for invoicing sales taxes was not 
+fully implemented by HNA until January 2007.  HNA was unable to install a comprehensive 
+software package designed to invoice the appropriate sales tax, report sales tax liabilities, and 
+prepare state sales tax returns until February 2008, following the completion of the PeopleSoft 
+installation. 
+11. From Hudson’s 2003 spin-off from Monster Worldwide, Inc. until 2007, HNA’s 
+accounting system was incapable of calculating the amounts of sales taxes that HNA owed without 
+manual intervention. 
+12. As a result of the conduct described above, Hudson violated Section 13(b)(2)(B) of 
+the Exchange Act, which requires all 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 accordance with generally 
+accepted accounting principles. 
+13. As a consequence of Hudson’s inadequate internal controls during this period, 
+Hudson’s books and records did not accurately reflect its tax liabilities. 
+14. Also a result of the conduct described above, Hudson violated 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.   
+IV. 
+In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent Hudson’s Offer. 
+Accordingly, it is hereby ORDERED that: 
+A. Pursuant to Section 21C of the Exchange Act, Respondent Hudson cease and desist 
+from committing or causing any violations and any future violations of Sections 13(b)(2)(A) and 
+13(b)(2)(B) of the Exchange Act. 
+4
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+ 
+B. Pursuant to Section 21B of the Exchange Act, Respondent shall, within 14 days of 
+the entry of this Order, pay a penalty of $200,000 to the United States Treasury.  If timely payment 
+is not made, interest shall accrue pursuant to SEC Rule of Practice 600.  Payment shall be: (A) 
+made by wire transfer, 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 Hudson 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 Lorin 
+Reisner, Division of Enforcement, Securities and Exchange Commission, 100 F St., N.E., 
+Washington, D.C. 20549.   
+ By the Commission.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+5
+ 
\ No newline at end of file
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+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 63690 / January 11, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3227 / January 11, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-10762 
+: 
+In the Matter of : ORDER AMENDING 
+: ORDER MAKING FINDINGS AND 
+MICHAEL R. DROGIN, CPA, : 
+: 
+IMPOSING REMEDIAL SANCTIONS 
+PURSUANT TO RULE 102(e) OF 
+Respondent. : 
+: 
+THE COMMISSION’S RULES OF PRACTICE 
+I. 
+On May 6, 2003, the Securities and Exchange Commission (“Commission”) issued an 
+Order Making Findings and Imposing Remedial Sanctions (the “2003 Order”) against Michael R. 
+Drogin, CPA (“Drogin”).  The 2003 Order found that Drogin engaged in improper professional 
+conduct under Rule 102(e)(1)
+1 of the Commission’s Rules of Practice in connection with his audit 
+of the 1999 financial statements of Teltran International Group, Ltd.  The 2003 Order denied 
+Drogin the privilege of appearing or practicing before the Commission as an accountant, with the 
+ability to request that the Commission consider reinstatement after two years.  The Commission 
+has not reinstated Drogin’s privilege to appear or practice before the Commission.  As set forth 
+below, Drogin thereafter violated the terms of the 2003 Order.   
+Rule 102(e)(1) of the Commission’s Rules of Practice provides in pertinent part that:   
+The Commission may censure a person or 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: . . . (ii) To be lacking in character or integrity or 
+to have engaged in unethical or improper professional conduct; 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. 
+1 
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+II. 
+Drogin has submitted an Amended Offer of Settlement (the “Amended Offer”) in which he 
+consents to the entry of an order amending the 2003 Order to strike Subsections B and C of 
+Section IV of the 2003 Order regarding requests for reinstatement of his privilege to appear or 
+practice before the Commission.  Solely for purposes of these proceedings and any other 
+proceedings brought by or on behalf of the Commission, or as 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, Drogin consents to the 
+entry of this Order Amending Order Making Findings and Imposing Remedial Sanctions Pursuant 
+to Rule 102(e) of the Commission’s Rules of Practice (“Order”), as set forth below. 
+III. 
+On the basis of this Order and Drogin’s Amended Offer, the Commission finds that: 
+A. Respondent 
+Drogin resides in New York and is licensed as a Certified Public Accountant in New York 
+and New Jersey.  From January 1998 through early 2009, Drogin was a partner in the accounting 
+firm Liebman, Goldberg & Drogin, LLP (“LGD”).  The 2003 Order denied Drogin the privilege of 
+appearing or practicing before the Commission as an accountant.  The Commission has not 
+reinstated Drogin’s privilege to appear or practice before it as an accountant. 
+B. Facts 
+Beginning no later than the fall of 2005 and continuing into late 2008, while he was a 
+partner of LGD, Drogin violated the 2003 Order by performing audit, review and other accounting 
+work in connection with filings made by three issuers with the Commission.  In 2005 and 2006, 
+Drogin participated in auditing the financial statements of one of the companies, which were 
+included in registration statements and amendments filed with the Commission, including a Form 
+SB-2 filed in September 2005.  In 2007, Drogin participated in auditing the financial statements of 
+all three issuers, which were incorporated in various filings with the Commission, including an 
+annual report, a proxy statement, and registration statements filed by two of the issuers.  Drogin 
+also reviewed quarterly and current filings made with the Commission by the three issuers. In 
+several instances, Drogin advised management of the respective companies regarding disclosures 
+contained in those filings.  When one of the issuers restated its prior period consolidated financial 
+statements to properly reflect the classification of stock warrants receivable, Drogin participated in 
+the audit of the restated financial statements, which were included in the issuer’s amended 2006 
+Form 10-K-SB filed with the Commission in November 2007. 
+In addition to performing audit and review work, Drogin assisted two of the issuers in 
+responding to comments from the staff of the Commission’s Division of Corporation Finance on 
+the three registration statements described above.  Further, Drogin periodically provided advice to 
+the three issuers concerning accounting and disclosures issues, which was then reflected in the 
+2
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+financial statements and disclosures included in various filings that these companies made with the 
+Commission. 
+In March and April 2008, Drogin issued audit reports for the financial statements of the 
+three issuers, stating that each issuer’s financial statements were prepared in conformity with 
+GAAP and fairly presented the financial position of the respective companies.  These audit reports 
+were incorporated into the issuers’ 2007 annual reports on Form 10-K filed with the Commission, 
+as well as an amended securities registration statement on Form S-1/A filed by one of the issuers in 
+April 2008. In each instance, Drogin issued the audit report without having performed an audit of 
+the financial statements.  Drogin nevertheless represented in each audit report that an audit had 
+been performed in accordance with applicable auditing standards and provided a reasonable basis 
+for the unqualified report.  Drogin’s audit reports also misrepresented that the amounts and 
+disclosures in the financial statements had been examined on a test basis and the accounting 
+principles used and significant estimates made by management had been assessed. 
+C. Drogin’s Violations 
+Drogin’s performance of audit, review, and other services for the three issuers from the fall 
+of 2005 through late 2008 constitute appearing or practicing before the Commission, in violation of 
+the 2003 Order.  Rule 102(f) broadly defines “practicing before the Commission” to include “[t]he 
+preparation of any statement, opinion or other paper by any . . . accountant . . . filed with the 
+Commission in any registration statement, notification, application, report or other document with 
+the consent of such . . . accountant . . ..”  The purpose of Rule 102 is to protect the integrity of the 
+Commission’s processes, see Touche Ross & Co. v. S.E.C., 609 F.2d 570, 582 (2d Cir. 1979) and, 
+accordingly, covers a wide range of conduct related to the disclosure process under the securities 
+laws.   
+Between 2005 and 2008, Drogin appeared or practiced before the Commission within the 
+meaning of Rule 102(f) in violation of the 2003 Order by, among other things:  participating in the 
+audit of financial statements that were subsequently included in filings with the Commission 
+(including annual reports and registration statements); reviewing quarterly and current reports;  
+participating in the preparation of responses to comment letters from the Division of Corporation 
+Finance concerning registration statements; providing accounting advice to the issuers that was 
+then reflected in financial statements the issuers filed with the Commission; and issuing audit 
+reports on behalf of LGD for the three issuers in 2008.  Accordingly, Drogin repeatedly violated 
+the 2003 Order over a period of several years. 
+Further, as described above, Drogin issued three audit reports in 2008 without having 
+completed audits of the issuers’ financial statements.  Therefore, each of the three audit reports 
+Drogin issued in March and April 2008 contained false or misleading representations concerning 
+the performance of audits of the respective financial statements.  As a result, Drogin willfully 
+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.  With respect to 
+the two issuers that had a class of securities registered with the Commission pursuant to Section 
+12, Drogin also willfully aided and abetted violations of Section 13(a) of the Exchange Act and 
+Rules 12b-20 and 13a-1 thereunder. 
+3
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+   
+ 
+IV. 
+Based on the foregoing, the Commission finds that Drogin appeared or practiced before the 
+Commission in violation of the 2003 Order.  The Commission further finds that Drogin willfully 
+violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 
+thereunder, and willfully aided and abetted violations of Section 13(a) of the Exchange Act and 
+Rules 12b-20 and 13a-1 promulgated thereunder. 
+V. 
+In view of the foregoing, the Commission deems it appropriate to amend Section IV of the 
+2003 Order as agreed to in Drogin’s Amended Offer. 
+Accordingly, IT IS HEREBY ORDERED that: 
+A. 	 Subsections B and C of Section IV of the 2003 Order, regarding requests for 
+reinstatement of Drogin’s privilege to appear or practice before the Commission as 
+an accountant, are stricken in their entirety.   
+B. 	 Subsection A of Section IV of the 2003 Order, which denies Drogin the privilege of 
+appearing or practicing before the Commission as an accountant, remains in effect. 
+By the Commission.
+      E l i z a b e t h M . M u r p h y
+ Secretary 
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+Service List 
+Rule 141 of the Commission’s Rules of Practice provides that the Secretary, or another 
+duly authorized officer of the Commission, shall serve a copy of the Order Amending Order 
+Making Findings and Imposing Remedial Sanctions Pursuant to Rule 102(e) of The Commission’s 
+Rules of Practice on the Respondent and his legal agent. 
+The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+The Honorable Brenda P. Murray 
+Chief Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC  20549-2557 
+Thomas W. Peirce, Esq. 
+Division of Enforcement  
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC  20549-5720 
+Andrew S. Rendeiro, Esq. 
+Flamhaft Levy Hirsch & Rendeiro LLP 
+Suite 3301 
+16 Court Street 
+Brooklyn, NY 11241 
+(Counsel for Respondent) 
+Mr. Michael R. Drogin, CPA 
+8 Hunt Court 
+Jericho, NY 11753 
+5
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3228.txt b/raw/aaer/2011/AAER-3228.txt
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+     SEC.gov | Michael R. Drogin 
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+       
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+                   U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 21804 / January 11, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3228 / January 11, 2011 
+
+  SEC v. Michael R. Drogin, CPA,  Civ. Action No. 11-0063 (RJL) (D.D.C.) 
+
+ SEC Charges Michael R. Drogin, CPA With Fraud and Violating 2003 SEC Order Barring Him from Appearing or Practicing Before SEC; Relief Sought Includes Injunction, Civil Penalty and Disgorgement 
+
+ The U.S. Securities & Exchange Commission announced today that it has filed a settled enforcement action against Michael R. Drogin, a certified public accountant licensed in New York and New Jersey.  The Commission's complaint charges that, between 2005 and 2008, while he was a partner with the accounting firm Liebman Goldberg & Drogin, LLP in Garden City, New York, Drogin performed audit, review, and other accounting work for three companies in violation of a Commission order issued on May 6, 2003.  That order barred Drogin from appearing or practicing before the Commission as an accountant based on his failure to exercise due professional care in his audit of the financial statements of a small telecommunication company.   In the Matter of Michael R. Drogin, CPA,  Admin. Proc. No. 3-10762 (May 6, 2003).   
+
+ The Commission's complaint alleges that Drogin began violating the 2003 Order as early as the fall of 2005, when he participated in auditing the financial statements of a small company that then filed a registration statement with the Commission to become a public company.  The financial statements, and the firm's audit report, were included in the registration statement and subsequent amendments.  Thereafter, Drogin violated the 2003 Order by: 
+
+  participating in auditing the 2007 financial statements of all three companies, which were incorporated into various filings by the companies, including registration statements, a proxy statement, and an annual report;    
+
+ reviewing quarterly and other Commission filings made by the three companies; and   
+
+ advising the respective companies' management regarding disclosures contained in those filings.   
+
+  In addition to performing audit and review work, Drogin also violated the 2003 Order by assisting two of the companies in responding to comments from the staff of the Commission's Division of Corporation Finance on the registration statements described above.   
+
+ The Commission's complaint also alleges that Drogin issued audit reports in 2008 for the three companies without having completed the audits.  The audit reports issued by Drogin falsely stated that an audit had been performed in accordance with applicable auditing standards and provided a reasonable basis for an unqualified report.  The complaint alleges that Drogin knew the companies would include the fraudulent audit reports in annual reports and a registration statement filed with the Commission. 
+
+ The complaint charges Drogin with violating the antifraud provisions of the federal securities laws by issuing the fraudulent audit reports, and with aiding and abetting violations of the reporting requirements of the securities laws.  The complaint also charges Drogin with violating the 2003 Order by repeatedly engaging in conduct between the fall of 2005 and 2008 that constituted appearing and practicing before the Commission as an accountant.   
+
+ Without admitting or denying the allegations in the complaint, Drogin has consented to the entry of a final judgment that:  permanently enjoins Drogin from violating, directly or indirectly, Section 17(a) of the Securities Act of 1933 (the "Securities Act"), Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rules 10b-5, 12b-20 and 13a-1   thereunder; restrains and enjoins him from violating the Commission's 2003 Order, as amended on January 11, 2011 (Release No. 34-63690); and orders him to pay disgorgement and prejudgment interest of $43,612.04, and a civil penalty in the amount of $38,953.17.  The settlement is subject to the court's approval. 
+
+ In a related proceeding, on January 11, 2011, the Commission entered an Order amending the 2003 Order to remove the time limit on Drogin's prior suspension.  Drogin consented to the entry of the amended Order without admitting or denying any of the findings. 
+
+ For additional information, see below: 
+
+   SEC Complaint in this matter    
+  Order Amending 2003 Order  
+    
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diff --git a/raw/aaer/2011/AAER-3229.txt b/raw/aaer/2011/AAER-3229.txt
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+              NIC, Inc., Jeffrey S. Fraser, Harry H. Herington, and Eric J. Bur; Stephen M. Kovzan
+           
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+        NIC, Inc., Jeffrey S. Fraser, Harry H. Herington, and Eric J. Bur; Stephen M. Kovzan
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+                   U.S. Securities and Exchange Commission 
+ 
+ Litigation Release No. 21809 / January 12, 2011 
+ 
+ Accounting and Auditing Release No. 3229 / January 12, 2011 
+ 
+  SEC v. NIC, Inc., Jeffrey S. Fraser, Harry H. Herington, and Eric J. Bur , Civil Action No. 2:11-CV-02016 (EFM) (D. Kansas Jan. 12, 2011) 
+ 
+  SEC v. Stephen M. Kovzan , Civil Action No. 2:11-CV-02017(JWL) (D. Kansas Jan. 12, 2011) 
+ 
+ SEC Charges NIC, Inc. and Four Current or Former Executives for Failing to Disclose CEO Perquisites 
+ 
+ The Securities and Exchange Commission ("Commission") charged Kansas-based NIC Inc. ("NIC") which manages government websites, its former CEO Jeffery Fraser, current CEO Harry Herington, former CFO Eric Bur, and current CFO Stephen Kovzan with failing to disclose more than $1.18 million in perquisites to Fraser from at least 2002 to 2007. 
+
+ The Commission alleges that NIC filed false and misleading proxy statements, annual reports and registration statements that failed to disclose Fraser's perquisites and falsely represented he worked virtually for free from 2002 until 2005, and continued to materially understate the perquisites Fraser received in 2006 and 2007. The Commission also alleges that NIC's related party transactions disclosures for 2002 through 2005 were misleading in failing to disclose its payment of $1 million to fly and operate planes for Fraser. 
+
+ NIC, Fraser, Herington and Bur agreed to settle the Commission's charges without admitting or denying the allegations against them. The Commission's litigation continues against Kovzan. 
+
+ The Commission's complaints, filed in federal court in the District of Kansas, contain the following additional allegations: 
+
+   Fraser's undisclosed perquisites included over $4,000 per month to live in a ski lodge in Wyoming; monthly cash payments for purported rent for a Kansas house owned by an entity Fraser set up and controlled; vacations for Fraser, his girlfriend and his family; Fraser's flight training, hunting, spa, skiing and health club expenses; computers and electronics for Fraser and his family; a leased Lexus SUV; costs for Fraser to commute by private aircraft from his home in Wyoming to his office at NIC's Kansas headquarters; and other day-to-day living expenses such as groceries, liquor, tobacco, nutritional supplements, and clothing.  
+
+    Fraser, who did not have a personal credit card, routinely charged living expenses on NIC credit cards and submitted expense vouchers falsely claiming personal items were business related in order to have NIC pay for these personal expenses. Fraser also sought reimbursement for certain expenses he had not incurred.  
+
+    Kovzan, then Chief Accounting Officer, authorized NIC's payment of Fraser's personal expenses, circumvented NIC's internal controls and policies that required the CEO to document the business purpose for his expenses and knew, or was reckless in not knowing, that Fraser's expenses were falsely characterized as business expenses in NIC's books and records. Kovzan prepared, reviewed and/or signed NIC's proxy statements, annual reports, and registration statements that materially underreported Fraser's compensation and Kovzan made false representations to NIC's independent auditors.  
+
+    Bur permitted NIC to pay the expenses that Fraser submitted on his expense vouchers even though he was informed that Fraser was not submitting the required documentation. A finance department employee raised concerns to Bur that some of Fraser's expenses were not business related. Bur was aware of the Commission's rules requiring the disclosure of executive perquisites, yet he reviewed, signed, and/or certified NIC's public filings that failed to disclose Fraser's perquisites.  
+
+    Herington, then Chief Operating Officer, was informed of problems with Fraser's expense reporting and failed to adequately address them. Herington received information showing that NIC was paying for some of Fraser's personal expenses, yet he reviewed and/or signed NIC's public filings that failed to disclose Fraser's perquisites.  
+
+    NIC failed to correct Fraser's expense reporting problems even after a finance department employee warned in 2006 of the risk of possible income tax fraud charges, a whistleblower had complained to NIC and the company learned of the Commission's investigation of this matter in mid-2007. The majority of Fraser's perquisites were not repaid or disclosed, and NIC continued to make misleading public filings. NIC failed to disclose to investors in public filings that an internal review concluded Fraser had intentionally misclassified his expenses.  
+  NIC agreed to settle the Commission's charges by paying a $500,000 civil penalty and hiring an independent consultant to recommend, if appropriate, improvements to policies, procedures, controls, and training relating to payment of expenses, handling of whistleblower complaints, and related party transactions. NIC consented to a final judgment enjoining it from violating Sections 17(a)(2) and (3) of the Securities Act of 1933 ("Securities Act"); Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Exchange Act Rules 12b-20, 13a-1, 13a-11, 14a-3, and 14a-9. 
+
+ Fraser agreed to pay $1,184,246 in disgorgement, $358,844 in prejudgment interest, and a $500,000 civil penalty, and consented to an order barring him from serving as an officer or director of a public company. Fraser consented to a final judgment enjoining him from violating Section 17(a) of the Securities Act, Sections 10(b), 13(b)(5), and 14(a) of the Exchange Act, and Exchange Act Rules 10b-5, 13a-14, 13b2-1, 13b2-2, 14a-3, and 14a-9, and from aiding and abetting NIC'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 and 13a-1. 
+
+ Herington agreed to pay a $200,000 civil penalty and consented to a final judgment enjoining him from violating Sections 17(a)(2) and (3) of the Securities Act and Section 13(b)(5) of the Exchange Act, and aiding and abetting NIC's violations of Sections 13(a) and 14(a) of the Exchange Act, and Exchange Act Rules 12b-20, 13a-1, 14a-3, and 14a-9. 
+
+ Bur agreed to pay a $75,000 civil penalty and consented to a final judgment enjoining him from violating Exchange Act Rules 13a-14 and 13b2-1, and aiding and abetting NIC's violations of Exchange Act Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a), and Exchange Act Rules 12b-20, 13a-1, 14a-3, and 14a-9. In addition, Bur agreed to resolve an anticipated administrative proceeding by consenting to a Commission order prohibiting him from appearing or practicing before the Commission as an accountant with a right to reapply after one year. 
+
+ Kovzan is charged with violating Section 17(a) of the Securities Act, Section 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 NIC's violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 14a-3, and 14a-9. The SEC's complaint seeks a permanent injunction, disgorgement, civil penalties, prejudgment interest, and an officer and director bar against Kovzan. The Commission's action against Kovzan is ongoing. 
+
+   SEC Complaint vs. NIC, Fraser, Herington, and Bur  
+    SEC Complaint vs. Kovzan  
+   
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diff --git a/raw/aaer/2011/AAER-3230.txt b/raw/aaer/2011/AAER-3230.txt
new file mode 100644
index 0000000000000000000000000000000000000000..796794fa08348b8703babeb5c523298b75ac60b5
--- /dev/null
+++ b/raw/aaer/2011/AAER-3230.txt
@@ -0,0 +1,1383 @@
+
+
+ 
+ 
+   
+     
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+     SEC.gov | Sujata Sachdeva, et. al. 
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+                   U.S. Securities and Exchange Commission 
+ 
+ Litigation Release No. 21810 / January 13, 2011 
+ 
+ Accounting and Auditing Release No. 3230 / January 13, 2011 
+ 
+  SEC v. Sujata Sachdeva, et. al. , Civil Case No. 10-CV-747, USDC, E.D., Wisc.  
+ 
+ SEC Obtains Permanent Injunction and Officer and Director Bar Against Sujata Sachdeva, Former Koss Accountant 
+ 
+ The Securities and Exchange Commission ("Commission") announced that on January 11, 2011, the Honorable Judge Rudolph T. Randa of the U.S. District Court of the Eastern District of Wisconsin entered an order of permanent injunction against Sujata Sachdeva, the former Principal Accounting Officer, Secretary and Vice-President of Finance at Koss Corporation in Milwaukee, Wisconsin, arising from her embezzlement of over $30 million from Koss.  
+
+ On August 31, 2010, the Commission filed its complaint against Sachdeva alleging that Sachdeva: 
+
+  stole over $30 million from Koss; 
+ used the embezzled funds to finance an extravagant lifestyle, including lavish spending sprees at department stores, designer boutiques, jewelry stores, and other high-end retailers; 
+ concealed and facilitated the theft from Koss by preparing materially false accounting records,  hid the embezzlement on Koss's balance sheet and income statement by overstating assets, expenses, and cost of sales, and by understating liabilities and sales; and 
+ falsified accounting records, causing Koss to file materially false current, quarterly, and annual reports with the Commission. 
+  After discovering the embezzlement, Koss amended and restated its financial statements for fiscal years 2008 and 2009 and the first three quarters of fiscal year 2010.   
+
+ Sachdeva consented to the injunctive order without admitting or denying the allegations in the Commission's complaint.  The order: 
+
+  enjoins Sachdeva from violating the anti-fraud and books and records provisions (Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5, 13b2-1 and 13b2-2), and from aiding and abetting violations of the reporting, books and records and internal controls provisions (Sections 13(a), 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-11 and 13a-13) of the federal securities laws; and  
+ bars Sachdeva from acting as an officer or director of a public company. 
+  In a related criminal matter in the U.S. District Court for the Eastern District of Wisconsin, on November 17, 2010, Sachdeva pleaded guilty to six counts of wire fraud and was ordered to pay $34 million in restitution and was sentenced to 11 years in prison.   
+
+ The Commission acknowledges the assistance of the U.S. Attorney's Office for the Eastern District of Wisconsin, the Federal Bureau of Investigations and the Public Company Accounting Oversight Board.   
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diff --git a/raw/aaer/2011/AAER-3231.txt b/raw/aaer/2011/AAER-3231.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9f831f8c1770986dcbed154e12c90661a2a53e94
--- /dev/null
+++ b/raw/aaer/2011/AAER-3231.txt
@@ -0,0 +1,1377 @@
+
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+              Joseph D. Radcliffe and Michael J. Radcliffe
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+        Joseph D. Radcliffe and Michael J. Radcliffe
+       
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+                   U.S. Securities and Exchange Commission 
+ 
+ Litigation Release No. 21814 / January 14, 2011 
+ 
+ Accounting and Auditing Enforcement Release No. 3231 / January 14, 2011 
+ 
+  SEC v. Joseph D. Radcliffe and Michael J. Radcliffe , Civil Action No. 1:11-cv-00091 (RBW) (D. D.C.  Jan. 14, 2011) 
+ 
+ SEC Charges Father and Son in Financial Fraud at Sports Memorabilia Company 
+ 
+ The Securities and Exchange Commission ("Commission") today charged Joseph D. Racliffe and his son Michael J. Radcliffe, both of Elka Park, New York, with operating a financial fraud at Image Innovations Holdings, Inc. ("Image"), a public company that dealt in sports memorabilia. The Commission also charged Joseph Radcliffe with illegal insider trading. 
+
+ The Commission's complaint, which was filed in the United States District Court for the District of Columbia, alleges that Michael Radcliffe was a Director of Image and the Chief Operating Officer of its operating subsidiary, and he signed the company's financial reports. Joseph Radcliffe, who held himself out as a "consultant" for the company, actually controlled the operations of the company. According to the Commission's complaint, in 2004 and 2005, Joseph and Michael Radcliffe engaged in a scheme in which they created fictitious sales of company merchandise, which were recorded in the company books and records as revenue. The Radcliffes used false invoices and other documentation to disguise the fact that the sales were phony. The Commission further alleges that the revenue reported from the fictitious sales was included in the company's financial reports, which were disseminated to the public and filed with the Commission. In 2004, Image reported about $6.1 million in revenue. For the first quarter of 2005, Image reported about $464,502 in revenue. About 92 percent of that reported revenue in 2004 and 2005 was fabricated by Joseph and Michael Radcliffe. In addition, Joseph Radcliffe sold shares of the Company at prices inflated by the fraud while in possession of material, nonpublic information regarding the Company's true financial performance and without registering the sales as required by the securities laws. The Radcliffes obtained a total of at least $965,000 from the financial fraud and illegal stock sales. The fraudulent scheme eventually came to light when a newly-hired company officer questioned the company's revenue figures. 
+
+ Joseph and Michael Radcliffe agreed to settle the Commission's charges without admitting or denying the allegations against them. The proposed settlements are subject to the court's approval 
+
+ Joseph Radcliffe agreed to pay $955,000 in disgorgement, $299,541 in prejudgment interest, and $175,000 in civil penalty. He also consented to a final judgment enjoining him from violating Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 ("Securities Act"); Section 10(b) of the Securities Exchange Act ("Exchange Act") and Rule 10b-5 thereunder; and, as a "controlling person" under Exchange Act Section 20(a), from 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. 
+
+ Michael Radcliffe agreed to pay $10,000 in disgorgement, $3,060 in prejudgment interest, and $75,000 in civil penalty. He also consented to a final judgment enjoining him from violating Section 10(b) of the Exchange Act and Rule 10b-5 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. 
+
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diff --git a/raw/aaer/2011/AAER-3232.txt b/raw/aaer/2011/AAER-3232.txt
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+UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 63740 / January 20, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3232 / January 20, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-13997 
+In the Matter of 
+DOHAN + COMPANY CPAs, 
+STEVEN H. DOHAN, CPA, 
+NANCY L. BROWN, CPA, and 
+EREZ BAHAR, CA, 
+Respondents. 
+ORDER MAKING FINDINGS AND 
+IMPOSING REMEDIAL SANCTIONS 
+PURSUANT TO SECTION 4C OF THE 
+SECURITIES EXCHANGE ACT OF 1934 
+AND RULE 102(e) OF THE COMMISSION’S 
+RULES OF PRACTICE AS TO DOHAN + 
+COMPANY CPAS, STEVEN H. DOHAN, 
+CPA, AND NANCY L. BROWN, CPA 
+I. 
+In these proceedings, instituted on August 9, 2010 pursuant to Section 4C of the Securities 
+Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(ii) of the Securities and Exchange 
+Commission’s (“Commission”) Rules of Practice, Respondents Dohan + Company CPAs (“Dohan 
++ Co.”), Steven H. Dohan (“Dohan”), and Nancy L. Brown (“Brown”) (collectively 
+“Respondents”) have submitted Offers of Settlement (“Offer”) which the Commission has 
+determined to accept. 
+II. 
+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 Pursuant to Section 4C of the Securities 
+  
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+                                                 
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+  
+Exchange Act of 1934 and Rule 102(e) of the Commission’s Rules of Practice as to Dohan + 
+Company CPAs, Steven H. Dohan, CPA, and Nancy L. Brown, CPA (“Order”), as set forth below. 
+III. 
+On the basis of this Order and the Offers of Respondents Dohan + Co., Dohan, and Brown, 
+the Commission finds1 that: 
+A. SUMMARY 
+1. These proceedings arise out of Respondents’ improper professional conduct during 
+their audit of International Commercial Television, Inc.’s (“ICTV”) 2007 financial statements.  
+During fiscal year 2007, ICTV improperly recognized revenue and incorrectly recorded product 
+returns, resulting in a material overstatement of revenue and net income.  Respondents’ audit of 
+ICTV’s 2007 financial statements failed to comply with numerous Public Company Accounting 
+Oversight Board (“PCAOB”) auditing standards.  These included failing to demonstrate the 
+required level of proficiency, failing to exercise due care and professional skepticism, failing to 
+obtain sufficient evidential matter, failing to plan the audit, and failing to supervise the audit staff. 
+As a result, Respondents Dohan and Brown and others caused Respondent Dohan + Co. to issue an 
+unqualified audit report for ICTV’s 2007 Form 10-K/SB that incorrectly stated that the audit had 
+been conducted in accordance with the PCAOB’s auditing standards and that ICTV’s financial 
+statements were fairly reported in conformity with Generally Accepted Accounting Principles 
+(“GAAP”).  Respondents’ conduct, as further described below, constituted improper professional 
+conduct within the meaning of Rule 102(e)(1)(ii) and (iv) and Section 4C of the Exchange Act. 
+B. RESPONDENTS 
+2. Dohan + Company CPAs is an accounting and auditing firm based in Miami, 
+Florida. The firm provides services to public companies registered with the Commission and has 
+been registered with the PCAOB since October 2003.  The firm conducted audits of ICTV’s 
+financial statements for the years ended 2004, 2005, 2006, and 2007.  As auditor, Dohan + Co. 
+issued a report stating that ICTV’s financial statements were prepared in conformity with GAAP 
+and that Dohan + Co. had conducted audits in accordance with the PCAOB’s standards. 
+3. Steven H. Dohan, CPA, age 63, is a resident of Miami, Florida.  Dohan is the 
+founder and managing director of Dohan + Co. and was the concurring partner on the ICTV audits 
+and quarterly reviews during the relevant period.  Dohan is a Certified Public Accountant licensed 
+in Florida. 
+4. Nancy L. Brown, CPA, age 58, is a resident of Miami, Florida.  Until recently, 
+Brown was a director at Dohan + Co. and was the engagement partner on the ICTV audits and 
+quarterly reviews during the relevant period.  Brown is a Certified Public Accountant licensed in 
+Florida. 
+1 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 
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+                                                 
+     
+   
+ 
+C. RELATED PARTY 
+5. International Commercial Television, Inc. is a Nevada corporation headquartered 
+in Bainbridge Island, Washington.  Founded in 2001, the Company sells health and beauty 
+products internationally via infomercials and through various televised shopping networks.  
+ICTV’s common stock is registered under Section 12(g) of the Exchange Act and is quoted on the 
+Pink Sheets under the symbol “ICTL.” 
+D. FACTS 
+ICTV’s Improper Revenue Recognition 
+6. ICTV is a marketer of consumer retail goods, specializing in “fountain of youth” 
+health and beauty products it owns or holds the right to sell.  ICTV’s best-selling product is the 
+Derma Wand, a skin care appliance that purportedly “reduces fine lines and wrinkles and improves 
+overall skin appearance.” 
+7. ICTV sells product through two main channels:  (1) direct sales to end users via 
+infomercials produced by ICTV (“direct sales”), and (2) distribution through third-party 
+distributors for sell-through to end users.  ICTV’s distributors include televised shopping networks 
+such as the Home Shopping Network (“HSN”). 
+8. Over a six-quarter period from early 2007 and continuing into 2008, ICTV 
+improperly recognized revenue on sales through HSN.  In addition, ICTV failed to properly record 
+revenue, and estimate and account for returns, for product sold through its direct sales channels. 
+9. ICTV began selling product through HSN in 2007, predominantly through a “drop-
+ship” contract entered into between ICTV and HSN in or about May 2007.  Under the drop-ship 
+contract, HSN did not purchase the product itself, but instead facilitated sales to HSN’s customers 
+(i.e., the end users). Generally, HSN sent ICTV written requests to pre-order product that would 
+be sold during future HSN television broadcasts.  ICTV retained title to the product until HSN sold 
+the product on-air to its customers and the product was shipped to the end users.  HSN did not 
+guarantee the purchase of any product, and any unsold product remained under the ownership of 
+ICTV. The contract also allowed HSN to return any product from its customers up to 60 days after 
+delivery to the customer.2 
+10. Despite these contractual provisions governing sell-through and right of return, 
+ICTV recognized revenue in most cases upon HSN’s order of the product, before HSN sold 
+through to its customers and before the right of return expired.  In some instances, ICTV also 
+recognized revenue without a corresponding written request from HSN.  In those cases, ICTV 
+booked HSN sales upon alleged confirmation from its third-party fulfillment warehouse that 
+product had been physically segregated for HSN’s use. 
+2 ICTV also sold product directly to HSN under the terms of a separate, “traditional” contract, in which HSN issued 
+a purchase order, retrieved the product, sold the product to end users, and paid ICTV after the sell-through.  
+However, only the first HSN sale was made per the terms of the traditional contract.  All other sales were made per 
+the drop-ship arrangement. 
+3 
+
+  
+ 
+  
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+  
+ 
+ 
+ 
+ 
+11. ICTV failed to ensure that HSN sold through the units booked by the end of the 
+quarter, resulting in a mounting accounts receivable balance with each successive HSN order.  This 
+accounting treatment violated multiple revenue recognition criteria under Generally Accepted 
+Accounting Principles (“GAAP”). 
+12. In addition to prematurely recognizing revenue on sales through HSN, ICTV also 
+booked revenue in 2007 on a product that failed an HSN quality control inspection and was never 
+sold through HSN.  The purported sale remained on ICTV’s books through the 2007 audit and was 
+not reversed until ICTV issued a restated Form 10-K/SB in March 2009. 
+13. In total, ICTV booked seven HSN sales in 2007 totaling $2.8 million.  This figure 
+was reported in ICTV’s trial balance and ultimately reported by ICTV in its 2007 Form 10-K.  
+Respondents’ working papers state that the auditors tested the HSN sales and traced certain of the 
+sales to ICTV’s sales journal, which in turn showed the amount that ICTV booked as revenue. 
+14. Each HSN sale recognized for 2007 was improperly recognized, resulting in a 
+material overstatement of revenue for ICTV’s fiscal 2007. 
+15. ICTV also failed to properly record revenue on its direct sales.  ICTV provided its 
+direct sales customers a 30-day free trial period whereby the customer could try the ordered 
+product prior to purchase, and billed customers upon expiration of the 30-day period.  Despite this 
+provision, ICTV recognized revenue upon shipment of the product, and before expiration of the 
+trial period, in violation of GAAP.  ICTV also failed to properly estimate and record product 
+returns on direct sales. 
+16. Over the course of the six-quarter period, ICTV filed periodic reports with the 
+Commission on Forms 10-Q and 10-K.  As a result of the improper accounting discussed above, 
+ICTV reported materially inflated revenue and net income to investors and to the Commission. 
+ICTV’s Restatement 
+17. In October 2008, ICTV announced that it intended to restate its financial statements 
+for the fiscal year ended 2007 and the first two quarters of 2008 as a result of improper revenue 
+recognition. ICTV filed its restated Form 10-K/A for fiscal year 2007 on March 31, 2009.  The 
+restatement resulted in a $1.4 million reduction in 2007 revenue related to the HSN errors, and an 
+$840,000 reduction in 2007 revenue related to the failure to properly record direct sales returns. 
+18. In March 2010, ICTV’s new outside auditors uncovered additional revenue 
+recognition errors and ICTV reported that it intended to restate its previously-restated financial 
+statements for the fiscal year ended 2007 and the first two quarters of 2008.  In April 2010, ICTV 
+again restated its financial statements for the fiscal year ended 2007.  The restatement included an 
+additional $550,000 revenue reduction related to the premature recognition of direct sales revenue 
+prior to expiration of a free trial period. 
+4 
+
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+  
+ 
+  
+ 
+19. The chart below shows that the errors were material to ICTV’s financial statements: 
+Period Previously 
+Reported Net 
+Income 
+Restated Net 
+Income (Loss) 
+Reduction to Reported Net 
+Income 
+FY 2007 $1,475,775 ($1,081,988) ($2,557,763) 
+1Q 2008 $109,980 ($164,773) ($274,753) 
+2Q 2008 $260,298 ($862,399) ($1,122,697) 
+Applicable Revenue Recognition Principles and Guidance 
+20. The basic principles of revenue recognition under GAAP provide that revenue must 
+be realized or realizable and earned before it can be recognized.  Further, “[p]rofit is deemed to be 
+realized when a sale in the ordinary course of business is effected, unless the circumstances are 
+such that the collection of the sales price is not reasonably assured.”  Accounting Research Bulletin 
+No. 43, Restatement and Revision of Accounting Research Bulletins, Chapter 1A. SEC Staff 
+Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements (as 
+superseded, in part, by SAB No. 104, Revenue Recognition), reflects these basic principles of 
+revenue recognition and provides guidance in the application of GAAP with respect to recognizing 
+revenue.  SAB 101 sets forth four criteria to be considered when determining whether revenue has 
+been realized or realizable and earned.  Specifically, revenue generally may be recognized when 
+persuasive evidence of an arrangement exists, delivery has occurred, the seller’s price is fixed or 
+determinable, and collectibility is reasonably assured. 
+21. GAAP also provides that, when a right of return exists, revenue can be recognized 
+at the time of sale only if all of the following conditions are met:  (1) the seller’s price is 
+substantially fixed or determinable at the date of sale; (2) the buyer has paid, or the buyer is 
+obligated to pay and the obligation is not contingent on resale of the product; (3) the buyer’s 
+obligation would not be changed in the event of theft, physical destruction, or damage of the 
+product; (4) the buyer acquiring the product for resale has economic substance apart from that 
+provided by the seller; (5) the seller does not have significant obligations for future performance to 
+directly bring about resale of the product by the buyer; and (6) the amount of future returns can be 
+reasonably estimated.  Statement of Financial Accounting Standards No. 48, Revenue Recognition 
+When Right of Return Exists. 
+Respondents’ Deficient 2007 Audit 
+Background 
+22. Dohan + Co. issued the audit report filed with ICTV’s 2007 financial statements 
+and reviewed ICTV’s quarterly statements during 2007 through the second quarter of 2008. 
+23. Dohan + Co. contracted with another accounting firm to provide an audit manager 
+and senior accountant to perform the field work at ICTV.  Dohan + Co. and the other accounting 
+firm had worked together in a similar arrangement on several other engagements.  Under PCAOB 
+5 
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+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+auditing standards, the staff sharing arrangement between Dohan + Co. and the other accounting 
+firm was subject to the supervision rules and responsibilities set forth in AICPA Codification of 
+Statements on Auditing Standards (as adopted and amended by the PCAOB) (“AU”) § 311, 
+Planning and Supervision. 
+24. Dohan + Co. reviewed the other accounting firm’s working papers and satisfied 
+itself with both the quality and the amount of work performed by the other accounting firm.  
+Dohan + Co. also made the decision to adopt the other accounting firm’s working papers, with 
+little modification, and performed few additional substantive procedures. 
+25. The audit team for the 2007 ICTV audit primarily consisted of Brown, the 
+engagement partner; Dohan, the concurring partner; a Canadian Chartered Accountant employed 
+by the other accounting firm who served as the audit manager (the “Audit Manager”); and a senior 
+accountant who conducted all substantive audit procedures and field work (the “Senior 
+Accountant”).  The Senior Accountant conducted the onsite work for the audit over a two-to-three 
+day period in March 2008.  The Audit Manager’s responsibilities included planning the audit, 
+supervising the onsite work and reviewing any work performed by the Senior Accountant.  
+Brown’s responsibilities included the overall planning and supervision of the audit.  Dohan’s 
+responsibilities included providing an objective review of the audit and the financial statements 
+that were the subject of the report. 
+The Auditors’ Working Papers 
+26. On their face, the year-end 2007 audit working papers reveal that Respondents 
+knew of an agreement between ICTV and HSN that claimed to contribute to a 280% increase in 
+revenue over fiscal year-end 2006.  The revenue lead sheet stated: 
+The Company is also now using the Home Shopping Network for sales in the US market.  
+HSN buys product from the Company (DermaWand and CellRX so far) and features the 
+product on various shows.  The Company records the sales once HSN has placed the order 
+and the order has been shipped.  HSN does not pay until they have sold the products.  This 
+process sometimes takes a few months as HSN will pre-order for future shows. 
+27. A similar notation appeared on the accounts receivable lead sheet: 
+HSN buys a certain amount of product from the Company prior to showing the 
+infomercials.  The Company records the sale at this time.  HSN pays the Company once the 
+product has actually been sold. 
+28. The year-end 2007 audit working papers also documented that the HSN 
+relationship was a new and material development in ICTV’s business.  An analytical review 
+worksheet highlighted a 280% increase in ICTV’s annual sales revenue, from $3 million in 2006 to 
+$11.3 million in 2007 due to “an agreement with the Home Shopping Network during the year to 
+sell the Company’s product.”  The worksheet also reported a 414% increase to accounts receivable, 
+from $555,000 in 2006 to $2.9 million in 2007, as a result of increased sales.  The material increase 
+in ICTV’s revenue, ICTV’s new relationship with HSN, the contingent payment terms associated 
+6 
+
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+  
+with that relationship, and Respondents’ knowledge of ICTV’s deficient internal controls, among 
+other factors, required Respondents to apply heightened scrutiny to the ICTV audit. 
+Audit Failures by Dohan, Brown, and Dohan + Co. 
+29. Brown reviewed and signed off on the working papers.  Dohan, before signing off 
+on the audit, reviewed the majority of the working papers, including the revenue, accounts 
+receivable, and analytical review working papers.  Thus, Respondents each knew of certain terms 
+of ICTV’s arrangement with HSN, including that HSN did not pay ICTV until it sold the product 
+to end users. This should have alerted Respondents that ICTV’s revenue recognition practices did 
+not comply with GAAP. 
+30. Indeed, Dohan understood at the time of the audit that the sell-through of ICTV’s 
+product by HSN presented a revenue recognition issue under SAB 101, but failed to research the 
+issue at the time of his review nor direct any other member of the audit team to research the issue. 
+31. Despite knowledge of the above, Respondents unreasonably failed to properly audit 
+ICTV’s revenue recognition practices.  For example, Respondents failed to obtain a copy of the 
+applicable agreement between ICTV and HSN.  Brown knew that there was an agreement between 
+ICTV and HSN to sell ICTV’s product.  Dohan knew that ICTV’s revenue and accounts receivable 
+had increased “dramatically” in 2007 as a result of an agreement entered into with HSN.  Yet, 
+Respondents each failed to inquire as to the existence of any written agreement and failed to obtain 
+a copy of any written agreement.  Respondents’ failure to inquire about the terms of the applicable 
+ICTV agreement with HSN, to obtain a copy of the agreement, or to adequately understand the 
+nature of ICTV’s relationship with HSN was an unreasonable departure from professional 
+standards.  Because of these failures, Respondents failed to recognize that under the HSN drop-
+ship agreement, no sale occurred, and revenue should not have been recognized, until the product 
+was sold to end users. 
+32. Respondents also failed to issue audit confirmations to confirm ICTV’s accounts 
+receivable and inventory, or perform adequate alternative procedures.  Respondents knew that their 
+own audit program called for the confirmations of receivables and inventory.  Had confirmations 
+been sent and received by the auditors, Respondents could have learned that the sales and 
+inventory levels reported by ICTV were not supported. 
+33. Brown and Dohan + Co. also neglected to perform other audit procedures dictated 
+by the audit program.  For example, the audit program required the auditors to review and attend 
+physical inventory counts.  This step was marked “NA” in the working papers, indicating that it 
+was not performed.  The audit program also recommended that the auditors consider extended 
+procedures to confirm sales terms and conditions with customers; this step was marked “NA” as 
+well. Dohan knew that these procedures were not performed. 
+34. The working papers also contain a number of internal inconsistencies that should 
+have been resolved by Respondents.  For instance, although the revenue and accounts receivable 
+lead sheets described how HSN did not pay ICTV until sell-through, which sometimes took “a few 
+months,” the working papers elsewhere indicated that there were no “unusual or long payment 
+7 
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+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
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+ 
+ 
+ 
+ 
+ 
+ 
+terms” or “buyer conditions which must be met in order to complete the sale.”  In addition, the 
+revenue working papers reported that cash had been received for a $990,000 sale to HSN on 
+December 21, 2007, while the accounts receivable working papers reported the $990,000 balance 
+as still outstanding.  Respondents failed to reconcile any of these inconsistencies during their 
+review of the working papers. 
+35. Brown and Dohan + Co. also failed to properly audit ICTV’s stated revenue and 
+returns for direct consumer sales.  The working papers do not reflect that the audit team considered 
+ICTV’s revenue recognition practices for such sales in light of the 30-day free trial period extended 
+to direct sales customers.  The working papers also do not show that the auditors performed any 
+substantive testing of ICTV’s stated returns for direct sales, or that the auditors considered the 
+impact of applicable GAAP guidance on estimating future returns for such sales.  The auditors also 
+failed to reconcile an inherent inconsistency between ICTV’s stated returns and its disclosed 
+historical return rate for direct consumer sales. 
+The Auditors Issue Unqualified Audit Reports on ICTV’s 2007 Financial Statements 
+Despite Numerous Audit Failures 
+36. Despite these failures, Dohan, Brown, and the other auditors caused Dohan + Co. to 
+issue an unqualified audit report on ICTV’s 2007 financial statements, which incorrectly 
+represented that the audit had been conducted in accordance with the PCAOB’s auditing standards 
+and that ICTV’s financial statements were fairly reported in conformity with GAAP.  The audit 
+completion documents, which included a checklist and the auditors’ assessment that the audit was 
+complete, reflect that Dohan, Brown, and the other auditors were each satisfied with the work 
+performed and signed off on the release of the audit report. 
+37. Respondents also conducted the audit and review work on ICTV’s restatement for 
+the fiscal year ended 2007 and the first two quarters of 2008.  In March 2009, Dohan + Co. issued 
+an unqualified audit report on ICTV’s restated 2007 financial statements.  The restatement working 
+papers indicate that Dohan, Brown, and the other auditors each reviewed the restated financial 
+statements and signed off on the release of the audit report. 
+38. In September 2009, ICTV retained new auditors.  The new auditors found 
+additional revenue recognition errors and brought them to ICTV’s attention.  Based upon this 
+information, ICTV concluded that the restated 2007 financial statements needed to be restated.  
+This additional restatement further calls into question Dohan + Co.’s competence under applicable 
+PCAOB standards. 
+Respondents’ Improper Professional Conduct 
+39. The “applicable professional standards” for accountants practicing before the 
+Commission include the PCAOB auditing standards. 
+40. PCAOB auditing standards require that the auditor be proficient in accounting 
+matters and that the “auditor with final responsibility for the engagement should know, at a 
+minimum, the relevant professional accounting and auditing standards and should be 
+8 
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+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+knowledgeable about the client.”  AU § 230.06, Due Professional Care in the Performance of 
+Work; see also AU § 210, Training and Proficiency of the Auditor. AU Section 230 also requires 
+an auditor to exercise due professional care and professional skepticism, which includes 
+demonstrating a questioning mind and a critical assessment of audit evidence. 
+41. PCAOB auditing standards require that “competent evidential matter . . . be 
+obtained through inspection, observation, inquiries, and confirmations to afford a reasonable basis 
+for an opinion regarding the financial statements under audit.”  AU § 326.01, Evidential Matter. 
+This “includes both written and electronic information such as . . . contracts.”  AU § 326.17. The 
+auditor is also to send out audit confirmations.  AU § 330, The Confirmation Process. 
+42. Auditors must adequately plan, staff, and supervise the audit.  See AU §§ 150.02, 
+Generally Accepted Auditing Standards; 210.01; 230.06; 311.01 et seq., Planning and Supervision; 
+311.11 et seq.  This includes “obtain[ing] a level of knowledge of the entity’s business that will 
+enable” the auditor to understand transactions and practices that may have a significant effect on 
+the financial statements.  AU § 311.06. 
+43. Further, AU § 316, Consideration of Fraud in a Financial Statement Audit, requires 
+the auditor to assess the risks of material misstatement due to fraud and to presume that revenue 
+recognition is a fraud risk. 
+44. The Audit Manager was responsible for supervising and reviewing documentation 
+of field work performed.  As the engagement partner, Brown had overall responsibility for the 
+engagement to ensure that Dohan + Co.’s audit of ICTV’s 2007 financial statements was 
+conducted in accordance with PCAOB auditing standards, including planning and supervising the 
+audit and the review of field work.  Dohan, as the concurring partner, knew that his role was to 
+“give a fresh, clean look at a job, to provide a fresh set of eyes on the engagement, and to assist 
+where necessary in making sure the engagement goes out to the best of the firm’s ability.” 
+45. Indeed, Dohan and Brown were already on notice that the PCAOB had identified 
+material audit deficiencies with respect to many of the auditing standards discussed above, per an 
+inspection of Dohan + Co. by the PCAOB prior to Respondents’ 2007 ICTV audit.  As a result of 
+that inspection, Dohan and Brown learned that the PCAOB found a number of deficiencies 
+regarding the firm’s audits of other clients, including the failure to adequately test revenue and to 
+obtain sufficient evidential matter, as well as deficiencies in Dohan + Co.’s quality control 
+procedures, including concurring partner reviews. 
+46. During the 2007 ICTV audit, Respondents unreasonably departed from the PCAOB 
+auditing standards in numerous instances, including in the manner further described below. 
+47. Respondents failed to demonstrate the required level of proficiency.  Brown was 
+not aware of applicable GAAP guidance that prohibits revenue recognition if payment of the 
+related sales receivable was dependent upon sell-through by the customer. Although Dohan was 
+aware of some of the applicable GAAP guidance, and knew that ICTV’s revenue recognition 
+practices potentially violated GAAP, he failed to conduct additional research or direct another 
+member of the audit team to follow up. 
+9 
+
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+48. Respondents failed to obtain sufficient evidential matter.  Respondents failed to 
+understand, or obtain a copy of, ICTV’s written contract with HSN, despite the fact that each knew 
+that ICTV had an “agreement” or “business arrangement” with HSN to sell ICTV’s product.  In 
+addition, Brown and Dohan each reviewed the working papers that expressly stated that ICTV’s 
+revenue had materially increased in 2007 due to an “agreement” with HSN. 
+49. Respondents failed to exercise due professional care and skepticism in the face of 
+numerous red flags and inconsistencies.  Respondents never asked ICTV for a copy of any HSN 
+agreement or documentation of the terms of the agreement.  Brown and Dohan + Co. ignored or 
+disregarded specific audit program steps regarding, among others, long payment terms, buyer 
+conditions in the sale of product, the confirmation of significant accounts receivable, and the 
+observation of physical inventory counts.  Dohan, during his review, either agreed that such 
+procedures were not necessary or failed to identify his fellow auditors’ disregard for these auditing 
+steps. Respondents also failed to reconcile numerous inconsistencies during their review of the 
+working papers. 
+50. Respondents failed to send out accounts receivable confirmations as required by the 
+audit program or to ensure adequate alternative procedures.  Further, Brown and Dohan + Co. 
+knew that the audit program also recommended that the auditors send out sales terms and 
+conditions and inventory confirmations but elected not to do so.  Dohan supported these decisions 
+despite his belief that ICTV’s revenue recognition practice with respect to HSN presented an issue 
+under SAB 101 and with the knowledge that the audit program recommended these confirmations 
+be sent. 
+51. Respondents failed to adequately plan, staff and supervise the audit.  Brown never 
+visited ICTV or the office of the other accounting firm, and relied upon the Audit Manager to 
+manage all of the field work.  Dohan failed to ensure that Brown and the Audit Manager were 
+adequately proficient to conduct the audit. 
+52. Brown and Dohan + Co. failed to sufficiently understand ICTV’s business to enable 
+it to understand transactions that had a significant effect on ICTV’s financial statements.  Brown 
+and Dohan + Co. failed to identify the impact of ICTV’s 30-day free trial period, or applicable 
+GAAP standards prohibiting revenue recognition prior to customer acceptance where a trial or 
+evaluation period exists.  The working papers also do not reflect that Brown or Dohan + Co. 
+performed any substantive testing of ICTV’s stated returns for direct sales, or that they considered 
+the impact of applicable GAAP guidance on estimating future returns for such sales.  The auditors 
+also failed to reconcile an inherent inconsistency between ICTV’s stated returns and its disclosed 
+historical return rate for direct consumer sales. 
+53. Finally, Respondents also failed to consider other Standards of Field Work 
+contained in AU Section 300, including AU Section 316, Consideration of Fraud in a Financial 
+Statement Audit; AU Section 329, Analytical Procedures; and AU Section 331, Inventories. 
+10 
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+ 
+  
+ 
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+ 
+ 
+ 
+ 
+ 
+ 
+E.	 VIOLATIONS 
+54. Rule 102(e)(1)(ii) of the Commission’s Rules of Practice and Section 4C of the 
+Exchange Act authorize the Commission to censure or deny, temporarily or permanently, the 
+privilege of appearing or practicing before the Commission to accountants who are found to have 
+engaged in improper professional conduct.  Under 102(e)(1)(iv), the term “improper professional 
+conduct” includes “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.” 
+55. Dohan + Co.’s, Dohan’s and Brown’s actions during the engagements were 
+unreasonable, failed to conform to applicable professional standards and indicate a lack of 
+competence to practice before the Commission.  Dohan and Brown failed to (i) obtain sufficient 
+evidential matter regarding ICTV’s relationship with HSN; (ii) demonstrate the required level of 
+proficiency, particularly with respect to applicable GAAP guidance that prohibited ICTV’s 
+revenue recognition practices; (iii) exercise due professional care and professional skepticism in 
+performing the audit of ICTV; (iv) issue accounts receivable confirmations or to ensure adequate 
+alternative procedures; and (v) adequately plan the audit and properly supervise the audit personnel 
+in connection with the 2007 engagement.  Dohan + Co. issued an unqualified audit report for 
+ICTV’s Form 10-K/SB stating that it had conducted its audit in accordance with PCAOB standards 
+and that ICTV’s financial statements were fairly reported in conformity with GAAP.  Dohan + 
+Co.’s audit, however, was not conducted in accordance with PCAOB standards, in part due to 
+Dohan’s and Brown’s failures described above. 
+F.	 FINDINGS 
+56. As a result of the conduct described above, the Commission finds that Respondents 
+Dohan + Co., Dohan, and Brown engaged in improper professional conduct pursuant to Rules 
+102(e)(1)(ii) and 102(e)(1)(iv)(B)(2) of the Commission’s Rules of Practice and Section 4C of the 
+Exchange Act. 
+G. 	 UNDERTAKINGS 
+Dohan + Co. undertakes the following: 
+1. 	 Acceptance of New Public Company Audit Clients. The goal of this undertaking is 
+to provide adequate time for Dohan + Co. to implement the undertakings 
+concerning the auditing and quality control matters described below and implement 
+such other adjustments to its audit practice required by the suspensions of Dohan 
+and Brown from appearing or practicing before the Commission.  Dohan + Co. 
+undertakes that, following the issuance of the Order, it will not accept new 
+engagements for public company audits prior to the later of 12 months from the 
+date of entry of the Order, or the date that an independent consultant certifies in 
+writing that the undertakings discussed herein have been completed to the 
+satisfaction of the Independent Consultant, as described in paragraph 4(b), below.  
+A public company audit is defined as an engagement to audit the financial 
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+                                                
+ 
+   
+ 
+ 
+ 
+statements of an “issuer” as that term is defined in Section 3(a)(8) of the Exchange 
+Act. 
+2. 	 Auditing Matters. The goal of this undertaking is to require Dohan + Co. to engage 
+in an internal review of its existing policies and procedures concerning compliance 
+with the relevant professional, regulatory and firm requirements with respect to 
+public company audit engagements.  Within 12 months from the date of entry of the 
+Order, Dohan + Co. shall adopt and implement policies and procedures, including 
+but not limited to Quality Control Policy and Procedures, to provide Dohan + Co. 
+with a reasonable assurance, for its audit and review engagements, that the firm and 
+its personnel comply with professional auditing standards and applicable regulatory 
+and legal requirements, and that the firm or engagement partners issue reports that 
+are appropriate in the circumstances.  The elements of quality control are identified 
+in the PCAOB’s Interim Standard, System of Quality Control for a CPA Firm’s 
+Accounting and Auditing Practice (“QC 20”).  The Principals/Partners of Dohan + 
+Co. should have a working knowledge of Dohan + Co.’s procedures and how they 
+meet the requirements of QC 20. 
+3. 	 Professional Development. The goal of this undertaking is to require Dohan + Co. 
+auditing personnel to participate in professional development activities in subjects 
+that are relevant to their responsibilities and will contribute to their technical 
+training and proficiency as an auditor.  Dohan + Co. undertakes to require all of its 
+professional accounting and auditing personnel, to undergo training as follows: 
+(a) A minimum of 40 hours of continuing professional education (“CPE”) in the 
+following areas of generally accepted accounting principles set forth in FASB 
+Accounting Standard Codifications: (i) Topic 205:  Presentation of Financial 
+Statements; (ii) Topic 330: Inventory; (iii) Topic 450: Contingencies; and (iv) 
+Topic 605: Revenue Recognition (at leas t 16 hours on this Topic).  The CPE 
+must meet the requirements of the Florida State Board of Accountancy. 
+(b) A minimum of 40 hours of CPE in the following PCAOB topics and auditing 
+standards
+3: (i) Audit Confirmations; (ii) Cons ideration of Fraud in a Financial 
+Statement Audit; (iii) Audit Planning; (iv) Audit Evidence; (v) Inventories; 
+(vi) Training and Proficiency of the Independent Auditor; (vii) Planning and 
+Supervision; (viii) Due Professional Care in the Performance of Work and (ix) 
+3 PCAOB auditing standards consist of recent auditing standards adopted by the PCAOB and approved by the 
+Commission (“AS”), as well as preexisting AICPA auditing standards adopted as interim standards by the PCAOB 
+in April 2003 (“AU”). 
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+                                                 
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+ 
+Supervision of an Audit.4  The CPE must meet the requirements of the Florida 
+State Board of Accountancy. 
+(c) A minimum of 40 hours of independent self-study (need not be a formal 
+review course) in the following areas of accounting and auditing standards, 
+including interpretative guidance by the Commission staff:  (i) Staff 
+Accounting Bulletin No. 99: Materiality;  (ii) Staff Accounting Bulletin Nos. 
+101: Revenue Recognition in Financial Statements, and 104: Revision of 
+Topic 13; (iii) Staff Accounting Bulletin No. 108:  Considering the Effects of 
+Prior Year Misstatements When Quantifying Misstatements in Current Year 
+Financial Statements; (iv) FASB Accounting Standard Codification Topic 
+605-15-25: Sale of Product when Right of Return Exists; (v) AU 150:  
+Generally Accepted Auditing Standards; (vi) AU 550:  Other Information in 
+Documents Containing Audited Financial Statements; and (vii) AS No. 7:  
+Engagement Quality Review. 
+4. 	 Independent Consultant. Dohan + Co. shall retain an Independent Consultant 
+acceptable to the Commission staff, to work with Dohan + Co. to assure the 
+Commission staff that Dohan + Co. has satisfactorily implemented the undertakings 
+expressed herein and that after such undertakings it is reasonable to expect that the 
+violations found have been remedied and that Dohan + Co.’s future audits should 
+result in compliance with the relevant professional, regulatory and firm 
+requirements with respect to public company audit engagements.  The Independent 
+Consultant shall report to the Commission staff as follows: 
+(a) 	 The Independent Consultant shall report to the Commission staff in 
+writing six months and 12 months from the date work has begun as to the 
+findings of the Independent Consultant’s review and Dohan + Co.’s efforts 
+at correcting the violations. 
+(b) 	 The suspension from accepting new audit engagements for public 
+company clients, as described in paragraph 1, above, shall continue until 
+the Independent Consultant has certified in writing that the undertakings 
+discussed herein have been completed to the satisfaction of the 
+Independent Consultant. 
+(c) 	 The Independent Consultant will review a sampling of Dohan + Co.’s 
+audits of SEC registrants after the 12-month suspension discussed in 
+paragraph 1, above, has elapsed and after Dohan + Co. has resumed 
+4 PCAOB guidance on many of the auditing standards listed herein are in transition.  Certain existing standards are 
+expected to be amended or superseded.  Specifically, the PCAOB has recently adopted AS No. 8 through AS No. 15 
+(Eight New Risk Assessment Standards), which have been submitted to the Commission for approval (see Securities 
+and Exchange Commission Release No. 34-62919).  The standards, if approved, will become effective for audits of 
+fiscal periods beginning on or after December 15, 2010.  The CPE completed pursuant to these undertakings should 
+focus on the requirements of the new standards, including changes made to existing standards if approved. 
+13 
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+ 
+auditing SEC registrants, for a 12-month period.  The Independent 
+Consultant and Dohan + Co. shall certify that they each have no reason to 
+believe that Dohan + Co.’s audits do not conform with the relevant 
+professional, regulatory and firm requirements with respect to public 
+company audit engagements in all material matters. 
+All reports and certifications shall be submitted to Tracy Davis, Assistant Regional 
+Director, San Francisco Regional Office or her successor, with copies to the Office 
+of Chief Counsel of the Enforcement Division and to the PCAOB, Director of 
+Registration and Inspection. 
+5. 	 Independent Consultant Independence. Dohan + Co. will require the Independent 
+Consultant to enter into an agreement 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 Dohan + Co., 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 the Order shall not, without prior written consent of the San 
+Francisco Regional Office, enter into any employment, consultant, attorney-client, 
+auditing or other professional relationship with Dohan + Co., 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. 	 Joint Audit Arrangements. Dohan + Co. agrees to cease permanently all joint audit 
+arrangements with other auditors in which Dohan + Co. serves as the principal 
+auditor in connection with audits of SEC registrants, other than joint arrangements 
+required by foreign jurisdictions. 
+7. 	 Certification of Compliance. Dohan + Co. will certify, in writing, compliance with 
+the undertakings set forth above.  The certification shall identify the undertakings, 
+provide written evidence of compliance in the form of a narrative, and be supported 
+by exhibits sufficient to demonstrate compliance.  The Commission staff may make 
+reasonable requests for further evidence of compliance, and Dohan + Co. agrees to 
+provide such evidence. The certification and supporting material shall be submitted 
+to Tracy Davis, Assistant Regional Director, San Francisco Regional Office or her 
+successor, with a copy to the Office of Chief Counsel of the Enforcement Division, 
+no later than sixty (60) days from the date of the completion of the undertakings. 
+14 
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+ 
+   
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+  
+III. 
+In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondents’ Offers. 
+Accordingly, it is hereby ORDERED, effective immediately, that: 
+Dohan + Co. 
+A. Dohan + Co. is hereby censured pursuant to Rule 102(e)(1)(ii) and 
+102(e)(1)(iv)(B)(2) of the Commission’s Rules of Practice and Section 4C of the Exchange Act. 
+Dohan 
+B. Dohan is denied the privilege of appearing or practicing before the Commission as 
+an accountant. 
+C. After three years from the date of this order, Dohan 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 Dohan’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) Dohan, 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) Dohan, 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) Dohan 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) Dohan acknowledges his responsibility, as long as Dohan appears 
+or practices before the Commission as an independent accountant, to comply with all 
+15 
+
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+   
+ 
+ 
+ 
+ 
+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. 
+D. The Commission will consider an application by Dohan 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 Dohan’s character, 
+integrity, professional conduct, or qualifications to appear or practice before the Commission. 
+E. As a condition for reinstatement, Dohan shall have completed the professional 
+training as described in Section III(G)(3), above. 
+Brown 
+F. Brown is denied the privilege of appearing or practicing before the Commission as 
+an accountant. 
+G. After three years from the date of this order, Brown 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 Brown’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) Brown, 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) Brown, 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) Brown 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 
+16 
+
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ (d) Brown acknowledges her responsibility, as long as Brown 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. 
+H. The Commission will consider an application by Brown 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 Brown’s character, integrity, 
+professional conduct, or qualifications to appear or practice before the Commission. 
+I. As a condition for reinstatement, Brown shall have completed the professional 
+training as described in Section III(G)(3), above. 
+ By the Commission.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+17 
+
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+  
+ 
+ 
+    
+    
+ 
+ 
+ 
+ 
+   
+ 
+ 
+ 
+ 
+ 
+Service List 
+Rule 141 of the Commission's Rules of Practice provides that the Secretary, or 
+another duly authorized officer of the Commission, shall serve a copy of the Order Making 
+Findings and Imposing Remedial Sanctions Pursuant to Section 4C of the Securities 
+Exchange Act of 1934 and Rule 102(e) of the Commission’s Rules of Practice as to 
+Dohan + Company CPAs, Steven H. Dohan, CPA, and Nancy L. Brown, CPA (“Order”), on 
+the Respondents and their legal agents. 
+The attached Order has been sent to the following parties and other persons entitled 
+to notice: 
+Honorable Carol Fox Foelak 
+Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Lloyd Farnham, Esq. 
+John Yun, Esq. 
+Jason Habermeyer, Esq. 
+San Francisco Regional Office 
+Securities and Exchange Commission 
+44 Montgomery Street, Suite 2600 
+San Francisco, CA 94104 
+Dohan + Company CPAs 
+c/o Michael Tarre, Esq. 
+Two South Biscayne Boulevard, Suite 3700 
+Miami, FL 33131 
+Mr. Steven H. Dohan 
+c/o Michael Tarre, Esq. 
+Two South Biscayne Boulevard, Suite 3700 
+Miami, FL 33131 
+Ms. Nancy L. Brown 
+c/o Susan E. Trench, Esq. 
+Goldstein, Tanen & Trench, P.A. 
+One Biscayne Tower, Suite 3700 
+Two South Biscayne Boulevard 
+Miami, FL 33131 
+18 
+
+  
+ 
+ 
+ 
+ 
+ 
+ 
+Michael Tarre, Esq. 
+Two South Biscayne Boulevard, Suite 3700 
+Miami, FL 
+(Counsel for Dohan + Company CPAs and Steven H. Dohan)
+ 
+33131 
+Susan E. Trench, Esq. 
+Goldstein, Tanen & Trench, P.A. 
+One Biscayne Tower, Suite 3700 
+Two South Biscayne Boulevard 
+(Counsel for Nancy L. Brown)
+ 
+Miami, FL 33131 
+19 
diff --git a/raw/aaer/2011/AAER-3233.pdf b/raw/aaer/2011/AAER-3233.pdf
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+1 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 63743 / January 20, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3233 / January 20, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14201
+      
+ 
+      :  
+ :  
+ :   
+In the Matter of : ORDER INSTITUTING 
+ : ADMINISTRATIVE 
+      : PROCEEDINGS PURSUANT TO RULE 
+  ERIC J. BUR, CPA,   : 102( e) OF THE COMMISSION’S RULES  
+      : OF PRACTICE, MAKING FINDINGS,  
+  Respondent.   : 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 Eric J. 
+Bur (“Respondent” or “Bur”) 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 Responde nt’s Offer, the Commission finds that:  
+ 
+ 1. Bur, age 49, was licensed to practice as a CPA in No rth Carolina starting in 
+1987, until that license was forfeited in 1988.  He was also licensed to practice as a CPA in Missouri 
+starting in 1988, and in Kansas starting in 1994, but these licenses lapsed.  Bur’s certificate status in 
+Kansas is currently active.  He served as Chief Financial Officer (“CFO”) of NIC Inc. (“NIC”) from 
+April 2001, until June 2007.  Bur also was a member of NIC’s disclosure committee. 
+ 
+ 2. NIC, Inc. was, at all relevant times, a Colorado corporation with its 
+principal place of business in Kansas.  NIC was engaged in the business of developing and 
+managing web sites, online services, and secure payment processing systems for state, local, and 
+federal government agencies.  At all relevant times, NIC’s common stock was registered under 
+Section 12(g) of the Securities Exchange Act of 1934 (“Exchange Act”), and traded on the 
+NASDAQ Global Select Market. 
+ 
+ 3. On January 12, 2011, the Commission  filed a complaint against Bur in 
+Securities and Exchange Commission v. NIC Inc., et al.
+, Civil No. 2:11-cv-02016 (EFM-JPO) (D. 
+Kansas). On January 18, 2011, the court entered a final judgment permanently enjoining Bur, by 
+consent, from future violations of Exchange Act Rules 13a-14 and 13b2-1, and aiding and abetting 
+violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and Rules 
+12b-20, 13a-1, 14a-3, and 14a-9 thereunder.  Bur was also ordered to pay a $75,000 civil money 
+penalty. 
+ 
+  4. The Commission’s Co mplaint alleged, among other things, that NIC’s 
+former CEO (the “CEO”) received more than $1.18 million in undisclosed perquisites from at least 
+2002 to 2007.  The Complaint alleged that Bur, NIC’s CFO and a member of NIC’s disclosure 
+committee, had responsibility, along with NIC’s Chief Accounting Officer, for NIC’s internal 
+controls, books and records, and executive compensation disclosures in public filings.  The 
+Complaint alleged that Bur was informed that the CEO was not submitting documentation 
+supporting a business purpose for his expenses as required by NIC’s policies.  The Complaint 
+alleged that a subordinate raised concerns to Bur that some of the CEO’s expenses were not 
+ 3
+business related.  The Complaint alleged that Bur permitted NIC to pay the CEO’s expenses, which 
+caused NIC’s books, records and accounts to falsely characterize the CEO’s perquisites as business 
+expenses.  In addition, the Complaint alleged that Bur was aware of the Commission’s rules 
+requiring the disclosure of perquisites in proxy statements and annual reports, yet he reviewed, 
+signed, and/or certified NIC’s filings with the Commission for 2002 through 2006, which failed to 
+disclose the CEO’s perquisites and contained false statements concerning the CEO’s 
+compensation.   
+ 
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanction agreed to in Respondent Bur’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately, that: 
+ 
+ A. Bur is suspended from appearing 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 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 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 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 as an independent accountant provided that 
+his state CPA license is current and he has resolved all other disciplinary issues with the 
+applicable state boards of accountancy.  The Commission will consider an application by 
+Respondent to resume appearing or practicing before the Commission as 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 provided that his state CPA license 
+or certificate 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. 
+ 
+ 
+ 
+       E l i z a b e t h  M .  M u r p h y  
+       S e c r e t a r y  
+ 5
+Service List 
+ 
+ Rule 141 of the Commission's Ru les of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the Order Instituting Administrative 
+Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and 
+Imposing Remedial Sanctions ("Order"), on the Respondent and his legal agent. 
+ 
+ The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+ 
+Honorable Brenda P. Murray    
+Chief Administrative Law Judge   
+Securities and Exchange Commission  
+100 F Street, N.E. 
+Washington, DC 20549-2557    
+ 
+Lisa Weinstein Deitch, Esq.     
+Securities and Exchange Commission  
+100 F Street, N.E. 
+Washington, DC 20549-5720    
+      
+Eric J. Bur    
+c/o Eugene I. Goldman, Esq. 
+McDermott Will & Emery 
+600 13th Street, N.W. 
+Washington, DC 20005-3096 
+ 
+Eugene I. Goldman, Esq. 
+McDermott Will & Emery 
+600 13th Street, N.W. 
+Washington, DC 20005-3096 
+(Counsel for Eric J. Bur) 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3234.txt b/raw/aaer/2011/AAER-3234.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9b8b43c7def00b03cd115b80e0081c91b87ee336
--- /dev/null
+++ b/raw/aaer/2011/AAER-3234.txt
@@ -0,0 +1,1405 @@
+
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+                   U.S. Securities and Exchange Commission 
+ 
+ Litigation Release No. 21819 / January 20, 2011 
+ 
+ Accounting and Auditing Release No. 3234 / January 20, 2011 
+ 
+  Securities and Exchange Commission v. NutraCea, et al. , United States District Court, District of Arizona, Civil Action No. CV 11-0092-PHX-DGC 
+ 
+ SEC CHARGES ARIZONA-BASED HEALTH FOOD COMPANY AND FORMER EXECUTIVES WITH ACCOUNTING FRAUD 
+ 
+ On January 13, 2011, the Securities and Exchange Commission charged NutraCea, three former executives, and two former accounting personnel for engaging in a fraudulent accounting scheme to inflate NutraCea's product sales revenues. 
+
+ The SEC alleges that NutraCea overstated its sales revenues for the second and third quarters of its fiscal year 2007 and fiscal year 2007 by booking false sales and engaging in improper revenue recognition practices. Through misstated financial statements, NutraCea disguised its true operating results in the second and third quarter of 2007 and fiscal year 2007. 
+
+ The SEC charged NutraCea's former chief executive officer, Bradley D. Edson, former chief financial officer, Todd C. Crow, and former senior vice president and secretary, Margie Adelman, for their roles in the fraudulent accounting scheme. The SEC also charged former controller, Joanne D. Kline, and former director of financial services, Scott Wilkinson, for their roles in the improper accounting. 
+
+ NutraCea, an Arizona-based company that manufactures and sells health food products, agreed to settle the SEC's charges. Edson agreed to pay a $100,000 penalty, reimburse NutraCea $350,000 in bonuses he received in 2008, and agreed to a permanent officer and director bar to settle the SEC's charges against him. Adelman, Kline, and Wilkinson also agreed to settle the SEC's charges.  
+
+ The SEC's complaint, filed in federal district court in Arizona, alleges that NutraCea, Edson, Crow, and Adelman falsified NutraCea's sales revenues in 2007, and Kline and Wilkinson engaged in improper accounting by recording these false revenues. NutraCea booked $2.6 million in false sales to Bi-Coastal Pharmaceutical Corp. in the second quarter of 2007, resulting in overstated product sales revenue of as much as 35% in the second quarter of 2007.  
+
+ According to the SEC's complaint, Edson instructed Bi-Coastal's president to falsify his family's financial statements to reflect a higher net worth in order to support the false sales to Bi-Coastal. In reality, Bi-Coastal's "down payment" for the $2.6 million sale came from NutraCea's former COO. When Kline tried to discuss with Crow in 2007 her discovery that the $1 million deposit for the Bi-Coastal sale came from a loan from the former COO to Bi-Coastal in order to justify NutraCea's recognition of revenue from this sale, she says that Crow "covered his ears and said, 'No, no, no, no, no, no, no, no, no. I don't want to hear it.'" 
+
+ The complaint also alleges that NutraCea improperly recorded revenue on a bill and hold transaction related to a $1.9 million sale of product to ITV Global, Inc. in the fourth quarter of 2007. As a result of the Bi-Coastal and ITV Global transactions alone, NutraCea overstated its product sales revenue by 36.8% for fiscal year end 2007. These false revenues caused NutraCea to misstate its operating loss by over 89% in the second quarter 2007, over 17.6% in the third quarter 2007, and nearly 7% in fiscal year 2007. 
+
+ Without admitting or denying the SEC's allegations, NutraCea, Edson, Adelman, Kline, and Wilkinson agreed to settle this matter on the following terms: 
+
+   NutraCea consented to the entry of an order that permanently enjoins it from future violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder.   
+
+    Edson consented to a final judgment permanently enjoining him from future violations of Section 17(a) of the 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 for 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. Edson also agreed to a permanent officer and director bar, to pay a civil penalty of $100,000, and to reimburse NutraCea, pursuant to the Sarbanes Oxley Act of 2002, the $350,000 in bonuses he received in 2008.   
+
+    Adelman consented to a final judgment permanently enjoining her 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 for 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. Adelman further consented to a five year officer and director bar.  
+
+    Kline and Wilkinson both consented to final judgments permanently enjoining them from future violations of Section 13(b)(5) of the Exchange Act, and Rules 13b2-1 and 13b2-2 thereunder, and for 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. Kline and Wilkinson also agreed to each pay a civil penalty of $25,000. Kline and Wilkinson further consented to the issuance of administrative orders pursuant to Rule 102(e) of the Commission's Rules of Practice, suspending each of them from appearing or practicing before the Commission as an accountant with the right to apply for reinstatement after one year.  
+  These settlements are subject to the approval of the U.S. District Court of Arizona. 
+
+ The complaint against Crow alleges that he violated and aided and abetted violations of the antifraud, books and records, financial reporting, internal controls, and lying to auditors provisions of the federal securities laws. The complaint also alleges that Crow violated Exchange Act Rule 13a-14 by signing certifications required by Section 302 of the Sarbanes Oxley Act that were false and misleading. The SEC's complaint against Crow seeks a permanent injunction, a civil penalty, and an officer and director bar. The case against Crow is ongoing. 
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diff --git a/raw/aaer/2011/AAER-3235.txt b/raw/aaer/2011/AAER-3235.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7329d2ba094171ebd8f65eeed7eb76d67c765777
--- /dev/null
+++ b/raw/aaer/2011/AAER-3235.txt
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+
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+                   U.S. Securities and Exchange Commission 
+ 
+ Litigation Release No. 21822 / January 24, 2011 
+ 
+ Accounting and Auditing Release No. 3235 / January 24, 2011 
+ 
+  Securities & Exchange Commission v. Paul W. Jennings , 1:11-CV-00144 (D.D.C.) (RMC) 
+ 
+ SEC FILES SETTLED BRIBERY CHARGES AGAINST PAUL W. JENNINGS 
+ 
+ The Securities and Exchange Commission filed a settled enforcement action on January 24, 2011, in the U.S. District Court for the District of Columbia, charging Paul W. Jennings, a former officer at Innospec, Inc., with violating the Foreign Corrupt Practices Act (FCPA) by approving bribes to government officials to obtain and retain business. 
+
+ The SEC's complaint alleges that: 
+
+ Innospec engaged in widespread bribery of foreign officials, some of which occurred and was approved by Jennings beginning in mid to late 2004 during his tenure as Chief Financial Officer ("CFO") and continuing after he became Chief Executive Officer ("CEO") in 2005. 
+
+ From 2000 to 2008, Innospec, a manufacturer and distributor of fuel additives and other specialty chemicals, routinely paid bribes to government officials in order to sell TEL, a fuel additive, which boosts the octane value of gasoline, to government owned refineries and oil companies in Iraq and Indonesia. Innospec's known bribery activities in Iraq began with its participation in the United Nations Oil for Food Program in 2001, and extended all the way until at least 2008. Innospec also paid bribes to government officials in Indonesia beginning as early as 2000, and continued until 2005, when Indonesia's need for TEL ended. Beginning in mid to late 2004, Jennings, who held various senior roles at Innospec, actively participated in the bribery schemes in Iraq and Indonesia. In all, between 2000 and 2008, Innospec made illicit payments of approximately $6.3 million and promised an additional $2.8 million in illicit payments to Iraqi ministries and government officials as well as Indonesian government officials in exchange for contracts worth approximately $176 million.	 
+
+ Jennings joined Innospec as the CFO in November 2002. Jennings learned of the longstanding practice of paying bribes to obtain TEL orders in mid to late 2004. In 2004, Jennings assumed the role of head of the TEL unit in addition to his role as CFO. In 2005, Jennings became the interim CEO and became the permanent CEO and President of Innospec in June 2005. Beginning in 2005, Jennings, along with other members of Innospec's management, approved bribery payments to officials at the Iraqi Ministry of Oil ("MoO") in order to sell TEL to Iraq. Innospec used its agent in Iraq to funnel payments to Iraqi officials. Innospec made payments totaling approximately $1,610,327 and promised an additional $884,480 to MoO officials. For example, in an October 2005 e-mail copying Jennings, the agent said that Iraqi officials were demanding a 2% kickback and that "[w]e are sharing most of our profits with Iraqi officials. Otherwise, our business will stop and we will lose the market. We have to change our strategy and do more compensation to get the rewards." The kickback and later payments were paid by increasing the agent's commission, which Jennings approved. Jennings was aware of the scheme to pay an official at the Trade Bank of Iraq in exchange for a favorable exchange rate on letters of credit. Another scheme involved a bribe to ensure the failure of a field test of a competitor product. A confidential MoO report for the field trial test was shared with Jennings who was generally aware of the bribery. Bribes were also offered to secure a 2008 Long Term Purchase Agreement that would have caused approximately $850,000 to be shared with Iraqi officials. The agreement,however, did not go forward due to the investigation and ultimate discovery of widespread bribery by United States regulators. 
+
+ Innospec also paid bribes to Indonesian government officials from at least 2000 through 2005 in order to win contracts worth approximately $48,571,937 from state owned oil and gas companies in Indonesia. Jennings became aware of and approved payments beginning in mid to late 2004. Various euphemisms to refer to bribery were commonly used in e-mails and in discussions with Jennings and others at Innospec, including "the Indonesian Way," "the Lead Defense Fund," and "TEL optimization." Bribery discussions were held on a flight in the U.S. and even discussed at Jennings' performance review in 2005. In one bribery scheme with Pertamina, an Indonesian state owned oil and gas company, Innospec agreed, with approval by Jennings, to a "one off payment" of $300,000 to their Indonesian Agent with the understanding that it would be passed on to an Indonesian official. 
+
+ From 2004 to February 2009, Jennings signed annual certifications that were provided to auditors where he falsely stated that he had complied with Innospec's Code of Ethics incorporating the Company's Foreign Corrupt Practices Act policy. Jennings also signed annual and quarterly personal certifications pursuant to the Sarbanes-Oxley Act of 2002 in which he made false certifications concerning the company's books and records and internal controls. 
+
+ Without admitting or denying the SEC's allegations, Jennings has consented to the entry of a final judgment that permanently enjoins him from violating Sections 30A and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 13a-14, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting Innospec's violations of Exchange Act Sections 30A, 13(b)(2)(A) and13(b)(2)(B). Jennings will disgorge $116,092 plus prejudgment interest of $12,945, and pay a civil penalty of $100,000 that takes into consideration Jennings' cooperation in this matter. 
+
+ The SEC appreciates the assistance of the U.S. Department of Justice, Fraud Section, the Federal Bureau of Investigation, and the United Kingdom Serious Fraud Office in this matter. 
+
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diff --git a/raw/aaer/2011/AAER-3236.txt b/raw/aaer/2011/AAER-3236.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a5ae1f465d536ad22ad43efa97aebb1683aeff5b
--- /dev/null
+++ b/raw/aaer/2011/AAER-3236.txt
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+              Maxwell Technologies Inc.
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+                   U.S. Securities and Exchange Commission 
+ 
+ Litigation Release No. 21832 / January 31, 2011 
+ 
+ Accounting and Auditing Enforcement Release No. 3236 / January 31, 2011 
+ 
+  U.S. Securities and Exchange Commission v. Maxwell Technologies Inc. , Civil Action No. 1:11-CV-00258 (DDC) (BAH) 
+ 
+ SEC CHARGES MAXWELL TECHNOLOGIES INC. FOR BRIBERY SCHEME IN CHINA â€" MAXWELL TO PAY OVER $6.3 MILLION IN DISGORGEMENT AND INTEREST 
+ 
+ The Securities and Exchange Commission announced today that it filed a settled civil action against Maxwell Technologies Inc. (Maxwell) in the U.S. District Court for the District of Columbia, charging the company with violations of the Foreign Corrupt Practices Act (FCPA) for repeatedly paying bribes to government officials in China to obtain business from several Chinese state-owned entities. 
+
+ The SEC alleges that a Maxwell subsidiary paid over $2.5 million in bribes from 2002 through May 2009 for contracts that generated more than $15 million in revenues for Maxwell, a Delaware corporation headquartered in San Diego that manufactures energy storage and power delivery products. Maxwell has agreed to pay more than $6.3 million to settle the SEC's charges. 
+
+ The complaint alleges that from 2002 through May 2009, Maxwell, through its wholly-owned Swiss subsidiary, Maxwell Technologies SA (Maxwell SA), paid over $2.5 million in bribes to officials at several Chinese state-owned entities through a third-party sales agent. The bribes, which were classified in invoices as either "Extra Amount" or "Special Arrangement" fees, were made to improperly influence decisions by foreign officials to assist Maxwell in obtaining and retaining sales contracts for high voltage capacitors produced by Maxwell SA. According to the complaint, a Maxwell SA executive approved sales contracts with the Chinese state-owned entities knowing that the purchase orders were inflated by 20% with the intention that the 20% be paid as bribes. 
+
+ According to the complaint, the illicit payments were made with the knowledge and tacit approval of certain former Maxwell officials. For example, the complaint alleges that former management at Maxwell knew of the bribery scheme in late 2002, when an employee indicated that a payment made in connection with a sale in China appeared to be "a kick-back, pay-off, bribe, whatever you want to call it, . . . . in violation of US trade laws." A U.S.-based Maxwell executive replied that "this is a well know[n] issue" and he warned '[n]o more emails please." 
+
+ The SEC alleges that Maxwell failed to devise and maintain an effective system of internal controls and improperly recorded the bribes on its books. As a result of this bribery scheme, Maxwell SA was awarded contracts that generated over $15 million in revenues and $5.6 million in profits for Maxwell. These sales and profits helped Maxwell offset losses that it incurred to develop new products now expected to become Maxwell's future source of revenue growth. Maxwell accounted for the bribe payments as sales commission expenses in its financials. Maxwell made corrections in its Form 10-Q filing for the quarter ended March 31, 2009 to reclassify the kickbacks as a reduction in revenue. 
+
+ Without admitting or denying the allegations in the SEC's complaint, Maxwell consented to the entry of a final judgment that permanently enjoins the company from future violations of Sections 30A, 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934, orders the company to pay $5,654,576 in disgorgement, and $696,314 in prejudgment interest to be paid in two installments over one year. The order also requires the company to comply with certain undertakings regarding its FCPA compliance program. Maxwell cooperated in the investigation. In a related criminal proceeding, Maxwell has reached a settlement with the United States Department of Justice in which Maxwell has agreed to pay an $8 million criminal penalty in three installments over approximately two years. 
+
+ The Commission acknowledges the assistance of the Department of Justice's Criminal Division â€" Fraud Section, in its investigation, which is continuing. 
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diff --git a/raw/aaer/2011/AAER-3237.txt b/raw/aaer/2011/AAER-3237.txt
new file mode 100644
index 0000000000000000000000000000000000000000..321e8325945d449c22c6ccebf415da518e1e454b
--- /dev/null
+++ b/raw/aaer/2011/AAER-3237.txt
@@ -0,0 +1,414 @@
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 63818 / February 2, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3237 / February 2, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-14216 
+ 
+ 
+In the Matter of 
+ 
+Deerfield Capital Corp. and 
+Danielle Valkner, CPA,   
+ 
+Respondents. 
+ 
+ 
+ 
+ 
+ORDER INSTITUTING CEASE-AND-
+DESIST PROCEEDINGS PURSUANT TO 
+SECTION 21C OF THE SECURITIES 
+EXCHANGE ACT OF 1934, 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 pursuant to Section 21C of the Securities 
+Exchange Act of 1934 (“Exchange Act”), against Deerfield Capital Corp. (“Deerfield Capital”) 
+and Danielle Valkner (collectively “Respondents”).   
+ 
+II. 
+ 
+ In anticipation of the institution of these proceedings, Respondents have submitted Offers 
+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 them and the subject matter of these 
+proceedings, which are admitted, Respondents consent to the entry of this Order Instituting Cease-
+and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
+Findings,  and Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth 
+below.   
+ 
+ 
+ 
+ 2
+III. 
+ 
+ On the basis of this Order and Res pondent’s Offer, the Commission finds1 that:  
+ 
+Summary 
+ 
+1. Deerfield Capital Corp. (“Deerfield Cap ital”) violated the books and records and 
+internal control provisions of the Exchange Act in connection with three transactions involving 
+securities issued by a Real Estate Mortgage Investment Conduit (“REMIC”)—an investment 
+vehicle used for the pooling of mortgage loans and the issuance of mortgage-backed securities.  In 
+each of the transactions, one of which occurred in December 2005 and two in March 2006, 
+Deerfield Capital improperly recognized a gain from the purported sales of the REMIC while 
+simultaneously purporting to purchase a “new” security (or “re-REMIC”) representing nearly the 
+same rights to nearly the same stream of payments.  Deerfield Capital’s recognition of a gain on 
+the sale of the REMIC was contrary to Generally Accepted Accounting Principles (“GAAP”).   
+ 
+ 2. For the December 2005 transaction, Deerfield Capital recognized $3.9 million of 
+gain on the sale of the REMIC, which constituted 15 percent of Deerfield Capital’s reported net 
+income for the fourth quarter of 2005 and 6 percent of its net income for the year ended December 
+31, 2005.  For the March 2006 transactions, Deerfield Capital recognized gains of $3.6 million, 
+which constituted 14 percent of its net income for the quarter ended March 31, 2006 and 4 percent 
+of its net income for the year ended December 31, 2006. 
+ 
+3. The misstatement related to the Dece mber 2005 transaction caused an excess 
+payment of $977,000 in performance fees to Deerfield Capital Management LLC (“Deerfield 
+Management”), which by virtue of its provision of investment management and administrative 
+services to Deerfield Capital, made the decision to account for the December 2005 transaction as a 
+sale.  
+ 
+Respondents 
+ 
+4. Deerfield Capital Corp. is a Maryland corporation with its principal place of 
+business located in Rosemont, Illinois.  At all relevant times, Deerfield Capital traded on the New 
+York Stock Exchange (“NYSE”) and was a specialty finance company that invested in real-estate 
+securities and various other asset classes and elected to be taxed as a real estate investment trust 
+(“REIT”), which meant that it was required to distribute to investors at least 90 percent of its 
+taxable income.  The company’s stated objective was to provide attractive returns to its investors 
+through a combination of dividends and capital appreciation.  At all times relevant to this Order, 
+Deerfield Capital was externally managed by Deerfield Management .  As an externally-managed 
+                                                 
+1 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.   
+ 
+ 
+ 
+ 3
+company, Deerfield Capital had its own CEO and CFO, but it had no employees and relied on 
+Deerfield Management to conduct its business and operations.  On December 21, 2007, Deerfield 
+Management became a wholly-owned subsidiary of Deerfield Capital.  On October 1, 2008, 
+Deerfield Capital terminated its REIT status retroactive to January 1, 2008.  Deerfield Capital is 
+now a Nasdaq-listed company.   
+ 
+5. Danielle Valkner (“Valkner”), age 41, is a CPA and was the CFO of Deerfield 
+Management during the relevant time period.  During the relevant time period, Valkner worked 
+closely with Deerfield Capital’s CFO and the staff responsible for Deerfield Capital’s accounting.  
+Valkner did not sign any of Deerfield Capital’s public filings, but signed management 
+representation letters in connection with the 2005 and 2006 audits and quarterly reviews of 
+Deerfield Capital by its outside auditor.   
+ 
+Background 
+ 
+6. The three REMIC securities at issue in this matter were “digital” interest-only 
+(“IO”) securities, which paid an annualized return of 8.375 percent when the one-month LIBOR 
+exceeded 4.0 percent, but nothing when LIBOR was at or below 4.0 percent.  During 2005, as the 
+one-month LIBOR rose, these digital IOs increased in value.   
+ 
+ 7. Due to differences in tax accounting for the original issue discount on the digital 
+IO, Deerfield Capital’s reported taxable income was greater than its reported GAAP income.  
+Deerfield Capital’s REIT status required it to distribute substantially all of its taxable income to its 
+shareholders, and the difference in taxable income and GAAP income would have led to Deerfield 
+Capital showing negative retained earnings on its GAAP balance sheet.  Deerfield Capital’s board 
+was concerned about the tax/GAAP disparity and the possibility of shareholder confusion, as 
+shareholders might have interpreted dividend payments in excess of GAAP earnings as a 
+premature return of capital.   In October 2005, Deerfield Capital’s board of directors requested that 
+Deerfield Management attempt to resolve the difference between Deerfield Capital’s GAAP and 
+taxable income, and Deerfield Management then began exploring the possible sale of the digital 
+IOs.  Thus, in late 2005, Deerfield Management personnel explored the option of selling one of the 
+digital IOs in order to eliminate a difference between the income reported for tax purposes and the 
+income reported for GAAP purposes and to capture the gain on the increasing value of the digital 
+IO.  
+ 
+ 8. The trader responsible for Deerfield Ca pital’s mortgage-backed securities portfolio 
+did not want to sell the digital IO because he felt that the security provided an effective hedge 
+against increased funding costs of Deerfield Capital’s portfolio.  The trader wanted either to retain 
+the digital IO or to acquire an identical or similar security to provide that hedge.  In order to 
+accommodate the divergent goals of realizing a gain with respect to the digital IO, preserving its 
+perceived hedge value, and more closely aligning Deerfield Capital’s GAAP and tax income, 
+Deerfield Capital explored a number of options during the last quarter of 2005.   
+ 
+ 
+ 
+ 4
+9. The efforts to consummate a transaction or series of transactions, which had begun 
+in October, intensified as the year end approached.  During December, Deerfield Management 
+personnel continued their attempts to sell the digital IO but were unable to obtain what they felt 
+was a fair price.   
+ 
+10. Finally, on December 28, a sales person for a third-party broker-dealer proposed the 
+following transaction:  
+ 
+• The third-party broker-dealer would purchase the digital IO by the end of 2005, 
+with settlement on January 24, 2006. 
+• The third-party broker-dealer would re-securitize the digital IO cash flows by 
+combining the cash flows with those from an unrelated stream of principal-only 
+(“PO”) payments representing approximately 10 percent of the total value of the 
+“new” security.   
+• Deerfield Capital would purchase the “new” security for settlement on January 30, 
+2006.  
+• The price of the digital IO component would be the same in both the sale and 
+purchase transactions.  Deerfield Capital and the third-party broker-dealer agreed 
+upon a price halfway between the bid and ask price of the security on the date of the 
+transaction.  Since the third-party broker-dealer’s “purchase” and “sale” of the IO 
+component would be at the same price, the third-party broker-dealer’s salesman 
+told Deerfield Management’s trader that he was “indifferent” to the pricing of the 
+security.  
+ 
+11. On December 29, the par ties agreed to the transaction described above.  In its 
+financial statements for the year ended December 31, 2005, Deerfield Capital recognized a gain of 
+$3.9 million as a result of the transaction. 
+ 
+Application of GAAP 
+ 
+12. These transactions do not qualify  for sale treatment under SFAS 140, Accounting 
+for the Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, the 
+applicable generally accepted accounting principle.  Under SFAS 140(9)(a)-(c), a transaction may 
+be accounted for as a sale, and a gain or loss recognized, only if all of certain conditions are met.  
+Otherwise, the sale must be treated as a financing, upon which a gain or loss cannot be recognized.   
+13. Deerfield Capital’s three REMIC transactions in late 2005 and early 2006 did not 
+meet the requirements of SFAS 140(9)(b) and therefore should not have been treated as sales under 
+GAAP.  SFAS 140(9)(b) requires that the transferee have the right to pledge or exchange the 
+transferred assets it received and that no conditions both constrain the transferee from taking 
+advantage of its right to pledge or exchange and provide more than a trivial benefit to the 
+transferor. Deerfield Capital agreed to purchase a re-REMIC security that included the same cash 
+flows represented by the IOs sold through a forward purchase contract concurrent with the third-
+ 
+ 
+ 5
+party broker-dealer’s purchase, effectively constraining the third-party broker-dealer from pledging 
+or exchanging the assets.  Further, the IOs Deerfield Capital purportedly sold represented all 
+payments from the underlying REMIC trust, constraining the third-party broker-dealer’s ability to 
+obtain a similar security.  SFAS 140(32) states that, “A free standing forward purchase-sale 
+contract between the transferor and the transferee on transferred assets not readily obtainable in the 
+marketplace would benefit the transferor and is likely to constrain a transferee in much the same 
+manner” as a free standing call option.    
+ 
+14. In addition, neither Deer field Capital nor Deerfield Management performed a 
+sufficient analysis or obtained the legal advice necessary to determine if the transactions satisfied 
+SFAS 140(9)(a), which requires that the assets be “presumptively beyond the reach of the 
+transferor and its creditors.”  The third-party broker-dealer had a contractual obligation to deliver a 
+security for which 90 percent of the price represented the same stream of payments from the same 
+pool of specifically identified assets.   Deerfield Capital and Deerfield Management did not fully 
+analyze the available evidence or obtain a legal opinion and therefore did not have reasonable 
+assurance that the transactions would be deemed a true sale at law.   
+ 
+Deerfield Capital’s Accounting for the Transactions 
+ 
+15. In late December 2005, Valkner played a significant role in the operations of 
+Deerfield Capital.  Although others participated in the structuring of the December 2005 
+transaction, Deerfield Capital’s management relied primarily upon Valkner, the CFO of Deerfield 
+Management, to determine whether the transaction qualified for sales treatment under GAAP.  
+Valkner was aware of the difficulties that Deerfield Capital faced in executing a transaction that 
+met all the previously stated objectives.  Additionally, Deerfield Management’s head of trading 
+told Valkner in a December 21 email that “an outright sale” of the IO security was “very 
+challenging as no one wanted to provide a firm bid at a reasonable level in an acceptable time 
+frame.   
+ 
+16. In a series of December  29 communications between Valkner and other members 
+of Deerfield Management personnel, including the mortgage trader who had negotiated the 
+transaction, and after consultation with other Deerfield Capital accounting personnel, Valkner 
+stated she believed that the December 29 transaction qualified for sale treatment.   Deerfield 
+Capital had not previously engaged in a transaction similar to the December 29 transaction, and 
+Valkner did not correctly analyze the application of SFAS 140.  When analyzing the transaction, 
+Valkner did not ask the trader how the terms of the sale of the digital IO and the purchase of the re-
+REMIC were negotiated; never reviewed the Bloomberg message reflecting the terms of the 
+transaction; and did not determine whether the digital IO represented an entire tranche of a pool of 
+collateral, thereby making it unique. 
+  
+17. Deerfield Capital’s accounti ng staff failed to document its analysis of the complex 
+accounting issues raised by the transaction.  Although Deerfield Capital’s outside auditors had 
+been consulted concerning previous efforts to conduct a transaction concerning the IO, Deerfield 
+ 
+ 
+ 6
+Capital did not consult its outside auditor in connection with the December 2005 transaction and 
+did not bring the transaction to the auditor’s attention in connection with the audit of Deerfield 
+Capital’s accounts for the year ended December 31, 2005.   
+ 
+18. Valkner did not review the transaction after December 29.  Although she did not 
+sign the filings containing Deerfield Capital’s financial statements, she signed management 
+representation letters addressed to Deerfield Capital’s outside auditors, in which she stated to the 
+best of her knowledge, that Deerfield Capital’s financial statements were presented in accordance 
+with GAAP, for the audit of the year ended December 31, 2005, the year ended December 31, 
+2006 and the quarter ended March 31, 2006.   
+ 
+19. At the close of the quarter ended Ma rch 31, 2006, Deerfield Capital sold two 
+additional digital IO securities in similar transactions.  Deerfield Capital’s new CFO did not 
+undertake any independent review of the transactions, purportedly relying instead upon the work 
+done by Valkner and others to ensure compliance with GAAP in connection with the December 29 
+transaction.  Deerfield Capital did not inform its outside auditor of the transaction.  In connection 
+with the March 2006 transactions, Deerfield Capital recognized $3.6 million in gains on the sales. 
+ 
+Impact on Deerfield Capital’s Financial Statements 
+ 
+20. In connection with the December 2005 transactions, Deerfield Capital recognized a 
+gain on sale of $3.9 million and recorded a related expense of $977,000 for an incentive fee paid to 
+Deerfield Management.  In connection with the March 2006 transactions, Deerfield Capital 
+recognized a gain on sale of $3.6 million and recorded an incentive fee expense of $915 thousand; 
+however, Deerfield Management did not ultimately collect that fee at the time of its year-end 
+calculation, due to losses arising from the impairment of the re-REMICs later in 2006. 
+ 
+21. In its audited Statement of  Operations included in its Form 10-K for the year ended 
+December 31, 2005, Deerfield Capital represented that it had realized a net gain of $5.372 million 
+on the sale of available-for-sale securities, which was a component of $5.435 million in other 
+income and gain.  Deerfield Capital failed to disclose that $3.9 million of that gain represented the 
+“sale” of the IO security and there was an agreement to purchase a newly created re-REMIC 
+security that included the cash flows of the IO sold combined with cash flows from a PO security. 
+Similarly, in the Form 10-Q for the three months ended March 31, 2006, Deerfield Capital 
+represented that it had realized a gain of $2.092 million on the sale of available-for-sale securities.  
+Again, Deerfield Capital failed to disclose that $3.6 million of that gain related to the sale of the 
+digital IOs and that there was an agreement to purchase a newly created re-REMIC security that 
+included the cash flows of those IOs.   
+   
+22. Correcting the improper acc ounting requires that the gain on sale be excluded from, 
+and that the incentive fee be added back to, the income statement. As a result of the accounting 
+errors, Deerfield Capital overstated its net income for the fourth quarter of 2005 by $2.9 million, or 
+15 percent, and for the first quarter of 2006 by $2.7 million, or 14 percent.  As a result of the 
+ 
+ 
+ 7
+errors, Deerfield Capital also overstated its net income for the year ended December 31, 2005 by 6 
+percent.   
+ 
+Violations 
+ 
+23. As a result of the conduct described a bove, Deerfield Capital violated Section 
+13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder, and Valkner was a 
+cause of Deerfield’s violations of Section 13(a) of the Exchange Act and Rules 12b-20, and 13a-
+1 thereunder, which require every issuer of a security registered pursuant to Section 12 of the 
+Exchange Act to file with the Commission information, documents, and annual and quarterly 
+reports as the Commission may require, and mandate that periodic reports contain such further 
+material information as may be necessary to make the required statements not misleading.  
+Deerfield Capital violated those provisions by filing quarterly and annual reports that misstated 
+its net income and gain on sale of available-for-sale securities and by failing to disclose that it 
+was obligated to reacquire certain assets for which it had recognized revenue on a purported sale 
+that should have been accounted for as a financing.   
+ 
+ 24. As a result of the conduct described above, Deerfield Capital violated Section 
+13(b)(2)(A) of the Exchange Act, and Valkner was a cause of Deerfield Capital’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.  Because Deerfield Capital incorrectly recorded the 
+transactions described above as sales, rather than financings, its books, records and accounts did 
+not, in reasonable detail, accurately and fairly reflect its transactions and dispositions of assets. 
+ 
+ 25. Lastly, as a result of the conduct de scribed above, Deerfield Capital violated 
+Section 13(b)(2)(B) of the Exchange Act, which requires all 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 accordance 
+with generally accepted accounting principles.  Deerfield Capital failed to implement internal 
+accounting controls relating to its transactions in sales and purchases of re-securitizations sufficient 
+to provide reasonable assurances that these accounts were accurately stated in accordance with 
+generally accepted accounting principles.       
+ 
+ 
+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: 
+ 
+ 
+ 
+ 8
+ A. Pursuant to Section 21C of the Exchange Act, Respondent Deerfield Capital cease 
+and desist from committing or causing any violations and any future violations of Sections 13(a), 
+13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder.   
+ 
+ B. Pursuant to Section 21C of the Exchange Act, Respondent Valkner cease and desist 
+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-1 thereunder.   
+ 
+C. Respondent Deerfield Capital shall, within 15 days of the entry of this Order, pay 
+disgorgement of $977,000 and prejudgment interest of $300,070.36 to the United States Treasury.  
+If timely payment is not made, additional interest shall accrue pursuant to SEC Rule of Practice 
+600.  Payment shall be: (A) made by wire transfer, 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 Respondent Deerfield 
+Capital 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 Gerald Hodgkins, Associate Director, 
+Division of Enforcement, Securities and Exchange Commission, 100 F St., N.E., Washington, DC 
+20549-6010.   
+ 
+ By the Commission. 
+ 
+ 
+       E l i z a b e t h  M .  M u r p h y  
+       S e c r e t a r y  
+ 
+ 
+ 9
+Service List 
+ 
+ Rule 141 of the Commission's Ru les of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the Order Instituting Cease-and-Desist 
+Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, 
+Imposing Remedial Sanctions and a Cease-and-Desist Order ("Order"), on the Respondents and 
+their legal agents. 
+ 
+ The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+ 
+Honorable Brenda P. Murray    
+Chief Administrative Law Judge   
+Securities and Exchange Commission  
+100 F Street, N.E. 
+Washington, DC 20549-2557  
+ 
+Douglas McAllister, Esq. 
+Enforcement Division     
+Securities and Exchange Commission   
+100 F Street, N.E. 
+Washington, DC 20549-6561     
+     
+Ms. Danielle Valkner    
+c/o Kevin J. McCall, Esq. 
+Jenner & Block LLP  
+353 N. Clark Street 
+Chicago, IL 60654-3456 
+ 
+Kevin J. McCall, Esq. 
+Jenner & Block LLP  
+353 N. Clark Street 
+Chicago, IL 60654-3456 
+(Counsel for Danielle Valkner) 
+ 
+Deerfield Capital Corp. 
+c/o William R. Baker III 
+Latham & Watkins LLP 
+555 Eleventh Street, N.W. 
+Suite 1000 
+Washington, DC 20004 
+ 
+ 
+ 
+ 
+ 10
+ 
+ 
+ 
+William R. Baker III 
+Latham & Watkins LLP 
+555 Eleventh Street, N.W. 
+Suite 1000 
+Washington, DC 20004 
+(Counsel for Deerfield Capital Corp.) 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3238.txt b/raw/aaer/2011/AAER-3238.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1ed0cfa28cf6a21af7b0257ca138cb5d09951eb0
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+       
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+                   U.S. Securities and Exchange Commission 
+
+ Litigation Release No. 21835 / February 2, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3238 / February 2, 2011 
+
+  Securities and Exchange Commission v. Louis E. Rivelli, et al. , Civil Action No. 1:05-cv-01039-RPM (D.Colo.) 
+
+ SETTLEMENT OF SEC ENFORCMENT ACTION BY RODNEY B. JOHNSON AND ROBERT T. HOFFMAN CONCLUDES CASE AGAINST SIX FORMER FISCHER IMAGING EXECUTIVES 
+
+ The Securities and Exchange Commission announced that on January 31, 2011, the United States District Court for the District of Colorado entered Final Judgments against Defendants Rodney B. Johnson, former CFO of Fischer Imaging Corp. ("Fischer") and Robert T. Hoffman, a former Fischer sales executive.  In its complaint, filed on June 7, 2005, the Commission alleged that the Defendants were involved in improper revenue recognition and other accounting misstatements by Fischer.   
+
+ Johnson, without admitting or denying the Commission's allegations, consented to the entry of a Final Judgment that enjoins him from violations of 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 Rules 10b-5, 13b2-1, 13b2-2 and 13a-14 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; prohibits him from acting as an officer or director of a public company for five years; orders him to pay disgorgement of $36,761 and prejudgment interest of $23,268; and does not impose a civil penalty based on Johnson's sworn statement of financial condition and other documents and information submitted to the Commission.   
+
+ Hoffman, without admitting or denying the Commission's allegations, consented to the entry of a Final Judgment that enjoins him from aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder.  The court also approved the Commission's motion for dismissal of a claim against Hoffman for aiding and abetting violations of Section 10(b) of the Exchange Act and rule 10b-5 thereunder. 
+
+ On August 12, 2010, the Court entered the following Final Judgments against the four other Defendants in this enforcement action, which the Defendants consented to without admitting or denying the Commission's allegations: 
+
+  Louis E. Rivelli, former President and CEO:  Permanently enjoined from violating 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, and from aiding and abetting violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder; ordered to disgorge $681,325, plus prejudgment interest of $138,859.62, however, all but $45,000 of such amount was waived and civil penalties not imposed based upon his sworn statement of financial condition and other evidence submitted to the Commission; and barred from serving as an officer or director of any public company.   
+
+ Teresa W. Ayers, former member of the board of directors: Permanently enjoined from violating Rule 13b2-1 under the Exchange Act and from aiding and abetting violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder; and ordered to pay a civil penalty of $25,000.   
+
+ Stephen G. Burke, former CFO:  ordered to pay a $25,000 civil penalty.   
+
+ Craig L. Stevenson, former vice president of sales:  Permanently enjoined from violating Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 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, 13a-1, and 13a-13 thereunder; and ordered to disgorge $26,000, plus prejudgment interest of $15,174.19, however, payment of disgorgement and prejudgment interest was waived and civil penalties not imposed based upon his sworn statement of financial condition and other evidence submitted to the Commission. 
+
+  On August 24, 2010, the Commission issued an administrative order that directs Burke to cease and desist from committing or causing any violations and any future violations of Section 13(b)(5) of the Exchange Act and Rules 13b2-1, 13b2-2, and 13a-14 promulgated thereunder; 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 and 13a-13 promulgated thereunder.  The Order also suspends Burke from appearing or practicing before the Commission as an accountant with the right to apply for reinstatement after three years.  Burke consented to the issuance of the order without admitting or denying the Commission's findings. 
+
+ For further information, see Litigation Release No.  19255  (June 8, 2005); Securities Exchange Act of 1934 Release No.  62761  (August 24, 2010). 
+
+ 
+  SEC Complaint in this matter  
+  -->
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diff --git a/raw/aaer/2011/AAER-3239.pdf b/raw/aaer/2011/AAER-3239.pdf
new file mode 100644
index 0000000000000000000000000000000000000000..8c91bd9a0d3171a4205b4086648dd16f158caf15
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new file mode 100644
index 0000000000000000000000000000000000000000..db4a1f9dde56d6db2e92f404cabb3d902477152c
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+++ b/raw/aaer/2011/AAER-3239.txt
@@ -0,0 +1,113 @@
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 63822 / February 2, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3239 / February 2, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-14217 
+______________________________ 
+:  
+In the Matter of   :  
+  : ORDER OF FORTHWITH SUSPENSION  
+ERIC A. HOLZER, CPA : PURSUANT 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 Eric A. Holzer (“Holzer”) pursuant to Rule 102(e)(2) of the 
+Commission’s Rules of Practice [17 C.F.R. § 200.102(e)(2)].
+1 
+  
+II. 
+ 
+FINDINGS 
+ 
+The Commission finds that:  
+ 
+A. Holzer was licensed to practice law in  the State of New York on July 18, 2003. 
+ 
+B. Holzer is a certified public acc ountant in the State of New York. 
+ 
+C. On May 7, 2009, Holzer pleaded guilty befo re the United States District Court for 
+the Southern District of New York in United States v. Eric A. Holzer, Case No.1:09-cr-470 
+(S.D.N.Y), to one count of conspiracy to commit securities fraud, in violation of 18 U.S.C. § 
+371, and one count of securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78ff, 17 C.F.R. § 
+240.10b-5 and 240.10b5-2, and 18 U.S.C. § 2.  On October 2, 2009, a judgment in the criminal 
+case was entered against Holzer on the basis of his plea of guilty.  As a result, Holzer was 
+                         
+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
+                        
+sentenced to five (5) years of probation, ordered to pay an assessment of $200 and a criminal fine 
+of $15,000, and ordered to forfeit over $119,300, representing proceeds derived from his 
+criminal offense. 2 
+  
+III. 
+ 
+ORDER IMPOSING SANCTIONS 
+ 
+In view of the foregoing, the Commission finds that Holzer has been convicted of a 
+felony involving moral turpitude within the meaning of Rule 102(e)(2) of the Commission’s 
+Rules of Practice. 
+ 
+Accordingly, it is ORDERED, that Eric A. Holzer 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. 
+ 
+ 
+Elizabeth M. Murphy 
+Secretary 
+ 
+ 
+2  On December 29, 2009, disciplinary proceedings in New York by the First Department of the Appellate Division 
+resulted in Holzer’s disbarment due to his felony convictions. 
+ Service List 
+ 
+ Rule 141 of the Commissoin’s Rule of Prac tice provides that the Secretary, or another 
+duly authorized officer of the Commission, shall serve a copy of the Order of Forthwith 
+Suspension Pursuant to Rule 102(e)(2) of the Commission’s Rules of Practice (“Order”) on the 
+Respondent and his legal agent. 
+ 
+ The attached Order has been sent to the fo llowing parties and other persons entitled to 
+notice: 
+ 
+Honorable Brenda P. Murray    
+Chief Administrative Law Judge   
+Securities and Exchange Commission  
+100 F Street, N.E. 
+Washington, DC 20549-2557  
+   
+Sarah L. Levine, Esq. 
+Assistant Chief Litigation Counsel 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-4030     
+    
+Mr. Eric A. Holzer 
+c/o Paul Shechtman, Esq. 
+Stillman, Friedman & Shechtman, P.C.  
+425 Park Avenue 
+New York, NY 10022 
+  
+Paul Shechtman, Esq. 
+Stillman, Friedman & Shechtman, P.C.  
+425 Park Avenue 
+New York, NY 10022 
+(Counsel for Eric A. Holzer) 
+        
+ 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3240.pdf b/raw/aaer/2011/AAER-3240.pdf
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index 0000000000000000000000000000000000000000..96c876eb788a33f45be640bfc0f4324de66ad553
--- /dev/null
+++ b/raw/aaer/2011/AAER-3240.txt
@@ -0,0 +1,267 @@
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+      
+ 
+      
+ 
+  
+  
+          
+     
+       
+   
+        
+       
+  
+   
+ 
+ 
+ 
+ 
+   
+ 
+ 
+ 
+                                                 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 63833 / February 3, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3240 / February 3, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14226 
+: 
+: 
+: 
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+: PROCEEDINGS PURSUANT TO RULE 
+DAVID E. WATSON, 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 David 
+E. Watson (“Respondent” or “Watson”) 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 (“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. Watson, age 55, a resident of Kansas City, Missouri, was hired by American 
+Italian Pasta Company (“AIPC”) as its chief financial officer in 1994.  From approximately 
+October 2000 through March 2003, Watson served as AIPC’s executive vice president of 
+operations and corporate development.  From approximately April 2003 through December 2003, 
+when he left AIPC, Watson served as AIPC’s executive vice president of corporate development 
+and strategy. From approximately January 2004 through December 2005, Watson agreed to 
+consult with AIPC on an as-needed basis.  Watson was licensed as a certified public accountant in 
+Missouri and Kansas, but allowed his licenses to expire in 1994.       
+2. At all relevant times, AIPC was a Delaware corporation with its principal 
+place of business in Kansas City, Missouri.  AIPC is a producer and marketer of dry pasta.  At all 
+relevant times, AIPC’s common stock was registered pursuant to Section 12(b) of the Securities 
+Exchange Act of 1934 (“Exchange Act”).  The company filed annual, quarterly, and current reports 
+with the Commission on Forms 10-K, 10-Q, and 8-K, respectively.  At all relevant times, AIPC 
+stock was traded on the New York Stock Exchange (“NYSE”).  In July 2010, Ralcorp Holdings, 
+Inc. acquired AIPC.         
+3. On October 22, 2008, the Commission filed its amended complaint against 
+Watson in the United States District Court for the Western District of Missouri (Civil Action No. 
+4:08-cv-0067). On January 28, 2011, the court entered an order permanently enjoining Watson, 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 from aiding and abetting violations 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.  By 
+consent, the court further ordered that Watson pay $397,113 in disgorgement; $189,464 in 
+prejudgment interest; and a $75,000 civil money penalty.  The court further ordered by consent that 
+Watson be prohibited, for five (5) years following the date of the court’s order, 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. 
+2
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+      
+        
+ 
+ 
+ 
+      
+  
+      
+            
+ 
+ 
+ 
+ 
+4. The Commission’s amended complaint alleged, among other things, that 
+Watson and others at AIPC engaged in a fraudulent scheme that hid from the investing public the 
+true financial state of the company by filing materially false and misleading statements in the 
+company’s annual reports on Forms 10-K, quarterly reports on Forms 10-Q, and current reports on 
+Forms 8-K for AIPC’s fiscal years 2002, 2003, and 2004.  The complaint alleged that to meet 
+aggressive external targets, Watson and others engaged in numerous fraudulent accounting 
+practices that departed from generally accepted accounting principles, including, among other 
+things, capitalizing improperly millions of dollars of normal operating costs; overstating 
+improperly by millions of dollars the company’s spare parts inventory; and structuring round-trip 
+cash transactions.   
+IV. 
+In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanction agreed to in Respondent Watson’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 (5) 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; 
+3
+ 
+ 
+ 
+ 
+ 
+      
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+ 
+ (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 
+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.  
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+4
+
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+   
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+Service List 
+Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the Order Instituting Administrative 
+Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and 
+Imposing Remedial Sanctions ("Order"), on the Respondent and his legal agent. 
+The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC  20549-2557 
+Nancy J. Gegenheimer, Esq. 
+U.S. Securities and Exchange Commission 
+Denver Regional Office 
+1801 California Street, Suite 1500 
+Denver, CO 80202 
+David E. Watson, CPA 
+c/o Jed D. Reeg, Esq. 
+Lathrop & Gage, LLP 
+2345 Grand Boulevard, Suite 2200 
+Kansas City, MO 64108-2618 
+Jed D. Reeg, Esq. 
+Lathrop & Gage, LLP 
+2345 Grand Boulevard, Suite 2200 
+Kansas City, MO 64108-2618 
+5
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3241.txt b/raw/aaer/2011/AAER-3241.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9edbd59bc27d03a6924663818e2cc843e88adf1c
--- /dev/null
+++ b/raw/aaer/2011/AAER-3241.txt
@@ -0,0 +1,209 @@
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 63879 / February 9, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No.  3241 / February 9, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-14247
+      
+ 
+      :  
+ :  
+ :   
+ In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+      : PROCEEDINGS PURSUANT TO RULE 
+    RODNEY B. JOHNSON,   : 102( e) OF THE COMMISSION’S RULES OF 
+      : PRACTICE, MAKING FINDINGS, AND 
+    Respondent.          : IMPOSING REME DIAL 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 Rodney 
+B. Johnson (“Respondent” or “Johnson”) 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:  Th e 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. Rodney B. Johnson, age 58, of Cent ennial, Colorado, was the chief financial 
+officer, vice president of finance, and secretary of Fischer Imaging Corporation (“Fischer”) from 
+August 2000 until he left Fischer in October 2002.  Johnson was licensed as a CPA in 1982.  His 
+CPA license became inactive in 1994 and expired in 2004. 
+ 
+ 2. Fischer, during the relevant period , was a Delaware corporation with its 
+principal place of business in Denver, Colorado.  Fischer was dissolved as of May 18, 2007, 
+pursuant to a Chapter 11 Liquidating Plan.  Prior to its dissolution, Fischer designed, 
+manufactured, and marketed specialty medical imaging systems used for the diagnosis and 
+screening of disease.  Fischer’s common stock was registered with the Commission pursuant to 
+Section 12(g) of the Securities Exchange Act of 1934 (“Exchange Act”) and Fischer was required 
+to file periodic reports with the SEC on Forms 10-K and 10-Q.  In 2004, the Commission imposed 
+a cease-and-desist order against Fischer for violations of the anti-fraud, reporting, internal controls 
+and books and records provisions of the federal securities laws resulting from improper revenue 
+recognition and other accounting misstatements.  In the Matter of Fischer Imaging Corporation
+, 
+(Exch. Act Rel. No. 50663). 
+ 
+ 3. On June 7, 2005, the Commission filed a civil inj unctive action in the U. S. 
+District Court for the District of Colorado against Johnson and five other Fischer executives and 
+board members based on their alleged roles in improper revenue recognition and other accounting 
+misstatements by Fischer.  SEC v. Louis E. Rivelli et al.
+, Civil Action No. 1:05-cv-01039 
+(D.Colo).  On May 6, 2008, the Commission filed its First Amended Complaint (“Complaint”).  
+On January 31, 2011, the court entered an order permanently enjoining Johnson, by consent, from 
+future violations of 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, 13b2-2 and 13a-14 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.  Johnson was also ordered to pay disgorgement and 
+prejudgment interest totaling $60,029 and was prohibited from serving as an officer or director of a 
+public company for five years.  Based on his sworn statement of financial condition and other 
+ 3
+documents and information provided to the Commission, the court did not order Johnson to pay a 
+civil penalty. 
+ 
+ 4. The Commission’s Comp laint alleged, among other things, that Johnson 
+knowingly or recklessly engaged in a fraudulent revenue recognition scheme that resulted in false 
+and misleading statements in Fischer’s filings on Forms 10-K and 10-Q and other filings and 
+public statements from Fischer’s third quarter of 2000 through its second quarter of 2002.  The 
+complaint alleged that Johnson was involved in Fischer’s improper recognition of revenue upon 
+shipment of products to storage facilities rather than upon shipment to customers or customer 
+designated locations.  The complaint also alleged that Johnson knew or was reckless in not 
+knowing that Fischer improperly recognized revenue from orders subject to material contingencies 
+and other terms rendering revenue recognition inappropriate under Generally Accepted Accounting 
+Principles.  In addition, the complaint alleged that Johnson failed to disclose information and made 
+false and misleading statements to Fischer’s auditors relating to Fischer’s improper revenue 
+recognition practices.  The complaint further alleged that Johnson circumvented or failed to 
+implement a system of accounting controls at Fischer, falsified or directly or indirectly caused to 
+be falsified certain books, records or accounts of Fischer, and aided and abetted Fischer’s 
+violations of certain reporting, internal controls, and books and records provisions of the federal 
+securities laws.       
+ 
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanction agreed to in Respondent Johnson’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately, that: 
+ 
+ A. Johnson 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: 
+      
+ 4
+           (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 
+ 
+   (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 he has resolved all 
+disciplinary issues with the applicable state boards of accountancy.  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. 
+ 
+ 
+ 
+       E l i z a b e t h  M .  M u r p h y  
+       S e c r e t a r y  
+ 5
+Service List 
+ 
+ Rule 141 of the Commission's Ru les of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the Order Instituting Administrative 
+Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and 
+Imposing Remedial Sanctions (the “Order”), on the Respondent and his legal agent. 
+ 
+ The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+ 
+Honorable Brenda P. Murray    
+Chief Administrative Law Judge   
+Securities and Exchange Commission  
+100 F Street, N.E. 
+Washington, DC 20549-2557  
+    
+Zachary T. Carlyle, Esq. 
+Denver Regional Office 
+Securities and Exchange Commission 
+1801 California Street, Suite 1500 
+Denver, CO 80202   
+  
+Mr. Rodney B. Johnson  
+c/o Josiah Hatch, Esq. 
+Ducker, Montgomery, Lewis & Bess, P.C. 
+One Civic Center Plaza 
+1560 Broadway, Suite 1400 
+Denver, CO 80202 
+ 
+Josiah Hatch, Esq. 
+Ducker, Montgomery, Lewis & Bess, P.C. 
+One Civic Center Plaza 
+1560 Broadway, Suite 1400 
+Denver, CO 80202 
+(Counsel for Rodney B. Johnson)             
+ 
\ No newline at end of file
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new file mode 100644
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--- /dev/null
+++ b/raw/aaer/2011/AAER-3244.txt
@@ -0,0 +1,193 @@
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 63928 / February 18, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3244 / February 18, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14268
+      
+ 
+      :  
+ :  
+ :   
+ In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+      : PROCEEDINGS PURSUANT TO RULE 
+ JOANNE KLINE,    : 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 Joanne 
+Kline (“Respondent” or “Kline”) 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 her 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. Kline, age 48, has been  a certified public accountant licensed to practice in 
+the State of Arizona since April 1993, but her license was suspended in November 2010.  She 
+served as the controller of NutraCea, Inc. (“NutraCea”) from March 2007 to June 2009. 
+ 
+ 2. NutraCea is a California corpora tion with its principal executive offices 
+located in Phoenix, Arizona and is engaged in the business of manufacturing health food products.  
+NutraCea’s common stock is registered with the Commission pursuant to Section 12(g) of the 
+Securities Exchange Act of 1934 (“Exchange Act”) and trades on the OTC:BB under the symbol 
+“NTRZ”. 
+ 
+ 3. On January 13, 2011, the Commission  filed a complaint against Kline in 
+SEC v. NutraCea, et al.
+ (Civil Action No. CV 11-0092-PHX-SRB).  On February 14, 2011, the 
+court entered an order permanently enjoining Kline, by consent, from future violations of Section 
+13(b)(5) of the Exchange Act and Rules 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.  Kline was also ordered to pay a $25,000 civil money penalty. 
+ 
+ 4. The Commission’s complaint alleged,  among other things, that NutraCea, 
+through the misconduct of Kline and others, overstated its sales revenues for the second and third 
+quarters of fiscal year 2007 and its fiscal year 2007 by booking false sales and engaging in 
+improper revenue recognition practices.  The complaint alleged that Kline violated the books and 
+records and internal controls provisions of the federal securities laws because she knew that 
+NutraCea improperly accounted for a $2.6 million sale in the second quarter of 2007 and a $1.9 
+million sale in the fourth quarter of 2007.  The complaint further alleged that Kline also signed 
+false management representation letters to NutraCea’s auditors. 
+ 
+ 
+ 
+ 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 Kline’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately, that: 
+ 
+A. Kline is suspended from appearing 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 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.   
+ 
+ 
+ 
+ 4
+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. 
+ 
+ 
+ 
+       E l i z a b e t h  M .  M u r p h y  
+       S e c r e t a r y  
+ 5
+Service List 
+ 
+ Rule 141 of the Commission's Ru les of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the Order Instituting Administrative 
+Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and 
+Imposing Remedial Sanctions (“Order”), on the Respondent and her legal agent. 
+ 
+ The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+ 
+Honorable Brenda P. Murray    
+Chief Administrative Law Judge   
+Securities and Exchange Commission  
+100 F Street, N.E. 
+Washington, DC 20549-2557  
+    
+Spencer E. Bendell, Esq.     
+Los Angeles Regional Office    
+Securities and Exchange Commission   
+5670 Wilshire Blvd., 11th Floor  
+Los Angeles, CA 90036     
+     
+Ms. Joanne Kline    
+c/o Maureen Beyers, Esq.    
+Osborn Maledon 
+2929 N. Central Avenue 
+Twenty-First Floor 
+Phoenix, AZ 85012 
+             
+Maureen Beyers, Esq.    
+Osborn Maledon 
+2929 N. Central Avenue 
+Twenty-First Floor 
+Phoenix, AZ 85012 
+(Counsel for Joanne Kline) 
+ 
\ No newline at end of file
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@@ -0,0 +1,125 @@
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+                                                 
+    
+ 
+UNITED STATES OF AMERICA  
+Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No. 63940 / February 22, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT  
+Release No. 3245 / February 22, 2011 
+ADMINISTRATIVE PROCEEDING  
+File No. 3-11377 
+: 
+In the Matter of 
+Benedict P. Rybicki, CPA 
+: 
+: 
+: 
+: 
+ORDER GRANTING APPLICATION FOR 
+REINSTATEMENT TO APPEAR AND PRACTICE 
+BEFORE THE COMMISSION AS AN ACCOUNTANT 
+: 
+On August 5, 2004, Benedict P. Rybicki, CPA ("Rybicki") 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 Rybicki pursuant to Rule 
+102(e) of the Commission's Rules of Practice.
+1  Rybicki consented to the entry of the order 
+without admitting or denying the findings therein.  This order is issued in response to Rybicki’s 
+application for reinstatement to practice before the Commission as an accountant. 
+In his role as the sole engagement manager for Doeren Mayhew & Co., P.C.’s joint audit, 
+with Grant Thornton LLP, of MCA Financial Corporation’s (“MCA”) 1998 annual financial 
+statements, Rybicki was alleged to have engaged in improper professional conduct.  The 
+Commission alleged that Rybicki recklessly engaged in conduct that resulted in violations of 
+professional standards and recklessly failed to follow applicable auditing standards in the areas 
+of mortgages and land contracts held for resale and related party transactions.  Rybicki’s conduct 
+also caused and willfully aided and abetted MCA’s violations of Section 15(d) of the Securities 
+Exchange Act of 1934 (“Exchange Act”) and Rules 12b-20 and 15d-1 thereunder.  Finally, 
+Rybicki willfully aided and abetted violations of Section 10A of the Exchange Act by failing to 
+assure that MCA’s audit committee or board of directors were adequately informed of suspected 
+illegal acts that were detected in the course of the audit. 
+1 See Accounting and Auditing Enforcement Release No. 2076 dated August 5, 2004.  Rybicki was permitted, 
+pursuant to the order, to apply for reinstatement after one year upon making certain showings. 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+                                                 
+ 
+ 
+ 
+    
+    
+Rybicki 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 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, Rybicki 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 Rybicki, it appears that he has complied with the terms of the August 5, 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 Rybicki, 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 Rybicki, 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 
+Benedict P. Rybicki, CPA is hereby reinstated to appear and practice before the Commission as 
+an accountant. 
+By the Commission. 
+Elizabeth M. Murphy 
+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). 
+ 
+ 
+  
+ 
+ 
+ 
+SERVICE LIST
+ 
+Benedict P. Rybicki 
+c/o Jason D. Killups 
+Young & Susser, P.C. 
+26200 American Drive 
+Suite 305 
+Southfield, MI 48034 
+Jason D. Killups 
+Young & Susser, P.C. 
+26200 American Drive 
+Suite 305 
+Southfield, MI 48034 
+Counsel for Respondent 
\ No newline at end of file
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+ 
+ 
+ 
+ 
+ 
+ 
+       
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+      
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+  
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+ 
+                                                
+ 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 63982 / February 25, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3246 / February 25, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14275 
+: 
+: 
+: 
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+: PROCEEDINGS PURSUANT TO RULE 
+ SCOTT WILKINSON, 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 Scott 
+Wilkinson (“Respondent” or “Wilkinson”) 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. Wilkinson, age 54, is and has been a certified public accountant licensed to 
+practice in the State of Arizona.  He served as the director of financial services of NutraCea, Inc. 
+(“NutraCea”) from April 2007 to February 2009. 
+2. NutraCea is a California corporation with its principal executive offices 
+located in Phoenix, Arizona and is engaged in the business of manufacturing health food products.  
+NutraCea’s common stock is registered with the Commission pursuant to Section 12(g) of the 
+Securities Exchange Act of 1934 (“Exchange Act”) and trades on the OTC:BB under the symbol 
+“NTRZ”. 
+3. On January 13, 2011, the Commission filed a complaint against Wilkinson 
+in SEC v. NutraCea, et al. (Civil Action No. CV 11-0092-PHX-SRB ).  On February 14, 2011, the 
+court entered an order permanently enjoining Wilkinson, by consent, from future violations of 
+Section 13(b)(5) of the Exchange Act and Rules 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.  Wilkinson was also ordered to pay a $25,000 civil money 
+penalty. 
+4. The Commission’s complaint alleged, among other things, that NutraCea, 
+through the misconduct of Wilkinson and others, overstated its sales revenues for its fiscal year 
+2007 by engaging in improper revenue recognition practices.  The complaint alleged that 
+Wilkinson violated the books and records and internal controls provisions of the federal securities 
+laws because he knew that NutraCea improperly accounted for a $1.9 million sale in the fourth 
+quarter of 2007. The complaint further alleged that Wilkinson also signed false management 
+representation letters to NutraCea’s auditors. 
+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 Wilkinson’s Offer. 
+Accordingly, it is hereby ORDERED, effective immediately, that: 
+A. Wilkinson is suspended from appearing or practicing before the Commission as an 
+accountant. 
+B. After one year 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 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.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+4
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+   
+ 
+ 
+    
+   
+    
+ 
+  
+     
+     
+   
+                
+ 
+ 
+ 
+Service List 
+Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the Order Instituting Administrative 
+Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and 
+Imposing Remedial Sanctions (“Order”), on the Respondent and his legal agent. 
+The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Spencer E. Bendell, Esq.  
+Los Angeles Regional Office 
+Securities and Exchange Commission 
+5670 Wilshire Blvd., 11th Floor 
+Los Angeles, CA 90036 
+Mr. Scott Wilkinson 
+c/o Alan Baskin, Esq. 
+Bade & Baskin PLC 
+80 E. Rio Salado Parkway, Suite 511 
+Tempe, AZ 85281 
+Alan Baskin, Esq. 
+Bade & Baskin PLC 
+80 E. Rio Salado Parkway, Suite 511 
+Tempe, AZ 85281 
+(Counsel for Scott Wilkinson) 
+5
+ 
\ No newline at end of file
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@@ -0,0 +1,1378 @@
+
+
+ 
+ 
+   
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+     SEC.gov | DHB Industries, Inc. n/k/a Point Blank Solutions, Inc.; Jerome Krantz, Cary Chasin, and Gary Nadelman 
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+              DHB Industries, Inc. n/k/a Point Blank Solutions, Inc.; Jerome Krantz, Cary Chasin, and Gary Nadelman
+           
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+        DHB Industries, Inc. n/k/a Point Blank Solutions, Inc.; Jerome Krantz, Cary Chasin, and Gary Nadelman
+       
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+                U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 21867 / February 28, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3247 / February 28, 2011 
+
+  SEC v. DHB Industries, Inc. n/k/a Point Blank Solutions, Inc. , Civil Action No. 0:11-cv-60431-JIC (U.S. District Court for the Southern District of Florida, filed February 28, 2011) 
+
+  SEC v. Jerome Krantz, Cary Chasin, and Gary Nadelman , Civil Action No.0:11-cv-60432-WPD (U.S. District Court for the Southern District of Florida, filed February 28, 2011) 
+
+ The Securities and Exchange Commission today filed securities fraud charges against DHB Industries, Inc. n/k/a Point Blank Solutions, Inc. ("DHB"), a major supplier of body armor to the U.S. military and law enforcement agencies, for engaging in a massive accounting fraud that occurred at the company between 2003 and 2005. The agency also filed separate fraud charges against DHB's former outside directors and audit committee members, Jerome Krantz, Cary Chasin, and Gary Nadelman, for facilitating the company's fraud. 
+
+ The SEC's complaint against DHB, filed in U.S. District Court for the Southern District of Florida, alleges that the company, through its senior executive officers, engaged in pervasive accounting and disclosure fraud, and misappropriation of company assets that resulted in the company filing materially false and misleading periodic reports with the SEC. The complaint against Krantz, Chasin, and Nadelman alleges that they facilitated DHB's fraud by willfully ignoring numerous, significant red flags signaling widespread accounting fraud and misappropriation at the company by senior officers. 
+
+ The SEC's complaint against Krantz, Chasin, and Nadelman alleges that from at least 2003 through 2005, they were willfully blind to numerous red flags signaling accounting fraud, reporting violations, and misappropriation at DHB. According to the complaint, Krantz, Chasin, and Nadelman's willful blindness to these red flags, allowed senior management to manipulate the company's reported gross profit, net income, and other key figures in its earnings releases and public filings. The company did so by, among other things, overstating inventory values, failing to include appropriate charges for obsolete inventory, and falsifying journal entries. 
+
+ The complaint against Krantz, Chasin, and Nadelman further alleges that their willful blindness to red flags enabled DHB's former chief executive officer, David Brooks, to divert at least $10 million out of the company through fraudulent transactions with a related entity he controlled. By ignoring the numerous red flags, the three outside directors also facilitated DHB's improper payment of millions of dollars in personal expenses for Brooks. These expenses included such items as luxury cars, jewelry, art, real estate, extravagant vacations, and prostitution services. As a result of this misconduct, DHB's SEC filings and press releases contained materially false and misleading financial and other information. Despite being confronted with numerous, significant, and compounding red flags indicating fraud, Krantz, Chasin, and Nadelman approved and/or signed DHB's false and misleading filings. 
+
+ The SEC's complaint against DHB charges it with violating Sections 10(b), 13(a), 13(b)(2)(A),13(b)(2)(B), and 14(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. 
+
+ The complaint against Krantz, Chasin, and Nadelman charges them with violating Sections 10(b) and 14(a) of the Exchange Act and Rules 10b-5 and 14a-9 thereunder, and with aiding and abetting DHB's violations of 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, and also charges Nadelman with violating Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder. 
+
+ DHB has agreed to settle with the SEC and agreed to a permanent injunction from future violations. The proposed settlement took into account the remedial measures already taken by the company in this regard. The company is currently in bankruptcy and its settlement with the SEC is pending the approval of the bankruptcy court. Krantz, Chasin, and Nadelman have not settled to the charges and the SEC seeks injunctive relief, disgorgement of ill-gotten gains, monetary penalties, and officer and director bars against them. 
+
+ The SEC previously filed civil fraud charges in federal district court against David Brooks and two other DHB senior officers â€" former chief operating officer Sandra Hatfield and former chief financial officer Dawn Schlegel â€" for their roles in this fraud. The U.S. Attorney's Office for the Eastern District of New York also previously filed criminal charges against Brooks, Hatfield, and Schlegel based on the same conduct that led to the SEC's action against them. On September 14, 2010, a jury convicted Brooks and Hatfield of, among other things, multiple counts of securities fraud, insider trading, and obstruction of justice, including obstructing the SEC's investigation. Brooks and Hatfield are awaiting sentencing. Schlegel previously pled guilty to criminal charges pursuant to a plea agreement. The SEC's civil actions against Brooks, Hatfield, and Schlegel are stayed pending the full resolution of the criminal actions.   
+
+   SEC Complaint v. DHB Industries  
+    SEC Complaint v. Krantz, Chasin, and Nadelman  
+    
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diff --git a/raw/aaer/2011/AAER-3248.pdf b/raw/aaer/2011/AAER-3248.pdf
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+                                                 
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+ 
+UNITED STATES OF AMERICA 
+Before the
+ 
+SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No. 63987 / February 28, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3248 / February 28, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14276 
+In the Matter of 
+KPMG AUSTRALIA, 
+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 pursuant to 
+Sections 4C
+1 and 21C of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 
+102(e)(1)(ii)2 of the Commission’s Rules of Practice against KPMG Australia (“Respondent” or 
+“KPMG Australia”).   
+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 . . . (2) to be lacking in character or integrity, or to have 
+engaged in unethical or improper professional conduct; 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    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. 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+ 
+ 
+  
+                                                 
+     
+ 
+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 it 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 finds
+3 that: 
+A. OVERVIEW 
+This matter stems from the provision of non-audit services by KPMG Australia and 
+certain other KPMG member firms to two audit clients of KPMG Australia, Companies A and B, 
+both of which provided financial services in Australia and other jurisdictions and were audit 
+clients with a class of securities registered with the Commission during the relevant period, in 
+violation of the auditor independence requirements imposed by the Commission’s rules and by 
+generally accepted auditing standards in the United States of America (“U.S. GAAS”), or, with 
+respect to one financial reporting period relating to Company B, the standards of the Public 
+Company Accounting Oversight Board (“PCAOB”).  The violative services were rendered 
+during fiscal years 2001 and 2002 in the case of Company A, and during fiscal years 2001 
+through 2004 in the case of Company B. Several distinct categories of non-audit services were 
+rendered that violated Rule 2-01 of Commission Regulation S-X and therefore impaired 
+independence. First, KPMG Australia and at  least one other KPMG member firm outside 
+Australia seconded non-tax professional staff to work at each client’s premises, under the 
+supervision and direction of each client, doing the same types of work that each client’s own 
+employees or managers ordinarily would perform, in violation of the prohibition under Rule 2-
+01(c)(4)(vi) against “[a]cting, temporarily or permanently, as a director, officer, or employee of 
+an audit client, or performing any decision-making, supervisory, or ongoing monitoring function 
+for the audit client.” Second, KPMG Australia received trailing commissions from an acquired 
+subsidiary of Company B in exchange for KPMG Australia’s earlier promotion of the 
+subsidiary’s products prior to the subsidiary’s acquisition by Company B.  These services 
+violated the prohibition under Rule 2-01(c)(3) against direct business relationships with an audit 
+client. Third, certain overseas subsidiaries of Company B retained a legal practice associated 
+with another KPMG member firm to provide litigation services in violation of the prohibition 
+under Rule 2-01 against acting as an advocate for an audit client.   
+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 
+ 
+ 
+  
+ 
+   
+ 
+   
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+                                                 
+        
+  
+ 
+The provision of these prohibited services came about in substantial part as a result of 
+failures by KPMG Australia to take adequate steps both to educate its professional personnel and 
+also to monitor compliance by such personnel with respect to the auditor independence 
+requirements imposed by the Commission’s rules and by U.S. GAAS or, with respect to the audit 
+report on Company B’s financial statements for its 2004 fiscal year, by PCAOB standards. As a 
+result of these failures, on multiple occasions KPMG Australia failed to respond appropriately to 
+problematic information concerning certain non-audit services to Company A and Company B 
+that should have affected the independence determination. 
+Despite providing these prohibited services, KPMG Australia stated that it was 
+“independent” in contemporaneous audit reports it issued on Company A’s and Company B’s 
+financial statements, each of which was included, or incorporated by reference, in their 
+respective public filings with the Commission throughout the relevant time period.  By doing so, 
+KPMG Australia violated Rule 2-02(b) of Commission Regulation S-X and caused its audit 
+clients Company A and Company B to file periodic reports with the Commission that failed to 
+include independently audited financial statements as required by Exchange Act Section 13(a), 
+Exchange Act Rule 13a-1, and Regulation S-X.4 
+B. RESPONDENT 
+KPMG Australia is a partnership formed and existing under the laws of Australia which 
+provides auditing and other professional services to a variety of companies, including companies 
+whose securities were registered with the Commission and traded in U.S. markets.  KPMG 
+Australia is the Australian member firm of the KPMG network of independent member firms 
+affiliated with KPMG International, a Swiss cooperative.   
+C. RELEVANT ISSUERS 
+Company A is incorporated and headquartered in Australia.  KPMG Australia served as 
+the lead auditor of Company A’s financial statements for its fiscal years 2001 through 2004.  
+During this time period, Company A’s American Depositary Shares and American Depositary 
+Receipts were registered with the Commission pursuant to Exchange Act Section 12(b) and 
+traded on the New York Stock Exchange. Comp any A, whose fiscal year ended September 30, 
+filed annual reports on Form 20-F with the Commission pursuant to Exchange Act Section 13.   
+Company B is incorporated and headquartered in Australia.  KPMG Australia served as 
+the lead auditor of Company B’s financial statements for its fiscal years 2001 through 2004.  
+During this time period, Company B’s Ordinary Shares and American Depositary Shares were 
+registered with the Commission pursuant to Exchange Act Section 12(b) and traded on the New 
+York Stock Exchange. Company B, whose fiscal year ended September 30, filed annual reports 
+on Form 20-F with the Commission pursuant to Exchange Act Section 13.     
+This Order makes no finding with respect to Company A’s or Company B’s reported financial statements 
+for any fiscal year in which the violations discussed herein occurred. 
+3
+ 
+4 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+    
+  
+   
+ 
+ 
+ 
+ 
+                                                 
+     
+   
+ 
+ 
+D. 	 FACTS 
+1. 	 Secondments 
+The term “secondment” is commonly used in Commonwealth countries and is analogous 
+to the term “loaned staff engagements” used in the United States.  KPMG Australia’s internal 
+guidance explained that “[a] secondment is a temporary transfer of a KPMG employee (the 
+secondee) to the business of a client,” to perform work under the supervision and direction of the 
+client rather than of KPMG Australia. Begi nning in early 2001, KPMG Australia implemented a 
+business development drive that entailed the designation of personnel as “product champions” to 
+promote secondments and other service products as a means of serving clients, including audit 
+clients, and thereby generating revenue. Secondm ents also came to be viewed as a means of 
+providing KPMG Australia staff with practical business experience and client exposure. 
+a. 	 KPMG Australia’s Deficient Auditor Independence Guidance  
+On Secondments and Lack of Effective Compliance Monitoring 
+KPMG Australia’s secondment practice during the relevant period was premised on the 
+view, pervasive throughout the firm, that secondments to audit clients with a class of securities 
+registered with the Commission (“Commission-registered audit client”) were permitted under the 
+Commission’s auditor independence rules, provided that the secondee did not function as 
+management by making decisions that would bind the audit client without further client 
+oversight or ratification. 
+This understanding reflected domestic Australian independence standards at that time, 
+which permitted secondments to audit clients provided the secondee would not be involved in 
+“making management decisions”; “approving or signing agreements or other similar 
+documents”; or “exercising discretionary authority to commit the [audit] client”; and provided 
+the audit firm implemented safeguards by ensuring that the secondee was not given audit 
+responsibility for any function or activity they performed during their secondment and obtaining 
+an acknowledgment from the audit client of its responsibility for directing and supervising the 
+activities of the secondee.  Institute of Chartered Accountants in Australia, Professional 
+Statement F.1, Professional Independence § 2.89. 
+This understanding also was reinforced by two “Risk Alerts”
+5 issued internally by KPMG 
+Australia in March and July 2001, following that firm’s receipt of guidance issued by the 
+Department of Professional Practice (“DPP”) at KPMG LLP, the KPMG member firm in the 
+United States (“KPMG U.S.”), directly to KPMG Australia and of “Professional Practice 
+Letters” (“PPLs”) issued by DPP to professionals within KPMG U.S. and made available to 
+A Risk Alert was a bulletin containing written guidance issued periodically by the national risk 
+management office at KPMG Australia and distributed to professionals within the firm.  The guidance in such a Risk 
+Alert was binding on all professionals within the firm.   
+4
+ 
+5 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+                                                 
+    
+ 
+ 
+KPMG Australia through the firms’ mutual affiliation with KPMG International.6  The March 
+2001 Risk Alert advised that the Commission’s independence rules did not “stop all 
+secondments” but only precluded “act[ing] as a member of management while on secondment.”  
+The March 2001 Risk Alert also provided a sample engagement letter and sample terms and 
+conditions for secondments, such as limits on secondees’ use of audit clients’ business cards, 
+credit cards, and motor vehicles, as well as secondees committing audit clients to expenditures.  
+In addition, in response to general concerns expressed by the Commission’s Office of the Chief 
+Accountant about the lack of quality controls on non-audit services rendered by non-U.S. 
+accounting firms, the July 2001 Risk Alert introduced several new policies, including vesting 
+responsibility in lead audit engagement partners for pre-approval and other quality controls with 
+respect to non-audit services rendered to Australian Commission-registered audit clients.  
+In May 2002, KPMG U.S.’s DPP issued to its professionals in the United States a three-
+page PPL entitled “Loaned Staff Versus Advisory Services Engagements.”  This PPL stated in a 
+“Background” section on its first page:   
+The SEC and [American Institute of Certified Public Accountants (“AICPA”)] rules on 
+auditor independence prohibit firm personnel from acting either permanently or 
+temporarily as an employee of the audit client.  Therefore, it is important to ensure that 
+engagements resulting from requests from clients for staff assistance be structured to 
+avoid the appearance that the firm’s staff may be acting as an employee of the client.   
+The PPL advised that “every effort should be made to structure . . . engagement[s] under KPMG 
+supervision, with a defined timeline and scope of work,” but that “[i]f the engagement cannot be 
+structured as a discrete engagement, then it is considered a loaned staff engagement and stringent 
+requirements apply.”  With respect to Commission-registered audit clients, the PPL specified the 
+following restrictions:  (i) loaned staff engagements were permitted only with respect to staff 
+level personnel and not with respect to managers and above; (ii) audit engagement partners were 
+responsible for reviewing proposals for loaned staff engagements; and (iii) loaned staff 
+engagements were limited to four weeks for public audit clients, unless otherwise approved by 
+KPMG U.S.’s DPP. The PPL further specified that the following restrictions had to be “clearly 
+defined in the engagement letter”:  (a) the KPMG staff member could not function in a 
+management or employee role, could not make any management decisions, and could not sign 
+reports or letters in KPMG’s name; (b) the KPMG staff member could not be listed in client 
+directories or publications and could not use the client’s name on business cards; (c) a KPMG 
+partner had to be responsible for oversight and verification of ongoing compliance with the terms 
+of the engagement; and (d) the loaned KPMG staff had to prepare a memorandum summarizing 
+the engagement activity for each payroll cycle.  The PPL further dictated the use of standard 
+engagement letters and terms and conditions, as well as the inclusion in the standard work papers 
+of “the signed engagement letter(s); . . . copies of periodic status reports; and documentation of 
+partner oversight of engagement letter compliance (e.g. review of status reports and 
+memorandum to work papers).”   
+A PPL was a bulletin containing written guidance issued from time to time by KPMG U.S.’s DPP to 
+professionals within that firm and, on occasion, to other KPMG member firms through their mutual affiliation with 
+KPMG International. 
+5
+ 
+6 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+  
+ 
+                                                 
+            
+The May 2002 PPL was received and reviewed by KPMG Australia’s national risk 
+management office.  In June 2002 that office issued another two-page Risk Alert to all KPMG 
+Australia professional personnel. That Risk Aler t repeated guidance from the first half of the 
+May 2002 PPL that every effort should be made to structure the temporary provision of staff as 
+engagements under KPMG supervision and the general restrictions labeled (i) to (iii) above, 
+including the prohibition on seconding managers or above.  The June 2002 Risk Alert, however, 
+failed to expressly reference the substantive guidance set forth in the entire second half of the 
+May 2002 PPL, including items (a) through (d) above, which the PPL required be clearly defined 
+in the engagement letter, as well as the work paper documentation requirements introduced by 
+the PPL. The June 2002 Risk Alert cross-refere nced the earlier March 2001 Risk Alert for 
+further guidance, including on the use of engagement letters and the terms and conditions 
+forming part of the engagement, but these cross-referenced materials likewise did not include all 
+the prohibitions set forth in items (a) through (d) above or impose work paper documentation 
+requirements. 
+In July 2002, following issuance of the June 2002 Risk Alert, KPMG Australia held a 
+training program for its personnel which included instruction on the Commission’s independence 
+rules. The training instructi on cautioned that the “Perception/appearance” of independence was 
+a “huge” issue in the United States, and that even arrangements, such as “secondments,” which 
+would not pose a problem under Australian GAAS, would “most likely be an issue for US 
+GAAS.” This training instruction did not repeat  the substantive guidance and the documentation 
+requirements from the May 2002 PPL that had been omitted from the June 2002 Risk Alert.  
+The truncated guidance was compounded by KPMG Australia’s failure to adopt 
+contemporaneous quality controls adequate to monitor independence compliance with respect to 
+both firm guidance and the Commission’s independence rules, particularly by divisions of the 
+firm such as its Corporate Recovery Department7 that were not under the direct supervision of 
+the lead audit engagement partners.  As a result, KPMG Australia’s partners, particularly those in 
+such divisions, continued to arrange and extend secondments of the firm’s professional personnel 
+to Company B into 2003, although on a limited basis.  More than five secondments rendered at 
+various times from mid-2002 into 2003 violated not only the Commission’s substantive 
+independence rules but also internal firm guidance and procedures with respect to the pre-
+approval and duration of secondments.   
+b. Violative Secondments Rendered to Company A 
+During 2001 and the first half of 2002, KPMG Australia rendered secondments to 
+Company A, and at least one other KPMG member firm rendered secondments to Company A’s 
+foreign operations in another country.  At least 30 secondments rendered during that period 
+violated U.S. GAAS and the Commission’s auditor independence rules.      
+Examples of secondees seconded to act in a managerial capacity with financial reporting 
+responsibilities, in violation of the auditor independence rules, include the following.  Between 
+November 2000 and June 2001, an assistant manager was seconded to Company A to fill in for a 
+“Market Operations Support and Control Manager” who was out of the office on maternity 
+The Corporate Recovery Department separated from KPMG Australia in 2004. 
+6
+ 
+7 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+ 
+ 
+leave, and in that role he managed a team of 20 to 25 Company A employees who reconciled 
+trading information, cleared account items, and prepared monthly reports.  Likewise, between 
+May and August 2001, an accountant was seconded by another KPMG member firm to an 
+overseas subsidiary of Company A in the role of “Acting Senior Financial Controller, Personal 
+Financial Services,” in which capacity he hired and supervised staff, provided overall financial 
+control for the unit, and oversaw the preparation of monthly financial reports.  From March to 
+July 2002, a KPMG Australia manager was seconded to manage the life insurance accounting 
+team at a division of Company A where he functioned essentially as a controller of the team, 
+including giving guidance on accounting questions to the accountants working under him who 
+were preparing the life insurance accounts.  From September 2001 to August 2002, another 
+KPMG Australia manager was seconded to the life insurance accounting team, in which role he 
+supervised Company A personnel and also reported to the other KPMG Australia secondee.    
+In March 2001, a KPMG Australia senior manager was seconded to a funds management 
+subsidiary of Company A, in which role he was assigned the title “Acting CFO.” 
+In addition to the foregoing, secondments included implementing a general ledger system 
+for Company A in 2001 and conducting loan file reviews as part of internal audit procedures that 
+were then relied on as part of the external audit in both 2001 and 2002.  Another secondment 
+entailed preparing the financial statements for one of Company A’s foreign subsidiaries.   
+These and other violative secondments occurred because the Company A audit 
+engagement team instituted inadequate safeguards and controls prior to 2002 for purposes of 
+monitoring ongoing compliance with auditor independence rules governing the provision of non-
+audit services. Further, internal communications in March and Apr il 2001 within the audit 
+engagement team for Company A included information about the “Acting CFO” secondment 
+noted above which, had it been properly focused on, should have caused KPMG Australia to stop 
+that secondment from being arranged or continuing in order to avoid an impairment in 
+appearance of the firm’s auditor independence, as required by the Commission’s rules and U.S. 
+GAAS. 
+c. Violative Secondments Rendered to Company B 
+During the period November 2000 through October 2003, KPMG Australia rendered 
+secondments to Company B.  At least 20 secondments rendered during that period violated U.S. 
+GAAS, and the Commission’s auditor independence rules. 
+During that three-year period, KPMG Australia seconded four managers and a director (a 
+level above manager but below partner) from the firm’s Corporate Recovery Department for 
+periods lasting from five weeks to fifteen months to perform loan file portfolio functions at 
+Company B’s Credit Restructuring Unit (“CRU”).  Each of the five secondees managed a 
+portfolio of problematic “retention” loan files on behalf of Company B with the goal of 
+continuing payments on the loans.  If this proved impossible, the files were redesignated as 
+“exit” files and referred to another division of the CRU.  In this role, the secondees reviewed 
+loan files; met personally with customers of Company B; appointed third-party advisers; 
+developed and implemented strategies for recovery on the loans; and were assisted in the 
+7
+ 
+ 
+ 
+  
+ 
+  
+ 
+ 
+   
+foregoing by CRU analysts whose work they supervised from time to time.  The secondees were 
+given delegated credit authority, which enabled them to implement recovery strategies for loan 
+files below a set dollar amount without obtaining prior approval from their CRU supervisors, 
+although these decisions were subject to subsequent overview by their CRU supervisors.  For 
+purposes of communicating with customers and other third parties, the secondees used Company 
+B titles, business cards and letterhead.  In two instances loan files assigned to and worked on by 
+these corporate recovery secondees in their capacity as “account managers” were selected for 
+audit procedures by the KPMG Australia audit engagement team, and in one instance the 
+provisioning for a loan file was adjusted as a result of those audit procedures.    
+Moreover, two of the corporate recovery secondees held supervisory positions in 
+Company B’s CRU.  In one such secondment, the secondee from KPMG Australia served with 
+the client title “Executive, Credit Restructuring Retention” in the CRU office in Melbourne 
+during August and September 2002, with responsibility for supervising the CRU managers who 
+handled retention loan files. In that capacity, the secondee regularly made decisions, without 
+regard to oversight, concerning recovery strategies for loan files that exceeded the CRU 
+managers’ delegated credit authority.   
+KPMG Australia also seconded personnel from other practice areas to work for divisions 
+and subsidiaries of Company B that were consolidated into Company B’s financial statements.  
+For example, a KPMG Australia partner was seconded to serve as “Acting Global IT Audit 
+Manager” at Company B between late 2000 and August 2001, and later in the same reporting 
+period, while serving on the external audit engagement team at KPMG Australia, he reviewed 
+internal audit documentation he himself had prepared for the purpose of scoping the substantive 
+testing of Company B’s information technology.  Between January and March 2002, a KPMG 
+Australia senior manager was seconded to Company B to calculate an adjustment with respect to 
+the purchase price for the sale of a unit of the financial institution.   
+KPMG Australia also seconded personnel from other practice areas to work on 
+assignments for trusts and funds managed by Company B or its subsidiaries, but which were not 
+consolidated into Company B’s financial statements.  For example, between late 2000 and mid-
+2001, three KPMG Australia employees were seconded to a subsidiary of Company B for several 
+months to serve as “managers” with responsibility for reviewing and approving daily pricing 
+activities involving trusts managed by the subsidiary.  Among this group, one secondee 
+supervised a team of nine employees and another secondee was seconded specifically to fill in 
+for employees who had resigned.  Additionally, two secondees worked for a Company B 
+subsidiary preparing pro forma financial statements for managed investment funds, and two 
+secondees prepared or amended pro forma trust financial statements.  And from late 2002 
+through early 2003, a manager was seconded to serve as a liaison and coordinate the flow of 
+information and meetings between the external audit engagement team at KPMG Australia and a 
+subsidiary of Company B in respect of KPMG Australia's audit of trusts for which the subsidiary 
+was the responsible entity, the accounts of which were not consolidated into Company B’s 
+financial statements. 
+By late 2002 KPMG Australia had sufficient collective knowledge to be on notice of 
+secondments to Company B that violated the Commission’s independence rules.  In November 
+8
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+2002, there were internal communications within the firm about bringing to an end one 
+secondment that had been ongoing since January 2002 in violation of the policies contained in 
+the July 2002 Risk Alert.  There was also information about a later secondment which, had it 
+been properly communicated and focused on, should have caused the firm to stop that 
+secondment from being arranged or continuing.   
+d. KPMG Australia’s Termination of Non-Tax Secondments 
+On March 4, 2004, after the Commission’s commencement of a formal investigation of 
+this matter, KPMG U.S.’s DPP issued to professionals in that firm a PPL revising that firm’s 
+policy to prohibit the provision of loaned staff services to Commission-registered audit clients 
+not involving the provision of tax services. This PPL was received and reviewed by KPMG 
+Australia’s national risk management office.  On April 1, 2004, that office issued a bulletin to all 
+KPMG Australia professional personnel prohibiting all non-tax secondments to Commission-
+registered audit clients. 
+2. Other Violative Services Rendered to Company B 
+a. Commission Payments 
+Between July 2000 and November 2005, KPMG Australia received trailing commissions 
+from an affiliate of Company B, in return for having previously recommended the affiliate’s 
+products to its clients, prior to the affiliate’s acquisition by Company B in 2000.  Between 1996 
+and 2000, KPMG Australia had recommended the products to its clients in exchange for 
+receiving both initial commissions and subsequently, if the product was retained by the client, 
+trailing commissions as well.  Between 2000 and 2005, KPMG Australia received over 67,000 
+AUD in commissions for products sold before 2000 but which continued to be held by 29 
+individuals and one corporate entity.  In response to an anonymous inquiry received in 2005 
+relating to whether the payments impaired KPMG Australia’s independence in relation to 
+Company B, KPMG Australia terminated the relationship in November 2005 and returned to the 
+Company B affiliate the total amount of commission payments received from 2000 to 2005.      
+b. Advocacy Services 
+Between March 2002 and March 2004, a legal practice that at the time was associated 
+with a KPMG member firm other than KPMG Australia rendered litigation services to overseas 
+subsidiaries of Company B. These legal serv ices included representing the subsidiaries at 
+“employment tribunals” on claims of illness, injury, stress, discrimination, and unfair or 
+wrongful dismissal as well as representation of the subsidiaries in litigation on diverse subjects 
+including a bounced check, the liquidation of a customer corporation, a life insurance dispute, a 
+personal injury claim, and an unfair dismissal claim.  Most of these legal services were 
+terminated shortly after the Company B audit committee adopted, in November 2002, a policy 
+prohibiting legal services being provided by the auditor, but the representation in both a personal 
+injury and an unfair dismissal litigation continued up until April 1, 2004.  The KPMG Australia 
+audit engagement team noted the foregoing services and associated fees in a chart of non-audit 
+9
+ 
+ 
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+ 
+ 
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+  
+ 
+ 
+ 
+   
+ 
+  
+ 
+ 
+                                                 
+    
+   
+   
+  
+  
+ 
+  
+services and fees prepared monthly during the relevant period.  The legal practice separated from 
+the KPMG member firm on April 1, 2004.             
+E. LEGAL ANALYSIS 
+1. Independence Principles 
+a. Secondments 
+Since February 2001, Rule 2-01 of the Commission’s Regulation S-X has contained three 
+provisions relevant to KPMG Australia’s secondment practice.  First, Rule 2-01(b) sets forth a 
+general standard that deems independence to be impaired whenever “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.”  Second, Preliminary Note 2 to Rule 2-01 articulates four preliminary 
+factors to be considered “in the first instance” under the general standard, including 
+consideration of whether “the provision of a service . . . results in the accountant acting as 
+management or an employee of the audit client.” And third, the Rule sets forth “a non-exclusive 
+specification of circumstances inconsistent with” the general standard, including a specification 
+under the heading “Management functions,” which prohibits an accountant from “[a]cting, 
+temporarily or permanently, as a director, officer, or employee of an audit client, or performing 
+any decision-making, supervisory, or ongoing monitoring function for the audit client.”  Rule 2-
+01(c), (c)(4)(vi). Thus, acting eith er as a manager or employee of an audit client is inconsistent 
+with independence under Rule 2-01.  This principle is consistent with prior enforcement 
+proceedings, see In the Matter of Moret Ernst & Young Accountants, n/k/a Ernst & Young 
+Accountants, Exch. Act Rel. No. 46130 (June 27, 2002); In the Matter of Bernard Tarnowsky, 
+Exch. Act Rel. No. 34-32635 (July 15, 1993). See also Codification of Financial Reporting 
+Policies § 602.02.d. As described above, KPMG Aust ralia and another KPMG member firm 
+rendered at least 30 secondments to Company A, and KPMG Australia rendered at least another 
+20 secondments to Company B, which violated this principle.8 
+b. Direct Business Relationship 
+At the same time, Rule 2-01 has also prohibited, as inconsistent with the general standard 
+of independence, “any direct or material indirect business relationship with” the audit client, 
+excepting the relationship of “a consumer in the ordinary course of business.”  Rule 2-01(c)(3). 
+See also Codification of Financial Reporting Policies § 602.02.g; Commission Letter dated 
+2/14/89, responding to 3/29/88 Petition by Arthur Andersen & Co. and Others (available at:  
+As noted above, certain secondments were to Company B units whose operations were not included in 
+Company B’s consolidated financial statements and may not have been subject to audit procedures during an audit 
+of the company’s financial statements.   However, Rule 2-01(c)(4)(vi) has never contained a qualification that would 
+permit secondments of this type, even though qualifications for services where it is reasonable to conclude that the 
+results of the services will not be subject to audit procedures during an audit of the financial statements were added 
+to other subparagraphs of Rule 2-01(c)(4) in the amendments that took effect on May 6, 2003. 
+10
+ 
+8 
+ 
+ 
+ 
+  
+  
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+                                                
+ 
+           
+   
+    
+http//www.sec.gov/info/accountants/naction/aartan1.htm) (the “1989 Response”). This guidance 
+prohibits any business relationship in which an auditor and an audit client:  (i) “have joined 
+together in a profit-seeking venture,” thereby creating a “unity of interest”; (ii) have, to some 
+extent, rendered “the auditor’s interest . . . wedded to that of its client” thereby creating a 
+situation of “interdependence”; and (iii) are working together as “coventurers” to generate 
+“interdependent” revenues from a third party. 1989 Response, at 4. Such relationships create an 
+impermissible “mutuality or identity of interest” between the auditor and the audit client since 
+“the advancement of the auditor’s interest would, to some extent, be dependent upon the client,” 
+thereby rendering such relationships inconsistent with the essential requirement that the 
+appearance of independence be maintained.  Id. at 7. The Commissi on also has brought 
+numerous proceedings to enforce this prohibition. In the Matter of Ernst & Young, Initial 
+Decision Rel. No. 249, Admin. Proc. File No. 3-10933 (Apr. 16, 2004), finality order, Rel. No. 
+33-8413 (Apr. 26, 2004); In the Matter of Ernst & Young LLP, et al., Securities Exchange Act 
+Release No. 58309, AAER No. 2858, Admin. Proc. File No. 3-13114 (Aug. 5, 2008).  Applying 
+these principles, the trailing commission payments described above constituted a direct business 
+relationship between KPMG Australia and its audit client Company B.   
+c. Acting as an Advocate 
+Finally, Rule 2-01 has also included among its four preliminary factors a prohibition on 
+those services that “place[] the accountant in a position of being an advocate for the audit client.”  
+Preliminary Note 2 to Rule 2-01.  And Rule 2-01 has also prohibited legal services to the audit 
+client, subject to certain qualifications, as inconsistent with the general standard of 
+independence. Rule 2-01(c)(4)(ix). See also Codification of Financial Reporting Policies § 
+602.02.e.ii. As described above, the litigation services put the associated legal practice in the 
+position of acting as an advocate of KPMG Australia’s audit client Company B.   
+As a result of these non-audit services, KPMG Australia violated Rule 2-01 of Regulation 
+S-X and therefore did not maintain independence in appearance from its audit clients Company 
+A and Company B.   
+2. Violation of Rule 2-02(b) of Reg. S-X and of Issuer Reporting Provisions 
+Because these non-audit services impaired KPMG Australia’s independence as defined 
+by Rule 2-01 of Regulation S-X, they both constituted and caused certain statutory and 
+regulatory violations. 
+Each time KPMG Australia signed an audit report for Company A or Company B where 
+either the period covered by the audit, or the period of the audit work, or both, overlapped with 
+the non-audit services recited above, KPMG Australia directly violated 2-02(b) of Regulation S-
+X. See Rule 2-02(b) (requiring accountant’s report to “state whether the audit was made in 
+accordance with generally accepted auditing standards”).9  Issuing an audit report incorrectly 
+Pursuant to Commission Release 33-8422, GAAS, as used in Regulation S-X, means the standards of the 
+PCAOB and any applicable Commission rules.  Audit reports dated on or after May 24, 2004 – the effective date of 
+PCAOB Auditing Standard 1 – were required to state they were performed in accordance with PCAOB standards; 
+reports dated prior to May 24, 2004 were required to state that they were performed in accordance with the standards 
+11
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+                                                                                                                                                             
+   
+    
+ 
+  
+      
+   
+ 
+stating that the audit was performed in accordance with U.S. GAAS or PCAOB standards, which 
+include independence requirements, violates Rule 2-02(b).  The KPMG Australia audit reports 
+on financial statements for Company A’s 2001 and 2002 fiscal years and for Company B’s 2001 
+through 2003 fiscal years improperly stated that that the audits had been performed in 
+accordance with U.S. GAAS.  The KPMG Aust ralia audit report on Company B’s financial 
+statements for the 2004 fiscal year improperly stated that that the audit had been performed in 
+accordance with PCAOB standards. 
+Likewise, each time non-independent audit reports were filed with Company A’s or 
+Company B’s annual reports on Form 20-F, the issuer violated federal securities statutes and 
+rules requiring that those Commission filings include financial statements that were audited by 
+independent accountants. See Exchange Act § 13(a) and Exchange Act Rule 13a-1 thereunder 
+(requiring annual reports to include independently audited financials).10  By issuing consents for 
+inclusion of these audit reports in Commission filings, KPMG Australia bears responsibility for 
+causing all of these reporting violations, since it should have known that the non-audit services 
+would cause Company A and Company B to lack independent audits and thus to violate the 
+reporting provisions listed above. 
+3. Firm Responsibility 
+KPMG Australia as a firm bears responsibility for these violations for the additional 
+reason that it failed to adopt adequate quality controls to educate and to monitor its personnel 
+during the relevant period with respect to the independence requirements of U.S. GAAS or 
+PCAOB standards and applicable Commission rules.  During the relevant period, audit firms 
+were required to educate firm personnel assigned to engagements for Commission-registered 
+audit clients about these independence requirements.  See, e.g., American Institute of Certified 
+Public Accountants, QC Section 20.09 (“Policies and procedures should be established to 
+provide the firm with reasonable assurance that personnel maintain independence (in fact and 
+appearance) in all required circumstances.”).  These same firms were required to monitor on an 
+ongoing basis whether personnel were complying with these independence requirements.  See id. 
+QC Section 20.08 (“[P]olicies and procedures for the quality control element of Monitoring are 
+established to provide the firm with reasonable assurance that the policies and procedures related 
+to each of the other elements are suitably designed and are being effectively applied.”).  In this 
+context: 
+Monitoring involves an ongoing consideration and evaluation of the:  (a) relevance and 
+adequacy of the firm’s policies and procedures; (b) appropriateness of the firm’s 
+guidance materials and any practice aids; (c) effectiveness of professional development 
+of GAAS.  PCAOB independence standards under Rule 3600T require auditors to be independent from their audit 
+clients. 
+See also Form 20-F, Part I, Item 8.A.1 (requiring that the filing contain consolidated financial statements 
+audited by an independent auditor and accompanied by an audit report); id. Part 1, Item 8.A.2. (requiring that 
+financial statements be audited in accordance with GAAS and with Commission standards for auditor 
+independence). 
+12
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+                                                 
+   
+   
+  
+     
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+   
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+ activities; and (d) compliance with the firm’s policies and procedures.  When 
+monitoring, the effects of the firm’s management philosophy and the environment in 
+which the firm practices and its clients operate should be considered.   
+American Institute of Certified Public Accountants, QC Section 20.20.   
+As discussed above, KPMG Australia’s national risk management office failed to provide 
+its personnel with fulsome independence guidance with respect to secondments and also failed to 
+adopt quality controls adequate to monitor compliance by the firm’s personnel with respect to 
+both firm guidance and the Commission’s independence rules.  In addition, KPMG Australia 
+failed to adopt quality controls adequate to monitor the full range of non-audit services provided 
+to Commission-registered audit clients not only by the firm’s personnel but also by personnel at 
+associated KPMG member firms in other countries. 11  As a result of these failures, on multiple 
+occasions KPMG Australia’s personnel failed to inform themselves adequately or respond 
+appropriately to problematic information concerning non-audit services to Company A and 
+Company B that should have affected the independence determination.  See In the Matter of 
+KPMG Peat Marwick LLP, Rel. No. 34-43862, 2001 SEC LEXIS 98, at *97 (Jan. 19, 2001), 
+reconsideration denied, Rel. Nos. 34-44050 and AAER-1374 (Mar. 8, 2001), petition for review 
+denied, 289 F.3d 109 (D.C. Cir. 2002) (firm’s failure, at high levels, to inform itself about facts 
+material to independence determination constitutes negligence). 
+4. Improper Professional Conduct 
+Rule 102(e) of the Commission’s Rules of Practice and Exchange Act Section 4C both 
+define “improper professional conduct” to include: (i) “[a] single instance of highly unreasonable 
+conduct that results in a violation of applicable professional standards” in circumstances in 
+which the “accountant,” in the case of Rule 102(e), or “registered public accounting firm or 
+associated person,” in the case of Section 4C, “knows, or should know, that heightened scrutiny 
+is warranted”; or (ii) “[r]epeated instances of unreasonable conduct, each resulting in a violation 
+of applicable professional standards, that indicate a lack of competence to practice before the 
+Commission.”  The Commission has made  clear that auditor independence is always an area 
+requiring heightened scrutiny. See Adopting Release for Rule 102(e), Rel. Nos. 33-7593, 34-
+40567, 1998 SEC LEXIS 2256 (Oct. 19, 1998) (“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.”). Here, KPMG Australia’s conduct with respect to the non-audit services 
+As the firm that signed the audit reports on the financial statements of Company A and Company B, KPMG 
+Australia bore ultimate responsibility for the independence of the audit engagement.  Under the Commission’s Rule 
+2-01, the independence of the audit engagement may be compromised when non-audit services are rendered not just 
+by the firm that leads the audit engagement but also by any associated entities in other countries. See Rule 2-
+01(f)(2) (“Accounting firm means an organization . . . that is engaged in the practice of public accounting . . . and all 
+of the organization’s departments, divisions, parents, subsidiaries, and associated entities, including those located 
+outside of the United States.”).  Moreover, Rule 2-01(c)(7) requires, effective May 6, 2003, that all non-audit 
+services receive pre-approval from the client’s audit committee, and as a matter of practice any communications 
+between the auditor and the audit committee are typically coordinated through the firm that leads the audit 
+engagement.  Thus, Rule 2-01 implicitly contemplates that any associated entities will typically apprise the firm that 
+leads the audit engagement of any non-audit services prior to rendering such services to the client.  
+13
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+ 
+  
+rendered to Company A and Company B constituted improper professional conduct under both 
+prongs of this definition. 
+IV. 
+Based on the foregoing, the Commission finds that Respondent KPMG Australia: (a) 
+engaged in improper professional conduct pursuant to Exchange Act Section 4C and Rule 
+102(e)(1)(ii) of the Commission’s Rules of Practice; (b) violated Rule 2-02(b) of Regulation S-
+X; and (c) caused Company A and Company B to violate Section 13(a) of the Exchange Act and 
+Exchange Act Rule 13a-1 thereunder. 
+V. 
+Respondent has undertaken to: 
+1. Retain, within sixty (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 whether KPMG Australia’s quality controls are designed and implemented 
+in a manner reasonably sufficient under PCAOB standards and applicable Commission rules 
+both to educate and to monitor its personnel with respect to the independence requirements 
+concerning non-audit services to, advocacy on behalf of, and business relationships with 
+Commission-registered audit clients.  KPMG Australia shall cooperate fully with the 
+Independent Consultant and shall provide the Independent Consultant with access to its own 
+files, books, records, and personnel as reasonably requested for the review;  
+2. Require that the Independent Consultant issue a report, within six (6) months of 
+being retained, summarizing the review and recommending policies and procedures reasonably 
+designed to ensure compliance with the education and monitoring of firm personnel with respect 
+to the independence requirements, under PCAOB standards and applicable Commission rules, 
+concerning non-audit services to, advocacy on behalf of, and business relationships with 
+Commission-registered audit clients.  Simultaneously with providing that report to KPMG 
+Australia, KPMG Australia shall require that the Independent Consultant contemporaneously 
+transmit a copy to Nina B. Finston, Assistant Director, Division of Enforcement, U.S. Securities 
+and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-5631;  
+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, KPMG 
+Australia shall in writing advise the Independent Consultant and the Commission of any 
+recommendations that it considers to be unnecessary, unduly burdensome, impractical, or costly.  
+With respect to any recommendation that KPMG Australia considers unnecessary, unduly 
+burdensome, impractical or costly, KPMG Australia 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 KPMG Australia and the 
+Independent Consultant do not agree, such parties shall attempt in good faith to reach an 
+agreement within sixty (60) days after KPMG Australia serves the written advice.  In the event 
+14
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+KPMG Australia and the Independent Consultant are unable to agree on an alternative proposal, 
+KPMG Australia will abide by the determinations of the Independent Consultant;  
+4. Require the Independent Consultant to review and evaluate whether KPMG 
+Australia’s quality controls are designed and implemented in a manner reasonably sufficient 
+under PCAOB standards both: (i) to educate its personnel, and (ii) to monitor compliance by its 
+personnel, with respect to the independence requirements, under PCAOB standards and 
+applicable Commission rules, concerning non-audit services to, advocacy on behalf of, and 
+business relationships with Commission-registered audit clients.  This review shall encompass 
+whether KPMG Australia’s quality controls are designed and implemented in a manner 
+reasonably sufficient under PCAOB standards to monitor for prohibited non-audit services, 
+advocacy, and business relationships as between KPMG member firms in other countries and 
+Commission-registered audit clients for which KPMG Australia signs audit reports under Rule 2-
+02(b) of Regulation S-X. The Independent Cons ultant shall disclose to the staff of the 
+Commission in the event that KPMG Australia or any of its employees, agents, consultants, joint 
+venturors, contractors, or subcontractors, refuse to provide information necessary for the 
+performance of the Independent Consultant’s responsibilities.  KPMG Australia agrees that it 
+will not take any action to retaliate against the Independent Consultant for such disclosures;  
+5. Require the Independent Consultant to enter into an agreement with KPMG 
+Australia that provides that for the period of engagement and for a period of two (2) years from 
+completion of the engagement, the Independent Consultant shall not enter into any employment, 
+consultant, attorney-client, auditing or other professional relationship with KPMG Australia, or 
+any of its present or former affiliates, directors, officers, employees, or agents acting in their 
+capacity. The agreement will also provide that th e 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 KPMG Australia, 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 (2) years after the engagement;  
+6. Certify, in writing, compliance with the undertaking(s) set forth above.  The 
+certification shall identify the undertaking(s), provide written evidence of compliance in the form 
+of a narrative, and be supported by exhibits sufficient to demonstrate compliance.  The 
+Commission staff may make reasonable requests for further evidence of compliance, and 
+Respondent agrees to provide such evidence. The certification and supporting material shall be 
+submitted to Nina B. Finston, Assistant Director, Division of Enforcement at the address given 
+above with a copy to the Office of Chief Counsel of the Enforcement Division at the same 
+address as above but using zip code 20549-6553 no later than sixty (60) days from the date of the 
+completion of the undertakings; 
+7. These undertakings shall be binding upon any acquirer or successor in interest to 
+KPMG Australia’s or substantially all of KPMG Australia’s audit practice for Commission-
+registered audit clients; and 
+15
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+   
+ 
+ 
+   
+ 
+8. For good cause shown, the Commission’s staff may extend any of the procedural 
+dates set forth above. 
+VI. 
+In determining to accept the Offer, the Commission considered the remedial steps taken 
+by KPMG Australia since the time of the conduct described above, such as additional national 
+risk management staff and resources, increased training, revised policies, and strengthened 
+controls, as well as the cooperation by KPMG Australia and its personnel during the 
+investigation of this matter.   
+VII. 
+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 Respondent KPMG 
+Australia be, and hereby is, censured. 
+IT IS FURTHER ORDERED, effective immediately, that Respondent KPMG Australia 
+shall cease and desist from committing any violations and any future violations of Rule 2-02 of 
+Regulation S-X, and from causing any violations and any future violations of Section 13(a) of 
+the Exchange Act and Exchange Act Rule 13a-1 thereunder. 
+IT IS FURTHER ORDERED that Respondent KPMG Australia shall, within ten (10) 
+days of the entry of this Order, pay disgorgement of $1,982,000 and prejudgment interest of 
+$760,000 to the United States Treasury.  If timely payment is not made, additional interest shall 
+accrue pursuant to SEC Rule of Practice 600.  Payment shall be: (A) made by wire transfer, 
+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 KPMG Australia as a Respondent in these proceedings and the file number of 
+these proceedings, a copy of which cover letter and money order or check shall be sent to Nina 
+B. Finston, Assistant Director, Division of Enforcement, at the address given above. 
+IT IS FURTHER ORDERED that Respondent KPMG Australia shall comply with its 
+undertakings enumerated in Section V above.  
+By the Commission. 
+        E l i z a b e t h M . M u r p h y
+        S e c r e t a r y 
+16
+ 
+ 
+ 
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+    
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+    
+  
+             
+ 
+Service List 
+Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another 
+duly authorized officer of the Commission, shall serve a copy of the 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"), on the 
+Respondent and its legal agent. 
+The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Nina B. Finston, Esq. 
+Division of Enforcement  
+Securities and Exchange Commission  
+100 F Street, N.E. 
+Washington, DC 20549-5631 
+KPMG Australia   
+c/o Michael P. Carroll, Esq. 
+Davis Polk & Wardwell LLP 
+450 Lexington Avenue 
+New York, NY 10017 
+Michael P. Carroll, Esq. 
+Davis Polk & Wardwell LLP 
+450 Lexington Avenue 
+New York, NY 10017 
+(Counsel for KPMG Australia) 
+17
+ 
\ No newline at end of file
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+ 
+ 
+ 
+ 
+ 
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+       
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+   
+ 
+                                                 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64025 / March 3, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3249 / March 3, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14283 
+: 
+: 
+: 
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+: PROCEEDINGS PURSUANT TO RULE 
+S. BLAIR ABERNATHY, CPA, : 102(e) OF THE COMMISSION’S RULES OF 
+: 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 S. Blair 
+Abernathy (“Respondent” or “Abernathy”) 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. Abernathy, age 49, is a resident of La Verne, California.  Abernathy was 
+IndyMac Bancorp, Inc.’s (“IndyMac”) CFO from April 25, 2008 to July 2008.  Abernathy was 
+IndyMac Bank, F.S.B.’s (“IndyMac Bank”) executive vice president in charge of four Bank groups:  
+Capital Markets (November 2007 to April 25, 2008); Specialty Lending (March 2007 to November 
+2007); Investment Portfolio (2004 to March 2007); and Secondary Marketing (1994 to 2004).  
+Abernathy was licensed as a CPA in California until 2003. 
+2. IndyMac was a Delaware corporation with its principal executive offices in 
+Pasadena, California.  IndyMac’s common stock was registered with the Commission pursuant to 
+Section 12(b) of the Securities Exchange Act of 1934 and traded on the New York Stock Exchange 
+until it was delisted on August 18, 2008.  On July 31, 2008, IndyMac filed for Chapter 7 
+bankruptcy. 
+3. On February 11, 2011, the Commission filed a complaint against Abernathy 
+in SEC v. Abernathy, Civil Action No. CV 11-1308-JFW (SSx), in the United States District Court 
+for the Central District of California.  On February 17, 2011, a final judgment was entered against 
+Abernathy, permanently enjoining him from future violations of Sections 17(a)(2) and 17(a)(3) of 
+the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77q(a)(2) & (a)(3). 
+4. The Commission’s complaint alleged, among other things, that in 2007 
+Abernathy negligently made materially false and misleading statements in the offer and sale of six 
+IndyMac Bank mortgage-backed securities offerings regarding the quality of the residential 
+mortgage loans underlying the offerings.  In addition, the Commission’s complaint alleged that 
+Abernathy negligently made false and misleading statements regarding IndyMac’s capital and 
+liquidity position in its common stock prospectus filed on May 2, 2008.  The complaint alleged 
+that Abernathy, by his conduct, violated Sections 17(a)(2) and 17(a)(3) of the Securities Act. 
+2
+ 
+ 
+ 
+ 
+ 
+  
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+ 
+   
+ 
+      
+  
+      
+           
+ 
+ 
+ 
+ 
+ 
+      
+  
+IV. 
+In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanction agreed to in Respondent Abernathy’s Offer. 
+Accordingly, it is hereby ORDERED, effective immediately, that: 
+A. Abernathy is suspended from appearing or practicing before the Commission as an 
+accountant.   
+B. After two (2) 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 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.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+4
+ 
\ No newline at end of file
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+
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+                   U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 21873 / March 4, 2011 
+
+ Accounting and Auditing Release 3250 / March 4, 2011 
+
+  Securities and Exchange Commission v. Ian J. McCarthy , Case No. 1:11-CV-667-CAP (N.D. Ga.) 
+
+ On March 3, 2011, the Securities and Exchange Commission filed an action against Ian J. McCarthy, the President and Chief Executive Officer of Beazer Homes USA, Inc., an Atlanta, Georgia-based homebuilder, seeking to recover bonuses and other incentive-based and equity-based compensation and stock sale profits received while the Company was committing accounting fraud.  
+
+ The Commission's enforcement action charges McCarthy, of Atlanta, Georgia, with violations of Section 304 of the Sarbanes-Oxley Act of 2002. Section 304 requires reimbursement by chief executive officers and chief financial officers of certain compensation and stock sale profits they earned while their companies were in material non-compliance with financial reporting requirements due to misconduct, as well as profits from stock sales during that same period. According to the SEC's complaint against McCarthy, Beazer was required to prepare accounting restatements for the fiscal year ended September 30, 2006 and the first three quarters of fiscal 2006 due to its fraudulent misconduct.  This misconduct consisted of a manipulation of Beazer's land development and house cost-to-complete accounts to increase income, and the improper recording of certain model home financing transactions as sales, again to increase Beazer's income.  McCarthy was not charged with the underlying misconduct or alleged to have otherwise violated the federal securities laws.   
+
+ Without admitting or denying the Commission's allegations, McCarthy agreed to reimburse Beazer $6,479,281 in cash, 40,103 restricted stock units (or its equivalent), and 78,763 shares of restricted stock (or its equivalent). This reimbursement represents McCarthy's entire fiscal year 2006 incentive bonus ($5,706,949 in cash and 40,103 in restricted stock units), $772,332 in stock sale profits, and 78,763 shares of restricted stock granted in 2006.  The settlement with McCarthy is subject to court approval.    
+
+ This is the third enforcement action in the SEC's investigation into Beazer's accounting misconduct. In September 2008, the Commission issued an Order that instituted cease-and-desist proceedings and found that in certain periods between 2000 and 2007, Beazer fraudulently misstated its financial statements for the purpose of improperly managing its quarterly and annual earnings. Specifically, the Order stated that the Company managed its earnings during the period through the use of improper land inventory and housing accruals or reserves, and, beginning in fiscal 2006, improperly recognized income from certain model home financing transactions. Beazer consented to the issuance of the Order without admitting or denying any of the findings.  In July 2009, the Commission filed a civil injunctive action against Michael T. Rand, Beazer's former Chief Accounting Officer, for conducting the fraudulent earnings management scheme and for misleading Beazer's outside auditors and internal Beazer accountants in order to conceal his wrongdoing.  Litigation in that matter is ongoing. 
+
+ See also,  Exchange Act Release No. 58633  / September 24, 2008;  Litigation Release No. 21114  / July 1, 2009. 
+
+ 
+  SEC Complaint in this matter  
+  -->
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diff --git a/raw/aaer/2011/AAER-3251.txt b/raw/aaer/2011/AAER-3251.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4aa1b3a7b7a2fd7b5f47da2398f691cd75d1c8a7
--- /dev/null
+++ b/raw/aaer/2011/AAER-3251.txt
@@ -0,0 +1,98 @@
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64049 / March 8, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3251 / March 8, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-14288 
+______________________________ 
+:  
+In the Matter of   :  
+: ORDER OF SUSPENSION 
+: PURSUANT TO RULE 102(e)(2) OF THE  
+SUJATA SACHDEVA, : COMMISSION’S RULES OF PRACTICE 
+:  
+Respondent.   :    
+______________________________: 
+ 
+ 
+ 
+ I. 
+ 
+The Securities and Exchange Commission deems it appropriate to issue an order of 
+forthwith suspension of Sujata Sachdeva (“Sachdeva”) pursuant to Rule 102(e)(2) of the 
+Commission’s Rules of Practice [17 C.F.R.  200.102(e)(2)].
+1  
+ 
+ 
+II. 
+ 
+ In anticipation of the institution of these proceedings, Sachdeva 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, and the 
+findings contained in Section III.2. below, which are admitted, Respondent consents to the entry 
+of this Order of Suspension Pursuant to Rule 102(e)(2) of the Commission’s Rules of Practice 
+(“Order”), as set forth below.   
+ 
+                         
+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
+ 
+III. 
+ 
+ On the basis of this Order and Respondent’s Offer, the Commission finds that: 
+ 
+1. Sachdeva, age 46, is a resident of Mequon, Wisconsin.  From 1992 through her 
+termination on December 23, 2009, Sachdeva was Principal Accounting Officer, Secretary, and 
+Vice-President of Finance of Koss Corporation (“Koss”).  Koss securities are registered pursuant 
+to Section 12(b) of the Securities Exchange Act of 1934 and trade on the NASDAQ Global 
+Market.     
+ 
+2. On July 16, 2010, Sachdeva pleaded guilty  to six counts of wire fraud, in 
+violation of 18 U.S.C. Section 1343, before the United States District Court for the Eastern 
+District of Wisconsin in United States v. Sujata Sachdeva, Case No. 10-CR-6.  On November 17, 
+2010, the court in the criminal case entered judgment and sentenced Sachdeva to a prison term of 
+132 months, followed by 3 years of supervised release, and ordered Sachdeva to make restitution 
+in the amount of $34 million. 
+ 
+3. The counts of the criminal indictment to which Sachdeva pleaded guilty alleged, 
+inter
+ alia, that Sachdeva defrauded Koss and obtained money and property by means of material 
+false and fraudulent pretenses and representations and did knowingly cause wire 
+communications to be transmitted in interstate commerce for the purpose of executing her 
+scheme. 
+ 
+ 
+III. 
+ 
+In view of the foregoing, the Commission finds that Sachdeva 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 Sujata Sachdeva 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. 
+ 
+ 
+ 
+ 
+ 
+Elizabeth M. Murphy 
+Secretary 
+ 
+ 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3252.txt b/raw/aaer/2011/AAER-3252.txt
new file mode 100644
index 0000000000000000000000000000000000000000..55ff10baeca745abdbe31b29cad0e18977e16937
--- /dev/null
+++ b/raw/aaer/2011/AAER-3252.txt
@@ -0,0 +1,1366 @@
+
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+              Fernando J. Espuelas et al.
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+                U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 21880 / March 9 , 2011 
+
+ Accounting and Auditing Enforcement Release No. 3252 / March 9, 2011 
+
+  Securities and Exchange Commission v. Fernando J. Espuelas et al. , Civil Action No. 06 CV 2435 (RJH) (S.D.N.Y. filed Mar. 29, 2006) 
+
+ STARMEDIA CO-FOUNDER AGREES TO SETTLEMENT IN SEC LITIGATION 
+
+ The U.S. Securities and Exchange Commission today announced that on March 8, 2011, the U.S. District Court for the Southern District of New York entered a settled final judgment as to Defendant Jack C. Chen, a co-founder of StarMedia Network, Inc. and the company's former President. StarMedia is a former Internet portal based in New York City. The Commission's amended complaint, filed on December 11, 2008, alleged that for fiscal year 2000 and the first two quarters of fiscal year 2001, StarMedia's books and records, and its filings with the Commission, misstated the quality and amount of the company's revenue. The amended complaint also alleged that StarMedia executives made misstatements regarding the company's revenue to certain entities from which it was attempting to obtain financing. In its amended complaint, the Commission alleged violations of the federal securities laws by eight former StarMedia executives. 
+
+ Without admitting or denying the allegations in the amended complaint, Chen consented to the entry of the Final Judgment permanently enjoining him from future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and Rule 13b2-1 promulgated under the Securities Exchange Act of 1934, 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, and 13a-13, and ordering him to pay a civil penalty in the amount of $100,000. 
+
+ Chen is the third defendant to settle with the Commission.  See  Litigation Release Nos.  19627  (Mar. 29, 2006) and  19839  (Sept. 20, 2006).   
+
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diff --git a/raw/aaer/2011/AAER-3253.pdf b/raw/aaer/2011/AAER-3253.pdf
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@@ -0,0 +1,139 @@
+UNITED STATES OF AMERICA
+ 
+before the
+ 
+SECURITIES AND EXCHANGE COMMISSION
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Rel. No. 64077 / March 11, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Rel. No. 3253 / March 11, 2011 
+Admin. Proc. File No. 3-14177 
+In the Matter of 
+ORDER DENYING MOTION 
+CARL W. JASPER, CPA TO LIFT TEMPORARY 
+SUSPENSION AND 
+DIRECTING HEARING 
+On January 7, 2011, we issued an order instituting proceedings ("OIP") against Carl W. 
+Jasper, a certified public accountant ("CPA"), pursuant to Commission Rule of Practice 
+1102(e)(3),  that temporarily suspended him from appearing or practicing before the Commission
+1 Commission Rule of Practice 102(e)(3), 17 C.F.R. § 201.102(e)(3), provides in 
+pertinent part that: 
+(i) The Commission, with due regard to the public interest and without preliminary 
+hearing, may, by order, temporarily suspend from appearing or practicing before it 
+any . . . accountant . . . who has been by name: 
+(A) 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; or 
+(B) Found by any court of competent jurisdiction in an action brought by the 
+Commission to which he or she is a party or found by the Commission in any 
+administrative proceeding to which he or she is a party to have violated (unless 
+the violation was found not to have been willful) or aided and abetted the 
+violation of any provision of the Federal securities laws or of the rules and 
+regulations thereunder. 
+ 
+2
+ 
+as an accountant.2   Jasper has filed a petition, pursuant to Rule 102(e)(3)(ii),3  requesting that his 
+temporary suspension be lifted. 
+Jasper was Vice President, Chief Financial Officer, and Principal Accounting Officer of 
+Maxim Integrated Products, Inc. ("Maxim") during the period from April 1999 through January 
+2007.4   The Commission filed a complaint in the United States District Court for the Northern 
+District of California on December 21, 2007, alleging that Jasper "engaged in a scheme to 
+illegally backdate stock options granted to Maxim employees and directors, concealing millions 
+of dollars in expenses from investors and significantly overstating the Company's income."  The 
+complaint also alleged that Jasper "was aware of instances of backdating, and on repeated 
+occasions prepared for the signature of Maxim's then Chief Executive Officer falsely dated 
+option grant approval documents to make it appear as though the options had been granted at the 
+market price on an earlier date."  The complaint further alleged that Jasper "also knew, or was 
+reckless in not knowing, that the Company did not properly account for such options or 
+accurately disclose Maxim's option granting practices." 
+A jury found that Jasper violated the antifraud, books and records, false statements and 
+omissions to accountants and auditors, and false certifications provisions of the federal securities 
+laws.  The jury also found that Jasper aided and abetted Maxim's violations of reporting, 
+recordkeeping, and internal controls provisions of the Securities Exchange Act of 1934.
+5   On July 
+21, 2010, the District Court entered a judgment against Jasper permanently enjoining him from 
+2 Carl W. Jasper, CPA, Securities Exchange Act Rel. No. 63674 (Jan. 7, 2011), 
+100 SEC Docket 36680, 36680. 
+3 17 C.F.R. § 201.102(e)(3)(ii).  
+4 Jasper, 100 SEC Docket at 36681. The OIP alleged that Jasper "is and has been a 
+CPA licensed to practice in the State of California" and that Jasper's CPA license was inactive 
+during his tenure at Maxim. 
+5 The jury found that Jasper violated the antifraud provisions in Exchange Act 
+Section 10(b), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5, and 
+Section 17(a)(1) of the Securities Act of 1933, 15 U.S.C. § 77q(a)(1); the books and records 
+provisions of Exchange Act Rule 13b2-1, 17 C.F.R. § 240.13b2-1; the false statements and 
+omissions to accountants and auditors provisions of Exchange Act Rule 13b2-2, 17 C.F.R.         
+§ 240.13b2-2; and the false certifications provisions of Exchange Act Rule 13a-14, 17 C.F.R.    
+§ 240.13a-14. The jury further found that Jasper aided and abetted Maxim's violations of the 
+issuer reporting requirements in Exchange Act Section 13(a), 15 U.S.C. § 78m(a), and Exchange 
+Act Rules 12b-20, 13a-1, 13a-11, and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, 240.13a-11, 
+and 240.13a-13; the books and records provisions of Exchange Act Section 13(b)(2)(A), 15 
+U.S.C. § 78m(b)(2)(A), and the internal controls provisions of Exchange Act Section 
+13(b)(2)(B), 15 U.S.C. § 78m(b)(2)(B).  
+ 
+3
+ 
+"any future violations of the securities laws or regulations."6   The judgment also barred Jasper 
+from serving as a director or officer of a publicly-traded company for a period of two years, 
+ordered Jasper to pay a civil monetary penalty of $360,000, and ordered him to reimburse Maxim 
+for bonuses and stock-sale profits in the amount of $1,869,639. 
+In issuing the OIP, we found that it was "appropriate and in the public interest" that 
+Jasper be temporarily suspended from appearing or practicing before the Commission, based on 
+the District Court's final judgment.  We stated that the temporary suspension would become 
+permanent unless Jasper filed a petition challenging it within thirty days of service of the order, 
+pursuant to Rule of Practice 102(e)(3)(ii).  We further advised that, pursuant to Rule of Practice 
+102(e)(3)(iii), upon receipt of such a petition, we would either lift the temporary suspension, set 
+the matter down for hearing, or both. 
+In his petition, Jasper requests that the temporary suspension be lifted or modified to a 
+limited period "coterminous with the two-year D&O bar" imposed by the District Court.  Jasper 
+argues that the jury did not make findings setting forth the specific Maxim options grants with 
+respect to which Jasper had committed violations.  According to Jasper, "[i]t is therefore 
+impossible to discern from the verdict how many backdated grants the jury found Mr. Jasper was 
+aware of, the value of the grants, or the extent of his role in backdating."  Jasper states that the 
+jury found him not guilty of three of the eleven charges included in the Commission's complaint, 
+and "that the jury asked about the 'responsibility' of various officer for misstatements, 
+suggest[ing] it did not view Mr. Jasper as a ringleader in whatever improprieties it may have 
+found."  Jasper claims that a permanent suspension would serve no remedial purpose because he 
+is unlikely to commit future violations "in the absence of [Maxim's then-CEO] and the culture he 
+created at Maxim."  Jasper argues that the violations were "not motivated by self-interest (apart 
+from, at best, keeping his job)" and points out his prior lack of any disciplinary history during his 
+twenty-eight year career as an accountant and auditor. 
+The Division of Enforcement has not filed an opposition to Jasper's petition. 
+"Rule 102(e)(3) permits the Commission to suspend any accountant or other professional 
+or expert who has been permanently enjoined from violating or aiding and abetting the violation 
+of the Federal securities laws . . . ."
+7   Generally, a respondent in a "follow-on" proceeding is 
+precluded from challenging the basis for, or findings in, the underlying injunctive action.8   At this 
+6 Carl W. Jasper, Litigation Rel. No. 21598 (July 22, 2010). 
+7 Daniel S. Lezak, 57 S.E.C. 997, 1001 (2004). 
+8 Michael Batterman, 57 S.E.C. 1031, 1039 n.18 (2004); see also Lezak, 57 S.E.C. 
+at 1001 (holding that "[t]he findings of the Court, which [the petitioner] is precluded from 
+contesting in this proceeding, as well as the injunction issued against him justify the continuance 
+(continued...) 
+ 
+4
+ 
+stage, it appears that the findings made in the injunctive proceeding and the injunction issued 
+against Jasper "justify the continuance of his suspension until it can be determined what, if any, 
+action may be appropriate to protect the Commission's process."
+9   As provided in Rule 
+102(e)(3)(iii), therefore, we will set the matter down for public hearing. 
+Accordingly, IT IS ORDERED that this proceeding be set down for public hearing before 
+an administrative law judge in accordance with Rule of Practice 110.  As specified in Rule of 
+Practice 102(e)(3)(iii), the hearing in this matter shall be expedited in accordance with Rule of 
+Practice 500; it is further 
+ORDERED that the administrative law judge shall issue an initial decision no later than 
+210 days from the date of service of this Order; and it is further 
+ORDERED that the temporary suspension of Carl W. Jasper, entered on January 7, 2011, 
+remain in effect pending a hearing and decision in this matter. 
+By the Commission. 
+Elizabeth M. Murphy
+        Secretary 
+8 (...continued) 
+of his suspension until it can be determined what, if any, action may be appropriate to protect this 
+Commission's processes"). 
+9 William D. Shovers, Exchange Act Rel. No. 59874 (May 6, 2009), 95 SEC Docket 
+16512, 16515. 
\ No newline at end of file
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+ 
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+_____________________________ 
+    
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+ 
+                                                                                                                                                                              
+     
+ 
+ 
+ 
+ 
+ 
+UNITED STATES OF AMERICA 
+Before the
+ 
+SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64123 / March 24, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3255 / March 24, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14305 
+: 
+In the Matter of :  ORDER INSTITUTING CEASE-AND-DESIST
+ : PROCEEDINGS PURSUANT TO SECTION 
+: 21C OF THE SECURITIES EXCHANGE ACT 
+: OF 1934, MAKING FINDINGS, IMPOSING 
+BALL CORPORATION, : A CEASE-AND-DESIST ORDER AND A  
+: CIVIL MONEY PENALTY  
+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 Ball Corporation 
+(“Ball,” “the Company,” 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 
+Respondent and the subject matter of these proceedings, which are admitted, Respondent 
+consents to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to 
+Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a 
+Cease-and-Desist Order and a Civil Money Penalty (“Order”), as set forth below. 
+ 
+ 
+ 
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+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+III. 
+On the basis of this Order and Respondent’s Offer, the Commission finds that: 
+Summary 
+1. Ball Corporation, an Indiana corporation based in Broomfield Colorado, is 
+a manufacturer of metal packaging for beverages, foods and household products.  From 
+July 2006 through October 2007, Ball, through its Argentine subsidiary Formametal, 
+S.A., offered and paid at least ten bribes, totaling at least $106,749, to employees of the 
+Argentine government to secure the importation of prohibited used machinery and the 
+exportation of raw materials at reduced tariffs.  
+2. Although certain accounting personnel at Ball learned soon after Ball 
+acquired Formametal in March 2006 that Formametal employees may have made 
+questionable payments and caused other compliance problems before the acquisition, the 
+Company failed to take sufficient action to ensure that such activities did not recur at 
+Formametal after Ball took control of the Argentine company.  Within months of Ball’s 
+acquisition of Formametal, two Formametal executives—the then-Formametal President 
+and then-Formametal Vice President of Institutional Affairs (hereinafter the “President” 
+and “Vice President of Institutional Affairs,” respectively)—authorized improper 
+payments to Argentine officials.  The true nature of the payments was mischaracterized 
+as ordinary business expenses on Formametal’s books and records and went undetected 
+for over a year. 
+Respondent 
+3. In addition to supplying metal cans to food, beverage, and household 
+products customers, Ball Corporation provides aerospace and other technological services 
+to commercial and governmental customers.  The Company employs approximately 
+14,000 people in more than ninety locations worldwide.  Its stock is registered pursuant 
+to Section 12(b) of the Exchange Act and is listed on the New York Stock Exchange 
+under the ticker symbol BLL.  Ball’s Form 10-K for the period ending December 31, 
+2009, reported consolidated net income of $387.9 million on revenue of $7.34 billion. 
+Ball acquired Argentine company Formametal, S.A., on March 27, 2006, as part of an 
+acquisition of a larger U.S. aerosol container business.  Formametal, a wholly-owned 
+subsidiary of Ball, manufactures aerosol cans.  Formametal’s financial results are 
+reported on a consolidated basis in Ball’s financial statements.   
+2 
+
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+        
+  
+ 
+Facts 
+A. 	 Formametal Made or Offered Unlawful Payments to Officials of the 
+Argentine Government 
+4. In June 2006, approximately three months after Ball acquired Formametal, 
+a financial analyst in the general accounting group for Ball’s Metal Food and Household 
+Packaging Products Division made a routine visit to the newly acquired subsidiary to 
+gather information about its operations.  During the course of his visit, the analyst 
+discovered that Formametal’s employees may have made questionable payments and 
+caused other compliance problems in the past.  Concerned that such activity could recur 
+at Formametal in the future, the analyst included his findings in a report (“the 
+Formametal Report”) that he submitted to the director of accounting of Ball’s Metal Food 
+and Household Packaging Products Division. The Formametal Report highlighted prior 
+infractions by Formametal, including questionable customs fees, used machinery being 
+declared new to circumvent customs regulations, other dishonest customs declarations, 
+and the destruction of documents.  Although Ball had demoted Formametal’s incumbent 
+President and replaced the Chief Financial Officer after acquiring the subsidiary in March 
+2006, when the Formametal Report came to the attention of several senior executives in 
+Ball’s Metal Food and Household Packaging Products Division, Ball’s actions were not 
+sufficient to prevent future infractions by Formametal executives. 
+5. In the period between July 2006 and October 2007, and following the 
+analyst’s discoveries, Formametal’s senior officers authorized at least ten unlawful 
+payments totaling approximately $106,749 to Argentine government officials.  Some 
+payments were specifically authorized by Formametal’s President, while in other 
+instances, he appeared to have been aware that the unlawful payments were occurring and 
+acquiesced to them.  In some instances, the President learned about the opportunity to 
+make a bribe from the Vice President of Institutional Affairs, who would then make the 
+arrangements for the bribe without providing details to the President.  These payments 
+were disguised to appear as legitimate business expenses in Formametal’s books and 
+records and included in Ball’s consolidated financial results reported for fiscal year 2006 
+and the first three quarters of 2007. These improper payments are explained below. 
+B. 	 Equipment Import 
+6. Formametal paid bribes totaling over $100,000 in 2006 and 2007 to secure 
+the importation of equipment for use in its manufacturing process.  Formametal’s 
+President authorized at least two of these payments.  In most cases, the bribes were paid 
+to induce government customs officials to circumvent Argentine laws prohibiting the 
+importation of used equipment and parts.  The bribes often appeared on invoices from a 
+non-governmental customs agent for Formametal.  The payments were invoiced as 
+separate line items described inaccurately as “fees for customs assistance,” “customs 
+advisory services,” “verification charge,” or simply “fees,” were invoiced in addition to 
+other customs-related fees, and were sometimes in rounded peso amounts.  To further 
+obscure that the payments were really bribes, Formametal posted the payments 
+3 
+
+ 
+ 
+ 
+ 
+   
+ 
+ 
+ 
+ 
+ 
+ 
+inaccurately identified as “customs advice” or “professional fees” to an “Other Expenses” 
+account or in some instances to an account named for the related equipment.  
+C. Copper Scrap Export Waiver 
+7. Formametal paid a bribe that its President authorized in October 2007 in 
+an attempt to bypass high government duties imposed on copper scrap exports.  These 
+duties, which were generally 40 percent of the value of the copper, were imposed by 
+Argentina in an effort to discourage export sales of domestically produced copper and 
+copper scraps. The President estimated the additional profit from exporting this copper 
+scrap with the export duty waivers versus selling it inside Argentina would be 
+approximately $1.5 million annually. 
+8. For six months prior to August 2007, Formametal unsuccessfully sought 
+to gain government approval to export the scrap without the customarily high duties.  
+After giving up on obtaining the waiver legitimately, on October 18, 2007, Formametal 
+disbursed $4,821, representing the first of five bribe installments authorized by its 
+President to obtain an export duty waiver.  The payment was funneled through 
+Formametal’s third party customs agent.  Obscuring that the transaction was a bribe, 
+Formametal inaccurately recorded the payment as “Advice fees for temporary 
+merchandise exported” in an “Other Expenses” account.  Although the President believed 
+that the payments were requested by a customs official and would result in a copper scrap 
+export duty waiver, no copper scrap export shipments were made pursuant to the 
+improper payment.   
+D. Ball Accountants Learn About One Bribe 
+9. As early as February 2007, two accountants in Ball’s Metal Food and 
+Household Packaging Products Division learned about one of the bribes paid by 
+Formametal to import machinery for use in its manufacturing process.  Formametal’s 
+Vice President of Institutional Affairs, an Argentine national, who was formerly president 
+and owner of the subsidiary, had paid the bribe on behalf of Formametal out of his own 
+funds and received reimbursement from Formametal in the form of a company car.  
+Formametal initially booked the transfer of the car as an interest expense.  After being 
+pressed for details about the transaction, Formametal’s President revealed to the two Ball 
+accountants that the car was reimbursement for a bribe paid by the Vice President of 
+Institutional Affairs. Although Formametal  subsequently changed the accounting to 
+record the transfer of the car as a miscellaneous expense, it still failed to accurately 
+describe the “transfer” as a reimbursement for an illegal payment made to Argentine 
+customs officials. 
+4 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+E. Ball Failed to Establish Sufficient Internal Accounting Controls 
+10. Ball’s and Formametal’s weak internal controls, which included importing 
+equipment into Argentina in 2006 and 2007 without appropriate invoices and 
+documentation, made it difficult to detect that the subsidiary was repeatedly violating 
+Argentine law through the payment of bribes.  Ball’s weak internal controls also factored 
+into the Company’s failure to prevent further abuses at Formametal, after Ball 
+accountants learned of a bribe paid by Formametal to import machinery for use in its 
+manufacturing process.  As a result, Formametal continued to make improper payments 
+during 2007. 
+11. Further, Ball lacked sufficient internal controls to bring about effective 
+changes after information available to Ball’s executives indicated anti-bribery 
+compliance problems at Formametal.  For example, key personnel responsible for dealing 
+with customs officials remained at Formametal, even though external due diligence 
+performed on Formametal suggested that Formametal officials may have previously 
+authorized questionable payments.   
+Legal Analysis 
+12. The FCPA, enacted in 1977, added Exchange Act Section 13(b)(2)(A) to 
+require 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. It also added Excha nge Act Section 13(b)(2)(B) to require such 
+companies to devise and maintain a system of internal accounting controls sufficient to 
+provide reasonable assurances that transactions: (i) are executed in accordance with 
+management’s general or specific authorization; and (ii) 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).   
+13. As detailed above, Formametal failed to properly record illegal payments 
+and transactions when it repeatedly paid bribes disguised as customs assistance on 
+invoices from its customs agent.  In addition, Formametal used a customs agent as an 
+intermediary to obscure the source and destination of funds, and it created false or 
+misleading journal entries to facilitate the illegal importation of used machinery into 
+Argentina. Ultimately, the improper payments , as well as the book value of the car given 
+as reimbursement for a bribe paid by Formametal’s Vice President of Institutional Affairs 
+were mischaracterized as ordinary business expenses on Formametal’s books and 
+records. Because Formametal’s financial statements were consolidated with those of 
+Ball, Ball failed to keep accurate books and records in violation of Exchange Act Section 
+13(b)(2)(A). 
+14. In violation of Exchange Act Section 13(b)(2)(B), Ball also failed to 
+devise and maintain an effective system of internal controls to prevent and detect 
+violations of the FCPA at Formametal, even after senior Ball officers were on notice in 
+5 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+mid-2006 that in the past Ball’s subsidiary’s employees had made questionable payments 
+and caused other compliance problems. 
+Ball’s Remedial Efforts and Cooperation 
+15. In determining to accept the Offer, the Commission considered remedial acts 
+promptly undertaken by Respondent, Respondent’s voluntary disclosure of these matters to 
+the Commission, 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 Ball’s Offer. 
+Accordingly, it is hereby ORDERED that: 
+(A)	 Pursuant to Section 21C of the Exchange Act, Respondent Ball cease and 
+desist from committing or causing any violations and any future violations of 
+Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act; 
+(B)	 Respondent shall, within fifteen (15) days of the entry of this Order, pay 
+the civil penalty of $300,000 to the United States Treasury.  If timely 
+payment is not made, additional interest shall accrue pursuant to 31 U.S.C. 
+3717. Such payment shall be: (A) made  by wire transfer, 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 Ball Corporation 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 Gerald W. Hodgkins, 
+Associate Director, Division of Enforcement, Securities and Exchange 
+Commission, 100 F Street, N.E., Washington, D.C. 20549-6010. 
+(C)	 Respondent acknowledges that the Commission is not imposing a civil 
+penalty in excess of $300,000 based upon its cooperation in a Commission 
+investigation and related enforcement action.  If at any time following the 
+entry of the Order, the Division of Enforcement (“Division”) obtains 
+information indicating that Respondent knowingly provided materially 
+false or misleading information or materials to the Commission or in a 
+related proceeding, the Division may, at its sole discretion and without 
+prior notice to the Respondent, petition the Commission to reopen this 
+matter and seek an order directing that the Respondent pay an additional 
+civil penalty. Respondent may not, by way of defense to any resulting 
+6 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ administrative proceeding:  (1) contest the findings in the Order; or (2) 
+assert any defense to liability or remedy, including, but not limited to, any 
+statute of limitations defense.    
+By the Commission. 
+Elizabeth M. Murphy 
+Secretary 
+7 
+
+ 
+ 
+ 
+ 
+ 
+  
+   
+ 
+ 
+ 
+ 
+   
+  
+ 
+ 
+ 
+   
+ 
+    
+  
+ 
+   
+ 
+  
+ 
+ 
+Service List 
+Rule 141 of the Commission's Rules of Practice provides that the Secretary, or 
+another duly authorized officer of the Commission, shall serve a copy of the Order 
+Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities 
+Exchange Act of 1934, Making Findings, Imposing a Cease-and-Desist Order and a Civil 
+Money Penalty ("Order"), on the Respondent and its legal agent. 
+The attached Order has been sent to the following parties and other persons 
+entitled to notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Eugene H. Bull, Esq. 
+Securities and Exchange Commission  
+100 F Street, N.E. 
+Washington, DC 20549-6010A 
+Ball Corporation 
+Attn: Charles E. Baker, Vice Pres ident and Asst. Corporate Secretary
+ 
+c/o Charles F. Smith, Esq 
+Skadden, Arps, Slate, Meagher & Flom LLP 
+155 North Wacker Drive 
+Chicago, IL 60606-1720 
+ Charles F. Smith, Esq 
+Skadden, Arps, Slate, Meagher & Flom LLP 
+155 North Wacker Drive 
+Chicago, IL 60606-1720 
+(Counsel for Ball Corporation) 
+8 
diff --git a/raw/aaer/2011/AAER-3256.txt b/raw/aaer/2011/AAER-3256.txt
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+              Joseph J. Monterosso, et. al.
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+        Joseph J. Monterosso, et. al.
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+                U.S. Securities and Exchange Commission 
+
+ Litigation Release 21913 / April 1, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3256 / April 1, 2011 
+
+  Securities and Exchange Commission v. Joseph J. Monterosso, et. al.,  Civil Action No. 07-61693 (S.D. Fla., initial complaint filed on November 21, 2007) 
+
+ Court Grants Summary Judgment Against Defendants Joseph J. Monterosso And Luis Vargas 
+
+ On March 31, 2011, the United States District Court for the Southern District of Florida granted the Commission's motions for summary judgment against the two remaining defendants in a civil action originally filed in November 2007. The judgment permanently enjoins Joseph J. Monterosso and Luis Vargas from violations of the antifraud and other securities law provisions. The Court ordered that a magistrate judge would determine the amount of disgorgement and penalties that the defendants would pay. 
+
+ The Commission brought civil actions against Monterosso and Vargas in connection with GlobeTel Communications Corp., now Sanswire Corp. (GlobeTel). GlobeTel reported millions of dollars in telecommunications revenue from 2002 to 2006 that the Commission alleged were fake. Two former GlobeTel executives were sentenced to prison as a result of parallel criminal prosecutions.  See   U.S. v. Huff , 09-cr-60295-DMM (S.D. Fla.);  U.S. v. Jimenez , 08-cr-60367-DTKH (S.D. Fla.). Sanswire Corp. and three former executives, including the two sentenced to prison, previously consented to the entry of judgments against them in the Commission's action. 
+
+ The Commission's complaint against Monterosso and Vargas alleged that they 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. The complaint alleged that, in reality, there were no transactions under the program that GlobeTel executives described as the "off-net" revenue program. It alleged that two of GlobeTel's subsidiaries - Volta and Lonestar - actually did no business. It alleged that 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 court found that the Monterosso and Vargas violated Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), Rule 10b-5(a) promulgated thereunder, and Section 17(a)(1) of the Securies Act of 1933 (Securities Act) by their direct involvement in a scheme to report fraudulent "off-net" revenue. 
+
+ In addition, the court found that Monterosso and Vargas violated Rule 13b2-1 promulgated under the Exchange Act and aided and abetted GlobeTel's violated Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 promulgated thereunder. 
+
+ The GlobeTel case was investigated and litigated by Brent Mitchell, Peter Rosario, Jeffrey Infelise, Gina Twyman and Reid Muoio. 
+
+ For further information, please see Litigation Release Numbers  20371    (November 26, 2007) [initial complaint filed];  20550  (May 1, 2008) [civil injunctive action filed against GlobeTel and three former executives]; and  21202  (September 9, 2009) [civil action filed against Timothy J. Huff]. 
+
+ The Commission acknowledges the assistance of the Internal Revenue Service, the Federal Bureau of Investigation, the Tax Division of the United States Department of Justice, and the United States Attorney's Office for the Southern District of Florida.   
+
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diff --git a/raw/aaer/2011/AAER-3257.txt b/raw/aaer/2011/AAER-3257.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f78ed6aa421f110e7d5d7b21a5a5b0ca4d2e205f
--- /dev/null
+++ b/raw/aaer/2011/AAER-3257.txt
@@ -0,0 +1,2100 @@
+ 
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+                                                 
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+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64184 / April 5, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3257 / April 5, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14321 
+In the Matter of
+ 
+Lovelock & Lewes,
+ 
+Price Waterhouse, Bangalore,  
+Price Waterhouse & Co., Bangalore,
+ 
+Price Waterhouse, Calcutta, and  
+Price Waterhouse & Co., Calcutta, 
+Respondents. 
+ORDER INSTITUTING PUBLIC 
+ADMINISTRATIVE AND CEASE-
+ AND-DESIST PROC EEDINGS 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 Lovelock & 
+Lewes (“Lovelock”), Price Waterhouse, Bangalore (“PW Bangalore”), Price Waterhouse & Co., 
+Bangalore (“PW Co. Bangalore”), Price Waterhouse Calcutta (“PW Calcutta”), and Price 
+Waterhouse & Co., Calcutta (“PW Co. Calcutta”) (collectively “PW India,” the “PW India Firms” 
+or “Respondents”) pursuant to Sections 4C
+1 and 21C of the Securities Exchange Act of 1934 
+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; (2) to be lacking in character or integrity, or to have engaged in unethical or 
+improper professional conduct; 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. 
+1 
+
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+                                                 
+      
+   
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+  
+(“Exchange Act”) and Rule 102(e)(1)(ii) of the Commission’s Rules of Practice.2 
+II. 
+In anticipation of the institution of these proceedings, Respondents have 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 Respondents 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. SUMMARY 
+1. This matter involves violations of federal securities laws and improper professional 
+conduct by PW India while PW Bangalore served as auditor of record for Satyam Computer 
+Services Limited (“Satyam”) from 2005 through January 2009.  In connection with Satyam’s 2005­
+2008 publicly-filed financial statements, Satyam engaged in fraudulent financial accounting by 
+falsifying the company’s revenue, income, earnings per share, cash, and interest bearing deposits.  
+Satyam acknowledged that it falsely reported over $1 billion in revenue and cash, among other 
+items, in its publicly filed financial statements.  In January 2009, Satyam submitted a Form 6-K 
+with the Commission indicating that “Price Waterhouse’s audit reports and opinions in relation to 
+Satyam’s financial statements from the quarter ended June 30, 2000 until the quarter ended 
+September 30, 2008 should no longer be relied upon.” 
+2. Former officers and senior managers at Satyam, an Indian information technology 
+service company with depository shares traded on the New York Stock Exchange (“NYSE”) during 
+the relevant period, directed the creation of over 6,000 false invoices that they ensured were entered 
+into the company’s general ledger and falsely recorded as, among other things, revenue, income, 
+and accounts receivable in Satyam’s publicly filed financial statements.  Former senior management 
+at Satyam manufactured scores of false bank statements, confirmations, and supporting documents 
+2 Rule 102(e)(1)(ii) provides, in pertinent part, that:  “[t]he Commission may censure a person or 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.” 
+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
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+                                                 
+  
+    
+ 
+to reflect payment of the false invoices and created over $1 billion in fictitious cash balances and 
+other interest bearing deposits.  This false information made Satyam appear to be substantially more 
+profitable and financially sound than was actually the case.  When the fraud was revealed, the price 
+of Satyam’s depository shares plummeted and institutional investors located in the United States 
+sustained realized losses of over $450 million. 
+3. PW Bangalore issued unqualified opinions on Satyam’s March 31, 2005, March 31, 
+2006, March 31, 2007, and March 31, 2008 financial statements.  Each of these audit reports stated 
+that “Price Waterhouse” conducted its audits in accordance with generally accepted auditing 
+standards in the United States (“GAAS”) and that Satyam’s financial statements were presented in 
+conformity with generally accepted accounting principles (“GAAP”).  Each audit report also stated 
+that the underlying audit was conducted in accordance with Public Company Accounting 
+Oversight Board (“PCAOB”) Standards.  Contrary to the audit reports, PW India did not conduct 
+Satyam’s audits in accordance with PCAOB Standards, which is now understood to include 
+GAAS.4  Specifically, the PW India partners and staff on the Satyam engagement team (“Satyam 
+engagement team” or “engagement team”) failed to maintain control of the confirmation process 
+with respect to cash and cash equivalent balances as well as Satyam’s accounts receivables.  The 
+failure to properly execute third-party confirmation procedures resulted in the fraud at Satyam 
+going undetected until the former chairman’s public confession in January 2009. 
+4. The failures in the confirmation process on the Satyam audit were not limited to 
+that engagement, but were indicative of a quality control failure throughout PW India.  During the 
+relevant period, PW India’s quality control system failed to detect that engagement teams 
+throughout PW India routinely relinquished control of the delivery and receipt of cash 
+confirmations to their audit clients and rarely, if ever, questioned the integrity of the confirmation 
+responses they received from the clients.  Despite annual quality reviews, PW India did not 
+recognize this compliance failure until after January 2009. 
+5.  By failing to comply with PCAOB Standards, PW Bangalore issued audit reports 
+in connection with the Satyam engagement that were not accurate and, as a result, the PW India 
+Firms were a cause of Satyam’s issuing materially false and misleading financial statements and its 
+violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 12b-20, 
+13a-1 and 13a-16 thereunder.  The PW India Firms also violated Section 10A(a) of the Exchange 
+Act by failing to conduct procedures designed to provide reasonable assurance of detecting illegal 
+acts that would have a direct and material effect on the determination of financial statement 
+amounts. 
+4 References in Commission rules and staff guidance and in the federal securities laws to GAAS or to specific 
+standards under GAAS, as they related to issuers, should be understood to mean the standards of the PCAOB plus 
+any applicable rules of the Commission.  See Release Nos. 33-8422; 34-49708; FR-73 at http://www.sec.gov/rules/ 
+interp/33-8422.htm. 
+3
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+                                                 
+   
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+       
+ 
+B. RESPONDENTS 
+6. Lovelock & Lewes (“Lovelock”) is a public accounting firm organized as a 
+partnership under the laws of the Republic of India, and headquartered in Kolkata, West Bengal, 
+India. 
+7. Price Waterhouse, Bangalore (“PW Bangalore”) is a public accounting firm 
+organized as a partnership under the laws of the Republic of India, and headquartered in Bangalore, 
+Karnataka, India. 
+8. Price Waterhouse & Co., Bangalore (“PW Co. Bangalore”) is a public accounting 
+firm organized as a partnership under the laws of the Republic of India, and headquartered in 
+Bangalore, Karnataka, India. 
+9. Price Waterhouse & Co., Calcutta (“PW Co. Calcutta”) is a public accounting firm 
+organized as a partnership under the laws of the Republic of India, and headquartered in Kolkata, 
+West Bengal, India. 
+10. Price Waterhouse, Calcutta (“PW Calcutta”) is a public accounting firm organized 
+as a partnership under the laws of the Republic of India, and headquartered in Kolkata, West 
+Bengal, India. 
+11. Lovelock, PW Bangalore, PW Co. Bangalore, PW Co. Calcutta, and PW Calcutta 
+are member firms of PricewaterhouseCoopers International Limited, a United Kingdom-based 
+private company.5  Respondents are registered in the United States with the PCAOB and in India 
+with the Institute of Chartered Accountants of India (“ICAI”).  Section 102 of the Sarbanes-Oxley 
+Act of 2002 (“SOX”) prohibits accounting firms that are not registered with the PCAOB from 
+preparing or issuing audit reports on United States public companies and from participating in such 
+audits.  Section 106(a) of SOX further authorizes the PCAOB to require that non-US public 
+accounting firms that do not issue such reports, but that play a substantial role in the preparation of 
+the audit reports, register with the PCAOB. 
+12. PW India, along with five other India-based PwC Network Firms,6 operate as a 
+domestic Indian network of related audit firms. As such, these firms share common audit and other 
+assurance and assurance risk management leadership and follow common audit and other assurance 
+policies and procedures, including in the areas of audit and assurance risk management, training and 
+supervision. 
+5 Member firms of PricewaterhouseCoopers International Limited (“PwC IL”), are collectively referred to herein as 
+“PwC Network Firms.” 
+6 The five other India-based firms are registered with the ICAI but not with the PCAOB. They do not perform audit 
+work for SEC registrants. 
+4
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+                                                 
+   
+ 
+13. PW India and the five other India-based PwC Network Firms operate their audit 
+practices under resource sharing arrangements that facilitate the provision of audit services as a 
+network of related firms.  With respect to the PW India Firms, pursuant to these arrangements, 
+Lovelock and PW Calcutta have both partners and staff who perform audit procedures and provide 
+staffing for their own audit engagements, as well as for engagements of the other PW India Firms. 
+The partners of the remaining PW India Firms, PW Bangalore, PW Co. Bangalore, and PW Co. 
+Calcutta, undertake audit engagements, oversee the audit work conducted by engagement personnel, 
+and sign audit opinions.  PW India partners typically are affiliated with several firms within the 
+domestic network of audit firms simultaneously.  During the relevant period, PW India and the 
+other domestic India-based firms shared resources and settled inter-firm balances at the end of each 
+fiscal year. 
+14. PW India and the five other India-based PwC Network Firms operate in a manner 
+that generally does not make any distinctions among the individual firms in the network.  For 
+example, the PW India Firms share office space and have identical telephone numbers.  In addition, 
+the Respondents’ website makes no obvious distinction among the individual PwC Network Firms 
+located in India. 
+15. Satyam’s Forms 20-F during the relevant period list the company’s independent 
+registered public accounting firm as “Price Waterhouse,” the name of PW Bangalore set forth in its 
+partnership deed.  During the relevant period, the Satyam audit reports were signed by PW 
+Bangalore engagement partners who were also partners at Lovelock.7  Audit work on the Satyam 
+engagement was performed predominately by partners and staff associated with these firms, 
+although staff from PW Calcutta and partners of all five PW India firms billed time on the Satyam 
+audits during the relevant period. 
+C. ISSUER 
+16. Satyam Computer Services Limited (“Satyam”) is a large information technology 
+service company incorporated in India with its principal executive offices in Hyderabad.  Satyam’s 
+equity shares trade on the Bombay Stock Exchange and the National Stock Exchange of India.  
+Satyam also has 65 million American Depository Shares (“ADS”) representing approximately 11 
+percent of the company’s equity shares. At all relevant times, Satyam’s equity shares underlying 
+the ADS were registered pursuant to Section 12(b) of the Exchange Act, and Satyam’s ADS were 
+listed on the NYSE. On October 4, 2010, Satyam filed a Form 25 with the Commission 
+voluntarily removing its securities from listing on the NYSE and from registration under Section 
+12(b). Satyam’s equity shares underlying the ADS are currently deemed registered pursuant to 
+Section 12(g) of the Exchange Act, and Satyam’s ADS are currently quoted on the OTC Market 
+under the symbol SAYCY.PK. 
+7 The lead engagement partner for the audit of Satyam’s fiscal year ended March 31, 2008 was also listed as a 
+partner of PW Co. Calcutta. 
+5
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+ 
+17. Shortly after the fraud became public, the Government of India assumed control of 
+the company.  In mid-February 2009, the Company Law Board of India authorized the company to 
+select a strategic investor for Satyam.  As a result of the bidding process, Tech Mahindra Limited, 
+an Indian information technology competitor, through its subsidiary Venturbay Consultants Private 
+Limited, purchased approximately 42 percent of Satyam’s shares in India and became the new 
+controlling shareholder of Satyam.  In June 2009, Satyam filed a press release announcing 
+“Mahindra Satyam” as the company’s new “brand identity.”  The company continues to conduct 
+business in the United States as Satyam and is registered as a corporation doing business in the 
+State of New York and as a foreign private issuer with the Commission under the name Satyam.  
+D. FACTS 
+18. In connection with fiscal years 2005 through 2008, as well as earlier years, Satyam 
+engaged in certain practices relating to its revenue, income, cash, interest-bearing deposits, and 
+accounts receivable that made its financial statements materially false and misleading.  PW India’s 
+audits of Satyam’s financial statements for fiscal years 2005 through 2008 were deficient.  Among 
+other things, PW India departed from applicable PCAOB Standards by failing to maintain control of 
+the confirmation process with respect to cash, interest bearing deposits, and accounts receivable 
+balances.  As a result, PW India failed to uncover Satyam’s fraud and, instead, issued unqualified 
+audit opinions in connection with its audits of Satyam’s financial statements until its former 
+Chairman admitted that the company had been engaged in a billion dollar financial fraud and 
+Satyam publicly disclosed that admission in a Form 6-K.  As indicated herein, the failures PW India 
+experienced on the Satyam audit were not limited to that engagement, but were indicative of a 
+quality control failure throughout PW India. 
+Satyam’s Accounting Fraud 
+19. Satyam falsified its reported revenue by manufacturing false invoices for services 
+never provided and, in some cases, for customers that did not exist.  From at least 2005 through 
+2008, Satyam’s former senior management instructed certain employees to generate thousands of 
+false invoices and record them in the company’s invoice management system.  The invoice 
+management system exported the fake invoices into Satyam’s financial system where the revenues 
+were recorded in the company’s general ledger.  Based upon the fictitious invoices, Satyam 
+materially overstated revenue and net income from at least fiscal year 2005 through the first two 
+quarters of fiscal year 2009 by over $1 billion.   
+20. To support the false revenue and income that Satyam was reporting in its financial 
+statements, Satyam prepared materially false bank statements, from at least fiscal year 2005 through 
+2008, reflecting materially false cash deposits in the company’s bank accounts at, among other 
+places, the Bank of Baroda (“BOB”), which were recorded within the cash and cash equivalent 
+balances in Satyam’s publicly-filed financial statements.  
+21. To make it appear that Satyam was investing its false income during the relevant 
+time period, Satyam’s former senior management manufactured scores of false bank statements and 
+6
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+ 
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+  
+ 
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+ 
+also materially falsified the company’s publicly filed financial statements with regard to the balance 
+and fixed deposit receipts (hereinafter “interest bearing deposits”) and corresponding interest 
+income in accounts held at HSBC, BNP Paribas, HDFC, Citibank, and ICICI. 
+22. In Satyam’s 2005, 2006, 2007, and 2008 financial statements, the company reported, 
+among other assets, balance sheet line items entitled (a) “cash and cash equivalents,” and (b) 
+investments in bank deposits” (collectively, the “cash” line items).  During these years, Satyam’s 
+cash line items represented the largest asset on its reported balance sheet, making up 50% or more 
+of Satyam’s total assets during the relevant period.  For example, in 2008, Satyam reported cash of 
+$1.1 billion, constituting approximately 50 percent of total reported assets.  The vast majority of the 
+cash purportedly was on deposit at BOB, HSBC, BNP Paribas, HDFC, Citibank, and ICICI.  
+23. On January 7, 2009, Satyam submitted a Form 6-K with the Commission that 
+included a letter prepared by the then-Chairman of Satyam, B. Ramalinga Raju (“Raju”), admitting 
+that the company had been engaged in a billion dollar fraud.  According to Raju’s letter, as of 
+September 30, 2008, Satyam’s balance sheet reflected over $1 billion in fictitious cash and bank 
+balances when the actual amount was $66 million.  
+24. On January 14, 2009, Satyam submitted a Form 6-K with the Commission 
+indicating that “Price Waterhouse” had advised that all audit reports and opinions in relation to 
+Satyam’s financial statements during the relevant period should no longer be relied upon. 
+25. On February 21, 2009, Satyam submitted a Form 6-K with the Commission 
+indicating that Satyam’s Board of Directors accepted the resignation of “Price Waterhouse” as 
+Satyam’s independent auditor. 
+26. The two PW India lead engagement partners for the Satyam audits during the 
+relevant period are defendants, along with a significant number of former senior and mid-level 
+executives of Satyam, including the former Chairman, the former Managing Director and Chief 
+Executive Officer, and the former Chief Financial Officer, in a criminal trial in India arising out of 
+the Satyam fraud.  The trial is underway.  The two PW India engagement partners have also been 
+the subject of ongoing disciplinary matters in India before the ICAI and the Securities and 
+Exchange Board of India involving their role in the Satyam audit.  The two PW India lead partners 
+and the two PW India senior managers who were the engagement managers on the Satyam audits 
+during the relevant period were relieved of all auditing responsibilities in January 2009.  The two 
+engagement managers resigned in February 2010 and the lead engagement partner for the audits of 
+Satyam’s fiscal years ended March 1999-2007 retired in March 2009.  The lead engagement 
+partner for the audit of Satyam’s fiscal year ended March 31, 2008 is on administrative leave from 
+PW India pending the outcome of the various proceedings against him.  On March 16, 2010, the 
+two former PW India engagement managers were barred by the PCAOB from being associated 
+persons of a registered public accounting firm for their failure to comply with a demand requiring 
+their testimony in a PCAOB-related investigation into the Satyam audit engagements.  These PW 
+India managers are also the subject of ongoing disciplinary proceedings before the ICAI. 
+7
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+ 
+PW India’s Audits of Cash and Cash Equivalent Balances 
+Were Not Performed in Accordance with PCAOB Standards 
+for Fiscal Years 2005-2008 
+27. Respondents failed to identify the material overstatement of Satyam’s assets, in part, 
+because the engagement team failed to carry out the confirmation processes and procedures related 
+to cash and interest bearing deposits in accordance with PCAOB Standards -- and its own audit 
+plan -- for fiscal years 2005-2008.  PCAOB Standards require, among other things, that auditors 
+test the existence and valuation of reported cash and interest bearing deposit balances.  In order to 
+test the cash and interest bearing deposit balances during the relevant period, the audit plans for 
+each year during the relevant period called for the confirmation of Satyam’s major bank balances 
+and interest bearing deposits with third parties.  The working papers for each year during the 
+relevant period document that the engagement team confirmed cash balances and interest bearing 
+deposits for all banks at which Satyam had “major” accounts. 
+28. Respondents failed to make direct contact with either BOB, the New York branch 
+that held Satyam’s purported largest bank account, or the five largest banks purportedly holding 
+Satyam’s interest bearing deposits to confirm the cash and cash equivalent balances that Satyam 
+reported in its financial statements.  Instead, and in violation of PCAOB Standards, the 
+engagement team relied on the company’s senior management to mail out confirmation requests to 
+Satyam’s banks, and on the purported responses to those letters from the banks, including 
+purported responses provided to the engagement team by Satyam management.  Respondents 
+never attempted to contact the banks directly at any time during the audits.   
+29. Respondents also failed to conduct appropriate inquiry after receiving 
+confirmations directly from banks that were potentially conflicting with those received from 
+Satyam management.  During the fiscal year 2005, 2006, 2007 and 2008 audits, the Satyam 
+engagement team received confirmations, in the requested format, directly from branches of certain 
+banks that purportedly held Satyam’s largest interest bearing fixed deposit balances.  The 
+engagement team also received confirmations from Satyam’s management that purported to 
+confirm fixed deposit balances at a different branch of the same bank.  The confirmations received 
+from Satyam management were not in the format requested by the engagement team.  The bank-
+provided confirmation responses reflected significantly lesser cash balances than Satyam 
+management represented to be held in fixed deposits at the same banks, and significantly lesser 
+cash balances than what was reflected in the purported bank confirmations that Satyam provided to 
+the engagement team.  The engagement team could have, but did not, contact the banks directly to 
+determine the amounts that Satyam had on deposit with the banks.  Had the engagement team done 
+so, such inquiry should have revealed that cash and cash equivalent balances reported in Satyam’s 
+financial statements were significantly overstated.  The following chart provides several examples 
+of these differences:  
+8
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
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+ 
+ 
+                                                 
+  
+  
+Period 
+Ending 
+Bank Confirmations PW 
+India Received Directly 
+from Bank (in $ USD) 
+Confirmations PW 
+India Received from 
+Satyam (in $ USD) 
+9/30/08 BNP Paribas $1,860,280 $100,753,498 
+9/30/08 HSBC No balance identified $172,000,153 
+6/30/08 BNP Paribas $1,919,404 $109,014,675 
+3/31/08 Citibank $330,172 $152,923,538 
+3/31/08 HDFC No balance identified $175,952,024 
+3/31/07 BNP Paribas $11,192,807 $108,584,687 
+3/31/06 BNP Pariba s $13,082,509 $96,830,036 
+3/31/06 HSBC No balance identified $53,282,374 
+30. Rather than contact the banks to obtain an explanation for the differences, the 
+engagement team erroneously accepted both confirmations as genuine and purported to 
+“corroborate” the interest bearing fixed deposit balances with fabricated fixed deposit receipts and 
+other support supplied by Satyam.   
+31. Respondents did not reconcile this potentially conflicting audit evidence during the 
+fiscal years 2005, 2006, 2007 and 2008.  After the fraud was revealed, members of the Satyam 
+engagement team indicated that they had ceded control of the confirmation process to the client 
+and relied on Satyam’s representations, in large part, because they believed that Satyam’s former 
+chairman and senior management were honest and that they did not suspect that Satyam was 
+fabricating audit documents.  Members of the Satyam engagement team conceded that, in 
+hindsight, the confirmation process they employed for the Satyam audits was not in compliance 
+with PCAOB Standards. 
+32. During Satyam’s fiscal year 2008 audit, a partner from another PwC Network Firm 
+outside of India (“The PwC Network Firm Partner”) alerted members of the Satyam engagement 
+team that its cash confirmation procedures appeared substantially deficient.  Specifically, in May 
+2008, in response to questions raised by the “Appendix K filing reviewer” of Satyam’s draft Form 
+20-F,8 PW India requested that the PwC Network Firm Partner review the electronic workpapers 
+8 Under Rule 3400T(b), Interim Quality Control Standards, audit firms must comply with portions of the 
+Requirements of Membership of the AICPA SEC Practice Section (“SECPS”).  Audit firms associated with 
+international firms are required to seek the adoption of policies and procedures consistent with the objectives set 
+9
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+                                                                                                                                                             
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+  
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+  
+for the 2008 Satyam audit.  In response to that request, the PwC Network Firm Partner provided 
+the Satyam engagement team with a detailed set of comments, including remarks on the cash and 
+interest bearing deposit confirmation workpapers.  In particular, the PwC Network Firm Partner 
+informed the Satyam engagement team that their cash confirmation procedures appeared 
+inadequate because the working papers indicated that “the confirmation was obtained either 
+directly or from copies obtained from the client.  We can only take credit for confirms we send and 
+receive directly.” 
+33. Notwithstanding the above-described warnings it received from the PwC Network 
+Firm Partner, the Satyam engagement team failed to take any corrective action to confirm 
+Satyam’s cash and cash equivalent balances in a manner that complied with PCAOB Standards 
+during the fiscal year 2008 audit.  Had direct confirmation of the BOB bank balances been 
+performed in response to the PwC Network Firm Partner’s comment, Satyam’s fraud could have 
+been uncovered in the summer of 2008.   
+34. Respondents failed to perform the 2005-2008 Satyam audits with respect to cash 
+and cash equivalent balances in accordance with PCAOB Standards.  First, Respondents failed to 
+maintain control over confirmation requests and responses by establishing direct communication 
+between the intended recipient and the auditor to minimize the possibility that the results will be 
+biased because of interception and alteration of the confirmation requests or responses, as required 
+by PCAOB Standard AU § 330.28. Second, Respondents failed to exercise appropriate 
+professional skepticism throughout the confirmation process, as required by PCAOB Standard AU 
+§ 330.15. Third, Respondents failed to comply with PCAOB Standards AU § 333.02 and 326.01 
+when it neglected to obtain sufficient competent evidential matter to afford a reasonable basis to 
+determine the accuracy and completeness of the cash and cash equivalent balances reported in the 
+financial statements.  Instead, Respondents repeatedly substituted management representations for 
+competent evidence, which also does not comply with PCAOB Standards AU § 333.02 and 
+326.01. Fourth, Respondents failed to take appropriate action in response to warning signs 
+regarding the sufficiency of the cash confirmation procedures and caused the issuance of 
+inaccurate audit reports, which resulted from a failure to comply with the several PCAOB 
+Standards, including AU § 230.07 (“[d]ue professional care requires the auditor to exercise 
+professional skepticism.  Professional skepticism is an attitude that includes a questioning mind 
+and a critical assessment of audit evidence.”) and AU § 230.09 (“[i]n exercising professional 
+skepticism, the auditor should not be satisfied with less than persuasive evidence because of a 
+belief that management is honest.”).
+9  The failure to properly execute third-party confirmation 
+procedures contributed to the fraud at Satyam going undetected for years. 
+forth in the Requirements of Membership of the SECPS at Appendix K, SECPS Section 1000.45 (“Appendix K”). 
+See SECPS Section 1000.08(n).  Those objectives include having policies and procedures for certain filings of SEC 
+registrants which are the clients of foreign associated firms to be reviewed by persons knowledgeable in PCAOB 
+standards. 
+9 See also PCAOB Standards AU § 150.02 and AU § 230, which require due professional care to be exercised in the 
+performance of the audit and preparation of the report. 
+10 
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+ 
+Deficiencies in the Cash Confirmation Process 
+Occurred Throughout PW India
+ 
+35. From at least 2008 forward, the failures in the confirmation process on the Satyam 
+audit were not limited to that engagement, but were indicative of a quality control failure 
+throughout PW India.  In a large number of other audit engagements conducted by PW India, its 
+auditors planned to test the existence and valuation of cash balances by performing direct 
+confirmations, and then failed to control the confirmation process by relying on audit clients for 
+confirmation requests and responses.  PW India’s quality control system failed to detect that, for 
+several years, and on multiple audit engagements, audit personnel at PW India were not complying 
+with PCAOB standards governing the cash confirmation process.   
+36. PW India staff conceded that they routinely relinquished control of the delivery and 
+receipt of cash confirmations entirely to their audit clients and rarely, if ever, questioned the 
+integrity of the confirmation responses they received from the client by following up with the banks 
+prior to January 2009.  Similarly, PW India partners, including a partner formerly responsible for 
+audit risk and quality throughout PW India, indicated that client involvement in the confirmation 
+process during the relevant period was the norm because bankers rarely, if ever, responded directly 
+to confirmation requests made by auditors. 
+37. Despite annual quality reviews, PW India did not recognize the extensive nature of 
+this quality control failure until after January 2009, when PW India conducted a firm-wide review 
+of confirmation workpapers taken from completed and ongoing engagements for the current and 
+prior fiscal year. 
+PW India’s Audits of Accounts Receivable Balances
+ 
+Were Not Performed in Accordance with PCAOB Standards 
+for Fiscal Years 2006-2008
+ 
+38. During the relevant period, Satyam’s former senior management recorded fictitious 
+receivables by exploiting weaknesses in the internal controls of the company’s accounts receivable 
+system.  Specifically, the company’s invoicing system allowed for the manual entry of customer 
+invoices via the intervention of a “super user,” acting outside the regular controls of the billing and 
+invoicing process.  Satyam’s former senior management used this super user function to create 
+thousands of fake invoices totaling over $1 billion during the entirety of the fraud. 
+39. For the 2006-2008 fiscal year audits, Respondents failed to carry out the audits of 
+the accounts receivable balance in accordance with PCAOB Standards. As with the cash 
+confirmation process, the Satyam engagement team did not maintain control of the accounts 
+receivable confirmations and did not perform adequate follow-up procedures on confirmations that 
+were sent but not received from customers with purported accounts receivable balances recorded 
+on Satyam’s 2006-2008 fiscal year end financial statements. 
+11
+ 
+ 
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+  
+  
+  
+ 
+  
+  
+  
+  
+40. For example, from the period March 31, 2006 through August 31, 2007, the Satyam 
+engagement team prepared accounts receivable confirmation requests on five occasions but 
+received few, if any, responses to those requests.  During the relevant period, Respondents made 
+no attempt to follow up on those non-responses.  Further, as part of the 2007 fiscal year audit, the 
+engagement team sent out confirmation requests to 22 customers with outstanding receivables 
+balances on August 31, 2006, including seven that were later exposed as fictitious customers.  No 
+customers responded to those requests.  Appropriate diligence and follow-up procedures could 
+have exposed the true nature of these customers. 
+41. In other periods, instead of employing confirmation procedures to verify accounts 
+receivable balances, the Satyam engagement team purported to implement “alternative procedures” 
+to validate receivables through an attempt to verify their subsequent receipts.  The subsequent 
+receipt totals were obtained from Satyam’s management and then divided by the total outstanding 
+receivables as of the period end to arrive at a percentage of receivables that had been subsequently 
+collected. There was no other documented substantive analysis to go along with this calculation.  
+The above-described alternative audit procedures performed during the 2006-2008 fiscal audit 
+years did not provide adequate audit evidence to corroborate the existence of receivables because 
+they were not designed to ensure that the subsequent receipts had any relationship to the actual 
+outstanding receivables at the end of the respective fiscal year. 
+42. Further, the engagement team was aware of factors that increased the potential for 
+fraud at Satyam during at least the fiscal year 2007 audit, but failed to recognize the increased risk, 
+and therefore did not alter its planning and execution of the Satyam audits to take these risks into 
+account as required under PCAOB Standards.  In connection with the audit of the company’s fiscal 
+year ended March 31, 2007, PW India’s Systems and Process Assurance (“SPA”) personnel tested 
+Satyam’s Information Technology (“IT”) internal controls.  This testing revealed over 170 
+deficiencies in those controls, including eight significant deficiencies identified by the SPA team.  
+The nature of these deficiencies should have alerted the engagement team to a heightened risk with 
+respect to receivables. 
+43. In an area that called for increased audit vigilance, Respondents failed to develop an 
+audit plan that addressed the increased risk of a material misstatement of the receivables balance. 
+Instead, the 2007 and 2008 year-end audits excluded confirmation of the year-end receivables 
+balances. 
+44. Respondents failed to adequately plan and perform the 2006-2008 audits with 
+respect to accounts receivable in accordance with relevant PCAOB Standards.  First, the 
+engagement team ignored internal control deficiencies which should have alerted it to the 
+heightened fraud risk with respect to receivables, as required by PCAOB Standards AU § 312.16 
+(an auditor must consider the effect of an assessment of the risk of material misstatement due to 
+12
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+                                                 
+    
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+   
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+fraud on the overall audit strategy).10  Second, the receivables audit plan failed to address an 
+increased risk of a material misstatement of the receivables balance, as required by PCAOB 
+Standard AU § 312.17 (higher risk may cause the auditor to expand or modify the extent or nature 
+of procedures to obtain more persuasive evidence).  Third, the engagement team failed to follow up 
+on confirmation requests that were not returned, which resulted in a failure to comply with several 
+PCAOB Standards, including AU § 316.28 (describing instances in which audit procedures need to 
+be changed to obtain evidence that is more reliable or to obtain additional corroborative 
+information, including from independent sources), §330.30 (describing follow-up confirmation 
+request process), and §330.32 (describing alternative procedures to be employed in the 
+examination of accounts receivable, including the matching of subsequent cash receipts with the 
+actual items being paid).  Fourth, Respondents did not obtain sufficient competent evidential 
+matter to verify the existence of receivables, as required by PCAOB Standard AU § 326.01.11 
+Failure to Issue Accurate Audit Reports 
+45. PCAOB Standards require that the auditor’s report contain an opinion on the 
+financial statements taken as a whole and contain a clear indication of the character of the auditor’s 
+work. PCAOB Standard AU § 508.04. The auditor can determine that he or she is able to issue an 
+audit report containing an unqualified opinion only if he has conducted his audit in accordance 
+with PCAOB Standards and that the financial statements have been prepared in conformity with 
+GAAP. PCAOB Standard AU §§ 508.08, 508.14.12 
+46. PW India acted unreasonably in rendering audit reports containing unqualified 
+opinions for the fiscal year 2005-2008 publicly-filed financial statements.  PW India issued audit 
+reports on Satyam’s financial statements even though they should have known that Satyam’s audits 
+had not been conducted in accordance with PCAOB Standards and that Satyam’s financial 
+statements did not present fairly, in all material respects, Satyam’s financial position, operating 
+results, and cash flows in conformity with GAAP. 
+PW India Did Not Comply with PCAOB Auditing Standard No.3. 
+47. PW India was notified by the PCAOB in November 2007 that the PCAOB would 
+perform an inspection of PW India.  This inspection was to include a review of PW India’s 2007 
+fiscal year audit of Satyam.  The audit opinion included in Satyam’s 2007 Form 20-F was dated 
+10 See also PCAOB Standard AU § 110.02, which requires that an “auditor has the responsibility to 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.” 
+11 See also PCAOB Standards AU § 150.02 and AU § 230, which require due professional care to be exercised in the 
+performance of the audit and preparation of the report. 
+12 PCAOB Standard AU § 508.14 was in effect for reports issued from the beginning of the relevant period until 
+November 15, 2008. 
+13
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+  
+ 
+ 
+and released on April 27, 2007.  Satyam submitted its Form 20-F to the SEC on April 30, 2007.  
+The PCAOB inspection began in February 2008.   
+48. Under PCAOB Auditing Standard No. 3, Audit Documentation (“AS No. 3”), audit 
+documentation may not be deleted after the document completion date (i.e, the date that the 
+“complete and final set of audit documentation” has been assembled for retention, which must 
+occur within 45 days after the audit report release date).  AS No. 3 ¶15.  AS No. 3 also requires 
+that an auditor make certain written disclosures if the auditor adds or alters working papers after 
+the documentation completion date.  In particular, AS No. 3 specifies, in relevant part, that any 
+additions or alterations to audit documentation after the audit report release date “must indicate the 
+date the information was added, the name of the person who prepared the additional 
+documentation, and the reason for adding it.”  AS No. 3 ¶16. 
+49. After the audit “documentation completion date,” but before the PCAOB inspection 
+of the Satyam audit for fiscal year ended March 31, 2007, members of the Satyam engagement 
+team created certain documents, and gathered other documents, none of which previously were in 
+the 2007 Satyam audit workpapers.  The workpapers added by the Satyam engagement team 
+included the management letter and debtor confirmation requests.  The added workpapers did not 
+include any notations indicating that they were added or altered after the documentation 
+completion date. The added workpapers also neglected to provide the date the information was 
+added, the name of the person who prepared the additional documentation, and the reason for 
+adding it. Accordingly, PW India failed to comply with AS No.3 ¶¶ 15, 16. 
+E. VIOLATIONS 
+Because of Its Failure to Comply With PCAOB Standards, 
+PW India Was a Cause of Satyam’s Violations of Sections 13(a) and
+ 
+13(b)(2)(A) of the Exchange Act and Relevant Rules Thereunder
+ 
+50. Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-16 thereunder require 
+issuers with registered securities to file and furnish factually accurate annual and other reports.  
+Rule 12b-20 of the Exchange Act requires that, in addition to the information expressly required 
+to be included in such reports, the reports shall contain such further material information as may 
+be necessary to ensure that the required statements are not misleading.  As a foreign private 
+issuer, Satyam is required to file annual reports on Form 20-F pursuant to Rule 13a-1 under the 
+Exchange Act and to furnish reports on Form 6-K pursuant to Rule 13a-16 under the Exchange 
+Act. The information required by Form 6-K is what ever information the registrant makes, or is 
+required to make, public pursuant to the laws of the jurisdiction of its domicile or in which the 
+registrant is incorporated or organized.  The obligation to furnish these periodic reports includes 
+the obligation that they be true and correct in all material respects.  See, e.g., SEC v. IMC 
+International, Inc., 384 F.Supp. 889, 893 (N.D. Texas), aff’d mem. 505 F.2d 733 (5
+th Cir. 1974), 
+cert. denied sub nom. No s howing of scienter is necessary to establish a violation of Section 
+13(a) of the Exchange Act and Rules 13a-1, 13a-16, and 12b-20 thereunder.   
+14
+ 
+ 
+ 
+ 
+  
+ 
+   
+   
+ 
+ 
+ 
+     
+ 
+ 
+ 
+ 
+51. Under Section 21C of the Exchange Act, the Commission may “enter an order 
+requiring such person, and any other person that is, was, or would be a cause of the violation, due 
+to an act or omission the person knew or should have known would contribute to such violation, 
+to cease and desist from committing or causing such violation and any future violation of the 
+same provision, rule, or regulation.”  Exchange Act, 15 U.S.C. § 78u-3.  Negligence is sufficient 
+to establish liability for causing a primary violation that does not require scienter.  See KPMG 
+Peat Marwick LLP, 74 SEC Docket 384, 421 (2001), recon. denied, 74 SEC Docket 1351 (Mar. 
+8, 2001), pet. denied, 289 F.3d 109 (D.C. Cir. 2002), reh'g en banc denied, 2002 U.S. App. Lexis 
+14543 (July 16, 2002). 
+52. Satyam violated Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-16 
+thereunder by including in numerous of its periodic filings and submissions financial statements 
+for the years 2005-2008 that were materially false and misleading.  For each of those years, PW 
+India issued audit reports containing unqualified opinions stating that “Price Waterhouse” 
+conducted an audit of the company’s annual financial statements in accordance with PCAOB 
+Standards, that Satyam’s financial reporting was in conformity with GAAP, and that Satyam’s 
+reporting results fairly represented the financial condition of the company.  PW India consented to 
+the inclusion of these audit reports in Satyam’s Forms 20-F for fiscal years 2005 through 2008.  
+However, PW India’s audit reports were inaccurate because PW India failed to conduct its audits in 
+accordance with PCAOB Standards. PW India’s failure to comply with PCAOB Standards was a 
+cause of Satyam’s violations, including Satyam’s failure to disclose to investors that it was 
+engaged in non-GAAP and other accounting actions that prevented Satyam’s reported financial 
+results from fairly representing its financial condition.   
+53. In auditing Satyam’s accounts receivable and cash and cash equivalent balances, 
+Respondents did not comply with PCAOB Standards by failing to exercise due professional care 
+and skepticism, failing to obtain sufficient competent evidential matter and substituting 
+management’s representations for those auditing procedures necessary to afford a reasonable basis 
+for an opinion regarding the financial statements.  In fact, the engagement team never insisted on, 
+nor obtained, direct third-party confirmations for Satyam’s largest cash account, nor did it perform 
+sufficient audit procedures to determine whether Satyam’s accounts receivable and cash and cash 
+equivalent balances were not materially misstated.  As a result, PW India was a cause of Satyam’s 
+failure to file and furnish annual and other reports to the Commission that were complete and 
+accurate in all material respects in violation of Section 13(a). 
+54. Section 13(b)(2)(A) of the Exchange Act requires issuers of registered securities 
+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.  Satyam violated Section 
+13(b)(2)(A) of the Exchange Act by recording thousands of fictitious entries that resulted in the 
+false reporting of over $1 billion in non-existent revenue and cash.  As described above, PW 
+India failed to conduct its audits in accordance with PCAOB Standards, which allowed Satyam 
+to utilize accounting devices that did not comply with GAAP.  Had it done so, PW India would 
+have reasonably determined that Satyam failed to keep books and records that accurately 
+15
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+ 
+ 
+ 
+reflected transactions in violation of Section 13(b)(2)(A) of the Exchange Act.  Accordingly, PW 
+India’s actions were a cause of Satyam’s Section 13(b)(2)(A) violations.. 
+Section 10A(a) of the Exchange Act 
+55. Section 10A(a) of the Exchange Act requires each audit to include procedures 
+designed to provide reasonable assurance of detecting illegal acts that would have a direct and 
+material effect on the determination of financial statement amounts.  No showing of scienter is 
+necessary to establish a violation of Section 10A.  SEC v. Solucorp Industries, Ltd., 197 F. Supp. 
+2d 4 (S.D.N.Y. 2002). 
+56. PW India violated Section 10A(a) of the Exchange Act by failing to conduct 
+procedures designed to provide reasonable assurance of detecting illegal acts that would have a 
+direct and material effect on the determination of financial statement amounts, particularly after 
+PW India:  (1) failed to conduct the appropriate inquiry after receiving fixed deposit 
+confirmations, in the requested format, directly from branches of certain banks that purportedly 
+held Satyam’s largest interest bearing fixed deposit balances that were potentially conflicting 
+with confirmations it received from Satyam management that did not conform to the format 
+requested by the engagement team, a situation that should have alerted PW India to a heightened 
+risk that Satyam’s reported deposit balances were materially overstated; and (2) discovered 
+“significant deficiencies” in Satyam’s internal controls that should have caused PW India to take 
+additional procedures to address the heightened risk of material misstatement of Satyam’s 
+receivable balance during the 2007 fiscal year audit. 
+Rule 102(e) and Section 4C of the Exchange Act 
+57. Rule 102(e)(1)(ii) of the Commission’s Rules of Practice and Section 4C of the 
+Exchange Act authorize the Commission to censure or deny, temporarily or permanently, the 
+privilege of appearing or practicing before the Commission to accountants who are found to have 
+engaged in improper professional conduct.  Under Rule 102(e)(1)(iv), the term “improper 
+professional conduct” means, in part, “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.” 
+58. PW India caused Satyam to file and furnish materially inaccurate audit reports by 
+representing that the audits were conducted in accordance with PCAOB Standards.  Based on their 
+violations of applicable professional standards, PW India was a cause of Satyam issuing materially 
+false financial statements.  This conduct supports an action against PW India under Rules 
+102(e)(1)(ii) and 102(e)(1)(iv)(B)(2) of the Rules of Practice. 
+F. FINDINGS 
+59. Based on the foregoing, the Commission finds that PW India engaged in improper 
+professional conduct in connection with the 2005-2008 Satyam audits pursuant to Rule 
+16
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+  
+ 
+ 
+    
+ 
+  
+ 
+ 
+                                                 
+    
+102(e)(1)(ii) and 102(e)(1)(iv)(B)(2) of the Commission’s Rules of Practice and Section 4C of the 
+Exchange Act.  Additionally, the Commission finds that PW India violated Section 10A(a) of the 
+Exchange Act and was a cause of Satyam’s violations of Sections 13(a) and 13(b)(2)(A) of the 
+Exchange Act, and Rules 13a-1, 13a-16, and 12b-20 thereunder. 
+G. REMEDIAL ACTIONS 
+60. After January 2009, but before entry of this Order, PW India has taken a series of 
+remedial steps intended to enhance its audit quality controls in such areas as third-party 
+confirmations, engagement training and staffing, engagement review, and risk management.  PW 
+India has also engaged senior audit professionals from PwC Network Firms outside India to 
+review completed and ongoing audit engagements to evaluate and assess PW India’s existing 
+audit quality and to identify U.S.-related audit practice areas in need of improvement to be 
+addressed by the undertakings set forth in this Order. 
+61. In addition, PW India suspended its Satyam audit engagement partners from all 
+work and removed from client service all senior audit professionals (i.e., managers and above) 
+on the former Satyam audit team.  After January 2009, but before the entry of this Order, PW 
+India replaced virtually all senior management responsible for audit matters (“Assurance 
+Leadership Team”).  During this period, PW India also seconded several partners and other 
+senior audit professionals from PwC Network Firms outside of India to add full-time audit 
+infrastructure leadership and support throughout India. 
+H. UNDERTAKINGS13 
+PW India undertakes the following: 
+1. Acceptance of New SEC Issuer Audits. From the date of this Order, PW India shall not 
+accept any new SEC Issuer Audits prior to the Interim Certificate of Compliance Date (defined at 
+Paragraph 11). The term “SEC Issuer Audit(s)” is defined to mean an engagement to audit the 
+consolidated financial statements filed with the Commission of an “Issuer” as that term is defined 
+in Section 2(a)(7) of the Sarbanes-Oxley Act of 2002. Following the later of March 31, 2012 or 
+the Interim Certificate of Compliance Date, PW India shall conduct any new SEC Issuer Audit 
+pursuant to the Interim Conditions set forth in Paragraph 3 until the Final Certificate of 
+Compliance Date (defined at Paragraph 12).  Until the Final Certificate of Compliance Date, PW 
+India agrees that the Lead Engagement Partner (“Lead Partner”) on any SEC Issuer Audit must be 
+deemed not unacceptable to the Independent Monitor (defined at Paragraph 10) before PW India 
+commences work on any SEC Issuer Audit. 
+13 In determining to accept the Offer, the Commission further considered PW India’s representations that: (1) it had 
+not accepted any new SEC Issuer Audits or SEC Issuer Referred Engagement Work since January 2009; and (2) it 
+would voluntarily extend all relevant undertakings set forth in Section III.H to the five other India-based PwC 
+Network Firms. 
+17
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+ 
+ 
+ 
+   
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+2. Acceptance of SEC Issuer Referred Engagement Work. PW India shall not accept SEC 
+Issuer Referred Engagement Work for a new client for a period of six months following the date of 
+this Order.  The term “SEC Issuer Referred Engagement Work” is defined to mean instances in 
+which PW India: (a) conducts a full scope audit and provides, or should provide, consistent with 
+Applicable Professional Standards (defined at Paragraph 3.a.), an interoffice opinion for an SEC 
+Issuer-affiliated entity in connection with the audit of the SEC Issuer’s consolidated financial 
+statements filed with the Commission; or (b) provides audit work for an SEC Issuer-affiliated 
+entity in connection with the audit of the SEC Issuer’s consolidated financial statements filed 
+with the Commission that constitutes ten percent or more of the SEC Issuer’s consolidated 
+assets, revenues, or expenses, as measured by the SEC Issuer’s most recent fiscal year financial 
+statements filed with the Commission. The term SEC Issuer Referred Engagement Work 
+excludes Indian statutory audits for SEC Issuer-affiliated clients, SAS 70 reports (or, after June 15, 
+2011, SSAE No. 16 reports), and Shared Service Center Engagements (as defined in Paragraph 
+14). The term “new client” shall mean an SEC Issuer or a component of an SEC Issuer where PW 
+India: (i) has not provided any audit or review services to the SEC Issuer or any of its components 
+after January 1, 2010 through the date of this Order; and (ii) seeks to provide audit or review 
+services to the SEC Issuer or any of its components after the date of this Order.  After a period of 
+six months following the date of this Order and until the Final Certificate of Compliance Date, PW 
+India shall conduct SEC Issuer Referred Engagement Work for new clients pursuant to the Interim 
+Conditions set forth in Paragraph 3.   
+3. Interim Conditions. From April 1, 2011 until the Final Certificate of Compliance Date, PW 
+India shall conduct SEC Issuer Referred Engagement Work for current clients pursuant to the 
+conditions set forth below (“Interim Conditions”).  Upon expiration of the relevant restricted 
+periods specified in Paragraphs 1 and 2 above and until the Final Certificate of Compliance Date, 
+PW India agrees that any new SEC Issuer Audit and any SEC Issuer Referred Engagement Work 
+for a new client shall be subject to the following Interim Conditions:  
+a.	 Staffing and Selection of Lead Partners, Engagement Managers, and Quality Review 
+Partners. PW India’s Assurance Leadership Team (“ALT”), a group which shall 
+include, among others, PW India’s Assurance Leader and Risk & Quality Leader, shall 
+select, as part of meeting their quality control requirements, the  Lead Partner, 
+Engagement Manager, and Quality Review Partner (“QRP”), if required, for each SEC 
+Issuer Audit and SEC Issuer Referred Engagement Work after taking into account his 
+or her respective performance on SEC Issuer Audits, SEC Issuer Referred Engagement 
+Work, and SEC Issuer-related client engagements that do not meet the thresholds 
+described in Paragraph 2 (collectively “SEC Issuer-Related Audit Engagements”) as 
+indicated by the results of the Real Time Review and Engagement Compliance Review 
+(“ECR”) programs (Paragraph 9 and 10) and the real time review program undertaken 
+by PW India during 2010.  PW India undertakes to engage the engagement partner 
+from the PwC Network Firm which is the lead auditor of the relevant SEC Issuer client 
+(“Global Engagement Partner”) to review the selection of any Lead Partner, 
+Engagement Manager, and QRP before the commencement of any SEC Issuer Referred 
+Engagement Work.  PW India shall provide the Global Engagement Partner with a 
+18 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+                                                 
+   
+ 
+summary of the results of the engagement quality review conducted in October 2010, 
+any ECR conducted subsequent to the date of this Order, and any real time review 
+conducted during 2010 for each engagement on which the partner or manager served as 
+Lead Partner or Engagement Manager and shall provide the Global Engagement 
+Partner with access to any other relevant information upon request.  PW India agrees 
+that, in the event the Global Engagement Partner informs PW India that he or she 
+objects to the selection of the Lead Partner, Engagement Manager or QRP to perform 
+such work, PW India will select an alternative candidate that meets the conditions 
+described in this Paragraph. 
+A QRP shall be assigned for all SEC Issuer Referred Engagement Work that meets the 
+10 percent of assets, revenues, or expenses threshold in Paragraph 2.  For SEC Issuer 
+Referred Engagement Work that does not meet the 10 percent of assets, revenues, or 
+expenses threshold, a QRP will be assigned, if requested by the Global Engagement 
+Partner. The scope of the QRP’s role on such work shall be consistent with PCAOB 
+Auditing Standard No. 7, Engagement Quality Review.   
+Any PW India partner or manager who served as the Lead Partner or Engagement 
+Manager on any engagement that received an overall finding of unsatisfactory due to 
+departures from Applicable Professional Standards14 in connection with the 
+engagement quality review conducted in October 2010 or any ECR performed 
+subsequent to the date of this Order shall not be permitted to perform any SEC Issuer 
+Audit or SEC Issuer Referred Engagement Work as a Lead Partner or Engagement 
+Manager for a period of two fiscal years following the date of an overall finding of 
+“unsatisfactory.”  Provided, however, that if PW India believes that an individual 
+partner or manager whose engagement received an “unsatisfactory” rating should be 
+exempt from the two-year practice restriction, then PW India, through its Assurance 
+Leader, may make a written submission to the Independent Monitor explaining the 
+reasons therefore and the Independent Monitor shall have the authority to exempt the 
+individual partner or manager if he or she believes it is appropriate to do so.  In no 
+event, however, shall a partner or manager who receives an overall rating of 
+“unsatisfactory” due to departures from Applicable Professional Standards in two 
+consecutive quality reviews be exempt from the two-year practice restriction. 
+If a partner has an engagement on which he or she served as Lead Partner assessed as 
+unsatisfactory due to departures from Applicable Professional Standards in an 
+engagement quality review or ECR, that partner shall not be permitted to serve as a 
+QRP on any SEC Issuer Audit or SEC Referred Work Engagement for a period of two 
+fiscal years following the date of an overall finding of “unsatisfactory.” 
+14 The term “Applicable Professional Standards” means “professional standards” as defined in Section 2(a)(10) of 
+the Sarbanes-Oxley Act of 2002 as amended. 
+19
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+ 
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+  
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+ 
+ 
+  
+ 
+ 
+                                                 
+  
+   
+ 
+PW India shall comply with the conditions described in this Paragraph on a continuing 
+basis until the Final Certificate of Compliance Date. 
+b.	 Training. In addition to the training-based undertakings set forth in Paragraph 5, PW 
+India agrees to require the Lead Partner, QRP, and Engagement Manager to complete at 
+least: (a) eight hours of ethics training on an annual basis; and (b) 40 hours of 
+specialized training in U.S. GAAP, PCAOB Standards,15 and International Financial 
+Reporting Standards (“IFRS”) before initiating any SEC Issuer Audit or SEC Issuer 
+Referred Engagement Work and at least 16 hours of such training in each subsequent 
+year that such work is performed.  Training programs completed after June 2010 shall 
+be credited towards satisfying the 40 hour specialized training requirement of this 
+Paragraph. The specialized training requirements of this Paragraph may also satisfy the 
+specialized training hours requirements of Paragraph 5(d).  All other PW India audit 
+staff on any SEC Issuer Audit or SEC Issuer Referred Engagement Work shall be 
+subject to the training undertakings set forth in Paragraph 5. 
+c.	 Consultations. PW India undertakes to review all consultations with PW India’s 
+National Office concerning Applicable Professional Standards required by PW India’s 
+consultation policy (“Required Consultations”) involving any SEC Issuer Referred 
+Engagement Work with the Global Engagement Partner.   
+Before accepting any SEC Issuer Audit, PW India undertakes to develop a process for 
+review of all Required Consultations by an auditor from a PwC Network Firm outside 
+of India. Such process must be reviewed and deemed acceptable by the Independent 
+Monitor. 
+PW India further undertakes to resolve all Required Consultations in a manner 
+consistent with PW India policies and procedures prior to the issuance of any opinion, 
+report, or engagement completion document by PW India.  
+d.	 Pre-opinion Reviews. PW India undertakes, prior to the issuance of any opinion, 
+report, or engagement completion document by PW India, to: (i) engage the Global 
+Engagement Partner, or his or her partner or manager designee, to conduct a review of 
+any PW India SEC Issuer Referred Engagement Work; and (ii) conduct a Real Time 
+Review (Paragraph 9) of all SEC Issuer Audits. 
+4. Ongoing Cooperation. PW India (including its partners , principals, officers, agents and 
+employees) shall cooperate fully with the Commission with respect to this action and any related 
+15 References in Commission rules and staff guidance and in the federal securities laws to GAAS or to specific 
+standards under GAAS, as they relate to issuers, should be understood to mean the standards of the PCAOB plus any 
+applicable rules of the Commission.  See Release Nos. 33-8422; 34-49708; FR-73 at http://www.sec.gov/rules/interp 
+/33-8422.htm
+. 
+20
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+ 
+ 
+  
+   
+ 
+ 
+ 
+    
+ 
+ 
+ 
+ 
+judicial or administrative proceeding or investigation commenced by the Commission or to which 
+the Commission is a party and subject to compliance with applicable law.  PW India agrees that 
+such cooperation shall include, but is not limited to:   
+a. 	 Production of Information – at the Commission’s request, upon reasonable notice, and 
+without subpoena, PW India (including its partners, principals, officers, agents and 
+employees) shall truthfully and completely disclose all information requested by SEC 
+staff in connection with the Commission’s investigation, litigation or other proceedings, 
+except with respect to information related to clients other than Satyam, which 
+information shall be produced in response to subpoena or other appropriate legal 
+process; 
+b. 	 Production of Documents -- at the Commission's request, upon reasonable notice, and 
+without subpoena, PW India (including its partners, principals, officers, agents and 
+employees) shall provide any document, record, or other tangible evidence requested 
+by SEC staff in connection with the Commission’s investigation, litigation or other 
+proceedings, except with respect to documents related to clients other than Satyam, 
+which documents shall be provided in response to subpoena or other appropriate legal 
+process; and 
+c.	 Production of Cooperative Personnel – at the Commission's request, upon reasonable 
+notice, and without subpoena, PW India (including its partners, principals, officers, 
+agents and employees) shall use its best efforts to secure the attendance and truthful 
+statements or testimony of any PW India partner, principal, officer, agent, or 
+employee, excluding any such person who is a party to litigation with the 
+Commission, at any meeting, interview, testimony, deposition, trial, or other legal 
+proceeding.  
+The foregoing obligations are subject to PW India’s reservation of rights: 
+(i) to claim that documents or information requested is subject to attorney-client 
+privilege or attorney-work-product protection; and  
+(ii) 
+to seek entry of a confidentiality order as to (aa) sensitive business documents or 
+information, (bb) sensitive personnel documents or information, or (cc) 
+confidential information pertaining to clients other than Satyam. 
+PW India further agrees that, with respect to this action and any related judicial or 
+administrative proceeding or investigation commenced by the Commission or to which the 
+Commission is a party, it will: (i) accept service by email, mail or facsimile transmission of 
+notices, requests, or subpoenas issued by the Commission for documents or testimony at 
+depositions, hearings, or trials, or in connection with any related investigation by the 
+Commission staff (“Commission Service”); (ii) appoint PW India’s undersigned attorney as 
+agent to receive Commission Service; (iii) with respect to Commission Service, waive the 
+21
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+territorial limits upon 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 PW 
+India’s travel, lodging, and subsistence expenses at the then-prevailing U.S. Government per 
+diem rates; and (iv) consent to personal jurisdiction over PW India in any United States District 
+Court for purposes of enforcing any Commission Service. 
+5. Training and Professional Development. PW India shall evaluate its existing professional 
+development policy and shall make such revisions deemed necessary in order to adopt, implement, 
+and enforce written policies and procedures designed to provide its audit professionals with 
+reasonable training and education to minimize the risk of future violations of Applicable 
+Professional Standards and United States federal securities laws and regulations.  PW India agrees 
+that such training and education shall include subjects relevant to the audits of SEC Issuer-Related 
+Audit Engagements.  To that end, PW India shall require that all audit professionals complete a  
+training curriculum in the areas of traditional core audit and accounting, Applicable Professional 
+Standards, professional skepticism, behavioral change management, technical audit competence, 
+ethics standards, electronic and hard-copy audit documentation standards (including, as they relate 
+to PCAOB inspections), acceptable and appropriate third-party confirmation procedures, and other 
+relevant technical audit training. 
+a. Training Programs . Prior to March 31, 2011 and until the Final Certificate of 
+Compliance Date, PW India agrees and undertakes to provide annually, two-week 
+training programs covering the above-referenced audit topics as well as training and 
+presentation skills to select PW India audit professionals who thereafter will lead the 
+training of other PW India audit professionals.  After March 31, 2011, only PW India 
+audit professionals who have successfully completed a two-week training program will 
+be permitted to lead training of other PW India audit professionals. 
+b. 	 Mandatory Annual Training. Prior to December 31, 2011 and until the Final Certificate 
+of Compliance Date, PW India agrees and undertakes to require that all audit 
+professionals complete an annual three-day program that includes training on the 
+following topics: (i) audit basics; (ii) new audit and accounting standards; (iii) 
+emerging issues in the profession; (iv) specific audit and accounting challenges 
+identified in prior years’ PW India audits; and (v) the role of the engagement quality 
+reviewer. 
+c. 	 Professional Skepticism Training. Prior to December 31, 2011, PW India agrees and 
+undertakes to require that all audit professionals complete an eight-hour program that 
+covers acceptable and appropriate professional skepticism and fraud detection.  The 
+course will be offered annually thereafter to new hires, through the Final Certificate of 
+Compliance Date. 
+d. Specialized Training . In addition to the training and education described in Sections 
+5.b. and 5.c., all PW India audit professionals must complete successfully the following 
+core audit curriculum and specialized training before they commence audit work for 
+22 
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+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+any SEC Issuer Audit or SEC Issuer Referred Engagement Work for financial 
+statements after March 31, 2011: 
+(i) Minimum of 24 Hours of Audit-Related Training. The audit-related training 
+requirement shall address the following topics: (1) assessing risks of material 
+misstatements and developing responsive audit plans; (2) determining and 
+documenting appropriate sampling methods and sample sizes, selecting samples, 
+and evaluating and documenting results; (3) audit documentation; (4) obtaining and 
+evaluating sufficient competent evidential matter; (5) acceptable and appropriate 
+third-party confirmation procedures; (6) professional skepticism and corroboration 
+of management’s representations; (7) technical audit training; and (8) fraud 
+detection. Training courses completed after June 2010 shall be credited towards 
+satisfying the specialized audit training requirements of this Paragraph. 
+(ii) Minimum of 12 Hours of Specialized Training and Examination. Of the 24 hours 
+of required audit-related training described above, a minimum of 12 hours shall 
+involve live training taught by senior audit professionals from PwC Network Firms 
+outside India, including those who have been seconded to PW India, who are 
+experienced in auditing SEC Issuers and shall cover U.S. GAAP and PCAOB 
+Standards.  The live training shall be followed by an examination of the topics 
+covered. PW India audit professionals must complete a minimum of 6 hours of 
+such live training before they commence audit work for any SEC Issuer Audit or 
+SEC Issuer Referred Engagement Work in each subsequent year.  
+e. 	 Additional Training Programs. PW India agrees to consult with the Independent 
+Monitor in designing its training and education program, and to submit to the 
+Independent Monitor a detailed proposal within 60 days after retention of the 
+Independent Monitor that describes the content and implementation of the training and 
+education program.  PW India undertakes and agrees to provide such additional training 
+and workshops for its audit professionals on topics that include, but are not limited to: 
+IFRS training; additional workpaper documentation standards; behavioral instruction; 
+audit planning; PW India audit partner and manager supervisory training; audit quality 
+training for all PW India audit partners; and other training deemed necessary to rectify 
+deficiencies identified during the Quality Control Management Review and 
+Engagement Compliance Review programs (described in Paragraph 9).  The 
+Independent Monitor shall review PW India’s proposal describing the content and 
+implementation of the training and education program; such program must be deemed 
+not unacceptable to the Independent Monitor.   
+6. Ethical Code of Conduct and Associated Training. PW India has represented that it has a 
+Code of Ethical Business Conduct (the “Ethics Code”) that defines standards of behavior for PW 
+India audit professionals.  PW India undertakes to:  (a) adopt procedures designed to ensure that 
+the Ethics Code is disseminated to PW India audit professionals; (b) conduct appropriate ethics 
+training; (c) review the Ethics Code on a regular basis and update it as needed; (d) adopt an 
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+appropriate system of penalties to discourage and punish any violations of the Ethics Code; and (e) 
+adopt procedures designed to verify, on a regular basis, compliance with the Ethics Code. In 
+addition, PW India shall provide annual ethics training to PW India audit professionals deemed 
+most likely to perform SEC Issuer-Related Audit Engagements. 
+7. 	 Undertakings Concerning Staffing 
+a. 	 Audit Infrastructure Support. PW India undertakes to increase the size and improve the 
+expertise of its audit support personnel by adding full-time or full-time equivalent 
+senior professionals (i.e., managers and above) trained in and knowledgeable about 
+U.S. GAAP and PCAOB Standards from within PW India and from PwC Network 
+Firms outside India in all areas of audit support. 
+b. Engagement Staffing . PW India shall undertake to alter the structure of its engagement 
+teams on SEC Issuer-Related Audit Engagements.  Such measures shall include: (i) 
+policies and procedures designed to address the detection and resolution of potential 
+issues concerning the quality of audit work performed by senior audit professionals; (ii) 
+policies and procedures designed to ensure the QRP’s role is in compliance with 
+PCAOB Auditing Standard No. 7; (iii) greater emphasis on partner and manager time 
+and attention; (iv) regular coaching of junior audit professionals by experienced senior 
+audit professionals; and (v) as indicated below, recruitment of client service partners 
+and other senior audit professionals from PwC Network Firms outside India to increase 
+the size and improve the expertise of PW India’s audit personnel. 
+c. Secondment. PW India undertakes to  increase the number of senior audit professionals 
+seconded from PwC Network Firms outside India that are trained in and knowledgeable 
+about U.S. GAAP and PCAOB Standards who will, among other responsibilities, be 
+involved in the training of PW India audit professionals most likely to perform SEC 
+Issuer-Related Audit Engagements.  PW India also shall initiate an audit engagement 
+exchange program for junior audit professionals to and from PW India with a 
+particularized focus on the performance of integrated audit procedures on the financial 
+statements of clients affiliated with an SEC Issuer. 
+8. Undertakings Concerning Audit Quality Management System. Prior to December 31, 
+2011, PW India shall revise as may be necessary, and then engage in steps to implement and 
+enforce, such policies and procedures so as to provide reasonable assurance that PW India will 
+comply with its obligations under professional, regulatory and firm requirements with respect to 
+SEC Issuer-Related Audit Engagements.  To that end, PW India agrees and undertakes to provide 
+to the Independent Monitor for review and recommendation, its policies and procedures, including 
+evidence of their implementation, concerning the following: 
+a. Completion of Planning  Prior to the Commencement of Audit Fieldwork. Such 
+policies and procedures shall provide reasonable assurance that, prior to the 
+commencement of any significant audit procedures:  (i) workpapers identify all 
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+significant risks requiring additional testing; (ii) workpapers identify all significant 
+accounts and disclosures and their relevant assertions; (iii) workpapers document the 
+risks of material misstatements, and that the planned nature, timing, and extent of 
+testing are finalized and reviewed and approved by the Lead Partner, and, when 
+appropriate, the QRP; and (iv) workpapers are tailored to address identified risks of 
+material misstatement. 
+b. Third-Party Confirmations . Such policies and procedures shall be designed to provide 
+reasonable assurance that all audit personnel perform third-party confirmation 
+procedures in compliance with PCAOB Standards.  
+c. Consultations . Such policies and procedures shall set forth consultation procedures and 
+documentation requirements regarding procedures for external review of PW India 
+National Office Required Consultations, as well as for the resolution of such 
+consultations. 
+d. Documentation . Such policies and procedures shall be designed to provide 
+reasonable assurance that PW India’s SEC Issuer-Related Audit Engagements comply 
+with Auditing Standard No. 3, Audit Documentation.  Such procedures shall 
+emphasize that documentation must be prepared in sufficient detail for an 
+experienced auditor, without prior knowledge of the engagement, to be able to 
+reperform the work and require that any additions made after the documentation 
+date
+16 must identify the date the information was added, the name of the person who 
+prepared the additional documentation, and the reason for adding it.  Additionally, 
+PW India shall adopt a policy making it mandatory that a Lead Partner on an SEC 
+Issuer-Related Audit Engagement re view each audit area designated by the 
+engagement team as having a significant risk of material misstatement (whether due 
+to fraud or error) for compliance with both PCAOB Standards and related rules and 
+firm policies and procedures. 
+e. 	 Detection and Reporting of Illegal Client Activity (“Section 10A Compliance”). 
+Such policies and procedures shall be designed to provide reasonable assurance that 
+PW India complies with Section 10A of the Securities Exchange Act of 1934, as 
+amended, including without limitation, for each audit subject to Section 10A, 
+procedures designed to provide reasonable assurance of detecting illegal acts that 
+would have a direct and material effect on the determination of financial statement 
+16 PCAOB Auditing Standard No. 3, Paragraph 15, states, “A complete and final set of audit documentation should 
+be assembled for retention as of a date not more than 45 days after the report release date (documentation 
+completion date). If a report is not issued in connection with an engagement, then the documentation completion 
+date should not be more than 45 days from the date that fieldwork was substantially completed. If the auditor was 
+unable to complete the engagement, then the documentation completion date should not be more than 45 days from 
+the date the engagement ceased.” 
+25
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+amounts, and to comply with all requirements under the standards of the Commission, 
+the PCAOB, and Section 10A to evaluate and report suspected illegal acts. 
+f.	 Engagement Quality Control. Such policies and procedures shall be designed to 
+provide reasonable assurance that PW India complies with the PCAOB’s Auditing 
+Standard No. 7, Engagement Quality Review.  
+g. Audit Opinions . Such policies and procedures shall be designed to provide 
+reasonable assurance that the firm signing the audit report or opinion for an SEC 
+Issuer-Related Audit Engagement shall uniquely identify itself by, at a minimum, its 
+PCAOB-registered name, and the location of the registered office. 
+9. 	 Audit Quality Environment 
+a. 	 Real Time Reviews. From the date of this Order through at least the Interim Certificate 
+of Compliance Date, PW India shall engage senior audit professionals from PwC 
+Network Firms outside India with experience in both U.S. GAAP and PCAOB 
+Standards to lead pre-opinion reviews of certain SEC Issuer-Related Audit 
+Engagements (“Real Time Reviews”). All SEC Issuer Audits and a sample of other 
+SEC Issuer-Related Audit Engagements, including at least one other SEC Issuer-
+Related Audit Engagement for each partner serving as Lead Partner on such an 
+engagement, shall be subject to a Real Time Review each year.  These reviews shall be 
+designed to identify areas for improvement and to provide support to PW India audit 
+engagement teams working on SEC Issuer-Related Audit Engagements.  SEC Issuer 
+Referred Engagement Work is subject to the pre-opinion reviews described in 
+Paragraph 3(d) and shall be excluded from the Real Time Reviews.   
+b. 	 Engagement Compliance Review. PW India shall engage senior audit professionals 
+from PwC Network Firms outside India with experience in both U.S. GAAP and 
+PCAOB Standards to review selected, completed PW India SEC Issuer-Related Audit 
+Engagement workpapers as part of the ECR program in order to assess PW India’s 
+compliance with Applicable Professional Standards.  The Independent Team Leader 
+(“ITL”) will select the engagements for review, which selection shall be part of the 
+ECR planning and scope subject to review and recommendation by the Independent 
+Monitor. As part of their engagement by PW India, these senior audit professionals 
+shall develop an engagement quality review program designed to measure and assess 
+compliance with Applicable Professional Standards and PW India partner performance 
+on SEC Issuer-Related Audit Engagements through annual post-opinion evaluations of 
+selected SEC Issuer-Related Audit Engagements.  The ECR program will also identify 
+remedial needs on an ongoing basis.  As described further in Paragraph 10, the planning 
+and scope of the ECR program shall incorporate recommendations made by the 
+Independent Monitor. The ECR program shall be overseen by an ITL experienced in 
+U.S GAAP and PCAOB Standards and will continue on an annual basis until the Final 
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+Certificate of Compliance Date.  All SEC Issuer Audits and SEC Issuer Referred 
+Engagement Work shall be included as part of the annual ECR.  
+c. Quality Control Management Review. PW India shall engage senior audit 
+professionals from PwC Network Firms outside India experienced in PCAOB 
+Standards to devise and implement a quality control review program to measure and 
+assess whether, and to what extent, PW India has in place systems, policies, and 
+procedures to provide reasonable assurance that its audit personnel comply with 
+applicable professional standards and PW India’s standards of quality as defined by 
+PCAOB Quality Control Standards17 when performing work on SEC Issuer-Related 
+Audit Engagements (herein referred to as “Quality Control Management Review or 
+“QCMR”).18  As described further in Paragraph 10, PW India’s QCMR program shall 
+include an annual review of completed audit work measured against a series of key 
+performance indicators that shall be developed, assessed, and updated on an ongoing 
+basis. The planning and scope of the QCMR shall be overseen by the ITL and shall 
+incorporate recommendations made by the Independent Monitor.  The QCMR program 
+shall continue on an annual basis until the Final Certificate of Compliance Date. 
+10. Undertakings Related to Reporting Requirements and the Role of the Independent Monitor 
+a. 	 Independent Monitor Selection and Retention. PW India shall retain and pay for an 
+independent third-party not unacceptable to PCAOB staff and Commission staff who 
+has experience with public company reporting in the United States and is 
+knowledgeable in Applicable Professional Standards ("Independent Monitor") to 
+review PW India’s compliance with the undertakings set forth in this Order.  Within 
+60 days after the entry of this Order, PW India shall submit to PCAOB staff and 
+Commission staff a proposal setting forth the identity, qualifications, and proposed 
+terms of retention of the Independent Monitor. PW India may not retain as the 
+Independent Monitor any individual or entity that has provided legal, auditing, or other 
+services to, or has had any affiliation with, Satyam, PwC IL, or any PwC Network Firm 
+during the prior two years. 
+PW India agrees that its engagement agreement with the Independent Monitor shall 
+require the Independent Monitor to agree that, for the period of engagement and for a 
+17 References to “PCAOB Quality Control Standards” throughout this Order mean, collectively, QC Sec. 20, System 
+of Quality Control for a CPA Firm's Accounting and Auditing Practice; QC Sec. 30, Monitoring a CPA Firm's 
+Accounting and Auditing Practice; QC Sec. 40, The Personnel Management Element of a Firm's System of Quality 
+Control-Competencies Required by a Practitioner-in-Charge of an Attest Engagement; all amendments thereto, and 
+any subsequently enacted related standards of the PCAOB. 
+18 Staff recognizes that, subject to review and recommendation of the Independent Monitor, PW India also may 
+develop procedures and measurements designed to review and evaluate the firm’s quality control compliance with 
+International Standard on Quality Control 1, which PW India represents may prove relevant in determining PW 
+India’s overall quality control environment. 
+27
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+period of two years from completion of the engagement, the Independent Monitor shall 
+not enter into any employment, consultant, attorney-client, auditing, or other 
+professional relationship with Satyam, PwC IL, or any PwC Network Firm, or any of 
+their present or former affiliates, directors, officers, employees, or agents acting in their 
+capacity as such, and shall require that any firm with which the Independent Monitor is 
+affiliated or of which the Independent Monitor is a member, or any person engaged to 
+assist the Independent Monitor in performance of the Independent Monitor's duties 
+under this Order not, without prior written consent of the PCAOB staff and 
+Commission staff, enter into any employment, consultant, attorney-client, auditing, or 
+other professional relationship with Satyam, PwC IL, or a PwC Network Firm, or any 
+of their 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. 
+The term of the Independent Monitor shall expire upon the Final Certificate of 
+Compliance Date. PW India shall not have the authority to terminate the Independent 
+Monitor before the Final Certificate of Compliance Date without the prior written 
+approval of the PCAOB staff and the Commission staff. 
+b. 	 Role and Responsibilities Overview. As set forth in this Order, the Independent 
+Monitor’s roles and responsibilities shall include: (i) pre-appointment review of new 
+members of PW India’s Assurance Leadership Team and Lead Partners on SEC Issuer 
+Audits – such individuals shall not be unacceptable to the Independent Monitor; (ii) 
+approving the appointment of the ITL; (iii) reviewing and recommending revisions to  
+the audit Quality Management System policies and procedures of PW India; (iv) 
+reviewing and recommending revisions to PW India’s ECR and QCMR programs and 
+compliance work plans; (v) reporting upon PW India’s progress after review and 
+evaluation of PW India’s semi-annual and annual reports set forth herein; (vi) assessing 
+and recommending remedial steps deemed necessary to correct any deficiencies 
+identified in the semi-annual and annual reports; (vii) preparing an annual written 
+report concerning PW India’s progress in implementing the undertakings; (viii) making 
+findings as set forth in Paragraphs 11 and 12; and (ix) taking such reasonable steps as, 
+in his or her view, may be necessary to fulfill his or her obligations set forth in this 
+Order. 
+c. Monitoring Complia nce with Undertakings.  Within 60 days after retention of an 
+Independent Monitor, PW India shall submit to the Independent Monitor a work plan 
+that describes the manner in which PW India intends to set forth quantifiable goals in 
+which it may measure its ongoing implementation of, and compliance with, the 
+undertakings set forth in this Order.  PW India undertakes to permit the Independent 
+Monitor 30 days to make recommendations to its work plan and agrees to make a 
+good faith effort to address and incorporate all such recommendations.  PW India 
+shall work cooperatively with the Independent Monitor to resolve any disagreements 
+to the satisfaction of the Independent Monitor.  If a matter that the Independent 
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+Monitor believes is within his or her responsibility cannot be resolved, at the request of 
+the Independent Monitor, PW India shall promptly provide written notice to the 
+Independent Monitor and the PCAOB staff and Commission staff.  Any disputes 
+between PW India and the Independent Monitor with respect to the work plan shall be 
+decided by the PCAOB staff and the Commission staff, and PW India shall abide by 
+their decision. 
+For the period from the effective date of this Order to the Final Certificate of 
+Compliance Date, PW India agrees and undertakes periodically, at no less than six-
+month intervals, to provide a written report to the Independent Monitor regarding PW 
+India’s progress regarding the implementation of, and compliance with, the 
+undertakings set forth in this Order.  On an annual basis, PW India shall provide the 
+Independent Monitor with a written report that explains the circumstances 
+surrounding any failure to meet specific quantifiable goals set forth in the work plan 
+(as well as the specific audit involved, if any) and shall provide a detailed description 
+of what steps, if any, PW India has taken and shall take to remedy any such failure.  
+PW India’s follow-up reviews shall incorporate comments provided by the 
+Independent Monitor on PW India’s prior reviews and reports.  As part of PW India’s 
+compliance with the undertakings set forth in this Order, the Independent Monitor 
+shall also assess and report annually to PCAOB staff and Commission staff whether 
+PW India is complying with the undertaking regarding SEC Issuer Audits and SEC 
+Issuer Referred Engagement Work (Paragraphs 2 and 3). 
+d. 	 Monitoring Compliance with PW India’s Quality Control Management Review and 
+Engagement Compliance Review. Within 60 days after retention of an Independent 
+Monitor, PW India undertakes to engage the ITL to submit to the Independent Monitor 
+the QCMR and ECR proposed plans. 
+PW India agrees and undertakes that, until the Final Certificate of Compliance Date, 
+the ITL and the two individuals with direct responsibility for the QCMR and ECR (the 
+“Review Team Leaders”) shall be senior audit professionals from a PwC Network Firm 
+outside India with experience in U.S. GAAP and PCAOB Standards that have not 
+participated in any quality review of PW India prior to September 2010.  The ITL must 
+be approved by the Independent Monitor and deemed not unacceptable to both PCAOB 
+staff and Commission staff.  
+PW India undertakes to engage the ITL to permit the Independent Monitor 60 days to 
+make recommendations to its QCMR and ECR proposed plans and engage the ITL to 
+make a good faith effort to incorporate all such recommendations.  PW India shall 
+engage the ITL to work cooperatively with the Independent Monitor to resolve any 
+disagreements to the satisfaction of the Independent Monitor. If the matter cannot be 
+resolved, at the request of the Independent Monitor, PW India, through the ITL, shall 
+promptly provide written notice to the Independent Monitor and the PCAOB staff and 
+Commission staff. Any disputes between PW India or the ITL and the Independent 
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+Monitor with respect to the QCMR and ECR proposed plans shall be decided by the 
+PCAOB staff and the Commission staff, and their decision shall be final. 
+(i) Quality Control Management Review Reports. For the period from the effective 
+date of this Order to the Final Certificate of Compliance Date, PW India agrees and 
+undertakes to provide, through the ITL, an annual written report to the Independent 
+Monitor that assesses – and provides documented and supportable findings – as to 
+whether, and to what extent, there is reasonable assurance that PW India’s quality 
+controls with respect to SEC Issuer-Related Audit Engagements are in compliance with 
+PCAOB Quality Control Standards. PW India shall undertake follow-up reviews each 
+year until the Final Certificate of Compliance Date, incorporating comments provided 
+by the Independent Monitor on PW India’s prior reviews and reports, to further 
+monitor and assess PW India’s quality controls.  
+(ii) Engagement Compliance Review Reports. For the period from the effective date 
+of this Order to the Final Certificate of Compliance Date, PW India agrees and 
+undertakes to provide, through the ITL, an annual written report to the Independent 
+Monitor that assesses and provides documented and supportable findings as to 
+whether, and to what extent, PW India’s audits of SEC Issuer-Related Audit 
+Engagements are compliant with Applicable Professional Standards.19 Such 
+assessments and findings shall include, but not be limited to, documents sufficient to 
+support the results developed from all engagement reviews from which the report is 
+based. PW India shall undertake follow-up reviews each year until the Final 
+Certificate of Compliance Date, incorporating comments provided by the Independent 
+Monitor on PW India’s prior reviews and reports, to further monitor and assess PW 
+India’s engagement quality.  
+(iii) Independent Monitor Annual Report. Within 90 days of receiving the ECR or 
+QCMR report, whichever is later, and for the period from the effective date of this 
+Order to the Final Certificate Date, the Independent Monitor shall prepare an annual 
+report (“IM Report”) that assesses whether the QCMRs and ECRs were conducted 
+according to reasonable procedures and indicates whether the Independent Monitor 
+supports the findings and conclusions set forth in the QCMR and ECR reports.  The 
+Independent Monitor may extend the time period for the IM Report for up to thirty 
+calendar days upon prior written notice to PW India, PCAOB staff, Commission staff, 
+and the ITL. Within 30 days of receiving the IM Report, PW India may prepare a 
+written response to the IM Report. If the Final Certificate of Compliance does not take 
+effect within three years of the date of this Order, each IM Report thereafter shall 
+include an assessment regarding whether, and to what extent, PW India continues to 
+make substantial progress toward satisfying the undertakings set forth in this Order. 
+19 The ITL may opt to issue a single, aggregate report that covers the annual results of both the QCMR and the ECR. 
+30
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+(iv) Remedial Measures Resulting from Annual Review Reports. To the extent that 
+the annual ECR and QCMR reports, or the resulting IM Report, identify deficiencies or 
+instances of non-compliance with respect to the standards articulated therein, PW India 
+shall submit to the Independent Monitor a Remedial Plan within 60 days of its receipt 
+of the IM Report.  PW India shall permit the Independent Monitor 30 days to make 
+recommendations to the remedial plan.  PW India shall require the ITL to consult with 
+the Independent Monitor and make a good faith effort to incorporate the remedial plan 
+recommendations into the subsequent period’s ECR and QCMR, as appropriate and 
+PW India shall require the ITL to work cooperatively with the Independent Monitor 
+to resolve any disagreements to the satisfaction of the Independent Monitor. If the 
+matter cannot be resolved, at the request of the Independent Monitor, PW India, 
+through the ITL, shall promptly provide written notice to the Independent Monitor and 
+the PCAOB staff and Commission staff.  Any disputes between the ITL and the 
+Independent Monitor with respect to the remedial plan shall be decided by the PCAOB 
+staff and the Commission staff, and their decision shall be final. 
+e. Reporting Requirements .  PW India’s Assurance Leader shall sign all QCMR, ECR, 
+and Remedial Plan reports, attesting that he or she has read and understood their 
+content and certifying satisfaction with any undertakings addressed, findings reached, 
+and remedial steps required in the reports.  PW India shall provide copies of all 
+written reports described in this Paragraph to the appropriate PCAOB staff and 
+Commission staff designees no later than 10 days from the date of completion.   
+f. 	 Documentation Requirements.  PW India agrees and undertakes to prepare and 
+preserve a copy of all written plans, reports, and responses in connection with the 
+undertakings set forth in this Order.  In addition, PW India shall maintain sufficient 
+documentation to provide a clear undertaking of its purpose, sources of support, and 
+conclusions that form the basis of all reports set forth in this Order.  PW India agrees 
+and undertakes that all such documentation shall be made available to the 
+Independent Monitor and, upon reasonable request, to PCAOB staff and Commission 
+staff.  All such documentation will be retained for two years following the Final 
+Certification of Compliance Date. 
+11. Interim Certificate of Compliance. Upon a finding by the Inde pendent Monitor that PW 
+India: (i) has developed an acceptable proce ss for the review of Required Consultations 
+(Paragraph 3.c.) for SEC Issuer Audits by an auditor experienced in U.S. GAAP and PCAOB 
+Standards from a PwC Network Firm outside India; (ii) has demonstrated significant progress 
+toward completion of the undertakings set forth in this Order; and (iii) has evidenced reasonable 
+assurances from the QCMRs and ECRs that there are no significant deficiencies or instances of 
+material non-compliance with respect to an SEC Issuer Audit or SEC Issuer Referred 
+Engagement Work completed and reviewed for the previous fiscal year, PW India’s Assurance 
+Leader shall certify in writing that it has satisfied each of  the above specified conditions 
+(“Interim Certificate of Compliance”).  The Interim Certificate of Compliance shall identify each 
+of the relevant reports in which PW India demonstrated written evidence of satisfaction in the 
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+form of a narrative supported by exhibits sufficient to demonstrate compliance.  The Interim 
+Certificate of Compliance and supporting material shall be submitted to the appropriate 
+Commission Division of Enforcement and PCAOB Division of Enforcement designee (the 
+“Designees”). Upon receipt of the Interim Certificate of Compliance and any supporting 
+material that the ITL and Independent Monitor deem necessary to support that Certificate, the 
+Designees may make reasonable requests for further documents evidencing compliance and PW 
+India agrees to provide the requested documents to the Designees and the Independent Monitor.  
+Within the earlier of 30 days of receipt of the requested documents or 120 days after receipt of 
+the Interim Certificate of Compliance, the Independent Monitor must either affirm or withdraw 
+his or her initial findings regarding the Interim Certificate of Compliance in writing, a copy of 
+which shall be provided to PW India, the ITL, and the Designees.  The Interim Certificate of 
+Compliance takes effect upon confirmation by both Designees that they have received the 
+Independent Monitor’s affirmation of findings in writing (“Interim Certificate of Compliance 
+Date”), but in any event the Interim Certificate of Compliance Date shall not be before March 
+31, 2012. 
+12. Final Certificate of Compliance. Upon findings by the Independent Monitor that: (i) PW 
+India has complied with the undertakings set forth in this Order; (ii) PW India has evidenced 
+reasonable assurance that its quality controls in place for SEC Issuer-Related Audit Engagements 
+are in compliance with PCAOB Quality Control Standards; and (iii) PW India has evidenced 
+reasonable assurances that there are no significant deficiencies or instances of material non­
+compliance with respect to all of the SEC Issuer-Related Audit Engagements completed and 
+reviewed for the previous two fiscal years, PW India’s Assurance Leader shall certify in writing 
+that it has satisfied each of the above specified conditions (the “Final Certificate of 
+Compliance”). The Final Certificate of Compliance shall identify each of the relevant reports in 
+which the Independent Monitor has found that PW India demonstrated written evidence of 
+compliance in the form of a narrative supported by exhibits sufficient to demonstrate 
+compliance. The Final Certificate of Compliance and supporting material shall be submitted to 
+the Designees. Upon receipt of th e Final Certificate of Compliance and the relevant reports, the 
+Designees may make reasonable requests for further documents evidencing compliance and PW 
+India shall provide the requested documents to the Designees and the Independent Monitor.  
+Within the earlier of 60 days of the Designees’ receipt of the requested documents or 120 days 
+after the Designees’ receipt of the Final Certificate of Compliance, the Independent Monitor 
+must either affirm or withdraw his or her initial findings regarding the Final Certificate of 
+Compliance in writing, a copy of which shall be provided to PW India, the ITL, and the 
+Designees. The Final Certif icate of Compliance takes effect upon confirmation by both 
+Designees that they have received the Independent Monitor’s affirmation of findings in writing.   
+(“Final Certificate of Compliance Date”). 
+13. PCAOB Inspections. PW India shall provide to the Independent Monitor inspection 
+comment forms and responses and draft and final inspection reports pertaining to all PCAOB 
+inspections of PCAOB-registered PW India firms that may occur from the date of this Order to 
+the Final Certificate of Compliance Date.  The goal of this undertaking is to provide the 
+Independent Monitor with an opportunity to review and identify any criticisms or potential 
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+defects in PW India’s quality control system that would indicate PW India has failed to evidence 
+reasonable assurance that its quality controls in place for SEC Issuer-Related Audit Engagements 
+are in compliance with PCAOB Quality Control Standards.  If the Independent Monitor 
+concludes that the results of a PCAOB inspection of a PCAOB-registered PW India firm are 
+inconsistent with his or her findings made in connection with Paragraph 12, the Final Certificate 
+of Compliance Date will not take effect until the Independent Monitor provides a written report 
+to PW India, the ITL, and the Designees that explains how the Independent Monitor has 
+reconciled any such inconsistencies to his or her satisfaction. 
+14. From the date of this Order and until the Final Certificate of Compliance Date, PW India 
+agrees and undertakes that its Shared Service Center Engagements shall be subject to the 
+following conditions: (a) all workpapers prepared  by PW India shall be provided to the Global 
+Engagement Partner or his or her designee; (b) the Global Engagement Partner shall engage a 
+senior audit professional from a PwC Network Firm outside India to oversee and control the 
+execution of the Shared Service Center Engagement; and (c) the Global Engagement Partner 
+shall assume all responsibility for the Shared Service Center Engagement.  The term “Shared 
+Service Center” shall mean an outsourcing facility that is a component of, or a third-party vendor 
+to, an SEC Issuer and which operates, controls, and processes the SEC Issuer’s group financial 
+transactions. The term “Shared Service Center Engagement“ shall mean an audit engagement in 
+which the Global Engagement Partner for an SEC-issuer group that is audited by a PwC Network 
+Firm instructs PW India to audit the controls and processing of group financial transactions by a 
+Shared Service Center.  Where PW India audits a Shared Service Center’s own financial 
+statements and that engagement meets the definition of SEC Issuer Referred Engagement Work, 
+such engagement shall be subject to the limitations on acceptance of SEC Issuer Referred 
+Engagement Work set forth in Paragraph 2 and the Interim Conditions set forth in Paragraph 3. 
+In determining whether to accept the Offer, the Commission has considered these 
+undertakings. PW India agrees that if the Division of Enforcem ent believes that PW India has 
+not satisfied these undertakings within a reasonable time, the Division of Enforcement may 
+petition the Commission to reopen the matter to determine whether additional sanctions are 
+appropriate. 
+IV. 
+In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondents’ Offer. 
+Accordingly, pursuant to Sections 4C, 21B(a)(2)(B) and 21C of the Exchange Act, and 
+Rule 102(e)(1)(ii) of the Commission’s Rules of Practice, it is hereby ORDERED, effective 
+immediately, that: 
+A. Respondents shall cease and desist from committing or causing any violation and any 
+future violation of Section 10A(a) of the Exchange Act and from causing any 
+33
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+  
+ 
+ 
+  
+violation and any future violation of Sections 13(a) and 13(b)(2)(A) of the Exchange 
+Act and Rules 12b-20, 13a-1, and 13a-16 thereunder; 
+B. Respondents shall, within 45 days of the entry of this Order, pay a civil money 
+penalty in the amount of $6 million to the Securities and Exchange Commission. If 
+the payment is not made by the date the payment is required by this Order, the entire 
+outstanding balance of civil penalties, plus any additional interest accrued pursuant to 
+31 U.S.C. 3717, shall be due and payable immediately, without further application.  
+Payment shall be: (A) made by wire transfer, 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, Alexandria, VA 22312-0003; and (D) submitted under a 
+notification that identifies Lovelock & Lewes, Price Waterhouse, Bangalore, Price 
+Waterhouse & Co., Bangalore, Price Waterhouse Calcutta, and Price Waterhouse & 
+Co., Calcutta as the Respondents in these proceedings as well as the file number of 
+these proceedings.  Respondents shall simultaneously transmit a copy of such payment 
+and notification to Cheryl J. Scarboro, Chief, Foreign Corrupt Practices Act Unit, 
+Division of Enforcement, 100 F Street N.E., Washington, DC 20549-5030.  
+Respondents will cooperate with the staff of the Commission to obtain evidence of 
+receipt of the payments set forth herein. 
+C. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is created 
+for the penalties referenced in Paragraph B above.  Regardless of whether any such 
+Fair Fund distribution is made, the civil penalty shall be treated as a penalty paid to the 
+government for all purposes, including all tax purposes.  To preserve the deterrent 
+effect of the civil penalty, Respondents agree that they shall not, after offset or 
+reduction of any award of compensatory damages in any Related Investor Action based 
+on Respondents’ payment of a civil penalty in this proceeding, argue that they are 
+entitled to, nor shall they further benefit by offset or reduction of any part of such 
+compensatory damages award by the amount of any part of Respondents’ payment of a 
+civil penalty in this proceeding ("Penalty Offset").  If the court in any Related Investor 
+Action grants such a Penalty Offset, Respondents agree that they shall, within 30 days 
+after entry of a final order granting the Penalty Offset, notify the Commission's counsel 
+in this proceeding and pay the amount of the Penalty Offset to the United States 
+Treasury or to a Fair Fund, as the Commission directs.  Such a payment shall not be 
+deemed an additional civil penalty and shall not be deemed to change the amount of the 
+civil penalty imposed in this proceeding.  For purposes of this paragraph, a "Related 
+Investor Action" means a private damages action brought against any or all 
+Respondents by or on behalf of one or more investors based on substantially the same 
+facts as alleged in this Order instituted by the Commission in this proceeding. 
+D.	 Respondents are censured pursuant to Rule 102(e)(1)(ii) of the Commission’s Rules 
+of Practice; and 
+34
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+E. Respondents shall comply with the undertakings enumerated in Section III.H. above. 
+ By the Commission.
+       E l i z a b e t h M . M u r p h y
+        S e c r e t a r y 
+35
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+    
+   
+ 
+ 
+ 
+   
+ 
+ 
+ 
+        
+ 
+SERVICE LIST 
+Rule 141 of the Commission's Rules of Practice provides that the Secretary, or 
+another duly authorized officer of the Commission, shall serve a copy of the Order Instituting 
+Public Administrative and Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the 
+Securities and Exchange Act of 1934 and Rule 102(e) of the Commission’s Rules of Practice, 
+Marking Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order, on the 
+Respondents and their legal agent. 
+The attached Order has been sent to the following parties and other persons entitled 
+to notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Cheryl J. Scarboro, Esq.  
+Division of Enforcement 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549 
+Lovelock & Lewes 
+36
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+c/o Christopher Davies, Esq. 
+Wilmer Cutler Pickering Hale and Dorr LLP 
+1875 Pennsylvania Avenue, N.W.
+ 
+Washington, DC 20006 
+Price Waterhouse, Bangalore 
+c/o Christopher Davies, Esq. 
+Wilmer Cutler Pickering Hale and Dorr LLP 
+1875 Pennsylvania Avenue, N.W.
+ 
+Washington, DC 20006 
+Price Waterhouse & Co., Bangalore
+ 
+c/o Christopher Davies, Esq. 
+Wilmer Cutler Pickering Hale and Dorr LLP 
+1875 Pennsylvania Avenue, N.W.
+ 
+Washington, DC 20006 
+Price Waterhouse, Calcutta 
+37 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+c/o Christopher Davies, Esq. 
+Wilmer Cutler Pickering Hale and Dorr LLP 
+1875 Pennsylvania Avenue, N.W.
+ 
+Washington, DC 20006 
+Price Waterhouse & Co., Calcutta
+ 
+c/o Christopher Davies, Esq. 
+Wilmer Cutler Pickering Hale and Dorr LLP 
+1875 Pennsylvania Avenue, N.W.
+ 
+Washington, DC 20006 
+Christopher Davies, Esq.  
+Wilmer Cutler Pickering Hale and Dorr LLP 
+1875 Pennsylvania Avenue, N.W.
+ 
+Washington, DC 20006 
+(Counsel for Respondents Lovelock & Lewes,  
+Price Waterhouse, Bangalore,  
+Price Waterhouse & Co., Bangalore,  
+Price Waterhouse, Calcutta, and 
+Price Waterhouse & Co., Calcutta)
+ 
+38 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3258.txt b/raw/aaer/2011/AAER-3258.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6da20cabb155fe441d6f211961cd94eb8ab77410
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+++ b/raw/aaer/2011/AAER-3258.txt
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+              Satyam Computer Services Limited d/b/a Mahindra Satyam
+           
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+        Satyam Computer Services Limited d/b/a Mahindra Satyam
+       
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+                U.S. Securities and Exchange Commission 
+
+ Litigation Release No. 21915 / April 5, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3258 / April 5, 2011 
+
+  U.S. Securities and Exchange Commission v. Satyam Computer Services Limited d/b/a Mahindra Satyam , Civil Action No. 1:11-CV-00672 (D.D.C.) (ESH) 
+
+ SEC CHARGES SATYAM COMPUTER SERVICES WITH FINANCIAL FRAUD 
+
+ The Securities and Exchange Commission announced today that it filed a settled civil action against Satyam Computer Services Limited ("Satyam"), a foreign private issuer based in India, charging the company with fraudulently overstating the company's revenue, income and cash balances by more than $1 billion over five years. 
+
+ The SEC's complaint, filed in U.S. District Court in Washington, D.C., alleges that former senior officials at Satyam â€" an information technology services company based in Hyderabad, India â€" used false invoices and forged bank statements to inflate the company's cash balances and make it appear far more profitable to investors. Although Satyam's shares primarily traded on the Indian markets, its American depository shares traded on the New York Stock Exchange during the relevant period. 
+
+ According to the SEC's complaint, shortly after the fraud came to light in January 2009, the India government seized control of the company by dissolving Satyam's Board of Directors and appointing new government-nominated directors; removed former top managers of the company; and oversaw a bidding process to select a new controlling shareholder in Satyam. In addition, Indian authorities filed criminal charges against several former officials. 
+
+ In addition to the actions taken by the Indian authorities, Satyam, whose new leadership cooperated with the SEC's investigation, has agreed to pay a $10 million penalty to settle the SEC's charges, require specific training of officers and employees concerning securities laws and accounting principles, and improve its internal audit functions. In addition, it agreed to hire an independent consultant to evaluate the internal controls Satyam is putting in place. 
+
+ According to the SEC's complaint, Satyam's former senior managers engineered a scheme that created more than 6,000 phony invoices to be used in Satyam's general ledger and financial statements. Satyam employees created bogus bank statements to reflect payment of the sham invoices. This resulted in more than $1 billion in fictitious cash and cash-related balances, representing half the company's total assets. 
+
+ The SEC alleges that when the fraud was finally revealed, Satyam's then-Chairman, B. Ramalinga Raju, declared that maintaining Satyam's inflated revenues and profits "was like riding a tiger, not knowing how to get off without being eaten." 
+
+ Raju and other former senior and mid-level Satyam executives, as well as two lead engagement partners from Satyam's former external audit firm, are defendants in a criminal trial now underway in India. 
+
+ Without admitting or denying the allegations in the SEC's complaint, Satyam agreed to a permanent injunction against future violations of the periodic reporting provisions of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20 13a-1 and 13a-16. The settlement also requires Satyam to hire an independent consultant and comply with certain undertakings. 
+
+ In a related settlement, the Commission issued an Administrative Order that sanctioned Satyam's former independent auditors for violations of federal securities laws and improper professional conduct while auditing the company's financial statements from 2005 through January 2009. 
+
+ The SEC's investigation is continuing.   
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diff --git a/raw/aaer/2011/AAER-3259.pdf b/raw/aaer/2011/AAER-3259.pdf
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+ 
+ 
+ 
+ 
+ 
+ 
+       
+      
+ 
+  
+ 
+      
+    
+      
+    
+       
+       
+  
+   
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+                                                
+ 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64185 / April 5, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3259 / April 5, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14322 
+: 
+: 
+: 
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+: PROCEEDINGS PURSUANT TO RULE 
+MARC E. BERCOON, : 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 Marc E. 
+Bercoon (“Respondent” or “Bercoon”) 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, [or] 
+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. Marc E. Bercoon, 50, has been an attorney who was licensed to practice law 
+in the State of Illinois until 2008, and has held himself out as a Certified Public Accountant, or as 
+having passed the CPA examination.  Bercoon has held various positions with public companies, 
+including General Counsel and Secretary of one public company from February 1993 to February 
+1994, and Senior Vice President beginning in February 1994; Chief Financial Officer and 
+President of another public company from February 28, 2005, to April 28, 2005, and from April 
+28, 2005, to June 6, 2006, respectively; and Assistant Secretary for a third public company as of 
+March 25, 2005. 
+2. LADP Acquisition, Inc. (“LADP”) is a Delaware corporation located in 
+Atlanta, Georgia.  Bercoon exercised control over this company.  On January 8, 2010, the State of 
+Pennsylvania issued a cease and desist order against LADP to halt the unregistered offering of 
+LADP shares.  LADP has no business operations.   
+3. On February 11, 2011, a Judgment was entered against Bercoon, 
+permanently enjoining him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities 
+Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder 
+in the civil action entitled Securities and Exchange Commission v. LADP Acquisition, Inc. et al., 
+Civil Action Number CV10-6835, in the United States District Court for the Central District of 
+California.  Bercoon was also ordered to pay disgorgement of ill-gotten gains, prejudgment 
+interest, and a civil money penalty to be determined by the Court upon motion by the Commission. 
+4. The Commission’s complaint alleged, among other things, that Bercoon 
+participated in a fraudulent securities offering pursuant to which at least $3.2 million was raised 
+from at least 110 investors nationwide, from mid-2009 through the present.  Investors were cold-
+called and offered and sold shares in L.A. Digital Post, Inc. (“L.A. Digital”), a television and film 
+production company with offices in Los Angeles and New York, purportedly to grow the business 
+of L.A. Digital.  Bercoon directly and indirectly falsely told investors that L.A. Digital would 
+conduct an initial public offering of its stock within two to six months, and that its shares would 
+2
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+  
+soon trade on the New York Stock Exchange or the American Stock Exchange.  In fact, Bercoon 
+and others employed a “bait-and-switch” scheme whereby purchasers of the shares received stock 
+certificates stating that they own shares in LADP, rather than in L.A. Digital.  No public offering 
+of L.A. Digital stock has occurred.  Moreover, Bercoon has not distributed any monies raised in 
+the LADP offering to L.A. Digital.  Instead, Bercoon, who is one of the individuals who controls 
+LADP’s bank accounts, participated in the misappropriation for his and his co-defendant’s own 
+use and the use of other companies they control of at least $874,289 of the $3.2 million in investor 
+funds raised. 
+IV. 
+In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanction agreed to in Respondent Bercoon’s Offer. 
+Accordingly, it is hereby ORDERED, effective immediately, that Bercoon is suspended 
+from appearing or practicing before the Commission as an attorney or accountant. 
+ By the Commission.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+3
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+   
+ 
+ 
+    
+   
+    
+ 
+ 
+     
+  
+  
+             
+  
+ 
+ 
+ 
+Service List 
+Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the  Order Instituting Administrative 
+Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and 
+Imposing Remedial Sanctions ("Order"), on the Respondent and his legal agent. 
+The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge
+ 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Jason P. Lee, Esq. 
+Los Angeles Regional Office
+ 
+Securities and Exchange Commission 
+5670 Wilshire Blvd., Suite 1100 
+Los Angeles, CA 90036 
+Mr. Marc E. Bercoon 
+c/o Louis Cohan, Esq. 
+Weinstock & Scavo, P.C. 
+3405 Piedmont Road, Suite 300 
+Atlanta, GA 30305 
+Louis Cohan, Esq. 
+Weinstock & Scavo, P.C. 
+3405 Piedmont Road, Suite 300 
+Atlanta, GA 30305 
+(Counsel for Respondent Marc E. Bercoon)
+ 
+4
+ 
\ No newline at end of file
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+++ b/raw/aaer/2011/AAER-3260.txt
@@ -0,0 +1,204 @@
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+                    
+   
+ 
+ 
+ 
+                                                 
+  
+ 
+ 
+ 
+ 
+1 
+UNITED STATES OF AMERICA 
+Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64190 / April 5, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3260 / April 5, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14323 
+In the Matter of
+ MICHAEL C. PATTISON, 
+CPA 
+             Respondent. 
+ORDER INSTITUTING PUBLIC 
+ADMINISTRATIVE PROCEEDINGS AND 
+IMPOSING TEMPORARY SUSPENSION 
+PURSUANT TO RULE 102(e)(3) OF THE 
+COMMISSION’S RULES OF PRACTICE 
+I. 
+The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
+public interest that public administrative proceedings be, and hereby are, instituted pursuant to 
+Rule 102(e)(3)
+1 of the Commission’s Rules of Practice against Michael C. Pattison (“Respondent” 
+or “Pattison”). 
+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 c ourt of competent jurisdiction, by reason of his 
+or her misconduct in an action brought by the Co mmission, from violating or aiding and abetting 
+the violation of any provision of the Federal secu rities laws or of the rules and regulations 
+thereunder. 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+   
+  
+   
+  
+ 
+  
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+II. 
+The Commission finds that: 
+A. RESPONDENT 
+1. Pattison, age 46, is and has been a certified public accountant (“CPA”) 
+licensed to practice in the State of California.  From January 2000 to July 2005, Respondent served 
+as the Controller of Embarcadero Technologies, Inc. (“Embarcadero”), a San Francisco software 
+company. Prior to joining Embarcadero, from 1987 until 1998, Respondent worked as an 
+accountant at a series of San Francisco accounting firms.   
+B. CIVIL INJUNCTION 
+2. On February 23, 2011, the United States District Court for the Northern 
+District of California entered an amended final judgment against Respondent.  SEC v. Pattison, 
+C-08-4238 EMC (N.D. Cal.).  The final judgment, as amended, followed a jury trial in which the 
+jury found that Respondent violated Section 13(b)(5) of the Securities and Exchange Act of 1934 
+(“Exchange Act”), and Exchange Act Rule 13b2-1.    
+3. The final judgment, as amended, among other things, permanently enjoins 
+Respondent from future violations, direct or indirect, of Section 13(b)(5) of the Exchange Act and 
+Exchange Act Rule 13b2-1.  It also requires Respondent to pay disgorgement, including 
+prejudgment interest thereon, in the total amount of $74,446, and to pay a civil penalty in the 
+amount of $50,000.   
+4. The Commission’s complaint alleged, among other things, that from at least 
+2000 through 2005, Respondent intentionally falsified numerous books, records, and accounts in 
+connection with the backdating of stock options granted to Embarcadero’s employees.  It further 
+alleged that Respondent knowingly circumvented Embarcadero’s internal accounting controls in 
+order to avoid recording compensation expenses related to the backdated, in-the-money stock 
+options, during the same time period.      
+III. 
+Based upon the foregoing, the Commission finds that a court of competent jurisdiction has 
+permanently enjoined Respondent, a CPA, from violating the federal securities laws within the 
+meaning of Rule 102(e)(3)(i)(A) of the Commission’s Rules of Practice.  In view of these findings, 
+the Commission deems it appropriate and in the public interest that Respondent be temporarily 
+suspended from appearing or practicing before the Commission. 
+IT IS HEREBY ORDERED that Respondent be, and hereby is, temporarily suspended 
+from appearing or practicing before the Commission.  This Order shall be effective upon service 
+on the Respondent. 
+2
+ 
+ 
+ 
+ 
+  
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+IT IS FURTHER ORDERED that Respondent may within thirty days after service of this 
+Order file a petition with the Commission to lift the temporary suspension.  If the Commission 
+within thirty days after service of the Order receives no petition, the suspension shall become 
+permanent pursuant to Rule 102(e)(3)(ii). 
+If a petition is received within thirty days after service of this Order, the Commission shall, 
+within thirty days after the filing of the petition, either lift the temporary suspension, or set the 
+matter down for hearing at a time and place to be designated by the Commission, or both.  If a 
+hearing is ordered, following the hearing, the Commission may lift the suspension, censure the 
+petitioner, or disqualify the petitioner from appearing or practicing before the Commission for a 
+period of time, or permanently, pursuant to Rule 102(e)(3)(iii). 
+This Order shall be served upon Respondent personally or by certified mail at his last 
+known address. 
+ By the Commission.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+3
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+   
+ 
+ 
+   
+   
+    
+ 
+ 
+     
+   
+ 
+             
+   
+ 
+Service List 
+Rule 141 of the Commission’s Rules of Practice provides that the Secretary, or another 
+duly authorized officer of the Commission, shall serve a copy of the Order Instituting Public 
+Administrative Proceedings and Imposing Temporary Suspension Pursuant to Rule 102(e)(3) of the 
+Commission’s Rules of Practice (Order) on the Respondent and his legal agent. 
+The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Susan F. LaMarca, Esq.  
+Robert L. Tashjian, Esq.  
+San Francisco Regional Office 
+Securities and Exchange Commission 
+44 Montgomery Street, 26
+th Floor 
+San Francisco, CA 94104 
+Mr. Michael C. Pattison 
+1559 Los Montes Drive 
+Burlingame, CA  94010 
+Patrick J. Richard, Esq. 
+Nossaman LLP 
+50 California Street, 34th Floor 
+San Francisco, CA  94111-4707 
+(Counsel for Michael C. Pattison) 
+4
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3262.pdf b/raw/aaer/2011/AAER-3262.pdf
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--- /dev/null
+++ b/raw/aaer/2011/AAER-3262.txt
@@ -0,0 +1,197 @@
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+       
+      
+ 
+  
+ 
+       
+   
+      
+    
+       
+       
+  
+   
+ 
+ 
+ 
+  
+   
+ 
+                                                 
+ 
+ 
+  
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64271 / April 8, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3262 / April 8, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14331 
+: 
+: 
+: 
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+: PROCEEDINGS PURSUANT TO RULE 
+Nicole Rae Kaplan, 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 Nicole Rae Kaplan 
+(“Respondent” or “Kaplan”) 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 her 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. Kaplan, age 40, of Agoura Hills, California, became a certified public accountant licensed to 
+practice in the State of California in 1996; her license expired in February 2005.  Kaplan began work at 
+Vitesse Semiconductor Corporation (“Vitesse” or the “Company”), in 1998 as Manager of Finance, and in 
+2004 she became the Company’s Director of Finance.  She officially resigned from Vitesse on April 14, 
+2006. 
+2. Vitesse based in Camarillo, California, is a major producer of high-performance integrated 
+circuits for use primarily by systems manufacturers in the storage and communications industries.  Vitesse 
+was incorporated in Delaware in 1987, is headquartered in Camarillo, California, and maintains a 
+September 30th fiscal year-end.  During the relevant period, the Company’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 Nasdaq National Market under th e symbol VTSS.  The Co mpany’s common stock is 
+currently traded on the Nasdaq National Market under the symbol “VTSS.”     
+3. On March 22, 2011, a final judgment was entered against Kaplan, permanently enjoining 
+her from future violations of 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 violations of 
+Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 12b-20, 13a-1, and 13a-13 
+thereunder, in the civil action entitled Securities and Exchange Commission v. Nicole R. Kaplan, et al., 
+Civil Action Number 10-CV-9239, in the United States District Court for the Southern District of New 
+York. Kaplan was also ordered to pay $31,050 in disgorgement of ill-gotten gains and $16,445 in 
+prejudgment interest. 
+4. The Commission’s complaint alleged, among other things, that Vitesse engaged in 
+fraudulent revenue recognition practices that resulted in the Company filing with the Commission 
+materially false and misleading financial statements in annual reports on Form 10-K and quarterly reports 
+on Forms 10-Q from at least late 2001 through early 2006.  The complaint alleges that Kaplan participated 
+in prematurely and improperly recording revenues on product shipments to Vitesse’s distributors and 
+2
+ 
+ 
+  
+ 
+ 
+  
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+customers; failed to timely and properly record customer credits from the return of unwanted product; and 
+directed the misapplication of cash to account receivable balances in order to obscure the true age of the 
+receivables. The complaint alleges that Kaplan engaged in the foregoing misconduct from late 2001 
+through 2005. As a result, the complaint alleges that Kaplan, among other violations:  engaged in 
+fraudulent accounting practices that materially misstated the company’s annual and quarterly financial 
+statements, which she reviewed or participated in preparing; knowingly circumvented or failed to 
+implement Vitesse’s system of internal accounting controls and falsified Vitesse’s books, records, or 
+accounts; and made material misrepresentations to Vitesse’s independent auditor. 
+IV. 
+In view of the foregoing, the Commission deems it appropriate and in the public interest to impose 
+the sanction agreed to in Respondent Kaplan’s Offer. 
+Accordingly, it is hereby ORDERED, effective immediately, that: 
+Kaplan is suspended from appearing or practicing before the Commission as an accountant.   
+ By the Commission.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+3
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+Service List 
+Rule 141 of the Commission’s Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serv e a copy of the Order Instituting Administrative 
+Proceedings Pursuant to Rule 10 2(e) of the Commission’s Rules of Practice, Making Findings, and 
+Imposing Remedial Sanctions (“Order”), on the Respondent and her legal agent. 
+The attached Order has been sent to the following parties and other persons entitled to notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Richard Dominguez, Esq. 
+Division of Enforcement 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-5561 
+Ms. Nicole Rae Kaplan, CPA 
+c/o James T. Duff, Esq. 
+Law Offices of James T. Duff 
+One Wilshire Boulevard, Suite 2210 
+Los Angeles, CA 90017 
+James T. Duff, Esq. 
+Law Offices of James T. Duff 
+One Wilshire Boulevard, Suite 2210 
+Los Angeles, CA 90017 
+(Counsel for Nicole Rae Kaplan) 
+4
+ 
\ No newline at end of file
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+ 
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+                                                 
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+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64272 / April 8, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3263 / April 8, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14332 
+: 
+: 
+In the Matter of : ORDER INSTITUTING 
+: ADMINISTRATIVE PROCEEDINGS 
+   Yatin Dilip Mody, CPA,  : PURSUANT TO RULE 102(e) OF THE 
+: COMMISSION’S RULES OF
+   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 Yatin 
+Dilip Mody (“Respondent” or “Mody”) 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. Mody, age 48, of Agoura Hills, California, has been a certified public accountant 
+licensed to practice in the State of California since 1990; the status of his license is currently 
+inactive. Mody began work at Vitesse Semiconductor Corporation (“Vitesse” or the “Company”) 
+in 1992 and served as Controller from 1993 through November 1998, at which time he was 
+promoted to Vice President and Controller.  Mody’s job title changed slightly in 2002 to Vice 
+President, Finance and Controller.  In April 2005, he was promoted to Chief Financial Officer and 
+thereafter served as Vice President, Finance and Chief Financial Officer.  On May 17, 2006, 
+Vitesse’s Board of Directors terminated Mody due to concerns regarding the integrity of 
+documents evidencing the Company’s stock option grant practices. 
+2. Vitesse based in Camarillo, California , is a major producer of high-performance 
+integrated circuits for use primarily by systems manufacturers in the storage and communications 
+industries. Vitesse was incorporated in Delaware in 1987, is headquartered in Camarillo, 
+California, and maintains a September 30 th fiscal year-end.  Duri ng the relevant period, the 
+Company’s common stock was registered with the Commissi on pursuant to Section 12(b) of the 
+Securities Exchange Act of 1934 (“Exchange Act”) and traded on the Nasdaq National Market 
+under the symbol VTSS.  The Co mpany’s common stock is currently traded on the Nasdaq 
+National Market under the symbol “VTSS.”     
+3. On March 22, 2011, a final judgment was entered against Mody, permanently 
+enjoining him from future violations of Section 17(a) of the Securities Act of 1933; 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 Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and 
+Rules 12b-20, 13a-1, and 13a-13 thereunder, in the civil action entitled Securities and Exchange 
+Commission v. Yatin D. Mody, et al., Civil Action Number 10-CV-9239, in the United States 
+District Court for the Southern District of New York. Mody was also ordered to pay $105,604 in 
+disgorgement of ill-gotten gains and $56,716 in prejudgment interest, for a total of $162,320. 
+2
+ 
+ 
+ 
+ 
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+ 
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+ 
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+ 
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+ 
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+ 
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+ 
+ 
+   
+ 
+ 
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+ 
+ 
+ 
+ 
+ 
+ 
+ 
+4. The Commission’s complaint alleged, among other things, that Vitesse engaged in 
+fraudulent revenue recognition practices that resulted in the Company filing with the Commission 
+materially false and misleading financial statements in annual reports on Form 10-K and quarterly 
+reports on Forms 10-Q from at least late 2001 th rough early 2006.  The complaint alleges that 
+Mody participated in prematurely and improper ly recording revenues on product shipments to 
+Vitesse’s distributors and customers and failed to timely and properly record customer credits from 
+the return of unwanted product.  The complain t alleges that Mody engaged in the foregoing 
+misconduct from late 2001 through  2005.  As a result, the compla int alleges that Mody, among 
+other violations: engaged in fraudulent accoun ting practices that materially misstated the 
+company’s annual and quarterly financial statemen ts, which he reviewed and participated in 
+preparing; knowingly circumvented or failed to implement Vitesse’s system of internal accounting 
+controls and falsified Vitesse’s books, records, or accounts; and made material misrepresentations 
+to Vitesse’s independent auditor.  The complaint further alleges that, as part of his misconduct, 
+Mody signed and certified annual and quarterly repor ts containing false and misleading financial 
+statements, including Vitesse’s 2005 Form 10- K filed on December 13, 2005 and three Vitesse 
+Forms 10-Q filed between May 2005 and February 2006, and that Mody signed in 2005 and 2006 
+certain Vitesse registration statements filed on Form S-8 and Form S-3 that incorporated by 
+reference materially false and misleading Forms 10-K and/or Forms 10-Q. 
+IV. 
+In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanction agreed to in Respondent Mody’s Offer. 
+Accordingly, it is hereby ORDERED, effective immediately, that: 
+Mody is suspended from appearing or practicing before the Commission as an accountant.   
+ By the Commission.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+3
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+Service List 
+Rule 141 of the Commission’ s Rules of Practice provides that the Secretary, or another 
+duly authorized officer of the Commission, sh all serve a copy of the Order Instituting 
+Administrative Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making 
+Findings, and Imposing Remedial Sanctions (“Order”), on the Respondent and his legal agent. 
+The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Richard Dominguez, Esq. 
+Division of Enforcement 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-5561 
+Mr. Yatin Dilip Mody, CPA 
+c/o Roland Riopelle, Esq. 
+Sercarz & Riopelle LLP 
+Carnegie Hall Tower 
+152 W. 57
+th Street 
+Suite 24C 
+New York, NY 10019 
+Roland Riopelle, Esq. 
+Sercarz & Riopelle LLP 
+Carnegie Hall Tower 
+152 W. 57
+th Street 
+Suite 24C 
+New York, NY 10019 
+(Counsel for Yatin Dilip Mody) 
+4
+ 
\ No newline at end of file
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+ 
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+                                                
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+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64277 / April 8, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3264 / April 8, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14333 
+In the Matter of 
+TROY F. NILSON, CPA 
+Respondent. 
+ORDER INSTITUTING PUBLIC 
+ADMINISTRATIVE AND CEASE-
+ AND-DESIST PROC EEDINGS 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 Troy F. 
+Nilson, CPA ( “Respondent” or “Nilson”) pursuant to Sections 4C
+1 and 21C of the Securities 
+Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(ii) 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 . . . (1) not to possess the 
+requisite qualifications to represent others . . . (2) to be lacking in character or integrity, or to have engaged in 
+unethical or improper professional conduct; 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 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. 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+  
+ 
+  
+  
+                                                 
+    
+ 
+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 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 finds
+3 that: 
+A. SUMMARY 
+1. From year-end 2004 through the first quarter of 2008, Powder River Petroleum 
+International, Inc. (“Powder River” or “the company”) improperly accounted for over $43 million 
+in proceeds from conveyances of fractional working interests in oil-and-gas leases to investors in 
+Asia. In particular, Powder River immediately recognized revenue from the conveyances, despite 
+the fact that it had promised the Asian working interest investors a guaranteed return until they 
+recouped their initial investment.  In addition, Powder River also improperly recorded assets it did 
+not own or that were stated in excess of net realizable value.  As a result, Powder River’s financial 
+statements did not present fairly, in all material respects, the company’s financial position, 
+operating results, and cash flows in conformity with generally accepted accounting principles.  
+Powder River materially overstated its revenues by 7% to 2,417%, its pre-tax income by 18% to 
+441%, and its assets by 7% to 48% in its Commission filings during the applicable period. 
+2. Respondent was the engagement partner on the audit and review of Powder River’s 
+financial statements for year-end 2007 and the first quarter of 2008.  Respondent failed to conduct 
+these engagements in accordance with Public Company Accounting Oversight Board (“PCAOB”) 
+Standards. He also caused Chisholm, Bierwolf, Nilson and Morrill, LLC’s failure to have 
+procedures in place to detect fraud 
+and to evaluate Powder River’s ability to continue as a going 
+concern.  His failures as an auditor were a cause of Powder River’s filing of a false and misleading 
+2007 Form 10-K and a first-quarter 2008 Form 10-Q.  Accordingly, Respondent engaged in improper 
+professional conduct, violated Sections 10A(a)(1) and 10A(a)(3) of the Exchange Act, and was a 
+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 
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+                                                 
+   
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+    
+ 
+cause of Powder River’s violations of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 
+12b-20 thereunder. 
+B. RESPONDENT 
+3. Troy F. Nilson is a certified public accountant licensed in the state of Utah and has 
+been an audit partner at Chisholm, Bierwolf, Nilson and Morrill, LLC (“Chisholm Bierwolf”) from 
+2004 to the present. Nilson was the engagement partner on Powder River’s audit and quarterly 
+review for year-end 2007 and the first quarter of 2008, and supervised Chisholm Bierwolf’s 
+engagements to audit and review Powder River’s financial statements.  
+C. RELEVANT ENTITIES 
+4. Powder River Petroleum International, Inc. is an Oklahoma corporation 
+headquartered in Calgary, Canada.  The company’s common stock is registered with the 
+Commission pursuant to Exchange Act Section 12(g).  Powder River’s shares are currently quoted 
+on Pink OTC Markets, Inc.  In July 2008, an Oklahoma district court granted a temporary 
+restraining order and appointed a receiver for Powder River in connection with a complaint filed 
+by certain Asian investors.4  In December 2008, Powder River filed for bankruptcy.5  It has not 
+restated its financial statements, other than a restatement of its 2007 quarterly financial statements 
+included in its year-end 2007 financial statements, nor has it filed any reports with the Commission 
+since September 17, 2008. 
+5. Chisholm, Bierwolf, Nilson & Morrill, LLC, a PCAOB-registered audit firm with 
+offices in Bountiful and Layton, Utah, and its predecessors, have been Powder River’s auditor 
+since 2001. 
+D. FACTS 
+Oil-and-Gas Working Interest Conveyances 
+6. From year-end 2004 through the first quarter of 2008, Powder River offered and 
+sold working interests in its oil-and-gas leases through an independent sales agent to investors in 
+Singapore, Malaysia and Indonesia.  Powder River’s contracts with Asian investors provided that 
+they would receive guaranteed payments yielding an annual minimum of 9%, and in some cases 
+more, beginning approximately six months after the date of investment until investors reached the 
+“break-even” point, i.e. when their principal had been repaid (the “guaranteed payments”).  
+Thereafter, investors received lease production payments based on their respective working 
+interests. By the second quarter of 2007, Powder River’s guaranteed payments exceeded not only 
+the investors’ share of oil-and-gas production revenues, but also Powder River’s total production 
+4 See Chang v. Powder River Petroleum Int’l, Inc. (Okla. Dist. Ct. July 14, 2008) (No. CJ-2008-4855). 
+5 See In re Powder River Petroleum Int’l, Inc. (Bankr. W.D. Okla. Dec. 12, 2008) (No. 08-15613). 
+3
+ 
+ 
+ 
+ 
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+ 
+  
+ 
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+  
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+ 
+ 
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+ 
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+ 
+revenues. After that date, Powder River used proceeds from working interest conveyances to new 
+investors to fund guaranteed payments to earlier investors. 
+7. From year-end 2004 through the first quarter of 2008, Powder River improperly 
+recognized as revenue over $33.5 million in proceeds from conveyances of the working interests to 
+investors. These conveyances were in substance and should have been reported by Powder River 
+as borrowings, not revenue (see Financial Accounting Standards No. 19, Financial Accounting and 
+Reporting by Oil and Gas Producing Companies, paragraph 43). The investors’ contractual right 
+to receive guaranteed payments until their “break-even point” represented, in substance, a loan of 
+capital to Powder River at a guaranteed 9% minimum rate of return.  As a result of Powder River’s 
+improper accounting, the company materially overstated its revenues in its Forms 10-QSB, 10-Q, 
+10-KSB, and 10-K for the year ended December 31, 2004 through the quarter ended March 31, 
+2008 by 7% to 2,417% and its net pre-tax income by 18% to 441%. 
+8. Respondent supervised Powder River’s 2007 audit and first-quarter 2008 review.  
+In the second quarter of 2007, when the guaranteed payments exceeded Powder River’s entire oil-
+and-gas receipts, the company began recording the guaranteed payments on its balance sheet as an 
+asset labeled “pre-paid production payments.”  During the 2007 audit, Respondent examined some 
+of the contracts underlying the working interest conveyances, which described the guaranteed 
+payments, and determined that Powder River’s accounting for those payments as an asset was 
+improper.  Respondent failed, however, to consider whether, as a result of the guaranteed payment 
+provisions, the conveyances should have been reported as borrowings rather than sales. 
+9.   The company filed a Form 8-K on March 17, 2008, which disclosed the 
+guaranteed payments and indicated that the company’s second and third quarter 2007 financial 
+statements could not be relied upon.  When Powder River filed its 2007 Form 10-K and first- 
+quarter 2008 Form 10-Q, the company disclosed the guaranteed payments as a future commitment 
+in its financial statement footnotes.  As a result of Respondent’s failure to consider the nature of 
+the guaranteed payments on Powder River’s revenue recognition, however, the company continued 
+to improperly report the proceeds from its working interest conveyances as revenues.   
+10. Furthermore, Respondent was aware that Powder River’s guaranteed payments 
+exceeded the company’s total oil-and-gas revenues for 2007.  Yet, he failed to include a “going 
+concern” paragraph in Chisholm Bierwolf audit opinion, despite substantial reason to doubt that 
+Powder River’s future oil-and-gas revenues, which were only $3.3 million in 2007, would be 
+sufficient to cover the $6.1 million of guaranteed payments due in 2008. 
+ Inflated Assets 
+11. Powder River reported assets that it did not own, that did not exist, or that it should 
+have written off in its 2007 Form 10-K and first-quarter 2008 Form 10-Q financial statements.  
+During the company’s 2007 audit, Respondent failed to conduct sufficient audit procedures to 
+support the recorded oil-and-gas and other assets; otherwise he would have discovered information 
+that indicated a significant amount of such assets should be removed from Powder River’s 
+4
+ 
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+ 
+ 
+ 
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+ 
+ 
+ 
+  
+ 
+ 
+  
+ 
+ 
+  
+  
+financial statements.  As a result, the company overstated its assets by 45% and 48% in its 
+financial statements for year-end 2007 and first-quarter 2008, respectively. 
+12.   In particular, Powder River improperly included as assets in its year-end 2007 and 
+first-quarter 2008 financial statements two oil-and-gas leases it had agreed, but failed, to acquire.  
+Specifically, in 2005, Powder River made $500,000 in nonrefundable payments as a part of an 
+agreement to acquire a New Mexico oil-and-gas lease for $5 million, but by August 2005 it had 
+defaulted on the terms of the agreement and lost its rights to the lease.  Nonetheless, Powder River 
+continued to report the lease as an asset on its balance sheet, including in its financial statements 
+for year-end 2007 and the first quarter of 2008, which was its last quarterly report.  Similarly, 
+Powder River made nonrefundable payments totaling $1.5 million in late 2006 and early 2007 as 
+part of an agreement to acquire a Texas oil-and-gas lease for $6.5 million.  The company reported 
+the lease, along with an associated note payable, as assets on its balance sheet from year-end 2006 
+onward. In reality, the agreement was never consummated, no note agreement was ever executed, 
+and by the end of 2007, Powder River had forfeited its payments. 
+13. During Powder River’s 2007 audit, Respondent failed to perform procedures to 
+verify the existence and ownership of the New Mexico and Texas leases, despite the size of the 
+assets and the fact that the company had not paid any significant development costs or taxes on the 
+properties in 2007.  Respondent did not review the oil-and-gas lease purchase documents or any 
+promissory note agreement on the Texas lease. During the 2007 audit, Respondent requested 
+confirmation of the purported $5 million promissory note on the Texas lease, but failed to perform 
+sufficient alternative procedures when the confirmation was not returned.    
+14. Powder River listed a $1.2 million item as a “loan receivable” on the company’s 
+balance sheet in its 2007 Form 10-K financial statements.  In prior periods, this item was reported 
+as a cash or cash equivalent.  Despite this unexplained change in accounting treatment and the fact 
+that no payments had ever been made on the loan receivable, Respondent failed to obtain 
+documentation of the purported loan receivable or to perform any procedures to evaluate the 
+collectability of the loan.  Further, Respondent failed to identify that the loan receivable had not 
+been disclosed as a related party transaction in compliance with Statement of Financial Accounting 
+Standard No. 57, Related Party Disclosures. 
+Failure to Assess the Work of a Professional 
+15. At year-end 2007, oil-and-gas properties represented approximately 82% of Powder 
+River’s total assets.  The company, however, failed to obtain new or updated reserve reports in 
+2007, instead relying on the reports that it had used in connection with the 2006 audit.  In auditing 
+Powder River’s 2007 financial statements, Respondent relied on the work performed in the audit of 
+Powder River’s 2006 financial statements, without performing procedures to test or verify the scope 
+or adequacy of that prior audit work or the 2006 reserve reports.  Respondent did nothing to:  a) 
+evaluate the qualifications of the petroleum engineer who prepared the oil-and-gas reserve reports; 
+b) understand the nature of the work performed in preparing the oil-and-gas reserve reports; and c) 
+evaluate the petroleum engineer’s relationship to Powder River.  Respondent knew or should have 
+known that Powder River’s failure to obtain new or updated reserve reports raised questions as to: 
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+a) the qualifications of the engineer who prepared the reserve reports; and b) the adequacy of the 
+reserve reports to support disclosures made in the financial statements.  Accordingly, Respondent 
+failed to adhere to the guidance contained in AU 336, Using the Work of a Specialist, and failed to 
+obtain sufficient competent evidential matter to support Chisholm Bierwolf’s report on Powder 
+River’s 2007 financial statements. 
+Creation of Audit Documents 
+16. Prior to a PCAOB inspection in 2007, Respondent created and back-dated and 
+directed Chisholm Bierwolf’s staff to create and back-date audit planning and other documents 
+more than 45 days after the documentation completion dates for the 2006 audit of Powder River’s 
+financial statements.  Respondent and his firm’s staff failed to document in the workpapers the dates 
+that these changes were made, the names of the persons who made them, and the reasons for adding 
+information.  They also failed to notify the PCAOB inspection team that changes had been made to 
+the audit files without appropriately documenting the date of those changes.  As a result, 
+Respondent failed to comply with PCAOB Auditing Standard No. 3, Audit Documentation, in 
+addition to violating PCAOB rules. Respondent produced those documents to SEC staff during its 
+investigation, without disclosing that they had been back-dated or created after document 
+completion deadlines. 
+Failure to Conduct Audits in Accordance with PCAOB Standards 
+17. As the foregoing conduct demonstrates, Respondent failed to conduct Powder 
+River’s 2007 audit in accordance with PCAOB Standards and Rules.  Specifically, Respondent 
+failed to:  
+a. Adequately plan the audit and properly supervise assistants, under 
+AU 311, ¶8, Planning & Supervision. 
+b. Gather sufficient competent evidential matter, under AU 326, ¶13, 
+Audit Evidence, to support the characterization of Powder River’s revenue and his conclusions on 
+company assets; 
+c. Exercise due professional care and skepticism, under AU 230, ¶¶9, 
+25, Due Professional Care in the Performance of Work, as illustrated by repeated failures to 
+review underlying documentation, undue reliance on management, and failure to respond 
+appropriately to “red flags.” 
+d. Perform sufficient alternative procedures, under AU 330, ¶31, The 
+Confirmation Process, when his firm did not receive proper confirmations of a promissory note 
+and a loan receivable; 
+e. Evaluate, under AU 341, ¶3, The Auditor's Consideration of an 
+Entity's Ability to Continue as a Going Concern, Powder River’s ability to continue as a going 
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+concern even though the fact that Powder River’s total revenues were significantly less than its 
+guaranteed payment obligations should have raised substantial doubt about its ability to continue as 
+a going concern; 
+f. Consider whether, under AU 336, ¶¶8, 9, Using the Work of a 
+Specialist, Powder River’s petroleum engineers possessed the necessary qualifications for their 
+work to be used as audit evidence; and 
+g.  Properly prepare audit documentation, under PCAOB Auditing 
+Standard No. 3, ¶15, Audit Documentation, as demonstrated by after-the-fact creation and back­
+dating of audit planning documents and checklists at Respondent’s direction. 
+18. Furthermore, Respondent did not have procedures in place for the 2007 audit 
+designed to provide reasonable assurance of detecting illegal acts that would have a direct and 
+material effect on Powder River’s financial statement amounts, as required by Section 10A(a)(1) of 
+the Exchange Act.  This was demonstrated by Respondent’s failure to recognize Powder River’s 
+improper revenue recognition, his failure to identify assets improperly included on its balance 
+sheet, and his reliance on out-dated reserve reports that failed to support Powder River’s reported 
+reserves. 
+19. Respondent also did not include in the 2007 audit an evaluation of whether there 
+was substantial doubt about the ability of Powder River to continue as a going concern during the 
+ensuing fiscal year, as required by Section 10A(a)(3) of the Exchange Act.  This is demonstrated 
+by his failure to recognize that Powder River’s total revenues in 2007 were significantly less than 
+its guaranteed payment obligations for the following year, which should have raised substantial 
+doubt about the company’s ability to continue as a going concern. 
+E. VIOLATIONS 
+20. Exchange Act Section 10A(a)(1) requires each audit to include procedures designed 
+to provide reasonable assurance of detecting illegal acts that would have a direct and material 
+effect on the determination of financial statement amounts, and Section 10A(a)(3) requires each 
+audit to include an evaluation of whether there is substantial doubt about the ability of the issuer to 
+continue as a going concern during the ensuing fiscal year.  No showing of scienter is necessary to 
+establish a violation of Section 10A.  See SEC v. Solucorp Indus., Ltd., 197 F. Supp. 2d 4 
+(S.D.N.Y. 2002). 
+21. As discussed above, Respondent violated Sections 10A(a)(1) and 10A(a)(3) by 
+failing to have adequate procedures in place during Powder River’s 2007 audit to: 1) reasonably 
+assure detection of illegal acts, such as Powder River’s material overstatement of its revenues, its 
+inclusion of improperly recorded assets on its balance sheet, and its materially overstated oil-and­
+gas reserves, and its payments of later working interest conveyance proceeds to earlier working 
+interest investors, which materially affected the determination of financial statement amounts; and 
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+2) to evaluate whether there was substantial doubt about Powder River’s ability to continue as a 
+going concern.   
+22. Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13, and 12b-20 thereunder, 
+require every issuer of a security registered pursuant to Section 12 of the Exchange Act file with 
+the Commission information, documents, and annual and quarterly reports as the Commission 
+may require, and mandate that periodic reports contain such further material information as may 
+be necessary to make the required statements not misleading.  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), cert. denied, 440 U.S. 913 (1979).   
+23. As discussed above, during year-end 2007 and the first quarter of 2008, 
+Respondent’s failures were a cause of Powder River’s filing of a false and misleading 2007 Form 
+10-K and first-quarter 2008 Form 10-Q.  Accordingly, Respondent was a cause of Powder River’s 
+violations of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13, and 12b-20 thereunder. 
+24. Rule 102(e)(1)(ii) of the Commission’s Rules of Practice and Section 4C of the 
+Exchange Act authorize the Commission to censure or deny, temporarily or permanently, the 
+privilege of appearing or practicing before the Commission to accountants who are found to have 
+engaged in improper professional conduct.  Under Rule 102(e)(1)(iv), the term “improper 
+professional conduct” means, in part, “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.”  Respondent’s actions were unreasonable and failed to conform to 
+applicable professional standards.  Accordingly, his conduct supports an action under Rules 
+102(e)(1)(ii) and 102(e)(1)(iv)(B)(2) of the Rules of Practice. 
+F. FINDINGS 
+25. Based on the foregoing, the Commission finds that Respondent violated Sections 
+10A(a)(1) and 10A(a)(3) of the Exchange Act, and was a cause of Powder River’s violations of 
+Section 13(a) of the Exchange Act, and Rules 13a-1, 13a-13, and 12b-20 promulgated thereunder. 
+26. Based on the foregoing, the Commission finds that Respondent engaged in 
+improper professional conduct pursuant to Rules 102(e)(1)(ii) and 102(e)(1)(iv)(B)(2) of the 
+Commission’s Rules of Practice. 
+G. UNDERTAKING 
+27. Cooperation. Respondent undertakes to cooperate fully with the Commission with 
+respect to any matter relating to the Commission's investigation of Powder River or its current or 
+former officers, directors, employees, or auditors, including but not limited to any litigation or 
+other proceeding related to or resulting from that investigation.  Such cooperation shall include, but 
+is not limited to, upon reasonable notice and without subpoena:  
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+a. Producing any document, record, or other tangible evidence reasonably 
+requested by Commission staff in connection with the Commission's investigation, litigation or 
+other proceedings; 
+b. Providing all information reasonably requested by Commission staff in 
+connection with the Commission's investigation; and  
+c. Attending and providing truthful statements at any meeting, interview, 
+testimony, deposition, trial, or other legal proceeding reasonably requested by the Commission 
+staff. 
+28. In determining whether to accept the Offer, the Commission has considered these
+ 
+undertakings. 
+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. Respondent shall cease and desist from committing or causing any violations and any future 
+violations of Sections 10A(a)(1) and 10A(a)(3) of the Exchange Act. 
+B. Respondent shall cease and desist from committing or causing any violations and any 
+future violations of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13, and 12b-20 
+promulgated thereunder. 
+C. Respondent is denied the privilege of appearing or practicing before the Commission as an 
+accountant. 
+D. 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 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: 
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+a. Respondent, or the public accounting firm with which he is associated, is 
+registered with the PCAOB 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 PCAOB and that inspection did not identify any criticisms 
+of or potential defects in 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 PCAOB, and has 
+complied with all terms and conditions of any sanctions imposed by the PCAOB (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 PCAOB, including, but not limited to, all requirements 
+relating to registration, inspections, concurring partner reviews and quality control standards.   
+E. 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.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
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+Service List 
+Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the 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"), on the 
+Respondent and his legal agent. 
+The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Shoshana Thoma-Isgur, Esq. 
+Fort Worth Regional Office 
+Securities and Exchange Commission 
+801 Cherry Street, Suite 1900 
+Fort Worth, TX 76102 
+Mr. Troy F. Nilson 
+c/o Douglas E. Griffith, Esq. 
+Kesler & Rust 
+68 South Main Street, 2nd Floor 
+Salt Lake City, UT 84101 
+Douglas E. Griffith, Esq. 
+Kesler & Rust 
+68 South Main Street, 2nd Floor 
+Salt Lake City, UT 84101 
+(Counsel for Troy F. Nilson) 
+11
+ 
\ No newline at end of file
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+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64278 / April 8, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3265 / April 8, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14334 
+In the Matter of 
+JEFFERY Q. JOHNSON, CPA 
+and 
+STEVEN M. HANNI, CPA,  
+Respondents. 
+ORDER INSTITUTING PUBLIC 
+ADMINISTRATIVE AND CEASE-
+ AND-DESIST PROC EEDINGS 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 Jeffery Q. 
+Johnson, CPA (“Johnson”) and Steven M. Hanni, CPA (“Hanni”) (collectively “Respondents”) 
+pursuant to Sections 4C
+1 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 . . . (1) not to possess the 
+requisite qualifications to represent others . . . (2) to be lacking in character or integrity, or to have engaged in 
+unethical or improper professional conduct; 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 Rule 102(e)(1)(iii) provides, in pertinent part, that: 
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+II. 
+In anticipation of the institution of these proceedings, Respondents have 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 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 finds
+3 that: 
+A. SUMMARY 
+1. From year-end 2004 through the first quarter of 2008, Powder River 
+Petroleum International, Inc. (“Powder River”) improperly accounted for over $43 million in 
+proceeds from conveyances of fractional working interests in oil-and-gas leases to investors in 
+Asia. In particular, Powder River immediately recognized revenue from the conveyances, despite 
+the fact that it had promised the Asian working interest investors a guaranteed return until they 
+recouped their initial investment.  In addition, Powder River also improperly recorded assets it did 
+not own or that were stated in excess of net realizable value.  As a result, Powder River’s financial 
+statements did not present fairly, in all material respects, the company’s financial position, 
+operating results, and cash flows in conformity with generally accepted accounting principles.  
+Powder River materially overstated its revenues by 7% to 2,417%, its pre-tax income by 18% to 
+441%, and its assets by 7% to 48% in its Commission filings during the applicable period.   
+2. Respondents incorrectly advised Powder River on how it should record 
+financial items, including revenue from the working-interest conveyances from 2005 through 
+August 2007. After August 2007, Johnson, as CFO, and Hanni, assisting Johnson as a de facto co-
+CFO, supervised and directed the company’s improper recording of its assets and its revenue from 
+the working-interest conveyances.  By mid-2007, Powder River used proceeds from current 
+The Commission may . . . deny, temporarily or permanently, the privilege of appearing or practicing before 
+it . . . to any person who is found…to have willfully viol ated, or willfully aided and abetted the violation of any 
+provision of the Federal securities laws or the rules and regulations thereunder. 
+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.  
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+working interest conveyances to pay the guaranteed returns to earlier Asian investors.  In mid-
+March 2008, Johnson authorized one of those payments, but failed to disclose in Powder River’s 
+first quarter 2008 Form 10-Q that the company was using later investor funds to pay earlier 
+investors. 
+B. RESPONDENTS 
+3. Jeffery Q. Johnson is a certified public accountant licensed in the state of 
+Utah and was employed at Stayner Bates & Jensen, PC (“Stayner Bates”) from January 2006 until 
+November 2010.  Johnson provided bookkeeping, financial reporting, and other accounting 
+services to Powder River from June 2006 until August 2007, when he contracted with Powder 
+River to serve as Powder River’s CFO on a part-time basis.  Johnson resigned as Powder River’s 
+CFO in September 2008.  While CFO, Johnson remained employed at Stayner Bates. 
+4. Steven M. Hanni is a certified public accountant licensed in the state of 
+Utah and served as the engagement partner on Stayner Bates's engagement to provide 
+bookkeeping, financial reporting, and other accounting services to Powder River from 2004 to 
+August 2007. Pursuant to Johnson and Powder River’s arrangement with NJS Management, LLC, 
+Hanni assisted Johnson with his duties as Powder River’s CFO.   
+C. RELEVANT ENTITIES 
+5. Powder River Petroleum International, Inc. is an Oklahoma corporation 
+headquartered in Calgary, Canada.  The company’s common stock is registered with the 
+Commission pursuant to Exchange Act Section 12(g).  Powder River’s shares are currently quoted 
+on Pink OTC Markets, Inc.  In July 2008, an Oklahoma district court granted a temporary 
+restraining order and appointed a receiver for Powder River in connection with a complaint filed 
+by certain Asian investors.
+4  In December 2008, Powder River filed for bankruptcy.5  It has not 
+restated its financial statements, other than a restatement of its 2007 quarterly financial statements 
+included in its year-end 2007 financial statements, nor has it filed any reports with the Commission 
+since September 17, 2008 
+6. Stayner Bates & Jensen, PC, a CPA firm located in Salt Lake City, Utah, 
+became registered with the Public Company Accounting Oversight Board (“PCAOB”) in 2009, 
+and has no public company audit clients.  From 2004 through August 2007, Powder River engaged 
+Stayner Bates to provide bookkeeping, financial reporting, and other accounting services. 
+7. NJS Management, LLC (“NJS”), a Utah limited liability company, was 
+formed by Johnson, Hanni, and another Stayner Bates partner to provide CFO services.  Powder 
+River had an agreement with Johnson through which Powder River paid NJS the money 
+representing Johnson’s salary from Powder River.  That money was then split amongst Johnson, 
+4 See Chang v. Powder River Petroleum Int’l, Inc. (Okla. Dist. Ct. July 14, 2008) (No. CJ-2008-4855). 
+5 See In re Powder River Petroleum Int’l, Inc. (Bankr. W.D. Okla. Dec. 12, 2008) (No. 08-15613). 
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+for services rendered as Powder River’s CFO; Hanni, for assisting Johnson with his duties as 
+Powder River’s CFO; and another Stayner Bates partner, for increased assistance to Johnson in 
+connection with other Stayner Bates engagements. 
+D. FACTS 
+Oil-and-Gas Working Interest Conveyances 
+8. From year-end 2004 through the first quarter of 2008, Powder River offered 
+and sold working interests in its oil-and-gas leases through an independent sales agent to investors 
+in Singapore, Malaysia and Indonesia.  Powder River’s contracts with Asian investors provided 
+that they would receive guaranteed payments yielding an annual minimum of 9%, and in some 
+cases more, beginning approximately six months after the date of investment until investors 
+reached the “break-even” point, i.e. when their principal had been repaid (the “guaranteed 
+payments”). Thereafter, investors received lease production payments based on their respective 
+working interests. By the second quarter of 2007, Powder River’s guaranteed payments exceeded 
+not only the investors’ share of oil-and-gas production revenues, but also Powder River’s total 
+production revenues.  After that date, Powder River used proceeds from working interest 
+conveyances to new investors to fund guaranteed payments to earlier investors. 
+9. From year-end 2004 through the first quarter of 2008, Powder River 
+improperly recognized as revenue over $33.5 million in proceeds from conveyances of the working 
+interests to investors.  These conveyances were in substance and should have been reported by 
+Powder River as borrowings, not revenue (see Financial Accounting Standards No. 19, Financial 
+Accounting and Reporting by Oil and Gas Producing Companies, paragraph 43).  The investors’ 
+contractual right to receive guaranteed payments until their “break-even point” represented, in 
+substance, a loan of capital to Powder River at a guaranteed 9% minimum rate of return.  As a 
+result of Powder River’s improper accounting, the company materially overstated its revenues in 
+its Forms 10-QSB, 10-Q, 10-KSB and 10-K for the year ended December 31, 2004 through the 
+quarter ended March 31, 2008 by 7% to 2,417% and its net pre-tax income by 18% to 441%.  
+10. Beginning in 2005, Powder River hired Stayner Bates to provide 
+bookkeeping, reporting and other accounting services.  Hanni was the partner and oversaw the 
+firm’s engagement from 2005 through August 2007.  Johnson joined Stayner Bates in January 2006 
+and began assisting Hanni on the Powder River engagement in June 2006.  In connection with this 
+engagement, Hanni and Johnson provided accounting and reporting advice with respect to 
+acquisitions and conveyances of oil-and-gas interests and drafted Powder River’s financial 
+statements for inclusion in Powder River’s SEC filings.  Respondents advised the company 
+regarding the appropriate accounting for the working-interest-conveyance proceeds without 
+reviewing underlying documents, which reflected the guaranteed payments to investors.  Instead, 
+Respondents relied, without further inquiry, on Powder River management’s representations and 
+characterization of the working interest conveyances as “sales.”  As a result, Powder River: a) 
+failed to disclose and account properly for the guaranteed payments; and b) improperly reported 
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+the working interest conveyance proceeds as revenue in financial statements included in its Forms 
+10-K and Forms 10-Q for year-end 2005 through the second quarter of 2007. 
+11. During the preparation of Powder River’s financial statements for the year 
+ended December 31, 2006, Respondents became aware of Powder River’s 9% payments to the 
+working interest investors.  Yet, Hanni failed to analyze the significance of those payments and 
+erroneously advised Powder River to net them against oil-and-gas production revenues.  As a 
+result, Powder River continued to record the working interest conveyance proceeds as revenue, 
+failed to disclose the guaranteed payments, and improperly offset the guaranteed payments against 
+the company’s oil-and-gas production receipts in its 2006 Form 10-KSB and first quarter 2007 
+Form 10-QSB. 
+12. In the second quarter of 2007, when the guaranteed payments exceeded the 
+company’s total oil-and-gas receipts, Respondents erroneously advised the company to record the 
+guaranteed payments on the company’s balance sheet as an asset labeled as “pre-paid production 
+payments.”  As a result, Powder River continued to record the working interest conveyance 
+proceeds as revenue, failed to disclose the guaranteed payments, and mischaracterized those 
+payments as an asset in its financial statements included in its second quarter 2007 Form 10- QSB.  
+13. In August 2007, Powder River named Johnson as Powder River’s CFO and 
+began paying NJS for his and Hanni’s CFO services.  It was understood between Powder River and 
+NJS that Respondents would function together as Powder River’s CFO, yet they failed to assess 
+Powder River’s revenue recognition policy for working interest conveyances and the appropriate 
+accounting and reporting of the conveyances and related guaranteed payments to investors.  As a 
+result, Powder River continued to record the working interest conveyance proceeds as revenue in 
+its financial statements filed in its third-quarter 2007 Form 10-QSB and first-quarter 2008 Form 
+10-Q, and in its 2007 Form 10-K. 
+14. While preparing for the audit of Powder River’s 2007 financial statements, 
+Respondents concluded that Powder River had improperly reported the guaranteed payments as an 
+asset on Powder River’s balance sheet in its second and third-quarter 2007 financial statements.   
+As a result, on March 17, 2008, Powder River filed a Form 8-K in which it first publicly disclosed 
+the guaranteed payments and indicated that the company’s second and third quarter 2007 financial 
+statements could not be relied upon.  Respondents did not, however, change the company’s 
+recognition of revenue from the working interest conveyances in its year-end 2007 financial 
+statements.  Instead, in its 2007 Form 10-K, the company simply disclosed the guaranteed 
+payments and identified them as a future commitment in a footnote to the year-end 2007 financial 
+statements.  As a result, Powder River continued to materially overstate its revenues and pre-tax 
+income in financial statements included in its 2007 Form 10-K and its first quarter 2008 Form 10-
+Q. Johnson, as Powder River’s principal accounting officer, certified Powder River’s 2007 Form 
+10-K financial statements. 
+15. In early March 2008, Johnson authorized Powder River’s independent sales 
+agent to use new working interest investor funds the agent had collected to make guaranteed 
+5
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+payments to previous investors.  Johnson subsequently supervised the preparation of financial 
+statements for Powder River’s first quarter 2008 Form 10-Q, which he certified as company 
+principal accounting officer.  In this filing and Powder River’s March 17, 2008 Form 8-K, the 
+company failed to disclose that the company was using proceeds from current working interest 
+conveyances to fund guaranteed payments to earlier investors.  Johnson failed to disclose to 
+Powder River’s auditor that he had authorized guaranteed payments to existing investors from new 
+investors’ funds. 
+ Inflated Assets 
+16. Powder River reported assets that it did not own, that did not exist, or that it 
+should have written in financial statements included in its 2005, 2006 and 2007 Forms 10-KSB and 
+10-K and for its Forms 10-QSB and 10-Q for the first, second and third quarters of 2005, 2006, and 
+2007 and the first quarter of 2008, thereby inflating its assets between 37% and 48%.  After 
+Johnson became CFO, he and Hanni failed to devise and maintain a system of accounting controls 
+to validate the existence of the assets reported on the company’s balance sheet, evaluate reported 
+assets for potential impairment, or to ensure that Powder River’s financial statements were 
+prepared in accordance with generally accepted accounting principles.  Accordingly, Hanni and 
+Johnson were a cause of the misstatements in Powder River’s financial statements. 
+17. In particular, Powder River improperly included as assets on its financial 
+statements two oil-and-gas leases it had agreed, but failed, to acquire.  Specifically, in 2005, 
+Powder River made $500,000 in nonrefundable payments as a part of an agreement to acquire a 
+New Mexico oil-and-gas lease for $5 million, but by August 2005 it had defaulted on the terms of 
+the agreement and lost its rights to the lease.  Nonetheless, Powder River continued to report the 
+lease as an asset on its balance sheet from the third quarter of 2005 through the first quarter of 
+2008, which was its last quarterly report.  Similarly, Powder River made nonrefundable payments 
+totaling $1.5 million in late 2006 and early 2007 as part of an agreement to acquire a Texas oil-
+and-gas lease for $6.5 million.  The company reported the lease, along with an associated note 
+payable, as assets on its balance sheet from year-end 2006 onward.  In reality, the agreement was 
+never consummated, no note agreement was ever executed, and by the end of 2007 Powder River 
+had forfeited its payments. Without verifying the CEO’s characterization of these transactions, 
+Johnson and Hanni allowed Powder River to report the leases as assets on its balance sheet. 
+18. In addition, Powder River listed a $1.2 million item as a “loan receivable” 
+on the company’s balance sheet in its 2007 Form 10-K financial statements.  In prior periods, this 
+item was reported as a cash or cash equivalent.  In its financial statements included in its 2007 
+Form 10-K, Powder River reclassified a $1.2 item from “cash,” where it had been improperly 
+classified since year-end 2006, to “loan receivable” on its balance sheet.  This item represented a 
+loan receivable from a related party, yet had not been previously disclosed as required by 
+Statement of Financial Accounting Standard No. 57, Related Party Disclosures. Although the loan 
+was uncollectible and the company never received any loan payments, Respondents failed to 
+evaluate the collectability of the loan receivable at year end 2007, thereby causing the company to 
+overstate its assets in financial statements included in its 2007 Form10-K.  
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+  
+E. VIOLATIONS 
+19. Section 10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit a 
+person, in connection with the purchase or sale of a security, from making an untrue statement of a 
+material fact or from omitting to state a material fact necessary to make statements made, in light 
+of the circumstances under which they were made, not misleading.  To violate Section 10(b) or 
+Rule 10b-5, 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, manipulate, 
+or defraud," Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n.12 (1976).  Scienter may be 
+established by showing that the respondents acted intentionally or with severe recklessness.  See, 
+e.g., Broad v. Rockwell Int’l Corp., 642 F.2d 929, 961-62 (5th Cir.), cert. denied, 454 U.S. 965 
+(1981).  During March 2008, Johnson authorized guaranteed payments to existing investors from 
+new investor funds.  He failed, however, to disclose those payments in the first quarter 2008 Form 
+10-Q, which he signed and certified.  As a result of his severely reckless conduct, Johnson willfully 
+violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.6 
+20. Section 13(a) of the Exchange Act and Rules 13a-1, 13a-11, 13a-13, and 
+12b-20 thereunder, require every issuer of a security registered pursuant to Section 12 of the 
+Exchange Act to file with the Commission information, documents, and annual and quarterly 
+reports as the Commission may require, and mandate that periodic reports contain such further 
+material information as may be necessary to make the required statements not misleading.  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), cert. denied, 440 U.S. 913 
+(1979).  As discussed above, Johnson caused Powder River’s false and misleading quarterly and 
+annual Commission reports for third-quarter 2007, year-end 2007, and first-quarter 2008.  Hanni 
+caused Powder River’s false and misleading quarterly and annual Commission reports from year-
+end 2005 through the first quarter of 2008.  Johnson caused Powder River’s false and misleading 
+Form 8-K dated March 17, 2008.  Accordingly, Johnson and Hanni willfully aided and abetted and 
+caused Powder River’s violations of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13, 
+and 12b-20 thereunder, and Johnson willfully aided and abetted and caused Powder River’s 
+violations of Rule 13a-11. 
+21. Rule 13a-14 promulgated under the Exchange Act requires an issuer’s 
+principal executive and financial officer to certify in each quarterly and annual report filed or 
+submitted by the issuer under Exchange Act Section 13(a), that: (1) they have reviewed the report; 
+and (2) based on their knowledge, the report does not contain any untrue statement of material fact, 
+or omit to state a material fact necessary in order to make the statements made, in light of the 
+circumstances under which such statements were made, not misleading with respect to the period 
+covered by the report.  As discussed above, Johnson certified Powder River’s periodic reports from 
+A willful violation of the securities laws means merely “‘that the person charged with the duty knows what 
+he is doing.’” Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 
+(D.C. Cir. 1949)).  “Willfulness” does not require that the actor “‘also be aware that he is violating one of the Rules 
+or Acts.’” Id. (quoting Gearhart & Otis, Inc. v. SEC, 348 F.2d 798, 803 (D.C. Cir. 1965)). 
+7
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+the third quarter of 2007 through the first quarter of 2008, which misstated Powder River’s 
+revenue, net income and assets, and omitted to state that Powder River was using new investor 
+proceeds to pay previous investors. Accordingly, Johnson willfully violated Exchange Act Rule 
+13a-14. 
+22. 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. As described above, Respondents’ conduct from the third quarter of 
+2007 through the first quarter of 2008 was a cause of Powder River’s improper recording of 
+transactions in its books and records.  Accordingly, Johnson and Hanni willfully aided and abetted 
+and caused Powder River’s violations of Section 13(b)(2)(A) of the Exchange Act.  
+23. Section 13(b)(2)(B) requires all 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 accordance 
+with generally accepted accounting principles.  As discussed above, after August 2007, 
+Respondents were responsible for Powder River’s failure to devise and maintain a system of 
+internal accounting controls to properly record the company’s financial information, including its 
+assets. As a result, Respondents willfully aided and abetted and caused Powder River’s violations 
+of Section 13(b)(2)(B) of the Exchange Act. 
+24. Section 13(b)(5) of the Exchange Act provides that no person shall 
+knowingly falsify any such book, record, or account or circumvent internal controls.  Rule 13b2-1 
+also prohibits the falsification of any book, record, or account subject to Section 13(b)(2)(A).  Rule 
+13b2-2(a) prohibits an officer or director of an issuer from, directly or indirectly: (1) making, or 
+causing to be made, a materially false or misleading statement; or (2) omitting, or causing to be 
+omitted, a statement of a material fact necessary to make the statements made, in light of the 
+circumstances under which they were made, not misleading to an accountant in connection with a 
+required audit, or the preparation or filing of a required document or report.  As discussed above, 
+Johnson authorized payments to existing investors from new investor funds that he failed to 
+properly record or disclose to auditors or in Powder River’s first quarter of 2008 Form 10-Q.  
+Therefore, Johnson willfully violated Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 
+13b2-2 thereunder.  
+F. FINDINGS 
+25. Based on the foregoing, the Commission finds that: 
+a. Johnson willfully violated Sections 10(b) and 13(b)(5) of the Exchange Act 
+and Rules 10b-5, 13a-14, 13b2-1 and 13b2-2 promulgated thereunder, and willfully aided and 
+abetted and caused Powder River’s violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the 
+Exchange Act, and Rules 13a-1, 13a-11, 13a-13, and 12b-20 promulgated thereunder;  
+8
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+b. Hanni willfully aided and abetted and caused Powder River’s 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 promulgated thereunder; and  
+c. Johnson willfully violated Sections 10(b) and 13(b)(5) of the Exchange Act 
+and Rules 10b-5, 13a-14, 13b2-1 and 13b2-2 promulgated thereunder, and he and Hanni willfully 
+aided and abetted Powder River’s violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the 
+Exchange Act, and Rules 13a-1, 13a-11, 13a-13, and 12b-20 promulgated thereunder, within the 
+meaning of Exchange Act Section 4C and Rule 102(e)(1)(iii) of the Commission’s Rules of 
+Practice. 
+G. UNDERTAKINGS 
+26. Cooperation. Respondents undertake to cooperate fully with the 
+Commission with respect to any matter relating to the Commission's investigation of Powder 
+River or its current or former officers, directors, employees, or auditors, including but not limited 
+to any litigation or other proceeding related to or resulting from that investigation.  Such 
+cooperation shall include, but is not limited to, upon reasonable notice, and without subpoena:  
+a. Producing any document, record, or other tangible evidence reasonably 
+requested by Commission staff in connection with the Commission's investigation, litigation or 
+other proceedings; 
+b. Providing all information reasonably requested by Commission staff in 
+connection with the Commission's investigation; and  
+c. Attending and providing truthful statements at any meeting, interview, 
+testimony, deposition, trial, or other legal proceeding reasonably requested by the Commission 
+staff.  
+27. In determining whether to accept the Offer, 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’ Offer. 
+Accordingly, it is hereby ORDERED, effective immediately, that: 
+A. JOHNSON 
+Johnson shall cease and desist from committing or causing any violations and any future 
+violations of Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act 
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+and Rules 10b-5, 13a-1, 13a-11, 13a-13, 12b-20, 13a-14, 13b2-1 and 13b2-2 promulgated 
+thereunder. 
+Pursuant to Section 21C(f) of the Exchange Act, Johnson is prohibited, for a period of 
+five years from the date of this Order, 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.    
+Johnson is denied the privilege of appearing or practicing before the Commission as an 
+accountant. 
+After five years from the date of this Order, Johnson 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 Johnson’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. Johnson, or the public accounting firm with which he is associated, is 
+registered with the PCAOB in accordance with the Sarbanes-Oxley Act of 2002, and such 
+registration continues to be effective; 
+b. Johnson, or the registered public accounting firm with which he is 
+associated, has been inspected by the PCAOB and that inspection did not identify any criticisms 
+of or potential defects in Johnson’s or the firm’s quality control system that would indicate that 
+the respondent will not receive appropriate supervision; 
+c. Johnson has resolved all disciplinary issues with the PCAOB, and has 
+complied with all terms and conditions of any sanctions imposed by the PCAOB (other than 
+reinstatement by the Commission); and 
+d. Johnson acknowledges his responsibility, as long as Johnson appears or 
+practices before the Commission as an independent accountant, to comply with all requirements 
+of the Commission and the PCAOB, including, but not limited to, all requirements relating to 
+registration, inspections, concurring partner reviews and quality control standards.   
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+The Commission will consider an application by Johnson 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 Johnson’s character, 
+integrity, professional conduct, or qualifications to appear or practice before the Commission. 
+B. HANNI 
+Hanni shall 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 13a-1, 
+13a-13, and 12b-20 promulgated thereunder.  
+Hanni is denied the privilege of appearing or practicing before the Commission as an 
+accountant. 
+After two years from the date of this Order, Hanni 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 Hanni’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. Hanni, or the public accounting firm with which he is associated, is 
+registered with the PCAOB in accordance with the Sarbanes-Oxley Act of 2002, and such 
+registration continues to be effective; 
+b. Hanni, or the registered public accounting firm with which he is 
+associated, has been inspected by the PCAOB and that inspection did not identify any criticisms 
+of or potential defects in Hanni’s or the firm’s quality control system that would indicate that the 
+respondent will not receive appropriate supervision; 
+c. Hanni has resolved all disciplinary issues with the PCAOB, and has 
+complied with all terms and conditions of any sanctions imposed by the PCAOB (other than 
+reinstatement by the Commission); and 
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+d. Hanni acknowledges his responsibility, as long as Hanni appears or 
+practices before the Commission as an independent accountant, to comply with all requirements 
+of the Commission and the PCAOB, including, but not limited to, all requirements relating to 
+registration, inspections, concurring partner reviews and quality control standards. 
+The Commission will consider an application by Hanni 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 Hanni’s character, 
+integrity, professional conduct, or qualifications to appear or practice before the Commission. 
+ By the Commission.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
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+Service List 
+Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the 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"), on the 
+Respondents and their legal agent. 
+The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Shoshana Thoma-Isgur, Esq. 
+Fort Worth Regional Office 
+Securities and Exchange Commission 
+801 Cherry Street, Suite 1900 
+Fort Worth, TX 76102 
+Mr. Jeffery Q. Johnson 
+c/o James R. Kruse, Esq. 
+Kruse Landa Maycock & Ricks, LLC 
+136 East South Temple, 21
+st Floor 
+Salt Lake City, UT 84111 
+Mr. Steven M. Hanni 
+c/o James R. Kruse, Esq. 
+Kruse Landa Maycock & Ricks, LLC 
+136 East South Temple, 21
+st Floor 
+Salt Lake City, UT 84111 
+James R. Kruse, Esq. 
+Kruse Landa Maycock & Ricks, LLC 
+136 East South Temple, 21
+st Floor 
+Salt Lake City, UT 84111 
+ (Counsel for Jeffery Q. Johnson and Steven M. Hanni) 
+13
+ 
\ No newline at end of file
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+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64279 / April 8, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3266 / April 8, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14335 
+In the Matter of 
+TODD D. CHISHOLM, CPA,  
+Respondent. 
+ORDER INSTITUTING PUBLIC 
+ADMINISTRATIVE AND CEASE-
+ AND-DESIST PROC EEDINGS 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 Todd D. 
+Chisholm, CPA (“Respondent”) pursuant to Sections 4C
+1 and 21C of the Securities Exchange Act 
+of 1934 (“Exchange Act”) and Rule 102(e)(1)(ii) 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 . . . (1) not to possess the 
+requisite qualifications to represent others . . . (2) to be lacking in character or integrity, or to have engaged in 
+unethical or improper professional conduct; 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 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. 
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+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 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 finds
+3 that: 
+A. SUMMARY 
+1. From year-end 2004 through the first quarter of 2008, Powder River Petroleum 
+International, Inc. (“Powder River” or “the company”) improperly accounted for over $43 million 
+in proceeds from conveyances of fractional working interests in oil-and-gas leases to investors in 
+Asia. In particular, Powder River immediately recognized revenue from the conveyances, despite 
+the fact that it had promised the Asian working interest investors a guaranteed return until they 
+recouped their initial investment.  In addition, Powder River also improperly recorded assets it did 
+not own or that were stated in excess of net realizable value.  As a result, Powder River’s financial 
+statements did not present fairly, in all material respects, the company’s financial position, 
+operating results, and cash flows in conformity with generally accepted accounting principles.  
+Powder River materially overstated its revenues by 7% to 2,417%, its pre-tax income by 18% to 
+441%, and its assets by 7% to 48% in its Commission filings during the applicable period.  
+2. From year-end 2004 through the third quarter of 2007, Respondent was the 
+engagement partner on Powder River’s audits and reviews.  He failed to conduct these 
+engagements in accordance with Public Company Accounting Oversight Board (“PCAOB”) 
+Standards.  Respondent also caused Chisholm, Bierwolf, Nilson and Morrill, LLC’s failure to have 
+procedures in place to detect fraud 
+and his failures as an auditor were a cause of Powder River’s filing 
+of false and misleading Forms 10-QSB and 10-KSB.  Accordingly, Respondent engaged in improper 
+professional conduct, violated Section 10A(a)(1) of the Exchange Act, and was a cause of Powder 
+River’s violations of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 12b-20 
+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. 
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+  
+ 
+ 
+                                                 
+   
+ 
+    
+B. RESPONDENT 
+3. Todd D. Chisholm is a certified public accountant licensed in the state of Utah.  He 
+became an audit partner at a predecessor of Chisholm, Bierwolf, Nilson and Morrill, LLC 
+(“Chisholm Bierwolf”) in 1995, and he served as the firm’s managing partner from 2004 to 2010.  
+Chisholm was the engagement partner on the audits and quarterly reviews of Powder River from 
+2004 through the third quarter of 2007, and supervised Chisholm Bierwolf’s engagements to audit 
+and review Powder River’s financial statements throughout that period.    
+C. RELEVANT ENTITIES 
+4. Powder River Petroleum International, Inc. is an Oklahoma corporation 
+headquartered in Calgary, Canada.  The company’s common stock is registered with the 
+Commission pursuant to Exchange Act Section 12(g).  Powder River’s shares are currently quoted 
+on Pink OTC Markets, Inc.  In July 2008, an Oklahoma district court granted a temporary 
+restraining order and appointed a receiver for Powder River in connection with a complaint filed 
+by certain Asian investors.4  In December 2008, Powder River filed for bankruptcy.5  It has not 
+restated its financial statements, other than a restatement of its 2007 quarterly financial statements 
+included in its year-end 2007 financial statements, nor has it filed any reports with the Commission 
+since September 17, 2008. 
+5. Chisholm, Bierwolf, Nilson & Morrill, LLC, a PCAOB-registered audit firm with 
+offices in Bountiful and Layton, Utah, and its predecessors, have been Powder River’s auditor 
+since 2001. 
+D. FACTS 
+Oil-and-Gas Working Interest Conveyances 
+6. From year-end 2004 through the first quarter of 2008, Powder River offered and 
+sold working interests in its oil-and-gas leases through an independent sales agent to investors in 
+Singapore, Malaysia and Indonesia.  Powder River’s contracts with Asian investors provided that 
+they would receive guaranteed payments yielding an annual minimum of 9%, and in some cases 
+more, beginning approximately six months after the date of investment until investors reached the 
+“break-even” point, i.e. when their principal had been repaid (the “guaranteed payments”).  
+Thereafter, investors received lease production payments based on their respective working 
+interests. By the second quarter of 2007, Powder River’s guaranteed payments exceeded not only 
+the investors’ share of oil-and-gas production revenues, but also Powder River’s total production 
+4 See Chang v. Powder River Petroleum Int’l, Inc. (Okla. Dist. Ct. July 14, 2008) (No. CJ-2008-4855). 
+5 See In re Powder River Petroleum Int’l, Inc. (Bankr. W.D. Okla. Dec. 12, 2008) (No. 08-15613). 
+3
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
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+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+revenues. After that date, Powder River used proceeds from working interest conveyances to new 
+investors to fund guaranteed payments to earlier investors. 
+7. From year-end 2004 through the first quarter of 2008, Powder River improperly 
+recognized as revenue over $33.5 million in proceeds from conveyances of the working interests to 
+investors. These conveyances were in substance and should have been reported by Powder River 
+as borrowings, not revenue (see Financial Accounting Standards No. 19, Financial Accounting and 
+Reporting by Oil and Gas Producing Companies, paragraph 43). The investors’ contractual right 
+to receive guaranteed payments until their “break-even point” represented, in substance, a loan of 
+capital to Powder River at a guaranteed 9% minimum rate of return.  As a result of Powder River’s 
+improper accounting, the company materially overstated its revenues in its Forms 10-QSB, 10-Q, 
+10-KSB and 10-K for the year ended December 31, 2004 through the quarter ended March 31, 
+2008 by 7% to 2,417% and its net pre-tax income by 18% to 441%. 
+8. Respondent supervised Powder River’s audits and quarterly reviews from year-end 
+2004 through the third quarter of 2007.  During Respondent’s 2004 and 2005 audits, and his 
+quarterly reviews during 2005 and 2006, Respondent failed to examine the documents underlying 
+the working interest conveyances or to question Powder River’s improper revenue recognition of 
+conveyance proceeds.  Instead Respondent relied, without further inquiry, on the Powder River 
+CEO’s characterization of the working interest conveyances as “sales.”  As a result, Powder River: 
+a) failed to disclose and account properly for the guaranteed payments; and b) improperly reported 
+the working interest conveyance proceeds as revenue in financial statements included in its 2004 
+and 2005 Forms 10-KSB and its Forms 10-QSB from the first quarter of 2005 through the third 
+quarter of 2006. 
+9. During Powder River’s 2006 audit, Respondent became aware of Powder River’s 
+9% payments to the working interest investors, but failed to inquire further about them or consider 
+how those payments might affect Powder River’s revenue recognition or whether the company 
+should disclose its payment obligation in its 2006 financial statements.  As a result, Powder River 
+continued to record the working interest conveyance proceeds as revenue, failed to disclose the 
+guaranteed payments, and improperly offset the guaranteed payments against the company’s oil-
+and-gas production receipts.  
+10.  In the second quarter of 2007, when the guaranteed payments exceeded Powder 
+River’s entire oil-and-gas receipts, the company began recording the guaranteed payments on its 
+balance sheet as an asset labeled “pre-paid production payments.”  Respondent was aware of these 
+facts.  Yet, during his 2007 quarterly reviews, Respondent again failed to consider the impact of 
+the guaranteed payments on Powder River’s revenue recognition or to inquire further whether 
+Powder River’s accounting for those payments was correct.  He also failed to consider whether 
+Powder River should disclose its guaranteed payment obligation.  As a result of the foregoing, 
+Powder River continued to record the working interest conveyance proceeds as revenue, failed to 
+disclose the guaranteed payments, and mischaracterized those payments as an asset in its financial 
+statements included in its second and third quarter 2007 Forms 10- QSB. 
+4
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+  
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+ 
+Inflated Assets 
+11.  Powder River reported assets that it did not own or that did not exist in financial 
+statements included in its 2005 and 2006 Forms 10-KSB and its Forms 10-QSB for the first, 
+second and third quarters of 2005 and 2006.  During the company’s 2005 and 2006 audits, 
+Respondent failed to conduct sufficient audit procedures to support the recorded oil-and-gas assets; 
+otherwise he would have discovered information that indicated a significant amount of such assets 
+should be removed from Powder River’s financial statements.  As a result, the company overstated 
+its assets by 7% to 40%. 
+12. In particular, Powder River improperly included as assets in its financial statements 
+two oil-and-gas leases it had agreed, but failed, to acquire.  Specifically, in 2005, Powder River 
+made $500,000 in nonrefundable payments as a part of an agreement to acquire a New Mexico oil-
+and-gas lease for $5 million, but by August 2005 it had defaulted on the terms of the agreement 
+and lost its rights to the lease. Nonetheless, Powder River continued to report the lease as an asset 
+on its balance sheet from the third quarter of 2005 through the first quarter of 2008, which was its 
+last quarterly report.  Similarly, Powder River made nonrefundable payments totaling $1.5 million 
+in late 2006 and early 2007 as part of an agreement to acquire a Texas oil-and-gas lease for $6.5 
+million. The company reported the lease, along with an associated note payable, as assets on its 
+balance sheet from year-end 2006 onward.  In reality, the agreement was never consummated, no 
+note agreement was ever executed, and Powder River ultimately forfeited its payments.  
+13. During Powder River’s 2005 and 2006 audits, Respondent failed to review the oil-
+and-gas lease purchase documents for the New Mexico and Texas leases and to obtain adequate 
+documentation for the $2 million paid to third-parties in the failed lease purchases.  During the 
+2006 audit, Respondent also failed to perform adequate alternate procedures even though:  a) 
+documents provided by Powder River to Chisholm Bierwolf indicated the Texas lease purchase 
+agreement terms expired in December 2006; and b) Chisholm Bierwolf received an irregular 
+confirmation of the purported $5 million promissory note. 
+Failure to Assess the Work of a Professional 
+14. At year-end 2005 and 2006, oil-and-gas properties represented 62% and 67%, 
+respectively, of Powder River’s total assets.  In auditing Powder River’s 2005 and 2006 financial 
+statements, Respondent obtained and relied upon brief excerpts from oil-and-gas reserve reports.  
+Respondent did little, if anything, to: a) evaluate the qualifications of the petroleum engineer who 
+prepared the oil-and-gas reserve reports; b) understand the nature of the work performed in 
+preparing the oil-and-gas reserve reports; and c) evaluate the petroleum engineer’s relationship to 
+Powder River.  Prior to the completion of the 2005 audit, Respondent learned that the 
+Commission’s Division of Corporation Finance staff had issued comments, some of which 
+addressed Powder River’s oil-and-gas reserves, on its 2004 Form 10-KSB, and participated in at 
+least one telephone call regarding the company’s response to those comments.  Respondent knew or 
+should have known that the staff’s comments and Powder River’s responses thereto raised questions 
+as to: a) the qualifications of the engineer who prepared the reserve reports; b) the adequacy of the 
+5
+ 
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+ 
+ 
+ 
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+ 
+ 
+ 
+reserve reports to support disclosures made in the financial statements; and c) conformity of the 
+reserve reports with Rule 4-10 of Regulation S-X.  Accordingly, Respondent failed to adhere to the 
+guidance contained in AU 336, Using the Work of a Specialist, and failed to obtain sufficient 
+competent evidential matter to support Chisholm Bierwolf’s report on Powder River’s 2005 and 
+2006 financial statements. 
+15. Powder River’s year-end 2005 and 2006 financial statements disclosed 
+supplementary, unaudited footnote information required under Statement of Financial Accounting 
+Standards No. 69, Disclosures about Oil and Gas Producing Activities. Despite the questions raised 
+by the staff’s comments on Powder River’s 2004 Form 10-KSB, Respondent failed to comply with 
+the provisions of AU §9558, Required Supplementary Information; Auditing Interpretation of 
+Section 558, while supervising Powder River’s 2005 and 2006 audits.  AU §9558 states that if an 
+auditor believes that information may not be presented within the applicable guidelines he ordinarily 
+should make additional inquiries. Respondent had reason to believe that Powder River’s footnote 
+information may not have been presented within applicable guidelines.  Therefore, he ordinarily 
+should have made additional inquiries, but failed to do so. 
+Creation of Audit Documents 
+16. Prior to a PCAOB inspection in 2007, Respondent created and back-dated or 
+directed Chisholm Bierwolf’s staff to create and back-date audit planning and other documents 
+more than 45 days after the documentation completion dates for the 2006 audit of Powder River’s 
+financial statements.  Respondent and his firm’s staff failed to document in the workpapers the dates 
+that these changes were made, the names of the persons who made them, and the reasons for adding 
+information.  They also failed to notify the PCAOB inspection team that changes had been made to 
+the audit files without appropriately documenting the date of those changes.  As a result, 
+Respondent failed to comply with PCAOB Auditing Standard No. 3, Audit Documentation, in 
+addition to violating PCAOB rules. Respondent produced those documents to SEC staff during its 
+investigation, without disclosing that they had been back-dated or created after document 
+completion deadlines. 
+Failure to Conduct Audits in Accordance with PCAOB Standards 
+17. As the foregoing conduct demonstrates, Respondent failed to conduct Powder 
+River’s 2004, 2005, and 2006 audits in accordance with PCAOB Standards and Rules.  Specifically, 
+Respondent failed to:  
+a. Adequately plan audits and properly supervise assistants, under AU 
+311, ¶8, Planning & Supervision; 
+b. Gather sufficient competent evidential matter, under AU 326, ¶13, 
+Audit Evidence, to support the characterization of Powder River’s revenue and his conclusions on 
+company assets; 
+6
+ 
+ 
+ 
+ 
+ 
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+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+c. Exercise due professional care and skepticism, under AU 230, ¶¶9, 
+25, Due Professional Care in the Performance of Work, as illustrated by repeated failures to 
+review underlying documentation, undue reliance on management, and failure to respond 
+appropriately to “red flags;” 
+d. Consider whether, under AU 336, ¶¶8, 9, Using the Work of a 
+Specialist, Powder River’s petroleum engineers possessed the necessary qualifications for their 
+work to be used as audit evidence; 
+e. Make additional inquiries under AU §9558, Required Supplementary 
+Information; Auditing Interpretation of Section 558, although Respondent had reason to believe that 
+Powder River’s oil-and-gas reserves footnote information may not have been presented within 
+applicable guidelines; and  
+f. Properly prepare audit documentation, under PCAOB Auditing 
+Standard No. 3, ¶15, Audit Documentation, as demonstrated by after-the-fact creation and back­
+dating of audit planning documents and checklists at Respondent’s direction. 
+18. Furthermore, Respondent did not have procedures in place designed to provide 
+reasonable assurance of detecting illegal acts that would have a direct and material effect on 
+Powder River’s financial statement amounts, as required by Section 10A(a)(1) of the Exchange 
+Act. This was demonstrated by Respondent’s failure to recognize Powder River’s improper 
+revenue recognition, his failure to identify assets improperly included on its balance sheet, and his 
+reliance on non-SEC compliant reserve reports that failed to support Powder River’s reported 
+reserves. 
+E. VIOLATIONS 
+19. Exchange Act Section 10A(a)(1) requires each audit to include procedures designed 
+to provide reasonable assurance of detecting illegal acts that would have a direct and material 
+effect on the determination of financial statement amounts.  No showing of scienter is necessary to 
+establish a violation of Section 10A.  See SEC v. Solucorp Indus., Ltd., 197 F. Supp. 2d 4 
+(S.D.N.Y. 2002). 
+20. As discussed above, Respondent violated Section 10A(a)(1) by failing to have 
+adequate procedures in place during Powder River’s 2004, 2005 and 2006 audit to reasonably 
+assure detection of illegal acts, such as Powder River’s material overstatement of its revenues, its 
+undisclosed guaranteed payments, its inclusion of improperly recorded assets on its balance sheet, 
+and its materially overstated oil-and-gas reserves, which materially affected the determination of 
+financial statement amounts.   
+21. Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13, and 12b-20 thereunder, 
+require every issuer of a security registered pursuant to Section 12 of the Exchange Act file with 
+the Commission information, documents, and annual and quarterly reports as the Commission 
+7
+ 
+ 
+ 
+     
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+may require, and mandate that periodic reports contain such further material information as may 
+be necessary to make the required statements not misleading.  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), cert. denied, 440 U.S. 913 (1979).   
+22. As discussed above, from year-end 2004 through the third quarter of 2007, 
+Respondent’s failures were a cause of Powder River’s filing of false and misleading quarterly and 
+annual reports with the Commission.  Accordingly, Respondent was a cause of Powder River’s 
+violations of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13, and 12b-20 thereunder. 
+23. Rule 102(e)(1)(ii) of the Commission’s Rules of Practice and Section 4C of the 
+Exchange Act authorize the Commission to censure or deny, temporarily or permanently, the 
+privilege of appearing or practicing before the Commission to accountants who are found to have 
+engaged in improper professional conduct.  Under Rule 102(e)(1)(iv), the term “improper 
+professional conduct” means, in part, “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.”  Respondent’s actions were unreasonable and failed to conform to 
+applicable professional standards.  Accordingly, his conduct supports an action under Rules 
+102(e)(1)(ii) and 102(e)(1)(iv)(B)(2) of the Rules of Practice. 
+F. FINDINGS 
+24. Based on the foregoing, the Commission finds that Respondent violated Section 
+10A(a)(1) of the Exchange Act, and was a cause of Powder River’s violations of Section 13(a) of 
+the Exchange Act and Rules 13a-1, 13a-13, and 12b-20 promulgated thereunder. 
+25. Based on the foregoing, the Commission finds that Respondent engaged in 
+improper professional conduct pursuant to Rules 102(e)(1)(ii) and 102(e)(1)(iv)(B)(2) of the 
+Commission’s Rules of Practice. 
+G. UNDERTAKING 
+26. Cooperation. Respondent undertakes to cooperate fully with the Commission 
+with respect to any matter relating to the Commission's investigation of Powder River or its 
+current or former officers, directors, employees, or auditors, including but not limited to any 
+litigation or other proceeding related to or resulting from that investigation.  Such cooperation 
+shall include, but is not limited to, upon reasonable notice and without subpoena:  
+a. Producing any document, record, or other tangible evidence reasonably 
+requested by Commission staff in connection with the Commission's investigation, litigation or 
+other proceedings; 
+b. Providing all information reasonably requested by Commission staff in 
+connection with the Commission's investigation; and  
+8
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+ 
+c. Attending and providing truthful statements at any meeting, interview, 
+testimony, deposition, trial, or other legal proceeding reasonably requested by the Commission 
+staff.  
+27. In determining whether to accept the Offer, the Commission has considered these 
+undertakings. 
+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. Respondent shall cease and desist from committing or causing any violations and any future 
+violations of Section 10A(a)(1) of the Exchange Act. 
+B. Respondent shall cease and desist from committing or causing any violations and any 
+future violations of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13, and 12b-20 
+promulgated thereunder. 
+C. Respondent is denied the privilege of appearing or practicing before the Commission as an 
+accountant. 
+D. 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 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 PCAOB 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 PCAOB and that inspection did not identify any criticisms 
+of or potential defects in Respondent’s or the firm’s quality control system that would indicate 
+that the respondent will not receive appropriate supervision; 
+9
+ 
+ 
+ 
+ 
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+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+c. Respondent has resolved all disciplinary issues with the PCAOB, and has 
+complied with all terms and conditions of any sanctions imposed by the PCAOB (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 PCAOB, including, but not limited to, all requirements 
+relating to registration, inspections, concurring partner reviews and quality control standards.   
+E. 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.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+10
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+             
+ 
+ 
+ 
+Service List 
+Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the 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"), on the 
+Respondent and his legal  agent. 
+The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Shoshana Thoma-Isgur, Esq. 
+Fort Worth Regional Office 
+Securities and Exchange Commission 
+801 Cherry Street, Suite 1900 
+Fort Worth, TX 76102 
+Mr. Todd D. Chisholm 
+c/o Douglas E. Griffith, Esq. 
+Kesler & Rust 
+68 South Main Street, 2nd Floor 
+Salt Lake City, Utah 84101 
+Douglas E. Griffith, Esq. 
+Kesler & Rust 
+68 South Main Street, 2nd Floor 
+Salt Lake City, Utah 84101 
+(Counsel for Todd D. Chisholm) 
+11
+ 
\ No newline at end of file
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+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64288 / April 8, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3268 / April 8, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14338 
+ 
+ 
+In the Matter of 
+ 
+KENTUCKY ENERGY, INC., 
+EUGENE CHIARAMONTE, 
+III AND CLEAR MOUNTAIN 
+ASSOCIATES, LLC,  
+ 
+Respondents. 
+ 
+ 
+ 
+ 
+ 
+ORDER INSTITUTING CEASE-AND-DESIST 
+PROCEEDINGS PURSUANT TO SECTION 
+21C OF THE SECURITIES EXCHANGE ACT 
+OF 1934, MAKING FINDINGS AND 
+IMPOSING A CEASE-AND-DESIST ORDER 
+   
+ 
+I. 
+ 
+ The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
+public interest that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 
+21C of the Securities Exchange Act of 1934 (“Exchange Act”) against Kentucky Energy, Inc., 
+Eugene Chiaramonte, III and Clear Mountain Associates, LLC (collectively, “Respondents”).   
+ 
+II. 
+ 
+ In anticipation of the institution of these pr oceedings, Respondents have each submitted an 
+Offer of Settlement (an “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 each of them and the subject matter of 
+these proceedings, which are admitted, Respondents consent to the entry of this Order Instituting 
+Administrative and Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities 
+Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set 
+forth below.   
+ 
+ 
+2 
+ 
+III. 
+ 
+ On the basis of this Order and Res pondents’ Offers, the Commission finds1 that:  
+ 
+Summary 
+ 
+ These  proceedings arise out of improper accounting, by Kentucky Energy, Inc., formerly 
+known as Quest Minerals & Mining Corp., for warrants and certain convertible notes for the year 
+ended December 31, 2005.  Among other things, Kentucky Energy accounted for warrants it had 
+issued to third parties as an asset with a purported value at the end of the first quarter of 2005 of 
+more than $13 million.  This accounting was not in accordance with generally accepted accounting 
+principles (“GAAP”) and was material to Kentucky Energy’s financial statements, in that it caused 
+its assets to be overstated by 43% and its net loss to be overstated by 197% for the year ended 
+December 31, 2005.  The inaccurate financial statements were prepared by Eugene Chiaramonte, 
+III through his consulting company, Clear Mountain Associates, which had been retained by 
+Kentucky Energy for the purpose of preparing its financial statements. 
+ 
+Respondents  
+ 
+1. Kentucky Energy, Inc., formerly known as Quest Minerals & Mining Corp. 
+(“Kentucky Energy”) was organized under the laws of the state of Utah in 1985.  Since 2004, 
+Kentucky Energy has been in the business of mining coal in Kentucky.  It changed its name to 
+Kentucky Energy, Inc. effective June 16, 2010.  Kentucky Energy’s common stock previously 
+traded on the OTC Bulletin Board under the symbol QMLM.OB and currently trades in the pink 
+sheets under the symbol QMIN.PK and closed at $.0004 on October 4, 2010.    
+ 
+2. Clear Mountain Associates, LLC, a New Jersey limited liability company (“Clear 
+Mountain”), has been employed as a consultant to Kentucky Energy from the fall of 2004 to the 
+present.  It was formed by Eugene Chiaramonte, III. 
+ 
+3. Eugene Chiaramonte, III  is the founder and sole owner of Clear Mountain.  He 
+has never been licensed as a certified public accountant.  Through his consulting firm Clear 
+Mountain, Chiaramonte prepared the financial statements of Kentucky Energy beginning with its 
+quarter ended June 30, 2004, to the present.   
+ 
+                                                 
+1  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.  
+ 
+3 
+ 
+Background 
+ 
+Inaccurate financial statements. 
+ 
+4. Beginning in the fall of 2004 and continuing throughout 2005, Kentucky Energy 
+obtained a series of loans from third parties, evidenced by notes convertible into common stock.  
+As an additional incentive to the lenders, Kentucky Energy issued warrants along with each 
+convertible note.  The way in which Kentucky Energy accounted for these warrants and for the 
+conversion feature of the notes, however, caused its financial statements for the 2005 year to be 
+materially inaccurate.   
+ 
+ 5. Chairamonte formed Clear Mountain for the purpose of running the Kentucky 
+Energy accounting work, its only client, through an entity.  Since mid-2004, Chiaramonte, 
+through Clear Mountain, has been preparing the financial statements of Kentucky Energy and its 
+subsidiaries.  He has also been making determinations as to the proper accounting for Kentucky 
+Energy’s transactions, because the company has not had an officer or employee capable of 
+working in this area.  In these ways, he functioned as the CFO of Kentucky Energy.  
+Chiaramonte was solely responsible for deciding how to account for the warrants and convertible 
+notes issued by Kentucky Energy during 2004 and 2005.     
+ 
+6. All of Kentucky Energy’s inaccurate 2005 financial statements were the 
+responsibility of Chiaramonte.  He had no prior experience with accounting for warrants, the 
+beneficial conversion feature of a convertible note, or derivative accounting.  Chiaramonte 
+consulted the company’s audit firm for guidance.  He did not seek other outside expertise 
+regarding the proper accounting for the convertible notes and warrants.   
+ 
+7. Kentucky Energy’s auditor told Chiaramo nte that he should use the Black-Scholes 
+option pricing model to value the warrants.  While he had heard the term before, Chiaramonte had 
+no experience with Black-Scholes.  He used a search engine to find a Black-Scholes calculator on 
+the internet.  This calculator called for inputs for the “equity price,” “strike price,” “volatility,” 
+“rate/year,” and “term,” and would then generate a figure for “option value.”  Chiaramonte then 
+applied the resulting valuation to the warrants in Kentucky Energy’s financial statements.   
+ 
+8. In using the Black-Scholes  calculator he had found on the internet, Chiaramonte 
+did not input the actual volatility and interest rate applicable to Kentucky Energy’s common 
+stock.  Instead, he chose the generic example for volatility and interest rate provided by the 
+website, and inserted those numbers into the formula.  In the case of the volatility figure, 
+Chiaramonte used the generic input suggested by the website, which was 30%, for each quarter 
+in 2005.  In fact, the actual volatility of Kentucky Energy’s common stock was well in excess of 
+200% for each quarter.  This difference was material.   
+ 
+9. In its 2005 financial statements, Kentucky Energy recorded the warrant valuation 
+as an asset on the company’s balance sheet, and amortized that valuation over the life of the 
+ 
+4 
+ 
+underlying convertible note.  In fact, no portion of the loan proceeds represented by the warrants 
+should have been recorded as an asset.  Instead, this portion of the loan proceeds should have 
+been recorded in stockholders’ equity as paid-in capital, with an offsetting amount treated as a 
+debt discount and amortized.  In addition, the company did not account for the beneficial 
+conversion feature of the notes themselves.  Kentucky Energy should have allocated the loan 
+proceeds first to the notes and the warrants, and then allocated a portion from the resulting note 
+amount to the beneficial conversion feature of the notes.   
+ 
+10. As a result of this improper accounting, Kentucky Energy’s assets were materially 
+overstated for each quarter in 2005 and for the 2005 year.  For example, its assets were 
+overstated by approximately $13.8 million, or 213%, in the financial statements contained in the 
+Form 10-Q for the first quarter of 2005.   
+ 
+11. As a result of the amortization of the warrant asset, Kentucky Energy’s statement 
+of operations was also materially false for each quarter in 2005 and for the 2005 year.  For 
+example, this amortization caused its net loss to be overstated by approximately 174% for the 
+second quarter of 2005.   
+ 
+12. For its year ended December 31, 2005, as a result of its improper accounting for the 
+warrants and convertible notes, Kentucky Energy recorded a warrant asset in the amount of 
+$3,097,903 on its balance sheet, net of that which was amortized as an expense on its statements of 
+operations.  In so doing, the company overstated total assets by 43% and overstated its net loss by 
+197%.  Along the way it materially overstated paid-in capital, retained deficit, stockholders’ equity 
+and expenses.  Its recording of the warrants as an asset, and the subsequent amortization of that 
+asset, was material to both its balance sheet and its statement of operations contained in all of its 
+periodic filings for 2005, and caused those financial statements to be false and misleading.   
+ 
+Violations 
+ 
+13. As a result of the conduct described a bove, Kentucky Energy committed violations 
+of Section 13(a) of the Exchange Act, which requires registrants to file certain  periodic and other 
+reports, and of Rules 12b-20, 13a-1 and 13a-13.  Rules 13a-1 and 13a-13 require, respectively, the 
+filing of annual and quarterly reports.  Rule 12b-20 provides that, in addition to information 
+specifically required to be included in reports, registrants are obligated to include any material 
+information necessary to make the statements made in the reports not misleading.   
+ 
+14. As a result of the conduct described a bove, Kentucky Energy committed violations 
+of Section 13(b)(2)(A) and (B) of the Exchange Act.  Section 13(b)(2)(A) of the Exchange Act 
+requires every issuer that has a class of securities registered pursuant to Section 12 of the Exchange 
+Act 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 . . . .”  Scienter is not 
+required to establish a violation of Section 13(b) or the rules thereunder.  Section 13(b)(2)(B) 
+requires an issuer to “devise and maintain a system of internal accounting controls sufficient to 
+ 
+5 
+ 
+                                                
+provide reasonable assurances that . . . (ii) transactions are recorded as necessary (I) to permit 
+preparation of financial statements in conformity with generally accepted accounting principles or 
+any other criteria applicable to such statements, and (II) to maintain accountability for assets.”   
+  
+15. As a result of the conduct described a bove, Chiaramonte committed violations of 
+Section 13(b)(5) of the Exchange Act, which provides that “no person shall . . . knowingly falsify 
+any book, record, or account . . .” described in Section 13(b)(2).  Chiaramonte knowingly falsified 
+the financial statements of Kentucky Energy by improperly accounting for the warrants and 
+convertible notes. 
+ 
+16. As a result of the conduct described a bove, Chiaramonte committed violations of 
+Rule 13b2-1 under the Exchange Act, which generally prohibits the falsification of books and 
+records.   
+ 
+17. As a result of the conduct describe d above, Chiaramonte and Clear Mountain 
+caused Kentucky Energy’s violations of Sections 13(a) and 13(b)(2)(A) and (B) of the Exchange 
+Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. 
+ 
+Undertakings 
+ 
+ 18. Kentucky Energy has undertaken to: 
+ 
+  a. Maintain at least two independent di rectors on its Board of Directors so that 
+not less than two-thirds of the members of the Board of Directors will be independent directors;
+2 
+ 
+  b. Employ a Chief Financial Officer qu alified to prepare financial statements 
+in accordance with GAAP;  
+ 
+2  For a director to be considered independent within the meaning of these undertakings, the board must 
+determine that the director has no material relationship with Kentucky Energy (either directly or as a partner, 
+shareholder or officer of an organization that has a relationship with the company) that would interfere with the 
+exercise of independent judgment in carrying out the responsibilities of a director.  A director is not independent if (1) 
+he is, or has been within the last three years, an employee of the company, or if an immediate family member is, or has 
+been within the last three years, an executive officer of the company; (2) the director has received, or has an immediate 
+family member who has received, during any twelve-month period within the last three years, more than $120,000 in 
+direct compensation from the company, other than director and committee fees and pension or other forms of deferred 
+compensation for prior service (provided such compensation is not contingent in any way on continued service); (3) the 
+director or an immediate family member is, or has been with the last three years, employed as an executive officer of 
+another company where any of Kentucky Energy’s present executive officers at the same time serves or served on that 
+company's compensation committee; or (4) the director is a current employee, or an immediate family member is a 
+current executive officer, of a company that has made payments to, or received payments from, the company, other 
+than those payments to or from the company arising solely from investments in the company's securities or payments 
+under non-discretionary charitable contribution matching programs, for property or services in an amount which, in any 
+of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company's consolidated gross 
+revenues.  In addition, references to “Kentucky Energy” or “the company" include any parent or subsidiary in a 
+consolidated group with the company.  
+ 
+ 
+6 
+ 
+ 
+ c. Notify the Division of Enforcement if its chief financial officer resigns or is 
+terminated, or if one or more board members leave the company, such that the board as a whole is 
+no longer independent.  Such notification shall be submitted to Karen L. Martinez, Assistant 
+Director, Securities and Exchange Commission, 15 West South Temple Street, Suite 1800, Salt 
+Lake City, Utah 84101, with a copy to the Office of Chief Counsel of the Enforcement Division, 
+no later than sixty (60) days from the date of such event; 
+ 
+  d. Within three months of the date th is order is instituted, adopt a system of 
+written internal controls, and identify and implement actions to improve the effectiveness of its 
+disclosure controls and procedures and internal controls, including plans to enhance its resources 
+and training with respect to financial reporting and disclosure responsibilities, and to review such 
+actions with its independent auditors; and 
+ 
+ The above undertakings shall automatically expi re three years from the date this order is 
+instituted.   
+ 
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanctions agreed to in Respondents’ respective Offers. 
+ 
+ Accordingly, pursuant to Section 21C of the Exchange Act, it is hereby ORDERED that: 
+ 
+ A. Respondent Kentucky En ergy cease and desist from committing or causing any 
+violations and any future violations of Sections 13(a) and 13(b)(2)(A) and (B) of the Exchange Act 
+and Rules 12b-20, 13a-1 and 13a-13 thereunder.   
+ 
+B. Respondent Kentucky Energy comply with  its undertakings as enumerated in 
+Section III above.  Any undertaking set forth in Section III above which were implemented prior to 
+the date of this Order shall be maintained.   
+ 
+Respondent Kentucky Energy shall certify, in writing, compliance with the undertakings 
+enumerated in Section III above.  The certification shall identify the undertakings, provide written 
+evidence of compliance in the form of a narrative, and be supported by exhibits sufficient to 
+demonstrate compliance.  The Commission staff may make reasonable requests for further 
+evidence of compliance, and Respondent Kentucky Energy agrees to provide such evidence.  The 
+certification and supporting material shall be submitted to Karen L. Martinez, Assistant Director, 
+Securities and Exchange Commission, 15 West South Temple Street, Suite 1800, Salt Lake City, 
+Utah 84101, with a copy to the Office of Chief Counsel of the Enforcement Division, no later than 
+sixty (60) days from the date of the completion of the undertakings.   
+ 
+ 
+7 
+ 
+Any undertakings set forth in Section III above which were implemented prior to the date 
+of this Order shall be maintained.   
+  
+ C. Respondent Chiaramont e cease and desist from committing or causing any 
+violations and any future violations of Section 13(b)(5) of the Exchange Act and Rule 13b2-1 
+thereunder.  Respondents Chiaramonte and Clear Mountain cease and desist from committing or 
+causing any violations and any future violations of Section 13(a) and 13(b)(2)(A) and (B) of the 
+Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder.  
+ 
+By the Commission. 
+ 
+ 
+ 
+      E l i z a b e t h  M .  M u r p h y  
+      Secretary 
+ 
+8 
+ 
+Service List 
+ 
+ Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the Order Instituting Cease-and-Desist 
+Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings and 
+Imposing a Cease-and-Desist Order ("Order") on the Respondents and their legal agent. 
+ 
+ The attached Order has been sent to the follow ing parties and other persons entitled to notice: 
+ 
+Honorable Brenda P. Murray    
+Chief Administrative Law Judge   
+Securities and Exchange Commission  
+100 F Street, N.E. 
+Washington, DC 20549-2557  
+    
+Daniel J. Wadley, Esq.     
+Salt Lake Regional Office    
+Securities and Exchange Commission   
+15 W. South Temple, Suite 1800  
+Salt Lake City, UT 84101  
+ 
+Kentucky Energy, Inc. 
+c/o Marc A. Indeglia, Esq. 
+Indeglia & Carney, P.C. 
+1900 Main Street, Suite 300 
+Irvine, CA 92614 
+ 
+Eugene Chiaramonte, III 
+c/o Marc A. Indeglia, Esq. 
+Indeglia & Carney, P.C. 
+1900 Main Street, Suite 300 
+Irvine, CA 92614 
+ 
+Clear Mountain Associates, LLC 
+c/o Marc A. Indeglia, Esq. 
+Indeglia & Carney, P.C. 
+1900 Main Street, Suite 300 
+Irvine, CA 92614 
+ 
+Marc A. Indeglia, Esq. 
+Indeglia & Carney, P.C. 
+1900 Main Street, Suite 300 
+Irvine, CA 92614 
+(Counsel for Kentucky Energy, Inc., Eugene Chiaramonte, III and Clear Mountain Associates, LLC) 
+ 
\ No newline at end of file
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+                                                 
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+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64289A / April 8, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3269A / April 8, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14339 
+In the Matter of
+            Kempisty & Company, CPAs, 
+P.C., Philip C. Kempisty, CPA 
+and John Anthony Rubino, CPA, 
+Respondents. 
+CORRECTED 
+ORDER INSTITUTING CEASE-AND-
+DESIST PROCEEDINGS PURSUANT 
+TO SECTION 21C OF THE 
+SECURITIES EXCHANGE ACT OF 
+1934 AND PUBLIC ADMINISTRATIVE 
+PROCEEDINGS PURSUANT TO 
+SECTION 4C OF THE SECURITIES 
+EXCHANGE ACT OF 1934 AND RULE 
+102(e) OF THE COMMISSION’S 
+RULES OF PRACTICE, AND NOTICE 
+OF HEARING 
+I. 
+The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
+public interest that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 
+21C of the Securities Exchange Act of 1934 (“Exchange Act”) and that public administrative 
+proceedings be, and hereby are, instituted pursuant to Section 4C(2) and (3)
+1 of the Exchange Act 
+and Rule 102(e)(1)(ii) and (iii)2 of the Commission’s Rules of Practice against Kempisty and 
+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 . . . (2) to be lacking in character or 
+integrity, or to have engaged in unethical or improper professional conduct; 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 Rule 102(e)(1)(ii) and (iii) provide, in relevant part, that: 
+The Commission may . . . deny, temporarily or permanently, the privilege of appearing or practicing before the 
+Commission  . . . to any person who is found . . . (ii) to be lacking in character or integrity or to have engaged in 
+unethical or improper professional conduct; 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. 
+ 
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+                                                 
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+ 
+Company, CPAs, P.C., Philip C. Kempisty and John Anthony Rubino (collectively, 
+“Respondents”).   
+Summary 
+These proceedings arise out of quarterly reviews and an audit performed by Kempisty & 
+Company, CPAs, P.C. (“Kempisty & Company”), of the financial statements of its client, 
+Kentucky Energy, Inc. (“Kentucky Energy”),3 for the year ended December 31, 2005.  In these 
+financial statements, Kentucky Energy improperly accounted for warrants and convertible notes it 
+had issued to third parties.  Kempisty & Company rendered an unqualified report stating that, in 
+the firm’s opinion, the financial statements presented fairly the financial position of the company in 
+conformity with4 generally accepted accounting principles (“GAAP”).  In fact, the financial 
+statements were not presented in conformity with GAAP and the resulting errors were material.  
+Moreover, the respondents failed to comply with Public Company Accounting Oversight Board 
+(“PCAOB”) auditing standards (“AU”)5 in carrying out the relevant audits and reviews.   
+II. 
+After an investigation, the Division of Enforcement alleges that: 
+A. RESPONDENTS 
+Kempisty & Company, CPAs, P.C. (“Kempisty & Company”), is an audit firm with 
+offices in New York City.  It is a public accounting firm registered with the Public Company 
+Accounting Oversight Board.  Kempisty & Company was the independent auditor for Kentucky 
+Energy at all relevant times from 2003 until the company dismissed it on February 13, 2009.  
+Philip C. Kempisty, CPA, 61 (“Kempisty”), is the founding partner and majority 
+shareholder of Kempisty & Company.  He has been licensed as a CPA in the state of New York 
+since 1974. 
+John Anthony Rubino, CPA, 67 (“Rubino”), has been a partner/member in Kempisty & 
+Company since 1989.  He is licensed as a CPA in the states of New York and Nevada.  Rubino 
+worked for a series of CPA firms in the New York City area before joining Kempisty & Company 
+in approximately 1980.   
+3 The company was named Quest Minerals and Mining Corp. during the relevant time. 
+4 The Kempisty report did contain an explanatory paragraph describing substantial doubt about the entity’s 
+ability to continue as a going concern and an emphasis of matter paragraph describing that potential adverse rulings 
+in ongoing litigation could result in a loss of the company’s operating assets.
+5 “AU” refers to the specific sections of the codification of the American Institute of Certified Public 
+Accountants (“AICPA”) professional standards, known as the Statements on Auditing Standards, as issued by the 
+Auditing Standards Board of the AICPA.  These standards have been adopted by the PCAOB following passage of 
+the Sarbanes-Oxley Act of 2002 (“SOx”).  References in this order are to the standards in effect at the time of the 
+relevant conduct. 
+2
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+                                                 
+        
+ 
+B. FACTS 
+Issuance of convertible notes and warrants by Kentucky Energy 
+1. Kentucky Energy’s 2005 financial statements, like those for the preceding year, 
+were prepared by a consultant to the company.  This consultant’s father was the Vice President, 
+Secretary and a director of Kentucky Energy.  Kempisty and Rubino had no specific knowledge 
+of the consultant’s education or experience in accounting but were aware that he was not a CPA.  
+2. Beginning in 2004 and continuing into 2005, Kentucky Energy obtained a series of 
+loans from third parties evidenced by notes convertible into common stock.6  As an additional 
+incentive to the lenders, Kentucky Energy issued warrants along with each note.  Kentucky 
+Energy’s consultant needed to account for warrants for the first time in preparing the company’s 
+financial statements for inclusion in its Form 10-KSB for the year ended December 31, 2004.   
+Rubino had never previously dealt with the issue of how to account for warrants or a beneficial 
+conversion feature of a convertible note, both of which are derivatives.   
+Improper accounting for warrants and beneficial conversion feature 
+3. Rubino told the consultant that he would need to value the warrants using the  
+Black-Scholes option pricing model.  Accordingly, the consultant found a Black-Scholes 
+calculator on the internet.  This calculator called for him to fill in variables for the warrants’ 
+“equity price,” “strike price,” “volatility,” “riskless interest rate,” and “time to maturity,” and 
+would then generate a Black-Scholes valuation.  For “volatility” and “interest rate,” however, the 
+consultant simply inserted the generic numbers provided as an example by the website, rather 
+than calculate the actual volatility of Kentucky Energy stock and determine the real riskless 
+interest rate. In fact, Kentucky Energy’s stock price was far more volatile than that listed in the 
+website example. 
+4. Using this method, the consultant arrived at a value for the warrants issued during 
+the last quarter of 2004.  He recorded that value as an expense on the company’s statement of 
+operations and sent his draft financial statements to Kempisty & Company.   
+5. Rubino, however, contacted the consultant and told him that he should have 
+recorded the warrant valuation as an asset on the company’s balance sheet, rather than as an 
+expense on its statement of operations, and that he should then have amortized that amount over 
+the life of the underlying convertible notes.  Not only was this accounting treatment incorrect, but 
+both Rubino and the consultant ignored the necessity to provide for the beneficial conversion 
+feature of the notes. 
+6. In fact, accounting for the warrants in accordance with GAAP required that the 
+proper inputs be used in the Black-Scholes option pricing model.  Kentucky Energy should have 
+One series of notes issued during 2005 was not convertible and one note did not have warrants attached, 
+however. 
+3
+ 
+6 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+   
+ 
+allocated the loan proceeds first to the notes and the warrants; and then, from the portion 
+allocated to the notes, reallocated that to the notes and the beneficial conversion feature of the 
+notes. The amount of proceeds allocable to the warrants and the beneficial conversion feature 
+would be accounted for as paid-in-capital and as a discount to the face amount of the note.  The 
+note should have been recorded net of this discount on the balance sheet and the discount should 
+have been amortized to interest expense in the statement of operations over the life of the notes. 
+7. Rubino testified that he did not know whether or not the consultant was a CPA, 
+what his accounting background was, or whether he was familiar with GAAP.  Even after he 
+decided that the consultant’s first set of financial statements was incorrectly prepared, Rubino took 
+no further steps to verify the consultant’s competence.   
+GAAP failures  
+8. For the first quarter of 2005, using the same methodology established in 2004, the 
+consultant arrived at a value of $15,694,422 for the warrants, and that amount less amortization of 
+$1,881,139, or $13,813,283 was recorded as an asset on the company’s balance sheet.  In the 
+subsequent quarters of 2005, the consultant continued to calculate the warrant valuation improperly 
+and to record it as an asset which, for each of the first two quarters, amounted to over 60% of 
+Kentucky Energy’s total assets.  On the company’s statements of operations, the warrant 
+amortization expense increased correspondingly, and on its 2005 year-end statement of operations 
+amounted to 70% of Kentucky Energy’s net loss.  Throughout this period, the consultant continued 
+to fail to consider the effect of the beneficial conversion feature of the promissory notes.  The 
+combined valuation of the warrants and the beneficial conversion features should not have 
+exceeded the proceeds the company had received from the notes, which amounted to $1,875,000 at 
+the end of the first quarter and $3,105,000 at the end of 2005, and they should not have been 
+recorded as an asset. 
+9. For its year ended December 31, 2005, as a result of its improper accounting for the 
+warrants and convertible notes, Kentucky Energy recorded the warrant asset in the amount of 
+$3,097,903 on its balance sheet, reflecting the ensuing quarters’ amortization as an expense on its 
+statements of operations.  In so doing, the company overstated total assets by 43% and overstated 
+its net loss by 197%.  It also materially overstated paid-in capital, retained deficit, shareholders’ 
+equity and expenses.  This improper accounting was material to balance sheets and statements of 
+operations contained in its quarterly filings for 2005 as well.  For example, its assets were 
+overstated by approximately $13.8 million, or 213%, in the financial statements contained in its 
+Form 10-Q for the first quarter of 2005 and its net loss was overstated by approximately 174% for 
+the second quarter of 2005. 
+Audit and Reviews 
+10. Kempisty & Company, Kempisty and Rubino conducted quarterly reviews and a 
+year-end audit of Kentucky Energy’s financial statements for the 2005 year.  In the report filed 
+with the Form 10-KSB filed by the company on May 9, 2006, Kempisty and Co. stated that the 
+financial statement presented fairly the financial position of the company at December 31, 2005.  
+4
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+On these engagements, Rubino was the engagement partner and Kempisty was the concurring 
+review partner. They were the only auditors who worked on this engagement, and in fact were 
+the only partners and auditors in the firm at the time. 
+PCAOB auditing standards failures by Rubino as the engagement partner 
+Lack of training and proficiency. 
+11. Rubino lacked the necessary training and proficiency as an auditor to properly 
+interpret the professional guidance under GAAP having to do with accounting for warrants and 
+convertible notes.  The workpapers reflect no analysis to support treating the warrants as assets on 
+Kentucky Energy’s balance sheet.  Nevertheless, he sought no outside advice on these issues.  In 
+fact, Rubino did not realize that in accounting for the warrants he was dealing with derivative 
+instruments requiring a careful analysis for proper accounting.   
+12. PCAOB auditing standards require that the audit be performed by "a person or 
+persons having adequate technical training and proficiency as an auditor."  AU § 210.01. PCAOB 
+Auditing Standards further require that “[t]he auditor with final responsibility for the engagement 
+should know, at a minimum, the relevant professional accounting and auditing standards . . . .”  AU 
+§ 230.06. 
+Failure to exercise due professional care and skepticism 
+and to obtain sufficient competent evidential matter. 
+13. Rubino also failed to obtain and sufficiently examine, read and understand all of 
+the underlying documents evidencing the note/warrant transactions.  The workpapers did not 
+contain copies of all the relevant agreements underlying the convertible note financings.  There 
+is no evidence that Rubino evaluated this documentation to understand how the transactions 
+should be accounted for under GAAP. 
+14. Rubino knew that Kentucky Energy’s consultant had limited knowledge of 
+accounting and GAAP, yet he failed to review in sufficient detail the Black-Scholes assumptions 
+and analysis the consultant had used, therefore failing to discover that he had merely used the 
+generic volatility and interest rate numbers off the website rather than obtain the correct numbers 
+for Kentucky Energy.   
+15. PCAOB auditing standards require that "[d]ue professional care is to be exercised 
+in the planning and performance of the audit and the preparation of the report."  AU § 230.01. 
+Among other things, due professional care requires that an auditor exercise professional 
+skepticism, defined as "an attitude that includes a questioning mind and a critical assessment of 
+audit evidence."  AU § 230.07. Gathering and objectively evaluating audit evidence requires the 
+auditor to consider the competency and sufficiency of the evidence.  AU § 230.08.  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. 
+5
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+ 
+16. PCAOB auditing standards also require that "[s]ufficient competent evidential 
+matter is to be obtained through inspection, observation, inquiries, and confirmations to afford a 
+reasonable basis for an opinion regarding the financial statements under audit."  AU § 326.01. To 
+be competent, evidence, regardless of its form, must be both valid and relevant.  AU § 326.21. In 
+addition, the auditor should "recognize the possibility that the financial statements may not be 
+fairly presented in conformity with generally accepted accounting principles ..." and should 
+"consider relevant evidential matter regardless of whether it appears to corroborate or contradict 
+the assertions in the financial statements."  AU § 326.25.  Management representations "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 § 333.02. 
+Failure to comply with relevant PCAOB auditing standards regarding auditing of 
+derivatives 
+17. In fact, PCAOB auditing standards provide specific guidance to auditors in 
+planning and performing auditing procedures for assertions about derivative instruments that are 
+made in an entity’s financial statements.  AU§ 332.  This guidance states that the auditor may 
+need special skills or knowledge to plan and perform auditing procedures for certain assertions 
+about derivatives and securities. AU§ 332.05. 
+18. Rubino failed to, among other things: 
+•	 Understand the application of generally accepted accounting principles for 
+assertions about derivatives (AU§ 332.05) 
+•	 Understand the determination of fair value of derivatives, including the 
+reasonableness of key assumptions (AU§ 332.05 and AU§ 332.40) 
+•	 Alter its risk assessment and audit procedures based on the entity’s inexperience 
+with a derivative (AU§ 332.08) 
+•	 Obtain evidence supporting management’s assertion about fair value of the 
+derivative (AU§ 332.35) and 
+•	 Evaluate whether the presentation and disclosure of derivatives are in conformity 
+with generally accepted accounting principles (AU§ 332.49). 
+Thus, Rubino failed to fulfill  his responsibilities under PCAOB auditing standards for auditing 
+those instruments.   
+PCAOB auditing standards review failures by Rubino as the engagement partner 
+19. In addition to the audit failures, Rubino failed to comply with the specific 
+standards applicable to interim reviews of Kentucky Energy’s 2005 quarterly financial 
+statements.  These standards, set forth in AU § 722, provide guidance on the nature, timing and 
+extent of the procedures to be performed by an independent accountant when conducting a 
+review of interim financial information.   
+6
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+                                                 
+     
+   
+ 
+20.  The objective of a review of interim financial information is to provide the 
+accountant with a basis for communicating whether he or she is aware of any material 
+modifications that should be made to the interim financial information for it to conform with 
+GAAP. AU § 722.07. The standards specificall y require the accountant to perform certain 
+procedures when conducting a review of interim financial information, including, but not limited 
+to inquiring of management about unusual or complex situations that may have an effect on the 
+interim financial information, and matters about which questions have arisen in the course of 
+applying the review procedures and significant journal entries and other adjustments.  AU § 
+722.18. 
+21. The unusual or complex situations, referred to in the above paragraph, specifically 
+include the use of derivative instruments and unique terms for debt that could affect 
+classification. AU § 722.55 (Appendix B). Rubino, however, did not give adequate 
+consideration to the analysis and classification of the derivative instruments recorded in the 
+financial statements. 
+22. Finally, the same standards relating to adequate technical training and proficiency, 
+due professional care and professional skepticism apply to reviews as well as audits.  AU § 
+722.01. Therefore, Rubino’s audit failures for Kentucky Energy’s year ended 2005 apply 
+equally to the quarterly reviews. 
+ PCAOB auditing standards failures by Kempisty as the concurring review partner 
+23. Kempisty, as the concurring review partner, was responsible for performing an 
+objective review of significant auditing, accounting, and financial reporting matters that came to 
+his attention, and was an integral part of the resolution of matters prior to the issuance of the firm's 
+audit report.  SEC Practice Section (“SECPS”) §1000.39 (Appendix E).7  On the basis of that 
+review, Kempisty was required to conclude that no matters came to his attention that caused him to 
+believe that the financial statements of Kentucky Energy were not in conformity with GAAP in all 
+material respects, and that the firm's audit was performed in accordance with the standards of the 
+PCAOB. 
+24. Kempisty was required, among other things, to review documentation of the 
+resolution of significant accounting, auditing and financial reporting matters.  His review of the 
+financial statements and management documentation should have alerted him to the mistakes in 
+valuing and classifying the warrant.  
+25. Kempisty had additional specific responsibilities with respect to the concurring 
+review of Kentucky Energy’s interim financial statements.  For a review conducted on interim 
+financial information on financial statements in an SEC client’s quarterly Form 10-Q or 10-QSB 
+filing, a member firm's policies and procedures should require discussion with the concurring 
+partner reviewer, prior to the completion of the review, about any matters identified in the review 
+that involve a significant risk of material misstatement of the financial statements.  Any such 
+involvement should be documented.  SECPS §1000.39 (Appendix E).   
+This references concurring partner review standards set by the AICPA which were adopted by the PCAOB 
+following passage of SOx.  Kempisty & Company was a member of the SEC Practice Section of the AICPA from 
+1991until the formation of the PCAOB, making it subject to these standards. 
+7
+ 
+7 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+26. Although testimony indicates that Kempisty did discuss the warrant/convertible 
+note accounting issue with Rubino, the workpapers for the interim reviews do not contain any 
+documentation of such discussions nor of matters identified in the review that involve a significant 
+risk of material misstatement of the financial statements.   
+27. Finally, as a general matter, Kempisty as concurring reviewer was required to have 
+“sufficient relevant technical expertise and experience” to perform his duties.  SECPS §1000.39 
+(Appendix E).  In this matter he was therefore required to have technical expertise and experience 
+in the area of accounting for derivatives, including warrants and convertible notes.  The standards 
+also require that a concurring reviewer seek assistance from other individuals to supplement his 
+knowledge when necessary.   
+28. As concurring reviewer for both the interim reviews and year-end audit, Kempisty 
+lacked the expertise and experience necessary to understand that the instruments involved in the 
+transactions were derivatives.  He also failed to seek outside professional assistance to understand 
+how to properly account for such items.  
+Misstatement in Audit Report 
+29. In this matter, Kempisty & Company, Kempisty and Rubino’s audit report falsely 
+states that they conducted their audit in accordance with the standards of the PCAOB, and that in 
+their opinion the financial statements of Kentucky Energy were presented fairly, in all material 
+respects, in conformity with accounting principles generally accepted in the United States of 
+America. In fact, they were not. 
+C. VIOLATIONS 
+1. As a result of the conduct described above, Kempisty & Company, Kempisty and 
+Rubino willfully aided and abetted and caused Kentucky Energy’s violations of Sections 13(a) of 
+the Exchange Act and Rules 12b-20, 13a-1 and13a-13 thereunder. 
+2. As a result of the conduct described above, Kempisty & Company, Kempisty and 
+Rubino engaged in improper professional conduct pursuant to Section 4C(a)(2) of the Exchange 
+Act and Rule 102(e)(1)(ii) of the Commission’s Rules of Practice, and willfully aided and abetted 
+and caused Kentucky Energy’s violation of the federal securities laws, pursuant to Section 
+4C(a)(3) of the Exchange Act and Rule 102(e)(1)(iii) of the Commission’s Rules of Practice. 
+III. 
+In view of the allegations made by the Division of Enforcement, the Commission deems it 
+necessary and appropriate that public administrative and cease-and-desist proceedings be  
+instituted, to determine  
+A. Whether the allegations set forth in Section II are true and, in connection therewith, 
+to afford Respondents an opportunity to establish defenses to such allegations; 
+8
+ 
+ 
+ 
+ 
+   
+ 
+  
+ 
+ 
+ 
+ 
+ 
+B. Whether, pursuant to Section 21C of the Exchange Act, Respondents should be 
+ordered to cease and desist from committing or causing any violation and any future violation of 
+Sections 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and13a-13 thereunder; and 
+C. Whether, pursuant to Section 4C of the Exchange Act and Rule 102(e) of the 
+Commission’s Rules of Practice, Respondents should be censured or denied, temporarily or 
+permanently, the privilege of appearing or practicing before the Commission as accountants. 
+IV. 
+IT IS ORDERED that a public hearing for the purpose of taking evidence on the 
+questions set forth in Section III hereof shall be convened at a time and place to be fixed, and 
+before an Administrative Law Judge to be designated by further order as provided by Rule 110 
+of the Commission's Rules of Practice, 17 C.F.R. § 201.110. 
+IT IS FURTHER ORDERED that Respondents shall file an Answer to the allegations 
+contained in this Order within twenty (20) days after service of this Order, as provided by Rule 
+220 of the Commission's Rules of Practice, 17 C.F.R. § 201.220.  
+If any Respondent fails to file the directed answer, or fails to appear at a hearing after 
+being duly notified, that Respondent may be deemed in default and the proceedings may be 
+determined against it or him upon consideration of this Order, the allegations of which may be 
+deemed to be true as provided by Rules 155(a), 220(f), 221(f) and 310 of the Commission's 
+Rules of Practice, 17 C.F.R. §§ 201.155(a), 201.220(f), 201.221(f) and 201.310. 
+This Order shall be served forthwith upon each Respondent personally or by certified 
+mail. 
+IT IS FURTHER ORDERED that the Administrative Law Judge shall issue an initial 
+decision no later than 300 days from the date of service of this Order, pursuant to Rule 360(a)(2) 
+of the Commission’s Rules of Practice. 
+In the absence of an appropriate waiver, no officer or employee of the Commission 
+engaged in the performance of investigative or prosecuting functions in this or any factually 
+related proceeding will be permitted to participate or advise in the decision of this matter, except 
+9
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+as witness or counsel in proceedings held pursuant to notice.  Since this proceeding is not “rule  
+making” within the meaning of Section 551 of the Administrative Procedure Act, it is not 
+deemed subject to the provisions of Section 553 delaying the effective date of any final 
+Commission action. 
+By the Commission. 
+      Elizabeth M. Murphy 
+Secretary 
+10
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3270.txt b/raw/aaer/2011/AAER-3270.txt
new file mode 100644
index 0000000000000000000000000000000000000000..33974e7fd533d5a14af959ddb1991101fa7dc959
--- /dev/null
+++ b/raw/aaer/2011/AAER-3270.txt
@@ -0,0 +1,1380 @@
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+       
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+                U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 21930 / April 14, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3270 / April 14, 2011 
+
+  Securities and Exchange Commission v. Rebecca Lynn Higgins , Civil Action No. 3:11-cv-763 (N.D. Tex.) 
+
+ SEC Settles with Former Zale Employee for her Role in Improper Advertising Expense Accounting 
+
+ On April 14, 2011, the Securities and Exchange Commission filed a settled civil action in United States District Court for the Northern District of Texas, Dallas Division, against Rebecca Lynn Higgins, a former vice president of marketing at Zale Corporation.  The Commission's complaint alleges that, between 2004 and 2009, Higgins caused Zale to record certain television advertising costs as prepaid advertising when, in fact, those costs should have been expensed in the periods in which they were incurred.  According to the Commission, as a result of Higgins's actions, Zale's publicly reported prepaid advertising and advertising expense for these periods were materially misstated.   
+
+ Without admitting or denying the Commission's allegations, Higgins has consented to entry of a final judgment permanently enjoining her from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, and 13a-13 thereunder.  She also has agreed to pay a $25,000 civil penalty.    
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diff --git a/raw/aaer/2011/AAER-3271.txt b/raw/aaer/2011/AAER-3271.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bd00c321a46af08c9587db9610d5bd2e30202820
--- /dev/null
+++ b/raw/aaer/2011/AAER-3271.txt
@@ -0,0 +1,1373 @@
+
+
+ 
+ 
+   
+     
+ 
+ 
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+ 
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+     SEC.gov | Biovail Corporation, Eugene Melnyk, Brian Crombie, John Miszuk, and Kenneth G. Howling 
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+              Biovail Corporation, Eugene Melnyk, Brian Crombie, John Miszuk, and Kenneth G. Howling
+           
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+      
+             
+        Biovail Corporation, Eugene Melnyk, Brian Crombie, John Miszuk, and Kenneth G. Howling
+       
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+                   U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No.  21938 / April 19, 2011 
+
+ Accounting and Auditing Enforcement Release No.  3271 / April 19, 2011 
+
+  Securities and Exchange Commission v. Biovail Corporation, Eugene Melnyk, Brian Crombie, John Miszuk, and Kenneth G. Howling , 08 Civ. 02979 (LAK) (S.D.N.Y. filed March 24, 2008) 
+
+ FINAL JUDGMENTS ENTERED AGAINST FORMER BIOVAIL EXECUTIVES EUGENE MELNYK AND BRIAN CROMBIE  
+
+ On April 14, 2011, the Honorable Lewis A. Kaplan of the United States District Court for the Southern District of New York entered a final consent judgment against defendant Brian Crombie, Biovail Corporation's former chief financial officer, with respect to violations of the federal securities laws alleged by the Commission in a civil enforcement action filed in March 2008.  Crombie consented to a final judgment that (i) permanently enjoins him from future violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5, 13b2-1 and 13b2-2 and from aiding and abetting violations of Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Rules 12b-20, 13a-1 and 13a-16; (ii) requires him to pay a civil penalty in the amount of $100,000; and (iii) bars him from serving as an officer or director of a public company for five years.     
+
+ Additionally, on February 15, 2011, the court entered a judgment by consent against Biovail's former chief executive officer, Eugene Melnyk, that (i) permanently enjoins Melnyk from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5; (ii) imposes a civil penalty in the amount of $150,000; and (iii) bars Melnyk from serving as an officer or director of a public company for five years.  As the Commission previously has settled all charges against the other defendants identified in the complaint, the settlements with Melnyk and Crombie provide final resolution to this matter.  
+
+ Biovail previously settled with the Commission by consenting to a judgment that, among other things, permanently enjoins it from violating antifraud and other provisions of the federal securities laws, imposed a $10 million civil penalty, and ordered it to pay disgorgement of $1.  The Commission previously settled its claims against former Biovail vice president of corporate affairs Kenneth G. Howling by entry on December 21, 2009, of a final consent judgment that permanently enjoined Howling from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5 and imposed a civil penalty in the amount of $50,000.  The Commission settled its claims against former Biovail vice president, controller and assistant secretary John Miszuk by entry on September 8, 2010, of a final consent judgment that (i) permanently enjoins him from future violations of Section 10(b) 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 Rules 12b-20, 13a-1 and 13a-16; (ii) required him to pay a civil penalty in the amount of $75,000; and (iii) bars him from serving as an officer or director of a public company for five years.   
+
+ For further information, see Litigation Releases No.  20506  (March 24, 2008), No.  20880  (February 4, 2009), No.  20903  (February 17, 2009) and No.  21650  (September 15, 2010). 
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diff --git a/raw/aaer/2011/AAER-3273.txt b/raw/aaer/2011/AAER-3273.txt
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+++ b/raw/aaer/2011/AAER-3273.txt
@@ -0,0 +1,1370 @@
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+              Terry M. Phillips
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+        Terry M. Phillips
+       
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+             
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+
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+                U.S. Securities and Exchange Commission 
+
+ Litigation Release No. 21941 / April 21, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3273 / April 21, 2011 
+
+  Securities and Exchange Commission v. Terry M. Phillips , Civil Action No. 1: 11 CV 422 AJT/IDD (E.D. Va. April 20, 2011) 
+
+ Commission Files Settled Charges Against Chairman of SouthPeak Interactive Corporation 
+
+ The Securities and Exchange Commission today announced that it filed a civil action in federal district court against Terry M. Phillips, chairman of the board of directors of SouthPeak Interactive Corporation ("SouthPeak"). In its Complaint, the Commission alleges that, in February 2009, Phillips used personal funds to pay for the purchase of inventory for SouthPeak. The Commission further alleges that, in violation of SouthPeak's internal policy, Phillips failed to bring the proposed payment to the attention of the Audit Committee of SouthPeak's board of directors for its approval. According to the Complaint, Phillips also failed to ensure that the related party transaction was properly and accurately recorded in SouthPeak's books and records and disclosed in the relevant periodic report that SouthPeak filed with the Commission. The Commission further alleges that Phillips signed a management letter to SouthPeak's outside auditor representing that all related party transactions had been disclosed for the quarter ended March 31, 2009, even though Phillips' use of his personal funds to purchase inventory for SouthPeak had not been disclosed to the auditor. 
+
+ The Commission alleges that, by this conduct, Phillips violated Rule 13b2-2 of the Securities Exchange Act of 1934 ("Exchange Act"), which prohibits officers and directors of public companies from making materially false or misleading statements to accountants in connection with, among other things, the preparation of any report required to be filed with the Commission, and aided and abetted violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20 and 13a-13 thereunder, which are the public company periodic reporting, books and records, and internal controls provisions of the federal securities laws. 
+
+ Without admitting or denying the Commission's allegations, Phillips consented to the entry of a permanent injunction against future violations of these provisions and a court order directing Phillips to pay a $50,000 civil penalty. Phillips further consented to the entry of an order requiring him to comply with the 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 that was issued against Phillips by the Commission on May 2, 2007. 
+
+ The settlement is subject to the approval of the United States District Court for the Eastern District of Virginia. 
+
+ In related proceedings, the Commission today issued cease-and-desist orders against SouthPeak and its former vice president of operations, Patrice K. Strachan. Without admitting or denying the Commission's findings, SouthPeak consented to the issuance an order requiring SouthPeak to 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 and 13a-13 thereunder. Without admitting or denying the Commission's findings, Strachan consented to the issuance of an order finding that Strachan failed to ensure that Phillips' payment was properly recorded in SouthPeak's books and records, that Strachan instructed her subordinate not to inform the chief financial officer that Phillips had made the payment with his personal funds, and that Strachan made false material statements in an interview with SouthPeak's auditor. The order requires Strachan to cease 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-13 thereunder, and committing or causing any violations and any future violations of Rule 13b2-2 thereunder and orders her to pay a $10,000 civil penalty.   
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diff --git a/raw/aaer/2011/AAER-3274.txt b/raw/aaer/2011/AAER-3274.txt
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+ 
+ 
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+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No.  64380 / May 3, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No.  3274 / May 3, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14364 
+In the Matter of 
+Rockwell Automation, Inc. 
+Respondent. 
+ORDER INSTITUTING CEASE-AND-DESIST 
+PROCEEDINGS PURSUANT TO SECTION 
+21C OF THE SECURITIES EXCHANGE ACT 
+OF 1934, MAKING FINDINGS, AND 
+IMPOSING A CEASE-AND-DESIST ORDER 
+I. 
+The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
+and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
+Exchange Act of 1934 (“Exchange Act”), against Rockwell Automation, Inc. (“Rockwell” 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 Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
+Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below.   
+ 
+ 
+ 
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+                                                 
+   
+    
+ 
+III. 
+On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 
+Summary 
+1. This matter involves violations of  the books and records and internal 
+controls provisions of the Foreign Corrupt Practices Act ("FCPA") by Rockwell, through one of its 
+former subsidiaries in China, Rockwell Auto mation Power Systems (Shanghai) Ltd. ("RAPS-
+China"), which was divested by Rockwell in January, 2007. 
+2. From 2003 to 2006, certain employees of RAPS-China paid approximately 
+$615,000 to Design Institutes, which were typically state-owned enterprises that provided design 
+engineering and technical integration services that can influence contract awards by end-user state-
+owned customers. The payments were made through third-party intermediaries at the request of 
+Design Institute employees and at the direction of RAPS-China’s Marketing and Sales Director. 
+RAPS-China’s Marketing and Sales Director intended that these funds be paid directly to the 
+Design Institute employees, with the expectatio n that they would influence the ultimate state-
+owned customers to purchase RAPS products.  While the Design Institutes did provide some bona 
+fide engineering and other services in connection with RAPS-China’s end-user contracts, RAPS-
+China could not substantiate the specific servic es rendered or the value of those services.  Also 
+during the same period, employees of RAPS-C hina paid approximately $450,000 to fund 
+sightseeing and other non-business trips for employees of Design Institutes and other state-owned 
+companies. 
+3. Rockwell realized approximately $1.7 million in net profits on sales 
+contracts with end-user Chinese government-owned companies that were associated with payments 
+to the Design Institutes. 
+4. Rockwell failed to accurately record the payments in its books and records, 
+and failed to implement or maintain a system of internal accounting controls sufficient to prevent 
+and detect the payments. 
+Respondent 
+5. Rockwell is a global company engage d in the design and manufacture of 
+industrial automation products and services. The company is incorporated in Delaware and has its 
+principal executive offices in Milwaukee, Wisconsin.  Rockwell's common stock is registered with 
+the Commission pursuant to Section 12(b) of the Exchange Act and is listed on the New York 
+Stock Exchange. 
+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
+ 
+ 
+ 
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+ 
+Other Related Entities 
+6. RAPS-China was a wholly-owned subsidiary of Rockwell, headquartered in 
+Shanghai, China. In 2007, in connection with the sale of  its former Power Systems business, 
+Rockwell sold RAPS-China to Baldor Electric Company.  RAPS-China supplied industrial 
+mechanical power transmission products and industrial motors and drives. 
+Facts 
+A. RAPS-China Paid Design Institutes Through Third-Party Intermediaries 
+7. During 2003, RAPS-China opened a manufacturing facility in Shanghai. 
+Among other products, RAPS manufactured a Controlled Start Transmission (“CST”), which is 
+used in the mining industry. The CST produc t was sold by RAPS-China primarily to Chinese 
+government-owned coal mining and processing plants. 
+8. Design Institutes had an influence on the Chinese government-owned 
+mining companies to which RAPS-China sought to sell its CST product due to their expertise in 
+the engineering of systems that included the CST product.  Between 2003 and 2006, payments 
+were made to Design Institutes in connection with certain CST sales contracts (“DI Payments”).  
+9. 	 RAPS-China made the DI Payments through third-party intermediaries.  
+10. In all, RAPS-China made approximately $615,000 in DI Payments during 
+the period 2003 to 2006. Although the Design Institutes supplied RAPS-China with bona fide 
+technical and engineering services, the RAPS-Chi na Marketing and Sales Director also intended 
+the payments to influence sales contracts with end-user Chinese government-owned companies. 
+11. 	 RAPS-China recorded the DI Payments as “cost of sales.” 
+B.	 RAPS-China Funded Leisure Travel for State-Owned Customers and Design 
+Institute Employees 
+12. RAPS-China funded travel, including some leisure travel not directly 
+related to legitimate business purposes, for employees of Desi gn Institutes and other Chinese 
+government-owned companies to the U.S., Germany and Austra lia, among other locations. 
+Destinations in the U.S. incl uded New York City, Washington D. C., and Hawaii. These leisure 
+trips typically followed business-related travel that was also funded by RAPS-China. 
+13. Some trips appeared to have no di rect business component, other than the 
+development of customer good will.  For exampl e, RAPS-China arranged for so-called design 
+meetings in New York City despite the lack of any Rockwell facility there because "everyone likes 
+New York."   
+3
+ 
+  
+     
+ 
+ 
+ 
+ 
+  
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+ 
+ 
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+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+    
+ 
+ 
+ 
+  
+ 
+ 
+14. From 2003 to 2006 , employees of RAPS-China paid approximately 
+$450,000 to fund trips not directly related to business purposes for employees of Design Institutes 
+and state-owned customers.  Th ese trips were recorded in Ro ckwell's books and records as 
+business expenses, without any desi gnation that there were reasons not directly connected to the 
+negotiation or execution of contracts or to the promotion of the company’s products. 
+C. Discovery, Self-Reporting and Remediation 
+15. Rockwell disc overed the DI Payments and the third-party payment 
+mechanism in 2006 through its norm al financial review process.  This process was part of 
+Rockwell’s global corporate compliance/internal controls program, which had targeted China for 
+enhanced FCPA training and scrutiny starting in  2004.  Upon discovery of  the issue, Rockwell 
+hired counsel and investigated the DI Payments with  the oversight of its Board of Directors.  It 
+voluntarily self-reported the DI Payments to  the Commission and voluntarily provided the 
+Commission Staff with all relevant facts found in the investigation, and otherwise cooperated with 
+the Commission.  As a result of the discovery of this matter, Rock well undertook numerous 
+remedial measures, including employee termination and disciplinary actions, enhancements to its 
+internal controls and compliance program and c onducted a broad, global review of its other 
+operations. 
+Violations 
+16. The FCPA, enacted in 1977, added Exchange Act Section 13(b)(2)(A) to 
+require 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.  It 
+also added Exchange Act Section 13(b)(2)(B) to require such companies to devise and maintain a 
+system of internal accounting controls sufficient to provide reasonable assurances that transactions: 
+(i) are executed in accordance with management's general or specific authorization; and (ii) 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). 
+17. In connection with the payments described above, Rockwell failed to make 
+and keep accurate books, records and accounts as required by Section 13(b)(2)(A) of the Exchange 
+Act. 
+18. Further, as evidenced by the DI Payments (as described above) and leisure 
+travel payments, Rockwell failed to devise or maintain sufficient internal controls as required by 
+Section 13(b)(2)(B) of the Exchange Act. 
+IV. 
+In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent Rockwell’s Offer. 
+4
+ 
+ 
+ 
+   
+ 
+ 
+   
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+ 
+Accordingly, it is hereby ORDERED that:
+ A. Pursuant to Section 21C of the Exchange Act, Respondent Rockwell cease and 
+desist from committing or causing any violations and any future violations of Sections 13(b)(2)(A) 
+and 13(b)(2)(B) of the Exchange Act.
+ B. Respondent shall, within 14 days of the entry of this Order, pay disgorgement of 
+$1,771,000, prejudgment interest of $590,091 and a civil money penalty of $400,000 to the United 
+States Treasury. If timely payment is not made, additional interest shall accrue pursuant to SEC 
+Rule of Practice 600 and 31 USC 3717.  Payment shall be: (A) made by wire transfer, 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, 100 F St reet, NE, Stop 6042, 
+Washington, DC 20549; and (D ) submitted under cover lette r that identifies Rockwell 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 Cheryl Scarboro , Division of Enforcement, 
+Securities and Exchange Commission, 100 F St., N.E., Washington, D.C. 20549-5561. 
+C. Respondent acknowledges that the Commission is not imposing a civil penalty in 
+excess of $400,000 based upon its cooperation in a Commission investigation.  If at any time 
+following the entry of the Order, the Division of Enforcement (“Division”) obtains information 
+indicating that Respondent knowingly provided materially false or misleading information or 
+materials to the Commission or in a related proceeding, the Division may, at its sole discretion and 
+without prior notice to the Respondent, petition the Commission to reopen this matter and seek an 
+order directing that the Respondent pay an additional civil penalty.  Respondent may not, by way 
+of defense to any resulting administrative proceeding:  (1) contest the findings in the Order; or (2) 
+assert any defense to liability or remedy, including, but not limited to, any statute of limitations 
+defense.   
+ By the Commission.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+5
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+   
+ 
+ 
+ 
+ 
+   
+ 
+   
+ 
+      
+ 
+            
+ 
+ 
+ 
+            
+ 
+ 
+ 
+ 
+ 
+Service List 
+Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the Order Instituting Cease-and-Desist 
+Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and 
+Imposing a Cease-and-Desist Order ("Order"), on the Respondent and its legal agents. 
+The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+Honorable Brenda P. Murray 
+Chief Administrative Law Judge
+ 
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+Charles Cain, Esq.  
+Securities and Exchange Commission 
+100 F Street, N.E. 
+Washington, DC 20549-5553B 
+Rockwell Automation, Inc. 
+c/o Gregory S. Bruch, Esq. 
+Willkie Farr & Gallagher LLP 
+1875 K Street, N.W.
+ 
+Washington, DC  20006-1238 
+Gregory S. Bruch, Esq. 
+Willkie Farr & Gallagher LLP 
+1875 K Street, N.W.
+ 
+Washington, DC  20006-1238 
+(Counsel for Rockwell Automation) 
+David S. Simon, Esq. 
+Foley & Lardner LLP 
+777 East Wisconsin Avenue
+ 
+Suite 3800 
+Milwaukee, WI 53202-5306 
+(Counsel for Rockwell Automation) 
+6
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3275.pdf b/raw/aaer/2011/AAER-3275.pdf
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diff --git a/raw/aaer/2011/AAER-3275.txt b/raw/aaer/2011/AAER-3275.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b85d52e5964cde4d5604661ee1b181ed43069327
--- /dev/null
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@@ -0,0 +1,96 @@
+ 
+ 
+UNITED STATES OF AMERICA  
+Before the  
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No.  64382 / May 3, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT  
+Release No.  3275 / May 3, 2011 
+ADMINISTRATIVE PROCEEDING  
+File No. 3-12251 
+ 
+In the Matter of  
+Aron R. Carr, 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 March 30, 2006, Aron R. Carr, CPA (“Carr”) was denied the privilege of appearing or 
+practicing before the Commission as an accountant as a result of settled public administrative 
+proceedings instituted by the Commission against Carr pursuant to Rule 102(e)(1)(ii) of the 
+Commission's Rules of Practice.1  Carr consented to the entry of the order without admitting or 
+denying the findings therein.  This order is issued in response to Carr’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. 
+ The Commission found that Carr engaged in improper professional conduct within the 
+meaning or Rule 102(e)(1)(ii) of the Commission’s Rules of Practice while serving as a senior 
+auditor on the FY 2002 audit of Tenet Healthcare Corporation (“Tenet”) performed by KPMG 
+LLP.  Specifically, by modifying and creating workpapers without appropriate supplemental 
+documentation after the issuance of the audit report, Carr engaged in highly unreasonable 
+conduct that resulted in a violation of applicable professional standards in circumstances in 
+which he knew, or should have know, that heightened scrutiny was warranted. 
+ 
+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, Carr 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 
+                                                 
+1 See Accounting and Auditing Enforcement Release No. 2405 dated March 30, 2006.  Carr was permitted, pursuant 
+to the order, to apply for reinstatement after three years upon making certain showings. 
+ 
+ 2 
+practicing before the Commission in this capacity.  Carr 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, Carr’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 Carr, it appears that he has complied with the terms of the March 30, 2006 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 Carr, 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, 
+ 
+ORDERED pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice that 
+Aron R. Carr, 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. 
+ 
+ 
+Elizabeth M. Murphy  
+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
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+           
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+        Robert D. Orr, Leland G. Orr, Michael S. Lowry, Michael S. Hess, Kyle L. Garst, and Travis W. Vrbas
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+                U.S. Securities and Exchange Commission 
+
+ Litigation Release No. 21957 / May 4, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3276 / May 4, 2011 
+
+  SEC v. Robert D. Orr, Leland G. Orr, Michael S. Lowry, Michael S. Hess, Kyle L. Garst, and Travis W. Vrbas , Case No. 11-CV-2251 WEB/KGG (D. Kansas May 4, 2011) 
+
+ SEC CHARGES SIX FORMER EXECUTIVES OF THE BROOKE COMPANIES WITH FINANCIAL AND DISCLOSURE FRAUD 
+
+ The Securities and Exchange Commission today charged six former senior executives of Kansas-based Brooke Corporation and its other, publicly-traded subsidiaries, Brooke Capital Corporation, an insurance agency franchisor, and Aleritas Capital Corporation, a lender to insurance agency franchises and other businesses, with conducting an extensive financial and disclosure fraud. The Complaint alleges that in SEC filings and other public statements for year-end 2007 and the first and second quarters of 2008, senior executives at the Brooke companies misrepresented, among other things, the number of Brooke Capital franchisees and their financial health, the deterioration of Aleritas' corresponding loan portfolio, and the increasingly dire liquidity and financial condition of the Brooke companies. 
+
+ According to the SEC's Complaint filed in federal court in Kansas, Brooke Capital's former management inflated the number of franchise locations by including failed and abandoned locations in totals. They also concealed the nature and extent of Brooke Capital's financial assistance to its franchisees, which included making franchise loan payments on behalf of struggling franchisees. Aleritas' former management hid the company's inability to repurchase millions of dollars of short-term loans sold to its network of regional lenders. They also sold or pledged the same loans as collateral to more than one lender, and improperly diverted payments from borrowers for the company's operating expenses. Aleritas' former management also concealed the rapid deterioration of the company's loan portfolio by falsifying loan performance reports to lenders, understating loan loss reserves, and by failing to write-down its residual interests in securitization and credit facility assets. 
+
+ The SEC's Complaint charges the following former Brooke executives: 
+
+       Robert D. Orr, founder and former chairman of the board of Brooke Corporation, former chief executive officer and chairman of the board of Brooke Capital, and former chief financial officer of Aleritas 
+
+      Leland G. Orr, former chief executive officer, chief financial officer, and vice-chairman of the board of Brooke Corporation, and former chief financial officer of Brooke Capital 
+
+      Michael S. Lowry, former chief executive officer and member of the board of Aleritas 
+
+      Michael S. Hess, former chief executive officer and member of the board of Aleritas 
+
+      Kyle L. Garst, former chief executive officer, president, and member of the board of Brooke Capital 
+
+      Travis W. Vrbas, former chief financial officer of Brooke Corporation and Brooke Capital   As alleged in the Commission's Complaint, each of the defendants violated Sections 17(a)(1) and 17(a)(3) 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 aided and abetted violations by Brooke Corporation, Brooke Capital, and/or Aleritas of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. The Complaint also alleges that Robert Orr violated Exchange Act Section 16(a) and Rule 16a-3 thereunder; Robert Orr, Leland Orr, Lowry, Hess, and Garst violated Exchange Act Rule 13b2-2; Robert Orr, Leland Orr, Hess, Garst, and Vrbas violated Exchange Act Rule 13a-14 and aided and abetted violations by Brooke Corporation and Brooke Capital of Rule 13a-1; and Robert Orr and Hess aided and abetted violations by Aleritas of Exchange Act Rule 13a-11. 
+
+ The Commission seeks permanent injunctions, civil penalties, and officers and director bars against each defendant, and disgorgement with prejudgment interest against Robert Orr, Leland Orr, and Lowry. 
+
+ Robert Orr, Leland Orr, Lowry, Hess, and Vrbas agreed to settle the SEC's charges without admitting or denying the allegations in the Complaint. These settlements are subject to approval by the Court. Each of the defendants consented to be permanently enjoined from violating or aiding and abetting all of the provisions that the Commission alleges they violated, and to officer and director bars. Lowry also consented to pay a $175,000 civil penalty and disgorgement of $214,500, with prejudgment interest of $24,004.91, Hess consented to pay a $250,000 civil penalty, and Vrbas consented to pay a $130,000 civil penalty. Robert Orr and Leland Orr consented to pay civil penalties and disgorgement in amounts to be determined by the Court.   
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diff --git a/raw/aaer/2011/AAER-3277.txt b/raw/aaer/2011/AAER-3277.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bf07af8d6706df0a1731524cd2d7d003803a37bc
--- /dev/null
+++ b/raw/aaer/2011/AAER-3277.txt
@@ -0,0 +1,1423 @@
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+     SEC.gov | Michael W. Perry and A. Scott Keys; and S. Blair Abernathy 
+     
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+              Michael W. Perry and A. Scott Keys; and S. Blair Abernathy
+           
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+        Michael W. Perry and A. Scott Keys; and S. Blair Abernathy
+       
+
+             
+   
+
+
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+                        
+                   U.S. Securities and Exchange Commission 
+
+ Litigation Release No. 21853 / February 11, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3277 / February 11, 2011 
+
+  Securities and Exchange Commission v. Michael W. Perry and A. Scott Keys,  Civil Action No. CV 11-01309 GHK (JCx) (C.D. Cal.);  Securities and Exchange Commission v. S. Blair Abernathy,  Civil Action No. CV 11-01308 JFW (SSx) (C.D. Cal.) 
+
+ SEC CHARGES FORMER OFFICERS OF MORTGAGE LENDER INDYMAC WITH MISLEADING INVESTORS 
+
+ On February 11, the Securities and Exchange Commission charged three former senior executives at IndyMac Bancorp with securities fraud for misleading investors about the mortgage lender's deteriorating financial condition. 
+
+ The SEC alleges that former CEO Michael W. Perry and former CFOs A. Scott Keys and S. Blair Abernathy participated in the filing of false and misleading disclosures about the financial stability of IndyMac and its main subsidiary, IndyMac Bank F.S.B.  The three executives regularly received internal reports about IndyMac's deteriorating capital and liquidity positions in 2007 and 2008, but failed to ensure adequate disclosure of that information to investors as IndyMac sold millions of dollars in new stock. 
+
+ IndyMac Bank was a federally-chartered thrift institution regulated by the Office of Thrift Supervision (OTS) and headquartered in Pasadena, Calif.  The OTS closed the bank on July 11, 2008, and placed it under FDIC receivership.  IndyMac filed for bankruptcy protection later that month. 
+
+ According to the SEC's complaints filed in U.S. District Court for the Central District of California, Perry and Keys defrauded new and existing IndyMac shareholders by making false and misleading statements about IndyMac's financial condition in its 2007 annual report and in offering materials for the company's sale of $100 million in new stock to investors.  In early February 2008, IndyMac projected that it would return to profitability and continue to pay preferred dividends in 2008 without having to raise new capital.  In late February 2008, Perry and Keys knew that contrary to the rosy projections released just two weeks earlier, IndyMac had begun raising new capital to protect IndyMac's capital and liquidity positions.  Specifically, Perry and Keys regularly received information that IndyMac's financial condition was rapidly deteriorating and authorized new stock sales as a result, yet they fraudulently failed to fully disclose IndyMac's precarious financial condition in the 2007 annual report and the offering documents for the new stock sales.   
+
+ The SEC further alleges that Perry knew that rating downgrades in April 2008 on bonds held by IndyMac Bank had exacerbated its capital and liquidity positions to the extent that IndyMac had no choice but to suspend future preferred dividend payments by no later than May 2, 2008.  This material information was not disclosed in IndyMac's ongoing stock offerings.  Perry also failed to disclose in various SEC filings or a May 2008 earnings conference call that IndyMac would not have been "well-capitalized" at the end of its first quarter without departing from its traditional method for risk-weighting subprime assets and backdating an $18 million capital contribution.   
+
+ According to the SEC's complaint, Abernathy replaced Keys as IndyMac's CFO in April 2008.  He similarly made false and misleading statements in the offering documents used in selling new IndyMac stock to investors despite regularly receiving internal reports about IndyMac's deteriorating capital and liquidity positions.   
+
+ The SEC also alleges that in summer 2007 while serving as IndyMac's executive vice president in charge of specialty lending, Abernathy made false and misleading statements about the quality of the loans in six IndyMac offerings of RMBS totaling $2.5 billion.  Abernathy received internal reports each month revealing that 12 to 18 percent of IndyMac's loans contained misrepresentations regarding important loan and borrower characteristics.  However, the RMBS offering documents stated that nothing had come to IndyMac's attention that any loan included in the offering contained a misrepresentation.  The SEC alleges that Abernathy failed to ensure that the quality of IndyMac's loans was accurately disclosed and failed to disclose that information had come to IndyMac's attention about loans containing misrepresentations.  
+
+ Abernathy agreed to settle the SEC's charges without admitting or denying the allegations.  He consented to the entry of an order that permanently restrains and enjoins him from violating Section 17(a)(2) and 17(a)(3) of the Securities Act and requires him to pay a $100,000 penalty, $25,000 in disgorgement, and prejudgment interest of $1,592.26.  Abernathy also consented to the issuance of an administrative order pursuant to Rule 102(e) of the SEC's Rules of Practice, suspending him from appearing or practicing before the SEC as an accountant.  He has the right to apply for reinstatement after two years. 
+
+ The SEC's complaint charges Perry and Keys with knowingly violating the antifraud provisions of 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, and aiding and abetting IndyMac's violations of its periodic reporting requirements under Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder.  Perry also is charged with aiding and abetting IndyMac's reporting violations under Exchange Act Rules 13a-11 and 13a-13.  The SEC's complaint against Perry and Keys seeks permanent injunctive relief, an officer and director bar, disgorgement of ill-gotten gains with prejudgment interest, and a financial penalty. 
+
+ The SEC acknowledges the assistance of the Federal Deposit Insurance Corporation in this investigation.   
+
+ #  #  # 
+
+ For more information about this enforcement action, contact: 
+
+ John M. McCoy III
+ Associate Regional Director, SEC's Los Angeles Regional Office
+ (323) 965-4573 
+
+ Kelly Bowers
+ Senior Assistant Regional Director, SEC's Los Angeles Regional Office
+ (323) 965-3924 
+
+ Donald W. Searles
+ Senior Trial Counsel, SEC's Los Angeles Regional Office
+ (323) 965-4573 
+
+
+   SEC Complaint vs. Perry and Keys  
+  SEC Complaint vs. Abernathy  
+    
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diff --git a/raw/aaer/2011/AAER-3278.txt b/raw/aaer/2011/AAER-3278.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d9a8582ed7632bc0eb30fcd2c16474d419a04f67
--- /dev/null
+++ b/raw/aaer/2011/AAER-3278.txt
@@ -0,0 +1,258 @@
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+   SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64471 / May 11, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3278 / May 11, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14379 
+                                                              _ 
+     : 
+In the Matter of               : 
+     : 
+     : 
+  MICHAEL HIGGINS, CPA : ORDER INSTITUTING CEASE-AND-DESIST 
+     :  PROCEEDINGS PURSUANT TO SECTION 
+     : 21C OF THE SECURITIES EXCHANGE ACT 
+     : OF 1934, MAKING FINDINGS, AND  
+Respondent.                : IMPOSING A CEASE-AND-DESIST ORDER 
+     : 
+                                                               : 
+ I. 
+ 
+ The Securities and Exchange Commission (“Commission”) deems it appropriate that 
+cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the 
+Securities Exchange Act of 1934 (“Exchange Act”), against Michael Higgins (“Higgins” 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 Pursuant to Section 21C of the Securities Exchange Act of 1934, 
+Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below.   
+ 
+ 
+ 
+ 2 
+ 
+III. 
+ 
+ On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 
+ 
+Summary 
+ 
+1. This matter involves violations of the federal securities laws by Higgins in 
+connection with improper revenue accruals by Michael Baker Corporation (“Michael Baker” or 
+the “Company”) which led to the material overstatement of the company’s revenue and net 
+income in Commission filings.      
+ 
+2. As the former Chief Financial Officer of Michael Baker’s energy business 
+segment, Baker Energy, Higgins regularly approved month-end manual journal entries that had 
+been made by Baker Energy’s Manager of Project Accounting, but did not review the supporting 
+documentation for the manual journal entries as part of his approval process.  Certain of these 
+manual journal entries were not in accordance with generally accepted accounting principles 
+(GAAP), resulting in the Company’s material overstatements of revenue and net income in its 
+financial statements contained in the Form 10-K for its fiscal year 2006 (filed March 16, 2007) 
+and in the Forms 10-Q for the first three quarters of its fiscal year 2007 (filed May 8, 2007, 
+August 7, 2007, and November 5, 2007, respectively).   
+ 
+3. On Friday, February 22, 2008, Michael Baker first announced through a press 
+release posted to its website that it would restate its consolidated financial statements for the 
+first, second and third quarters of 2007 as a result of “the improper recognition of revenue on 
+domestic managed services projects during these periods” by Baker Energy.  On June 30, 2008, 
+Michael Baker filed its Form 10-K for fiscal year ended December 31, 2007, which included its 
+restated financial statements for its Form 10-K filed for the fiscal year ended December 31, 
+2006.  Subsequently, the Company restated the results of its quarterly financial statements for 
+each of the first three quarters of 2007 in a series of restatements tied to the quarterly filings of 
+its 2008 Forms 10-Q.   
+ 
+4. Michael Higgins caused Michael Baker’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, and 
+13a-13, due to acts or omissions that he knew or should have known would contribute to such 
+violations.   
+ 
+                                                 
+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 
+ 
+Respondent 
+ 
+5. Michael Higgins, age 61, was the Chief Financial Officer in Michael Baker’s 
+Baker Energy division from 2006 to 2008.  Higgins is currently self-employed as a financial and 
+strategic consultant. 
+ 
+Issuer 
+ 
+6. Michael Baker Corporation is a Pennsylvania corporation headquartered in Moon 
+Township, Pennsylvania (“Michael Baker” or the “Company”).  Michael Baker’s business, at the 
+time of the conduct at issue, was divided into two segments:  Engineering and Energy.  The 
+Engineering division focused on design and consulting services primarily in the United States.  The 
+Energy division, Baker Energy, was headquartered in Houston, Texas and focused on the provision 
+of oil related services both in the United States and abroad.  Baker Energy typically generated 
+roughly 35-40% of the Company’s consolidated gross revenues.   
+Background 
+7. Baker Energy provided labor and services to operate and maintain oil and gas 
+production facilities owned by third parties.  The improper accounting that led to the Company’s 
+restatements related to Baker Energy’s work on three large projects for its clients Storm Cat 
+Energy, J.M. Huber Corporation and Escambia Operating Company.  The Storm Cat and Huber 
+contracts were among the Company’s largest contracts and including the Escambia project 
+represented nearly eighty percent of Baker Energy’s revenues.     
+8. For the 2006 annual reporting period and the first three quarters of 2007, the 
+Company inappropriately overstated Baker Energy’s revenue, and, as a result, the Company’s 
+consolidated financial statements for these periods materially misstated its net income.  The 
+Company overstated its consolidated net income by $1.5 million or 13% for 2006 and by $1.5 
+million or 49%, $2.4 million or 28%, and $1.9 million or 30% for the first, second and third 
+quarters of 2007, respectively.  These revenue overstatements caused Baker Energy to show 
+operating income, rather than operating losses, for the first and third quarters of 2007.2     
+9. Michael Baker predominantly generated revenues on the Storm Cat, Huber and 
+Escambia projects through “cost plus” contracts pursuant to which the Company billed the 
+respective clients for project costs plus an agreed-upon margin.  There were exceptions as to 
+certain costs, such as vehicle costs on the Huber and Storm Cat projects that were contractually 
+agreed to be “non-billable,” meaning that the client would not reimburse Baker Energy for the 
+                                                 
+2
+  In the first quarter of 2007, Baker Energy’s overstatement caused it to report $900,000 of operating income 
+rather than $2 million of operating losses.  In the third quarter of 2007, Baker Energy’s overstatement caused it to 
+report $1 million of operating income rather than $1.4 million of operating losses. 
+ 
+ 
+ 
+ 4 
+ 
+cost.  In addition, one of the Storm Cat projects was a fixed-fee contract for the operation and 
+maintenance of various wells, meaning that all of the costs on this project were “non-billable.”   
+10.  In operating the oil and gas production facilities for third parties, Baker Energy’s 
+ability to recoup costs through reimbursement depended on the terms of its contracts with the 
+customers.  Baker Energy finance employees were required to regularly review project costs and 
+determine whether the costs were “billable” to the client or “non-billable” and accordingly 
+record the costs in Baker Energy’s Oracle Project Accounting (PA) Module on a monthly basis.  
+If the project costs were coded as billable, then the PA Module would automatically record 
+revenue.  Because the PA Module automatically posted to the General Ledger, Baker Energy’s 
+employees were required to enter any reconciling and correcting manual journal entries to the 
+General Ledger during each monthly close process in order to properly record the company’s 
+project costs.  Typically, hundreds of manual journal adjustments were done each month.  
+11.  As Baker Energy’s CFO, Higgins was responsible for overseeing Baker Energy’s 
+Manager of Project Accounting.  The Manager of Project Accounting posted entries into the PA 
+Module as well as posted reconciling and correcting manual journal entries into the General 
+Ledger.  Higgins also was required to approve the manual journal entries posted by the Manager 
+of Project Accounting.  This approval process was a key component of Baker Energy’s internal 
+controls to prevent or detect any inappropriate manual journal entries.       
+12. From the fourth quarter of 2006 through the first three quarters of 2007, Baker 
+Energy’s project accounting group, led by the Manager of Project Accounting—whom Higgins 
+as the CFO was ultimately responsible for—improperly entered costs as billable on the Storm 
+Cat, Huber and Escambia projects and thereby caused the material misstatements that led to the 
+company’s 2008 restatement announcement.  
+13. Until November 2006, the Manager of Project Accounting directly reported to 
+Baker Energy’s Assistant Controller-Domestic, who reviewed and approved the proposed 
+manual journal entries.  When the Assistant Controller-Domestic left the Company in November 
+2006, he informed Higgins that the Manager of Project Accounting’s work could not be relied on 
+without close supervision and oversight.  Although Higgins was ultimately responsible for 
+ensuring the accuracy of the manual journal entries and knew that the Manager of Project 
+Accounting’s direct supervisor had departed, Higgins did not review any supporting 
+documentation for the manual journal entries as part of his approval process.   
+ 
+14. Moreover, Higgins knew or should have known that the controls Baker Energy 
+had in place for reviewing manual journal entries were inadequate and that they relied heavily on 
+a monthly review by him of all of the manual journal entries.  Despite readily acknowledging the 
+inadequacy of this particular control, he took no steps to improve this particular control and 
+failed to properly implement it as a result of his own inadequate review.    
+ 
+15. As a result of the conduct described above, Higgins caused Michael Baker’s 
+violations due to acts or omissions that he knew or should have known would contribute to the 
+ 
+ 
+ 5 
+ 
+following violations:  Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 12b-20 
+thereunder, which require every issuer of a security registered pursuant to Section 12 of the 
+Exchange Act to file with the Commission information, documents, and annual and quarterly 
+reports as the Commission may require, and mandate that periodic reports contain such further 
+material information as may be necessary to make the required statements not misleading. 
+ 
+16. Also as a result of the conduct described above, Higgins caused Michael Baker’s 
+violations due to acts or omissions that he knew or should have known would contribute to 
+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 caused Michael Baker’s violations of 
+Section 13(b)(2)(B) of the Exchange Act, which requires every issuer 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.     
+      
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate to impose the relief agreed 
+to in Respondent Michael Higgins’ Offer. 
+ 
+ Accordingly, it is hereby ORDERED that: 
+ 
+ Pursuant to Section 21C of the Exchange Act, Respondent Michael Higgins 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 Exchange Act Rules 12b-20, 13a-1, and 13a-13. 
+ 
+ 
+By the Commission.  
+  
+   
+       Elizabeth M. Murphy 
+       Secretary 
+         
+ 
+ 
+ 6 
+ 
+Service List 
+ 
+ Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another 
+duly authorized officer of the Commission, shall serve a copy of the Order Instituting Cease-and-
+Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
+Findings, and Imposing a Cease-and-Desist Order ("Order") on the Respondent and his legal 
+agent. 
+ 
+ The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+ 
+Honorable Brenda P. Murray    
+Chief Administrative Law Judge   
+Securities and Exchange Commission  
+100 F Street, NE 
+Washington, DC  20549-2557  
+    
+Charles E. Cain, Esq.  
+Division of Enforcement    
+Securities and Exchange Commission   
+100 F Street, NE  
+Washington, DC  20549-5553-B     
+  
+Mr. Michael Higgins 
+c/o Paul R. Bessette, Esq. 
+Shareholder 
+Greenberg Traurig 
+300 West 6th Street, Suite 2050 
+Austin, TX 78701 
+ 
+Paul R. Bessette, Esq. 
+Shareholder 
+Greenberg Traurig 
+300 West 6th Street, Suite 2050 
+Austin, TX 78701 
+ 
+ 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3279.txt b/raw/aaer/2011/AAER-3279.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5b598c03b6dfe34a018d7f4b14d119d973a0be72
--- /dev/null
+++ b/raw/aaer/2011/AAER-3279.txt
@@ -0,0 +1,1393 @@
+
+
+ 
+ 
+   
+     
+ 
+ 
+ 
+ 
+ 
+ 
+
+     
+     
+     SEC.gov | Michael Baker Corporation, John Scullin and Dennis Higgins 
+     
+     
+     
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+              Michael Baker Corporation, John Scullin and Dennis Higgins
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+        Michael Baker Corporation, John Scullin and Dennis Higgins
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+                   U.S. Securities and Exchange Commission 
+
+ Litigation Release No.  21962 / May 11, 2011 
+
+ Accounting and Auditing Enforcement 
+Release No.  3279 / May 11, 2011 
+
+  SECURITIES AND EXCHANGE COMMISSION v. MICHAEL BAKER CORPORATION, JOHN SCULLIN and DENNIS HIGGINS,  Civil Action No. 4:11-cv-1791, United States District Court for the Southern District of Texas (Houston) (Filed May 11, 2011) 
+
+ COMMISSION CHARGES FORMER MICHAEL BAKER EMPLOYEE WITH FRAUD FOR ARTIFICALLY INFLATING COMPANY'S INCOME, AND ANOTHER FORMER EMPLOYEE WITH INSIDER TRADING  
+
+ The Securities and Exchange Commission today charged Michael Baker Corporation, a company headquartered in Moon Township, Pennsylvania, and John Scullin, a former Manager of Project Accounting in the company's former energy business segment, with falsifying the company's accounting records which inflated the revenue and income reported to shareholders.  The Commission's complaint alleges that the company's material financial misstatements were primarily caused by the fraudulent conduct of Scullin who prepared and caused false manual journal entries to be entered into the company's general ledger.  Scullin's misconduct occurred against a backdrop of Michael Baker's failure to maintain adequate internal controls over its former energy business segment's books, records and accounts.  
+
+ As alleged in the Commission's complaint, beginning in the fourth quarter of 2006 and continuing through the first three quarters of 2007, Scullin made unsupportable manual journal entries that resulted in the material overstatement of the company's pre-tax income by 13% for the fourth quarter of 2006, and by 100%, 33% and 28% for the first three quarters of 2007.  
+
+ The Commission also charged Dennis Higgins, a former operations manager in Michael Baker's energy segment, with insider trading.  The Commission's complaint alleges that Higgins sold all of his Michael Baker stock in his 401(k) account and terminated his ongoing 401(k) investments in the company upon learning of the material misstatements, and prior to the company's February 22, 2008 public announcement that it would restate its prior financial results.     
+
+ Without admitting or denying the allegations in the complaint, Michael Baker consented to a permanent injunction against future violations of the reporting, books and records and internal controls provisions of the federal securities laws, including 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; Scullin consented to the entry of a final judgment permanently enjoining him against violations of the antifraud, books and records and internal controls provisions of the federal securities laws, including 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 the reporting, books and records and internal controls provisions of the federal securities laws, including 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 ordering him to pay a $35,000 civil penalty.   
+
+ Additionally, without admitting or denying the allegations in the complaint, Dennis Higgins consented to a permanent injunction against violations of the antifraud provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and ordering disgorgement of $16,929.75 and prejudgment interest of $2,035.17, representing his losses avoided on account of his insider trading, and ordering him to pay a civil penalty of $16,929.75. 
+
+ In a related action, the Commission today also instituted a settled administrative proceeding against Michael Higgins, Scullin's former supervisor and the former Chief Financial Officer of Michael Baker's energy segment.  The Commission's findings include that: (1) as the former Chief Financial Officer of Michael Baker Corporation's energy business segment, Michael Higgins regularly approved month-end manual journal entries that had been posted by Scullin, but did not review the supporting documentation for the manual journal entries as part of his approval process; and (2) certain of these manual journal entries were not in accordance with GAAP, resulting in the Company's material overstatements of revenue and net income in its financial statements contained in the Form 10-K for its fiscal year 2006 (filed March 16, 2007) and in the Forms 10-Q for the first three quarters of its fiscal year 2007 (filed May 8, 2007, August 7, 2007, and November 5, 2007, respectively).  As a result, Michael Higgins caused Michael Baker's violations of the reporting, books and records and internal controls provisions of the federal securities laws.  Michael Higgins, without admitting or denying any of the findings in the Order except as to the jurisdiction of the Commission over it, which he admitted, consented to the entry of the Order which orders him to 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 Securities Exchange Act of 1934 and Exchange Act Rules 12b-20, 13a-1, and 13a-13 thereunder.  See Securities Exchange Act of 1934  Rel. No. 64471 , Accounting and Auditing Enforcement Rel. No. 3278, Administrative Proceeding File No.  3-14379. 
+
+   SEC Complaint in this matter  
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diff --git a/raw/aaer/2011/AAER-3280.txt b/raw/aaer/2011/AAER-3280.txt
new file mode 100644
index 0000000000000000000000000000000000000000..419f3666eb77e6fa774c43e3e4426039f7267995
--- /dev/null
+++ b/raw/aaer/2011/AAER-3280.txt
@@ -0,0 +1,1396 @@
+
+
+ 
+ 
+   
+     
+ 
+ 
+ 
+ 
+ 
+ 
+
+     
+     
+     SEC.gov | Thor Industries, Inc., and Mark C. Schwartzhoff 
+     
+     
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+     
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+              Thor Industries, Inc., and Mark C. Schwartzhoff
+           
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+        Thor Industries, Inc., and Mark C. Schwartzhoff
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+                U.S. Securities and Exchange Commission 
+
+ Litigation Release No. 21966 / May 13, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3280 / May 13, 2011 
+
+  Securities and Exchange Commission v. Thor Industries, Inc., and Mark C. Schwartzhoff , Case No. 1:11-cv-00889-RMC. (D.D.C., filed May 12, 2011) 
+
+ SEC Charges Thor Industries With Violating Commission Cease-and-Desist Order and Charges Former VP of Finance of Thor Subsidiary With Securities Fraud 
+
+ The Securities and Exchange Commission filed a settled enforcement action in United States District Court for the District of Columbia charging Ohio-based producer of recreational vehicles Thor Industries, Inc. with issuer reporting, record-keeping, and internal control violations. Thor has agreed to be permanently enjoined and to pay a $1 million civil penalty for violating a 1999 Commission cease-and-desist Order prohibiting violations of the books and records and internal controls provisions.  In the Matter of Thor Industries, Inc. , Exchange Act Release No. 42021 (Oct. 18, 1999). The SEC also charged Mark C. Schwartzhoff, a former Vice President of Finance at Thor's Dutchmen Manufacturing, Inc. subsidiary, with securities fraud and other violations. Schwartzhoff has agreed to be permanently enjoined, to be permanently barred from serving as an officer or director of a public company, and to be permanently suspended from appearing or practicing before the Commission as an accountant. Schwartzhoff also agreed to pay disgorgement of $394,830, which shall be deemed satisfied by the entry of a restitution order against Schwartzhoff in a parallel criminal case. 
+
+ The SEC's complaint alleges that from approximately December 2002 to January 2007, while serving as the senior financial officer of Dutchmen, one of Thor's principal operating subsidiaries, Schwartzhoff engaged in a fraudulent accounting scheme to understate Dutchmen's cost of goods sold in order to avoid recognizing inventory costs that were not reflected in Dutchmen's financial accounting system. Instead of properly recording increased cost of goods sold, Schwartzhoff concealed the costs in various balance sheet accounts by making baseless manual journal entries to falsify the financial statements and other records he provided to Thor. To cover-up his false entries, the complaint alleges that Schwartzhoff created false supporting documentation and false account reconciliations. Schwartzhoff also submitted false documents and information to Thor's external auditor. 
+
+ As alleged in the complaint, Schwartzhoff's fraud overstated Dutchmen's pre-tax income by nearly $27 million from fiscal year 2003 to the second quarter of fiscal 2007, and allowed him to obtain nearly $300,000 in ill-gotten bonuses. In June 2007, Thor filed restated financial statements for fiscal years 2004 to 2006, each of the quarters of fiscal 2005 and 2006, and the first quarter of fiscal 2007, reducing its pre-tax income by approximately $26 million in the aggregate. 
+
+ The SEC's complaint further alleges that Thor failed to maintain accurate books and records and adequate internal accounting controls in violation of a 1999 Commission cease-and-desist Order. The Order directed Thor to cease and desist from committing future books and records and internal controls violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act"), based on similar misconduct and internal control deficiencies that occurred over four years at a different Thor subsidiary. 
+
+ The complaint alleges that Thor's failure to implement adequate internal controls after the 1999 Order provided Schwartzhoff the opportunity to commit his fraud without detection. In particular, Thor failed to adequately implement and verify certain key segregation of duties within accounting and financial functions at Dutchmen, which allowed Schwartzhoff to have unfettered access rights to Dutchmen's accounting system, the ability to create, enter and approve manual journal entries, and the ability to create and approve account reconciliations. As a result, Schwartzhoff was able to make fraudulent journal entries in various accounts and to disguise these entries through account reconciliations and supporting documents that he falsified. In addition, as alleged in the complaint, Thor failed adequately to monitor and verify account reconciliations and account information that Schwartzhoff submitted in reporting Dutchmen's financial results. Thor also failed to implement an effective internal audit function for Dutchmen. 
+
+ As the SEC's complaint alleges, after Schwartzhoff's fraud came to light, Thor concluded that the internal control failures at Dutchmen constituted a material weakness in Thor's internal controls over financial reporting. Thor also determined that similar lack of segregation of duties existed in varying degrees at each of its subsidiaries. For example, senior accounting officers (Controllers and Vice Presidents of Finance) at numerous subsidiaries had the ability to create, enter, and approve journal entries and reconciliations in accounts such as accounts receivable, accounts payable, and cash. At all but one subsidiary, various individuals had inappropriate access rights to accounting and information systems, including "super user" access by senior accounting officers at some subsidiaries. In addition, the complaint alleges Thor also determined that it lacked sufficient corporate level monitoring of account reconciliations for all of its subsidiaries. 
+
+ Without admitting or denying the allegations in the complaint, Thor has consented to the entry of a final judgment: (1) requiring it to comply with the 1999 cease-and-desist Order; (2) permanently enjoining it from violating 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; (3) ordering it to pay a $1 million penalty pursuant to Exchange Act Section 21(d)(3) for violating the 1999 Order; and (4) ordering it to hire an independent consultant to review and evaluate certain of its internal controls and record-keeping policies and procedures. 
+
+ Without admitting or denying the allegations in the complaint, Schwartzhoff has consented to the entry of a final judgment: (1) permanently enjoining him from violating Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1, and 13b2-2 thereunder, and from aiding and abetting violations of Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Rules 12b-20, 13a-1 and 13a-13 thereunder; (2) ordering him to pay disgorgement of $299,805 plus prejudgment interest of $95,025, for a total of $394,830, with payment of this amount to be deemed satisfied by the entry of a restitution order against Schwartzhoff in a parallel criminal case that is equal to or greater than $394,830; and (3) permanently barring him from serving as an officer or director. Schwartzhoff also consented to the issuance of an order pursuant to Rule 102(e) of the Commission's Rules of Practice, permanently suspending him from appearing or practicing before the Commission as an accountant. 
+
+   These settlements are subject to the approval of the United States District Court for the District of Columbia. The settlement with Thor takes into account the company's self-reporting and significant cooperation in the SEC's investigation. 
+
+ Separately, on May 12, 2011, the United States Attorney's Office for the Northern District of Indiana filed a related criminal action against Schwartzhoff, and Schwartzhoff agreed to plead guilty to an Information charging him with one count of wire fraud and to pay restitution of approximately $1.9 million.   
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diff --git a/raw/aaer/2011/AAER-3281.pdf b/raw/aaer/2011/AAER-3281.pdf
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@@ -0,0 +1,380 @@
+ 
+ 
+ 
+UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64497 / May 13, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT  
+Release No. 3282 / May 13, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-14385 
+ 
+ 
+In the Matter of 
+ 
+PETER DISESSA,  
+ 
+Respondent. 
+ 
+ 
+ORDER INSTITUTING CEASE-AND-DESIST 
+PROCEEDINGS PURSUANT TO SECTION 
+21C OF THE SECURITIES EXCHANGE ACT 
+OF 1934, MAKING FINDINGS, AND 
+IMPOSING A CEASE-AND-DESIST ORDER 
+AND A CIVIL PENALTY  
+   
+ 
+I. 
+ 
+ The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
+public interest that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 
+21C of the Securities Exchange Act of 1934 (“Exchange Act”) against Peter DiSessa (“DiSessa” 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 Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
+Findings, and Imposing a Cease-and-Desist Order and a Civil Penalty (“Order”), as set forth 
+below.   
+ 
+ 
+ 2 
+III. 
+ 
+ On the basis of this Order and Respondent‟s Offer, the Commission finds that: 1 
+ 
+Summary 
+ 
+1. These proceedings concern Peter DiSessa‟s role in the improper recognition of 
+revenue for certain material transactions by GSI Group, Inc. (“GSI” or “the company”) during 
+2007 and 2008 (the “Relevant Period”).   DiSessa and others caused GSI to recognize revenue 
+from certain significant transactions in its Semiconductor Systems segment (the “Systems 
+Division”) that materially impacted GSI‟s financial results even though revenue recognition for 
+each of these transactions was prohibited pursuant to Generally Accepted Accounting Principles 
+(“GAAP”).  For example, during fiscal year 2007, DiSessa entered into a side agreement that 
+materially altered the terms of an arrangement between GSI and a Korean customer in a way that 
+made the revenue from the transaction not eligible for inclusion in GSI‟s financial statements at 
+that time, and he failed to disclose those terms to GSI‟s financial staff or external auditors.  In 
+connection with that same transaction, DiSessa signed a memo prepared by GSI‟s corporate 
+controller indicating that GSI had vendor specific objective evidence (“VSOE”) of value for an 
+undeveloped laser when, in fact, DiSessa knew or should have known that it did not.  As a result, 
+during the first and second quarters of fiscal year 2008, GSI improperly recorded in its books and 
+records and reported in its filings with the Commission over $16 million in revenue that should 
+have been deferred to later quarters or fiscal years.  In addition, during the fourth quarter of fiscal 
+year 2007, DiSessa also caused GSI to improperly recognize nearly $5 million in revenue from a 
+Taiwanese customer, even though he knew or should have known that GSI had not completed all 
+the necessary customized software automation, a fact that made the revenue ineligible for 
+recognition at that time under GAAP.  
+ 
+Respondent 
+ 
+2. Peter DiSessa, 59, of Winthrop, Massachusetts, worked for GSI Group, Inc. from 
+2006 through May 2009 as a product line manager.  During the Relevant Period, DiSessa earned a 
+bonus of $18,252.   
+ 
+Other Relevant Party 
+ 
+3. GSI, a New Brunswick, Canada corporation with its principal place of business in 
+Bedford, Massachusetts, manufactures and sells laser systems and other technology products.  
+GSI‟s stock was registered with the Commission pursuant to Section 12(g) of the Exchange Act 
+and traded on the NASDAQ National Market System until July 31, 2006.  From July 31, 2006 until 
+April 15, 2010, GSI‟s stock was registered with the Commission pursuant to Section 12(b) of the 
+Exchange Act and traded on the NASDAQ Global Market.  On April 15, 2010, GSI‟s stock was 
+                                                 
+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 
+delisted from the NASDAQ Global Market because it was delinquent in its Commission filings, 
+deregistered from Section 12(b) of the Exchange Act, and reverted back to its designation under 
+Section 12(g) of the Exchange Act.  On November 20, 2009, GSI filed a voluntary petition for 
+relief under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the 
+District of Delaware.  On May 27, 2010, the U.S. Bankruptcy Court for the District of Delaware 
+confirmed GSI‟s plan for reorganization.  On July 23, 2010, GSI completed a rights offering and 
+emerged from the Chapter 11 proceeding.  On December 4, 2008, GSI announced that past 
+financial statements filed with the Commission could no longer be relied upon due to errors 
+discovered with GSI‟s recognition of revenue for those periods.  On April 13, 2010, GSI filed 
+restated annual and quarterly financial statements for the periods contained within the fiscal years 
+2004, 2005, 2006, 2007, and 2008.  Effective February 14, 2011, GSI re-registered its common 
+stock pursuant to Section 12(b) of the Exchange Act and is currently listed on the Nasdaq Global 
+Select Market.   
+ 
+Facts 
+ 
+Background 
+ 
+4. During the Relevant Period, GSI‟s Systems Division manufactured production 
+systems that it sold to both domestic and international customers.  GSI‟s production systems 
+generally had both hardware (including lasers) and software components (including, in certain 
+instances, customized, vendor specific, factory automation software) and required on-site 
+installation by GSI personnel. DiSessa was the product line manager for one of the Systems 
+Division‟s product lines.   
+   
+5. From mid-2007 through October 2008, GSI‟s corporate controller, assisted by the 
+assistant corporate controller, made the determination when to recognize revenue from Systems 
+Division sales.   Systems Division staff – including DiSessa – documented the basic terms of a 
+transaction in a sales order approval form, which was reviewed and, depending on the size of the 
+order, approved by varying levels of sales, finance and management staff.  Transactions generally 
+were automatically recognized as revenue upon shipment.  Prior to the close of the quarter, the 
+corporate controller and assistant corporate controller reviewed the documents related to each 
+transaction and determined whether to recognize or defer revenue for the period. 
+ 
+The Korean Transaction 
+ 
+6. During November 2007, a Korean customer agreed to purchase from GSI ten 
+systems for nearly $1 million per system.  Each system was equipped with a laser previously sold 
+by GSI.  GSI agreed to upgrade these systems by replacing the original lasers with a laser that had 
+not yet been developed (the “Undeveloped Laser”) when it became available.2  As a final 
+                                                 
+2   During this period, GSI had two undeveloped lasers – a Multiple Pulse Infrared Laser and a Multiple Pulse 
+Green Laser – that were to be upgraded in the production systems ordered by the Korean customer during 2007 and 
+2008.  Neither of the lasers was substantially similar to the original lasers in the production system and, for the 
+purposes of this Order, will be referred to collectively as the Undeveloped Laser(s).  
+ 
+ 4 
+condition, the customer demanded that GSI upgrade five systems that the customer had previously 
+purchased with Undeveloped Lasers once they became available.     
+ 
+7. In November 2007, DiSessa sent a letter to the Korean customer confirming GSI‟s 
+obligation to upgrade the five systems with Undeveloped Lasers.  Although the letter was reviewed 
+by at least some members of the Systems Division, DiSessa did not copy anyone on the letter, and 
+neither the letter nor the terms therein were provided to GSI‟s finance department (the “Finance 
+Department”).  DiSessa completed the sales order approval form for the transaction representing, 
+among other things, that GSI had not made any “promises or guarantees for future deliverables 
+(systems improvements, software upgrades, etc).”  DiSessa also signed a quarterly certification for 
+the Finance Department stating that he was unaware of any side transactions or contingencies 
+connected to the transaction.  DiSessa knew that this certification (and the representations therein) 
+would be used by GSI in preparing its financial statements and would be provided to GSI‟s 
+independent auditor in connection with the quarterly reviews of GSI‟s financial statements. 
+ 
+8. In December 2007, DiSessa, members of the Finance Department staff, and the 
+Systems GM met to discuss whether they could establish VSOE of value, or “fair value,” for the 
+Undeveloped Lasers and thus recognize revenue from the transaction.  During these discussions, 
+they concluded that GSI could establish fair value for the Undeveloped Laser if they could find a 
+substantially similar laser that GSI had previously sold.  Shortly thereafter, they identified a laser 
+(the “Identified Laser”) as being substantially similar to the Undeveloped Laser. 
+ 
+9. In fact, the Identified Laser was not substantially similar to the Undeveloped Laser 
+for the purposes of recognizing revenue.  Among other things, the Undeveloped Laser was a 
+unique, undeveloped product that had significantly different future application potential.  In 
+addition, on several occasions DiSessa had communicated to the Finance Department and others 
+that the Undeveloped Lasers were worth substantially more than the Identified Laser.   
+ 
+10. On December 20, 2007, the corporate controller emailed DiSessa a draft of a memo 
+(the “Fair Value Memo”) concluding that the Undeveloped Laser and the Identified Laser were 
+substantially similar, which he asked DiSessa to finalize and sign.  DiSessa, however, initially 
+declined to sign the memo on the grounds that the lasers were different.  The corporate controller 
+then called the Systems GM and told him that if DiSessa did not sign the memo, the company 
+would not recognize revenue from the sale.  The Systems GM indicated that he would talk to 
+DiSessa and, that same evening, DiSessa emailed the corporate controller the signed Fair Value 
+Memo.  DiSessa knew or should have known that this Fair Value Memo (and the representations 
+therein) would be used by GSI in preparing its financial statements and would be provided to 
+GSI‟s independent auditor in connection with the quarterly reviews of GSI‟s financial statements.   
+ 
+11. In the first and second quarters of 2008, the Korean customer ordered eight 
+additional systems and corresponding upgrades for Undeveloped Lasers.  DiSessa signed another 
+memo (to which the Fair Value Memo was attached) representing that the Undeveloped Laser to 
+be used in these systems was substantially similar to the Identified Laser when in fact the lasers 
+ 
+ 5 
+were not substantially similar. As a result, the Finance Department again used the Fair Value 
+Memo to improperly recognize revenue for the systems.   
+ 
+12. During the first and second quarter of 2008, GSI recorded in its books and records 
+and reported in its financial statements filed with the Commission over $8.9 million and $7.1 
+million in revenue, respectively, from the transactions with the Korean customer.  However, GSI 
+should not have recognized any revenue from these transactions during these periods because GSI 
+had not delivered the Undeveloped Lasers, nor had it properly established fair value for the 
+Undeveloped Laser in accordance with GAAP.   
+ 
+The Taiwanese Transaction 
+ 
+13. In or around January 2007, DiSessa supported the Systems Division sales 
+department in the negotiation of a sale of six systems to a Taiwanese customer.  The initial 
+proposal specifically referenced a Tool Automation Specifications (“TAS”) Agreement that related 
+to the customer specifications or factory automation software that GSI would be obligated to 
+provide.   
+ 
+14. During this same time, the primary engineer responsible for creating the factory 
+automation software informed DiSessa that implementing all the TAS specifications would be “a 
+huge task,” requiring over an additional 2000 hours of labor, would cost between $450,000 to 
+$600,000, and could “not possibly be accomplished in the required time frame.”   
+ 
+15. In March 2007, the Taiwanese customer ordered the six systems and specifically 
+referenced compliance with the TAS as part of the arrangement. The purchase order 
+documentation, including the TAS, was made available to the Finance Department staff. DiSessa 
+and the Systems Division‟s management staff generally understood that all of the factory 
+automation software obligations referenced in the TAS would not likely be completed by the time 
+the systems were shipped.  DiSessa, however, never informed the Finance Department that, as part 
+of the March transaction, the customer required factory automation software that would not likely 
+be completed until several months after the systems had been installed and were operational.  GSI 
+booked the order and, between May and October 2007, shipped and installed the six systems.  
+Although the systems were operational, GSI did not complete all the factory automation 
+obligations required under the agreement.   
+ 
+16. In late September 2007, GSI‟s Finance Department told DiSessa and other Systems 
+Division personnel that GSI could not agree to any upgrades, contingencies, or future deliverables 
+if it wished to recognize the revenue from the transaction.  DiSessa responded with an email 
+specifically stating that “there are NO upgrades or contingencies,” even though he knew that GSI 
+had agreed to provide the customer with unique, customized software.  DiSessa also signed a 
+quarterly certification stating that he was unaware of any contingencies or side agreements 
+connected to the transaction.  When the customer accepted the first system during the fourth 
+quarter of 2007, GSI recognized in its financial statements nearly $5 million in revenue for that 
+quarter from the six systems that had shipped, even though GSI still owed the customer the 
+ 
+ 6 
+customized software.   Because GSI had not delivered the customized software, and because it did 
+not have fair value for the software, this revenue should not have been recognized at that time.  
+DiSessa knew that the quarterly certifications that he signed (and the representations therein) 
+would be used by GSI in preparing its financial statements and would be provided to GSI‟s 
+independent auditor in connection with the quarterly reviews of GSI‟s financial statements.   
+ 
+17. On March 20, 2008 GSI‟s corporate controller emailed DiSessa and others asking 
+whether there existed a factory automation issue with respect to the Taiwanese customer.  In 
+response, DiSessa told the corporate controller that GSI owed the customer “Phase II” factory 
+automation software, which GSI hoped to complete by the second quarter of 2008.  DiSessa 
+provided the corporate controller with a copy of the TAS, which he stated contained the Phase II 
+factory automation specifications.  
+ 
+18. During the fourth quarter of 2007, GSI recorded in its books and records and 
+reported in its financial statements filed with the Commission nearly $5 million in revenue from 
+sales to the Taiwanese customer.   However, GSI should not have recognized any revenue from 
+this transaction during this period because GSI had not delivered the customized, factory 
+automation software required under the customer agreement.   
+ 
+Impact on Financial Statements 
+ 
+19. The misleading financial information that resulted from the improper recognition of 
+revenue from the Korean and Taiwanese transactions was material because it (1) overstated 
+revenues by 7.1% in the fourth quarter of 2007, by 1.6% for fiscal year 2007, 14.7% in the first 
+quarter of 2008, and by 12.1% in the second quarter of 2008; and (2) overstated revenues for GSI‟s 
+Systems Division by 21.5% in the fourth quarter of 2007, by 4.3% during fiscal year 2007, by 
+39.3% in the first quarter of 2008, and by 48.0% in the second quarter of 2008.3  
+ 
+20. As a result of the conduct described above, GSI‟s Form 10-K for the company‟s 
+fiscal year 2007, as well as the Forms 10-Q for the quarters ended March 31, 2008 and June 30, 
+2008, contained false and misleading statements concerning GSI‟s financial results.  For those two 
+quarterly periods in 2008, GSI issued press releases, subsequently filed with the Commission on 
+Forms 8-K, containing the false and misleading financial information. 
+ 
+Violations 
+  
+21. As a result of the conduct above, DiSessa willfully4 committed violations of Section 
+13(b)(5) of the Exchange Act, which prohibits persons from knowingly circumventing or 
+                                                 
+3    GSI also overstated pre-tax income by $1.4 million (6.4%) for fiscal year 2007, $3.6 million (5,206.0%) 
+for the first quarter of 2008, and $2.9 million (1,443.1%) for the second quarter of 2008 as a result of the improper 
+revenue recognition for the Korean and Taiwanese transactions. 
+ 
+4  A willful violation of the securities laws means merely “„that the person charged with the duty knows what 
+he is doing.‟” Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 
+ 
+ 7 
+knowingly failing to implement a system of internal accounting controls or knowingly falsifying 
+any book, record or account as described in Section 13(b)(2) of the Exchange Act. 
+ 
+22. Also as a result of the conduct above, DiSessa caused GSI‟s violations of Section 
+13(b)(2)(A) of the Exchange Act, which requires all reporting companies to make and keep books, 
+records, and accounts which, in reasonable detail, accurately and fairly reflect their transactions 
+and disposition of their assets. 
+ 
+23. Also as a result of the conduct above, DiSessa caused GSI‟s violations of Section 
+13(b)(2)(B) of the Exchange Act, which requires all 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 
+generally accepted accounting principles. 
+ 
+24. Also as a result of the conduct above, DiSessa committed violations of Rule 13b2-1 
+of the Exchange Act, which prohibits any person from falsifying, or causing to be falsified, any 
+book, record or account subject to Section 13(b)(2)(A) of the Exchange Act. 
+ 
+25. Lastly, as a result of the conduct above, DiSessa caused GSI‟s violations of 
+Sections 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder, 
+which require every issuer of a security registered pursuant to Section 12 of the Exchange Act 
+file with the Commission information, documents, and annual, quarterly and other reports as the 
+Commission may require, and mandate that periodic reports contain such further material 
+information as may be necessary to make the required statements not misleading.  
+ 
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanctions agreed to in Respondent DiSessa‟s Offer. 
+ 
+ Accordingly, pursuant to Section 21C of the Exchange Act, it is hereby ORDERED that: 
+ 
+ A. Respondent DiSessa 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), and 13(b)(5) of the Exchange Act 
+and Rules 12b-20, 13b2-1, 13a-1, 13a-11, and 13a-13 thereunder.  
+ 
+ B. IT IS FURTHER ORDERED that Respondent shall pay a civil money penalty in 
+the amount of $25,000 and disgorgement of $10,140 plus prejudgment interest of $1,370, for a 
+total payment of $36,510, to the United States Treasury.  DiSessa shall pay $10,000 within 10 days 
+of entry of this Order, and shall pay the remaining $26,510 in installments of $8,255 within 180 
+days, $8,255 within 270 days, and $10,000 within 364 days of entry of this Order.  If any payment 
+                                                                                                                                                             
+(D.C. Cir. 1949)).  There is no requirement that the actor “„also be aware that he is violating one of the Rules or 
+Acts.‟” Id. (quoting Gearhart & Otis, Inc. v. SEC, 348 F.2d 798, 803 (D.C. Cir. 1965)). 
+ 
+ 
+ 8 
+is not made by the date the payment is required by this Order, the entire outstanding balance of 
+disgorgement, prejudgment interest, and civil penalties, plus any additional interest accrued 
+pursuant to SEC Rule of Practice 600 or pursuant to 31 U.S.C. 3717, shall be due and payable 
+immediately, without further application.   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,100 F Street, NE, Stop 6042, 
+Washington, DC  20549; and (D) submitted under cover letter that identifies Peter DiSessa 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 John T. Dugan, Associate Regional  
+Director, Boston Regional Office, Securities and Exchange Commission, 33 Arch Street, 23rd 
+Floor, Boston, Massachusetts  02110-1424. 
+ 
+  
+ 
+ By the Commission. 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+ 
+ 
+ 9 
+Service List 
+ 
+ Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the Order Instituting Cease-and-Desist 
+Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, 
+and Imposing a Cease-and-Desist Order and a Civil Penalty ("Order"), on the Respondent. 
+ 
+ The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+ 
+Honorable Brenda P. Murray    
+Chief Administrative Law Judge   
+Securities and Exchange Commission  
+100 F Street, N.E. 
+Washington, DC 20549-2557  
+ 
+Kevin M. Kelcourse, Esq.     
+Boston Regional Office   
+Securities and Exchange Commission   
+33 Arch Street, 23rd Floor  
+Boston, MA  02110     
+  
+Mr. Peter DiSessa 
+1 Seal Harbor Road, #512 
+Winthrop, MA  02152   
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3283.txt b/raw/aaer/2011/AAER-3283.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9becc434e9fa1bdcd4de2ea6b132ecc7265b8b54
--- /dev/null
+++ b/raw/aaer/2011/AAER-3283.txt
@@ -0,0 +1,394 @@
+ 
+ 
+UNITED STATES OF AMERICA  
+Before the  
+SECURITIES AND EXCHANGE COMMISSION  
+ 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No.  64498 / May 13, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No.  3283 / May 13, 2011 
+ 
+ADMINISTRATIVE PROCEEDING  
+File No.  3-14386 
+ 
+ 
+In the Matter of 
+ 
+GSI GROUP, INC.,  
+ 
+Respondent. 
+ 
+ 
+ 
+ORDER INSTITUTING CEASE-AND-
+DESIST PROCEEDINGS PURSUANT TO 
+SECTION 21C OF THE SECURITIES 
+EXCHANGE ACT OF 1934, MAKING 
+FINDINGS, AND IMPOSING A CEASE-
+AND-DESIST ORDER  
+   
+I. 
+ 
+The Securities and Exchange Commission (“Commission”) deems it appropriate that 
+cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the 
+Securities Exchange Act of 1934 (“Exchange Act”), against GSI Group, Inc. (“GSI” 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 Pursuant to Section 21C of the Securities Exchange Act of 1934, 
+Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below. 
+ 
+ 
+ 2 
+III.  
+ 
+On the basis of this Order and Respondent’s Offer, the Commission finds that:1 
+ 
+Summary 
+ 
+1. From at least 2004 through at least June 2008 (the “Relevant Period”), GSI 
+improperly recognized revenue on certain transactions even though revenue recognition was 
+prohibited pursuant to generally accepted accounting principles (“GAAP”).  The improper 
+revenue recognition resulted in part from a deficient system of internal controls that included no 
+clear procedures to determine what deliverables the company owed its customers and whether it 
+had met those deliverables, along with a lack of understanding of the relevant accounting 
+principles among key employees.  In addition, for at least two material transactions that occurred 
+in 2007 and 2008, certain GSI employees engaged in misconduct by causing GSI to recognize 
+revenue when they knew or should have known that the revenue should not have been 
+recognized.  As a result, GSI overstated revenues by a total of approximately $1.9 million or 
+0.7% in 2004, $3.5 million, or 1.4%, in 2005; $43.1 million, or 16.6%, in 2006; $15.0 million, or 
+5.0%, in 2007 (including by $16.1 million, or 23.9%, for the fourth quarter of 2007); and by 
+approximately $7.8 million (12.7%) and $3.3 million (5.6%) during the first and second quarter 
+of 2008.2 
+ 
+Respondent 
+ 
+2. GSI, a New Brunswick, Canada corporation with its principal place of business in 
+Bedford, Massachusetts, manufactures and sells laser systems and other technology products.  
+GSI’s stock was registered with the Commission pursuant to Section 12(g) of the Exchange Act 
+and traded on the NASDAQ National Market System until July 31, 2006.  From July 31, 2006 
+until April 15, 2010, GSI’s stock was registered with the Commission pursuant to Section 12(b) 
+of the Exchange Act and traded on the NASDAQ Global Market.  On April 15, 2010, GSI’s 
+stock was delisted from the NASDAQ Global Market because it was delinquent in its 
+Commission filings, deregistered from Section 12(b) of the Exchange Act, and reverted back to 
+its designation under Section 12(g) of the Exchange Act.  On November 20, 2009, GSI filed a 
+voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the U.S. 
+Bankruptcy Court for the District of Delaware.  On May 27, 2010, the U.S. Bankruptcy Court for 
+the District of Delaware confirmed GSI’s plan for reorganization.  On July 23, 2010, GSI 
+completed a rights offering and emerged from the Chapter 11 proceeding.  On December 4, 
+2008, GSI announced that past financial statements filed with the Commission could no longer 
+be relied upon due to errors discovered with GSI’s recognition of revenue for those periods.  On 
+April 13, 2010, GSI filed restated annual and quarterly financial statements for the periods 
+contained within the fiscal years 2004, 2005, 2006, 2007, and 2008.  Effective February 14, 
+2011, GSI re-registered its common stock pursuant to Section 12(b) of the Exchange Act and is 
+currently listed on the Nasdaq Global Select Market.   
+                                                 
+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    Percentages are calculated based on restated revenues less discontinued operations. 
+ 
+ 3 
+ 
+Facts 
+ 
+Background 
+ 
+3. During the Relevant Period, GSI’s Systems Division manufactured production 
+systems that it sold to both domestic and international customers.  GSI’s production systems 
+generally had both hardware (including lasers) and software components (including, in certain 
+instances, customized, vendor specific, factory automation software) and required on-site 
+installation by GSI personnel. 
+ 
+4. From at least 2004 to mid-2007, the division controller for the Systems Division 
+made the determination when to recognize revenue from Systems Division sales.   In mid-2007, 
+pursuant to a reorganization of GSI’s finance department (the “Finance Department”), GSI’s 
+corporate controller, assisted by an assistant corporate controller, took over the revenue 
+recognition determination for the Systems Division.   
+ 
+5. During the Relevant Period, Systems Division sales staff documented the basic 
+terms of a transaction in a Sales Order Approval Form (“Sales Order Form”) which, along with 
+other documents associated with the transaction, were to be collected by the Systems Division’s 
+sales order administration personnel.  Before booking an order, the documents were to be 
+reviewed and, depending on the size of the order, approved by varying levels of sales, finance 
+and management staff.  Transactions generally were automatically recognized as revenue upon 
+shipment.  Prior to the close of the quarter, the Finance Department reviewed the documents 
+related to each transaction and determined whether to recognize or defer any revenue.  
+ 
+Internal Control Deficiencies 
+ 
+6. During the Relevant Period, GSI had numerous deficiencies throughout its system 
+of internal controls that were attributable, in part, to its failure to understand and assess the risks 
+in the control environment and to design and execute monitoring procedures that evaluated the 
+controls over those risks.  Among other things, Systems Division personnel did not communicate 
+well with Finance Department employees, a problem that worsened after the mid-2007 
+reorganization.  Accordingly, Finance Department employees often had difficulty getting 
+information from Systems Division employees. 
+ 
+7. The structure of the revenue recognition process did not ensure proper 
+communication of transaction terms to the Finance Department.  For example, sales 
+representatives agreed to provide additional items to customers after the company received a 
+purchase order, or offered customers other incentives, but frequently failed to properly document 
+or communicate those agreements to the Finance Department.  Because the Systems Division did 
+not have any clear process to ensure that any concessions, upgrades, or other terms agreed to in 
+the period between booking and recognizing revenue from a transaction were included with the 
+transaction documents, the Finance Department was often unaware of the actual transaction 
+terms.  Both the additional items and the incentives frequently impacted the timing of revenue 
+ 
+ 4 
+recognition because the Finance Department often relied on incomplete information when 
+making the revenue recognition decisions.   
+ 
+8. In addition, key sales and Finance Department employees did not sufficiently 
+understand the relevant accounting rules applicable to the multi-element arrangements.  The 
+corporate controller did not apply those accounting rules correctly, and he failed to apply proper 
+oversight over other employees involved in revenue recognition decisions. 
+ 
+The Korean Transaction 
+ 
+9. During November 2007, a Korean customer agreed to purchase from GSI ten 
+systems for nearly $1 million per system.  Each system was equipped with a laser previously 
+sold by GSI.  GSI agreed to upgrade these systems by replacing the original lasers with a laser 
+that had not yet been developed (the “Undeveloped Laser”) when it became available.3  As a 
+final condition, the customer demanded that GSI upgrade five systems that the customer had 
+previously purchased with Undeveloped Lasers once they became available.   
+ 
+10. In November 2007, one of GSI’s product line managers (the “PLM”) sent a letter 
+to the Korean customer confirming GSI’s obligation to upgrade the five systems with 
+Undeveloped Lasers.  The PLM did not copy anyone on the letter, and neither the letter nor the 
+terms therein were provided to the Finance Department.  The PLM completed the sales order 
+approval form for the transaction representing, among other things, that GSI had not made any 
+“promises or guarantees for future deliverables (systems improvements, software upgrades, 
+etc).”  The PLM also signed a quarterly certification for the Finance Department stating that he 
+was unaware of any side transactions or contingencies.  The PLM knew or should have known 
+that this certification (and the representations therein) would be used by GSI in preparing its 
+financial statements and would be provided to GSI’s independent auditor in connection with the 
+quarterly reviews of GSI’s financial statements. 
+ 
+11. In December 2007, the PLM, members of the Finance Department staff, and the 
+the general manager of the Systems Division (the “Systems GM”) met to discuss whether they 
+could establish vendor specific objective evidence of value or fair value for the Undeveloped 
+Lasers and thus recognize revenue from the transaction.  During these discussions, they 
+concluded that GSI could establish fair value for the Undeveloped Laser if they could find a 
+substantially similar laser that GSI had previously sold.  Shortly thereafter, the PLM and others 
+identified a laser (the “Identified Laser”) as being substantially similar to the Undeveloped Laser. 
+ 
+12. In fact, the Identified Laser was not substantially similar to the Undeveloped 
+Laser for the purposes of recognizing revenue.  Among other things, the Undeveloped Laser was 
+a unique, undeveloped product that had significantly different future application potential.  In 
+addition, on several occasions the PLM had communicated to the Finance Department and others 
+that the Undeveloped Lasers were worth substantially more than the Identified Laser.   
+                                                 
+3  During this period, GSI had two undeveloped  lasers – a Multiple Pulse Infrared Laser and a Multiple Pulse 
+Green Laser – that were to be upgraded in the production systems ordered by the Korean customer during 2007 and 
+2008.  Neither of the lasers were substantially similar to the original lasers in the production system and, for the 
+purposes of this Order, will be referred to collectively as the Undeveloped Laser(s).  
+ 
+ 5 
+ 
+13. On December 20, 2007, the corporate controller emailed the PLM a draft of a 
+memo (the “Fair Value Memo”) concluding that the Undeveloped Laser and the Identified Laser 
+were substantially similar, which he asked the PLM to finalize and sign.  The PLM, however, 
+initially declined to sign the memo on the grounds that the lasers were different.  The corporate 
+controller then called the Systems GM and told him that if the PLM did not sign the memo, the 
+company would not recognize revenue from the sale.  The Systems GM indicated that he would 
+talk to the PLM and, that same evening, the PLM emailed the corporate controller the signed Fair 
+Value Memo.  The PLM knew or should have known that this Fair Value Memo (and the 
+representations therein) would be used by GSI in preparing its financial statements and would be 
+provided to GSI’s independent auditor in connection with the quarterly reviews of GSI’s 
+financial statements.   
+ 
+14. In the first and second quarters of 2008, the Korean customer ordered eight 
+additional systems and corresponding upgrades for Undeveloped Lasers.  The PLM signed 
+another memo (to which the Fair Value Memo was attached) representing that the Undeveloped 
+Laser to be used in these systems was substantially similar to the Identified Laser when in fact 
+the lasers were not substantially similar.  As a result, the Finance Department again used the Fair 
+Value Memo to improperly recognize revenue for the systems. 
+ 
+15. During the first and second quarter of 2008, GSI recorded in its books and records 
+and reported in its financial statements filed with the Commission over $8.9 million and $7.1 
+million in revenue, respectively, from the transactions with the Korean customer.  However, GSI 
+should not have recognized any revenue from these transactions during these periods because 
+GSI had not delivered the Undeveloped Lasers, nor had it properly established fair value for the 
+Undeveloped Laser in accordance with GAAP. 
+ 
+The Taiwanese Transaction 
+ 
+16.  In or around January 2007, the PLM began negotiating a sale of six systems to a 
+Taiwanese customer.  The initial quotation specifically referenced a Tool Automation 
+Specifications (“TAS”) Agreement that related to the customer specifications or factory 
+automation software that GSI would be obligated to provide.   
+ 
+17. During this same time, the primary engineer responsible for creating the factory 
+automation software informed the PLM that implementing all the TAS specifications would be 
+“a huge task,” requiring over an additional 2000 hours of labor, would cost between $450,000 to 
+$600,000, and could “not possibly be accomplished in the required time frame.”   
+ 
+18. In March 2007, the Taiwanese customer ordered the six systems and specifically 
+referenced compliance with the TAS as part of the arrangement.  The PLM never informed the 
+Finance Department that, as part of the transaction, the customer required customized software 
+that would not be completed until several months after the systems had been installed and were 
+operational.  GSI booked the order and, between May and October 2007, shipped the six 
+systems.   
+ 
+ 
+ 6 
+19. In late September 2007, the GSI’s Finance Department told the PLM and other 
+Systems Division personnel that GSI could not agree to any upgrades, contingencies, or future 
+deliverables if it wished to recognize the revenue from the transaction.  The PLM responded with 
+an email specifically stating that “there are NO upgrades or contingencies,” even though he knew 
+that GSI had agreed to provide the customer with unique, customized software.   The PLM also 
+signed a quarterly certification stating that he was unaware of any contingencies or side 
+agreements.  When the customer accepted the first system during the fourth quarter of 2007, GSI 
+recognized nearly $5 million in revenue from the six systems that had shipped, even though GSI 
+still owed the customer the customized software.   Because GSI had not delivered the customized 
+software, and because it did not have fair value for the software, this revenue should not have 
+been recognized at that time.  The PLM knew or should have known that this certification (and 
+the representations therein) would be used by GSI in preparing its financial statements and would 
+be provided to GSI’s independent auditor in connection with the quarterly reviews of GSI’s 
+financial statements.   
+ 
+20. On March 20, 2008 GSI’s corporate controller emailed the PLM and others 
+asking whether there existed a factory automation issue with respect to the Taiwanese customer.  
+In response, the PLM told the corporate controller that GSI owed the customer “Phase II” factory 
+automation, which GSI hoped to complete by the second quarter of 2008.  The PLM provided the 
+corporate controller with a copy of the TAS, which he stated contained the Phase II factory 
+automation specifications. 
+ 
+21. In or around March 2008, the assistant corporate controller informed the corporate 
+controller that the failure to provide factory automation may impact the revenue that GSI had 
+previously recognized, which could result in a restatement.  On April 3, 2008, the corporate 
+controller emailed the assistant corporate controller, stating: “Please don’t dig into these unless it 
+blows up down the road.  Let’s work on getting things right going forward.”  On April 6, 2008, 
+the corporate controller again emailed the assistant corporate controller:  “When we go to the 
+acceptance method this issue goes away.  Let’s dig into that once we get the quarter close behind 
+us.”  The corporate controller did not properly investigate the matter and did not disclose the 
+potential existence of undelivered factory automation software to the external auditors. 
+ 
+22. During the fourth quarter of 2007, GSI recorded in its books and records and 
+reported in its financial statements filed with the Commission nearly $5 million in revenue from 
+sales to the Taiwanese customer.   However, GSI should not have recognized any revenue from 
+this transaction during this period because GSI had not delivered the customized, factory 
+automation software required under the customer agreement.   
+ 
+Impact on Financial Statements 
+ 
+23. As a result of the conduct described above, GSI overstated revenues by 
+approximately $1.9 million (or 0.7%) in 2004, $3.5 million (1.4%) in 2005; $43.1 million 
+(16.6%) in 2006; $15.0 million (5.0%) in 2007 (including by $16.1 million (23.9%) for the 
+fourth quarter of 2007); and by approximately $7.8 million (12.7%) and $3.3 million (5.6%) 
+during the first and second quarter of 2008, respectively.4   
+                                                 
+4    Percentages are calculated based on restated revenues less discontinued operations. 
+ 
+ 7 
+ 
+24. The misleading financial information that resulted from the improper recognition 
+of revenue from the Korean and Taiwanese transactions alone was material because it (1) 
+overstated revenues by 7.1% in the fourth quarter of 2007, by 1.6% for fiscal year 2007, by 
+14.7% in the first quarter of 2008 and by 12.1% in the second quarter of 2008; and (2) overstated 
+revenues for GSI’s Systems Division by 21.5% in the fourth quarter of 2007, by 4.3% during 
+fiscal year 2007, by 39.3% in the first quarter of 2008, and by 48.0% in the second quarter of 
+2008.5 
+ 
+25. As a result of the conduct described above, GSI’s Form 10-K for the company’s 
+fiscal years 2004 through 2007, the Forms 10-Q for every quarter therein, as well as the Forms 
+10-Q for the quarters ended March 31, 2008 and June 30, 2008, contained false statements 
+concerning GSI’s financial results.  For many of the quarterly periods described above, GSI 
+issued press releases, subsequently filed with the Commission on Forms 8-K, containing the 
+false and misleading financial information.     
+ 
+Violations 
+ 
+26. As a result of the conduct described above, GSI violated Section 13(a) of the 
+Exchange Act and Rules 13a-1, 13a-11, 13a-13 and 12b-20 thereunder, which require every 
+issuer of a security registered pursuant to Section 12 of the Exchange Act file with the 
+Commission information, documents, and annual and quarterly reports as the Commission may 
+require, and mandate that periodic reports contain such further material information as may be 
+necessary to make the required statements not misleading.  
+ 
+27. As a result of the conduct described above, GSI violated 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 
+disposition of their assets.  
+ 
+28. As a result of the conduct described above, GSI violated Section 13(b)(2)(B) of 
+the Exchange Act, which requires all 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 generally 
+accepted accounting principles. 
+ 
+Remedial Efforts by GSI 
+ 
+29. In determining to accept GSI’s Offer, the Commission considered remedial acts 
+promptly undertaken by Respondent and cooperation afforded the Commission staff. 
+ 
+                                                 
+5    GSI also overstated pre-tax income by $1.4 million (6.4%) for fiscal year 2007, $3.6 million (5,206.0%) for the 
+first quarter of 2008, and $2.9 million (1,443.1%) for the second quarter of 2008 as a result of the improper revenue 
+recognition for the Korean and Taiwanese transactions. 
+ 
+ 8 
+IV. 
+ 
+In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent GSI’s Offer.  
+ 
+Accordingly, pursuant to Section 21C of the Exchange Act, it is hereby ORDERED that 
+Respondent GSI cease and desist from committing or causing any violations and any future 
+violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-
+20, 13a-1, 13a-11, and 13a-13 thereunder. 
+ 
+  
+ By the Commission.  
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary  
+ 
+ 
+ 9 
+Service List 
+ 
+ Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another 
+duly authorized officer of the Commission, shall serve a copy of the Order Instituting Cease-and-
+Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
+Findings, and Imposing a Cease-and-Desist Order 
+("Order"), on the Respondent and its legal agent. 
+ 
+ The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+ 
+Honorable Brenda P. Murray    
+Chief Administrative Law Judge   
+Securities and Exchange Commission  
+100 F Street, N.E. 
+Washington, DC 20549-2557  
+ 
+Kevin M. Kelcourse, Esq.     
+Boston Regional Office   
+Securities and Exchange Commission   
+33 Arch Street, 23rd Floor  
+Boston, MA  02110     
+  
+GSI Group, Inc.    
+c/o Caz Hashemi, Esq.    
+Wilson Sonsini Goodrich & Rosati PC 
+650 Page Mill Road 
+Palo Alto, CA 94304 
+    
+Caz Hashemi, Esq.    
+Wilson Sonsini Goodrich & Rosati PC 
+650 Page Mill Road 
+Palo Alto, CA 94304 
+             
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3284.txt b/raw/aaer/2011/AAER-3284.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fd457250df73ebf955d098a158c491fa4c30f3a0
--- /dev/null
+++ b/raw/aaer/2011/AAER-3284.txt
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+                U. S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 21926 / April 11, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3284 / April 11, 2011 
+
+  Securities and Exchange Commission v. Brian D. Fox,  Civil Action No. 11-CV-211-CVE-PJC, United States District Court for the Northern District of Oklahoma. 
+
+ SEC Files Civil Charges against Brian D. Fox, Former CEO of Powder River Petroleum International, Inc., for Financial Fraud 
+
+ On April 8, 2011, the Securities and Exchange Commission (Commission) filed a civil action in United States District Court in Tulsa, Oklahoma against Brian D. Fox (Fox), the former chairman, chief executive officer and chief financial officer of Powder River Petroleum International, Inc. (Powder River). The Commission's complaint alleges that, from year-end 2004 through the first quarter of 2008, Fox misled the investing public by fraudulently inflating the revenue and omitting major liabilities of Powder River in Commission filings and by making other false and misleading public disclosures. Specifically, the complaint alleges that from year-end 2004, Powder River conveyed working interests in oil and gas leases to investors in Asia for over $43 million. The complaint further alleges that because Powder River promised full repayment of the working interest investors' initial investment, with a 9% guaranteed annual return of principal, these transactions were, in reality, loans. Powder River, with Fox as its chairman, CEO and CFO, improperly recognized the loan proceeds as revenues that were incorporated in Powder River's quarterly and annual public filings with the Commission. 
+
+ The complaint further alleges that Fox was responsible for Powder River's improper recording of oil and gas reserves on properties that the company did not own and inflation of the company's net realizable value of those reserves. 
+
+ The Commission's complaint further alleges that, by mid-2007, Powder River made undisclosed, Ponzi-style payments of incoming working interest conveyance proceeds from new investors to fulfill its ongoing minimum guaranteed payment obligations to prior investors. The Commission alleges that as a result of Fox's misconduct, Powder River materially overstated its revenues by 7% to 2,417%, its pre-tax income by 18% to 465%, and its assets by 7% to 48% in financial statements incorporated in its SEC filings. Finally, the Commission alleges that Fox, on behalf of Powder River, issued misleading press releases and other public disclosures announcing inflated revenues, assets, and reserves, and successful property purchases that Powder River never actually completed. 
+
+ The Commission's complaint alleges that Fox violated Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act), and Rules 10b-5, 13a-14, 13b2-1, and 13b2-2 thereunder, and that Fox aided and abetted Powder River's violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B), and Rules 13a-1, 13a-11, 13a-13, 12b-20. The Commission seeks a permanent injunction, disgorgement, civil money penalty and an officer-and-director bar against Fox. 
+
+ The SEC acknowledges the assistance of the Public Company Accounting Oversight Board.   
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diff --git a/raw/aaer/2011/AAER-3285.pdf b/raw/aaer/2011/AAER-3285.pdf
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+ UNITED STATES OF AMERICA  
+before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64535 / May 23, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3285 / May 23, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-14400 
+ 
+ 
+In the Matter of 
+ 
+JOHN SCULLIN 
+ 
+Respondent. 
+ 
+ 
+ 
+ 
+ 
+ORDER INSTITUTING ADMINISTRATIVE  
+PROCEEDINGS PURSUANT TO RULE 
+102(e) OF THE COMMISSION’S RULES 
+O
+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 John 
+Scullin pursuant to Rule 102(e)(3)(i) of the Commission’s Rules of Practice1 against John Scullin 
+(“Scullin” or “Respondent”).   
+ 
+ II. 
+ 
+ In anticipation of the institution of these proceedings, Scullin 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 
+                                                 
+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 … professional … 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
+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, Scullin 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 Scullin ’s Offer, the Commission finds that:  
+       
+1. John Scullin, age 51, was the Manager for Project Accounting at Baker Energy, 
+Michael Baker Corporation’s energy segment, from June 2006 through June 2008.  Scullin was 
+never licensed to practice as a certified public accountant (“CPA”), but falsely represented 
+himself to Michael Baker management as a CPA licensed to practice in Virginia.   
+ 
+2. Michael Baker Corporation is a Pennsylvania corporation headquartered in Moon 
+Township, Pennsylvania (“Michael Baker” or the “Company”).  Michael Baker’s business, at the 
+time of conduct at issue, was divided into two business segments:  Engineering and Energy.  The 
+Engineering division focused on design and consulting services primarily in the United States.  The 
+Energy division, Baker Energy, was headquartered in Houston, Texas and focused on the provision 
+of oil related services both in the United States and abroad.  Baker Energy typically generated 
+roughly 35-40% of the Company’s consolidated gross revenues.   
+ 
+3. On May 11, 2011, the Commission filed a complaint against Scullin in SEC v. 
+Michael Baker Corporation, et al. (Civil Action No. 11-cv-1791).  On May 17, 2011, the court 
+entered a final judgment permanently enjoining Scullin, by consent, from future violations of 
+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 Exchange Act Rules 12b-20, 13a-1, and 13a-13.   
+ 
+4. In its complaint, the Commission alleged that for the 2006 annual reporting period 
+and the first three quarters of 2007, Scullin, who misrepresented himself as CPA to Michael 
+Baker’s management, willfully engaged in improper accounting practices and aided and abetted 
+Michael Baker’s fraudulent accounting practices, which resulted in Michael Baker overstating its 
+revenue and net income. As a direct result of Scullin’s actions, the Company overstated its 
+consolidated net income by $1.5 million or 15% for 2006 and overstated its consolidated net 
+income by $1.5 million or 94%, $2.4 million or 39%, and $1.9 million or 42%, for the first, 
+second and third quarters of 2007, respectively.  The overstatements of revenue and net income 
+were primarily the result of Scullin’s improper accounting practices, which he knew or should 
+have known were improper.    
+ 
+ 
+ 
+ 3
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanction agreed to in Scullin’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately, that Scullin is suspended 
+from appearing or practicing before the Commission as an accountant pursuant to Rule 
+102(e)(3)(i). 
+   
+ 
+ By the Commission. 
+ 
+ 
+ 
+       E l i z a b e t h  M .  M u r p h y  
+       S e c r e t a r y  
+ 4
+Service List 
+ 
+ Rule 141 of the Commission's Rules of Prac tice provides that the Secretary, or another 
+duly authorized officer of the Commission, shall serve a copy of the Order Instituting 
+Administrative Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making 
+Findings, and Imposing Remedial Sanctions ("Order") on the Respondent and his legal agent. 
+ 
+ The attached Order has been sent to the fo llowing parties and other persons entitled to 
+notice: 
+ 
+Honorable Brenda P. Murray    
+Chief Administrative Law Judge   
+Securities and Exchange Commission  
+100 F Street, NE 
+Washington, DC  20549-2557  
+    
+Charles E. Cain, Esq.  
+Division of Enforcement    
+Securities and Exchange Commission   
+100 F Street, NE  
+Washington, DC  20549-5553-B     
+  
+Mr. John Scullin 
+c/o Paul R. Bessette, Esq. 
+Shareholder 
+Greenberg Traurig 
+300 West 6th Street, Suite 2050 
+Austin, TX 78701 
+ 
+Paul R. Bessette, Esq. 
+Shareholder 
+Greenberg Traurig 
+300 West 6th Street, Suite 2050 
+Austin, TX 78701 
+ 
+ 
+ 
\ No newline at end of file
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--- /dev/null
+++ b/raw/aaer/2011/AAER-3286.txt
@@ -0,0 +1,200 @@
+ 
+ 
+ 
+UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64588 / June 2, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3286 / June 2, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14177 
+ 
+ 
+In the Matter of 
+ 
+ CARL W. JASPER, CPA 
+ 
+             Respondent. 
+ 
+ 
+ORDER MAKING FINDINGS AND 
+IMPOSING REMEDIAL SANCTIONS 
+PURSUANT TO RULE 102(e)(3) OF THE 
+COMMISSION’S RULES OF PRACTICE 
+                    
+   
+I. 
+ 
+ On January 7, 2011, the Securities and Exchange Commission (“Commission”) instituted 
+public administrative proceedings pursuant to Rule 102(e)(3)1 of the Commission’s Rules of 
+Practice against Carl W. Jasper (“Respondent” or “Jasper”). 
+ 
+II. 
+ 
+In connection with 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 prior to a hearing pursuant to the Commission's Rules of Practice, 17 
+C.F.R. §201.100, et seq., and without admitting or denying the findings herein, except as to the 
+Commission’s jurisdiction over him and th e subject matter of these proceedings, which are 
+                                                 
+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 be en 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 
+admitted, Respondent consents to the entry of this Order Making Findings and Imposing Remedial 
+Sanctions Pursuant to Rule 102(e) of the Commission’s Rules of Practice, as set forth below. 
+ 
+III. 
+ 
+ On the basis of this Order and Respondent’s Offer, the Commission finds that: 
+ 
+1. Jasper, age 54, is an d has been a certified public accountant (“CPA”) licensed to 
+practice in the State of California.  From April 1999 through January 2007, Respondent served as 
+Vice President, Chief Financial Officer, and Principal Accounting Officer of Maxim Integrated 
+Products, Inc. (“Maxim”), a San Jose semiconductor company.  From 1983 to 1995, Respondent 
+worked as an auditor for Ernst & Young, LLP.  Respondent’s CPA license was inactive during his 
+tenure at Maxim. 
+ 
+2. On November 5, 2010, the United States District Court for the Northern District of 
+California entered an amended final judgment against Respondent.  SEC v. Jasper, C-07-6122 JW 
+(N.D. Cal. Dec. 4, 2007).  The Amended Final Judgment followed a jury trial in which the jury 
+found that Respondent violated Section 17(a)(1) of the Securities Act of 1933 (“Secur ities Act”) 
+and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act” ), and Rules 10b -5, 
+13a-14, 13b2-1, and 13b2 -2 thereunder, and aided and abetted Maxim’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. 
+ 
+3.    The Amended Final Judgment against Respondent, among other things, 
+permanently enjoins him from future violatio ns, direct or indirect, of Section 17( a)(1) of the 
+Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5, 13a-14, 13b2-1, and 13b2-
+2 thereunder, and from aiding and abetting any  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.  It also 
+bars Respondent, for a period of two years, from acting as an officer or director for any issuer that 
+has a class of securities registered pursuant to Section 12 of the Exchange Act, 15 U.S.C. § 781, or 
+that is required to file reports pursuant to Section 15(d) of the Exchange Act, 15 U.S.C. § 78o(d), 
+and requires Respondent to reimburse Maxim $1,869,639 and pay a civil penalty of $360,000. 
+ 
+4.   The Commission’s first amended complaint alleged that Respondent, from at least 
+2000 through 2005, engaged in a scheme to illegally backdate stock options granted to Maxim’s 
+employees and directors, concealing millions of dollars in expenses from investors and 
+significantly overstating Maxim’s income.  It further alleg ed that Respondent was aware that 
+Maxim granted options on purported dates that had been selected with hindsight and that he knew, 
+or was reckless in not knowing, that Maxim was failing to report expenses for those in-the-money 
+options and was falsely reporting that it only granted options at fair market value.  It further alleged 
+that Respondent signed several of Maxim’s public filings, including annual, quarterly, and current 
+reports and registration statements that were materially false and misleading. 
+ 
+   
+ 
+ 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 Jasper’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately, that: 
+ 
+ A. Jasper 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 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. 
+ 
+ 
+ 4 
+C. The Commission will consider an application by Respondent to resume 
+appearing or practicing before the Commission provided that his license is current and he 
+has resolved all other disciplinary issues with the applicable boards of accountancy.  
+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 
+Respondent’s character, integrity, professional conduct, or qualifications to appear or 
+practice before the Commission. 
+ 
+ 
+ By the Commission. 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+  
+ 
+ 5 
+Service List 
+ 
+ Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the Order Making Findings and 
+Imposing Remedial Sanctions Pursuant to Rule 102(e)(3) of the Commission’s Rules of Practice 
+(“Order”) on the Respondent and his legal agent. 
+ 
+ The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+ 
+Honorable Brenda P. Murray    
+Chief Administrative Law Judge   
+Securities and Exchange Commission  
+100 F Street, N.E. 
+Washington, DC 20549-2557  
+   
+Mark P. Fickes, Esq.     
+San Francisco Regional Office    
+Securities and Exchange Commission   
+44 Montgomery Street, 26th Floor 
+San Francisco, CA 94104      
+      
+Mr. Carl W. Jasper    
+6922 Serenity Way 
+San Jose, CA 95120  
+             
+Steven M. Bauer, Esq.  
+Robert E. Sims, Esq. 
+Margaret A. Tough, Esq.   
+Latham & Watkins LLP  
+505 Montgomery Street, Suite 2000 
+San Francisco, CA 94111    
+(Counsel for Carl W. Jasper) 
+ 
\ No newline at end of file
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@@ -0,0 +1,140 @@
+UNITED STATES OF AMERICA
+ 
+before the
+ 
+SECURITIES AND EXCHANGE COMMISSION
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Rel. No. 64598 / June 3, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Rel. No. 3287 / June 3, 2011 
+Admin. Proc. File No. 3-14323 
+In the Matter of ORDER DENYING MOTION 
+TO LIFT TEMPORARY 
+MICHAEL C. PATTISON, CPA SUSPENSION AND 
+DIRECTING HEARING 
+On April 5, 2011, we issued an order instituting proceedings ("OIP") against Michael C. 
+Pattison, a certified public accountant ("CPA"), pursuant to Commission Rule of              
+1Practice 102(e)(3),  that temporarily suspended him from appearing or practicing before the
+1 Rule of Practice 102(e)(3)(i), 17 C.F.R. § 201.102(e)(3)(i), provides, in pertinent 
+part, that: 
+(i) The Commission, with due regard to the public interest and without preliminary 
+hearing, may, by order, temporarily suspend from appearing or practicing before it 
+any . . . accountant . . . who has been by name: 
+(A)  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; or 
+(B)  found by any court of competent jurisdiction in an action brought by the 
+Commission to which he or she is a party or found by the Commission in any 
+administrative proceeding to which he or she is a party to have violated (unless 
+the violation was found not to have been willful) or aided and abetted the 
+violation of any provision of the Federal securities laws or of the rules and 
+regulations thereunder. 
+2
+ 
+Commission as an accountant.2   Pattison has filed a petition, pursuant to Rule 102(e)(3)(ii), 3 
+requesting that his temporary suspension be lifted. 
+Pattison was controller of Embarcadero Technologies, Inc. ("Embarcadero"), from 
+January 2000 through July 2005.4   On September 9, 2008, the Commission filed a complaint in 
+the United States District Court for the Northern District of California, alleging that Pattison, 
+among other things, knowingly falsified numerous books, records, and accounts in connection 
+with the backdating of stock options granted to Embarcadero's employees from 2000        
+through 2005.  The complaint further alleged that Pattison knowingly circumvented 
+Embarcadero's internal accounting controls to avoid recording compensation expenses related to 
+the backdated, in-the-money, stock options during the same time period. 
+A jury found that Pattison violated Section 13(b)(5) of the Securities Exchange Act       
+of 1934, which prohibits persons from "knowingly circumvent[ing] . . . a system of internal 
+accounting controls or knowingly falsify[ing] any [required] book, record, or account."
+5 The jury 
+also found that Pattison violated Exchange Act Rule 13b2-1, which prohibits persons from 
+"directly or indirectly, falsify[ing] any [required] book, record, or account."
+6 On 
+February 23, 2011, the district court entered an amended final judgment against Pattison 
+permanently enjoining him from violating Exchange Act Section 13(b)(5) and Exchange Act 
+Rule 13b2-1.
+7   The final judgment, as amended, further ordered Pattison to pay $74,446 in 
+disgorgement, plus prejudgment interest, and a second-tier civil monetary penalty of $50,000. 
+In issuing the OIP, we found it "appropriate and in the public interest" that Pattison be 
+temporarily suspended from appearing or practicing before the Commission, based on the district 
+court's final judgment.  We stated that the temporary suspension would become permanent unless 
+Pattison filed a petition challenging it within thirty days of service of the order, pursuant to Rule 
+of Practice 102(e)(3)(ii).  We further advised that, pursuant to Rule of Practice 102(e)(3)(iii), 
+2 Michael C. Pattison, CPA, Securities Exchange Act Rel. No. 64190 (Apr. 5, 
+2011), __ SEC Docket __. 
+3 17 C.F.R. § 201.102(e)(3)(ii).  
+4 Pattison, __ SEC Docket at ___. 
+5 15 U.S.C. § 78m(b)(5). 
+6 17 C.F.R. § 240.13b2-1. 
+7 SEC v. Pattison, C-08-4238 EMC, 2011 U.S. Dist. LEXIS 23427 (N.D. Cal.   
+Feb. 23, 2011).  The district court noted, in enjoining Pattison, that he "currently holds a position 
+as an accountant in a private trading company, and is still a licensed CPA, eligible to return to the 
+public accounting field."  Id. at *7. 
+ 
+ 
+3
+ 
+upon receipt of such a petition, we would either "lift the temporary suspension, or set the matter 
+down for hearing . . . , or both." 
+In his petition, Pattison argues that the temporary "suspension is premature" because he 
+has filed a "meritorious motion to amend the [final judgment]" with the district court and because 
+he "will appeal any adverse ruling on his motion."  He requests that the Commission lift the 
+temporary suspension "until that motion, and the potential appeal, are decided."  Pattison also 
+contends that the "suspension is inappropriate and excessive in light of the nature of the case," 
+noting that the jury dismissed several charges against him, "absolv[ing]" him of any wrongdoing 
+with respect to the "antifraud and disclosure provisions of the . . . Exchange Act."  He further 
+contends that the district court used "an improper standard for the requisite intent" under 
+Exchange Act Section 13(b)(5) and challenges the evidence used against him at trial, claiming 
+the Commission improperly relied on Embarcadero's financial statements and "elicit[ed] 
+improper expert testimony about complicated accounting rules from lay witnesses."  In addition, 
+Pattison also claims that the OIP erroneously states that he was enjoined from "indirect" 
+violations of Section 13(b)(5), urges the Commission to issue a more "definitive statement" 
+regarding his misconduct, and requests the opportunity "to present additional briefing . . . and 
+proposed findings . . . before any administrative hearing and decision."  The Division of 
+Enforcement opposes Pattison's petition.      
+Rule 102(e)(3) permits the Commission to suspend any accountant or other professional 
+or expert who has been "permanently enjoined from violating . . . the Federal securities laws or 
+of the rules and regulations thereunder; or . . . found by any court of competent jurisdiction in an 
+action brought by the Commission . . . to have violated . . . the . . . Federal securities laws or rules 
+and regulations thereunder.'"
+8   Although Pattison is entitled to appeal the underlying case against 
+him, neither the pendency of his current motion before the district court nor the possibility of an 
+appeal to the court of appeals "alter[s] the effect" of the jury's finding of securities law violations 
+or the court's imposition of an injunction, here.
+9   Generally, a respondent in a "follow-on" 
+proceeding is precluded from challenging the basis for, or findings in, the underlying injunctive 
+action.
+10   At this stage, it appears that the findings made in the injunctive proceeding and the 
+injunction issued against him justify continuing his suspension "until it can be determined what, 
+8 17 C.F.R. § 201.102(e)(3)(i). 
+9 Daniel S. Lezak, 57 S.E.C. 997, 1000 n.16 (2004); see also Michael T. Studer, 57 
+S.E.C. 890, 897 (2004) (noting that "the fact that Studer is still litigating that action [on appeal] 
+does not affect our statutory authority to conduct this proceeding"), aff'd, 148 F. App'x 58 (2d 
+Cir. 2005). 
+10 See, e.g., Jose P. Zollino, Exchange Act Rel. No. 55107 (Jan. 16, 2007), 89 SEC 
+Docket 2598, 2604-05 n.20 (noting the appropriate forum for respondent's challenges to 
+underlying litigation is the appellate court). 
+ 
+4
+ 
+if any, action may be appropriate to protect the Commission's processes."11 As provided in 
+Rule 102(e)(3)(iii), therefore, we will set the matter down for public hearing.  We note that 
+Pattison's other claims concerning the present proceeding – i.e., that the OIP is incorrect and that 
+a more definitive statement is needed – are more appropriately addressed, in the first instance, by 
+the law judge in the context of administering the hearing.  The law judge may order and schedule 
+the filing of an answer to the OIP, pursuant to Rule of Practice 220.
+12 We express no opinion as 
+to the merits of Pattison's claims. 
+Accordingly, IT IS ORDERED that this proceeding be set down for public hearing before 
+an administrative law judge in accordance with Rule of Practice 110.  As specified in Rule of 
+Practice 102(e)(3)(iii), the hearing in this matter shall be expedited in accordance with Rule of 
+Practice 500; it is further 
+ORDERED that the administrative law judge shall issue an initial decision no later    
+than 210 days from the date of service of this order; and it is further 
+ORDERED that the temporary suspension of Michael C. Pattison, entered on            
+April 5, 2011, remain in effect pending a hearing and decision in this matter. 
+By the Commission. 
+Elizabeth M. Murphy
+          Secretary 
+11 Lezak, 57 S.E.C. at 1001. 
+12 17 C.F.R. § 201.220. 
\ No newline at end of file
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+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64607 / June 6, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3288 / June 6, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14410 
+ 
+ 
+ 
+ 
+In the Matter of 
+ 
+            LIVINGSTON & HAYNES, P.C.,
+            KEVIN F. HOWLEY, CPA and 
+            WILLIAM W. WOOD, CPA,  
+ 
+Respondent. 
+ 
+ 
+ 
+ 
+ORDER INSTITUTING PUBLIC 
+ADMINISTRATIVE AND CEASE- 
+ AND-DESIST PROC EEDINGS 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 Livingston & 
+Haynes, P.C. (“L&H”); Kevin F. Howley, CPA; and William W. Wood, CPA (“Respondents”) 
+pursuant to Sections 4C
+1 and 21C of the Securities Exchange Act of 1934 (“Exchange Act”) and  
+                                                 
+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 . . . (2) to be lacking in character or integrity, or to have engaged in 
+unethical or improper professional conduct; 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
+Rule 102(e)(1)(ii) of the Commission’s Rules of Practice.2 
+ 
+II. 
+ 
+ In anticipation of the institution of these proceedings, the Respondents have each 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 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 Res pondents’ Offers, the Commission finds
+3 that: 
+ 
+A. SUMMARY  
+ 
+ 1. This matter concerns violations of Section 10A of the Exchange Act by L&H, 
+Howley and Wood in connection with L&H’s 2005 and 2006 year-end audits and quarterly interim 
+reviews of the financial statements of LocatePlus Holdings Corporation (“LocatePlus”) 
+(collectively “the Engagements”).  Howley served as the Engagement Partner and Wood served as 
+the Concurring Partner on the Engagements. 
+ 
+ 2. This matter also concerns improper professional conduct within the meaning of 
+Rule 102(e) of the Commission's Rules of Practice by L&H, Howley and Wood in connection with 
+the Engagements.   
+ 
+ 3. On October 14, 2010, th e Commission filed a complaint against LocatePlus 
+alleging, in part, that LocatePlus’ former CEO and CFO fraudulently inflated the company’s 
+publically-reported revenue in its periodic filings with the Commission for at least fiscal years 
+2005 and 2006.
+ 4  The complaint alleges that, as part of LocatePlus’ fraud, its CEO and CFO 
+                                                 
+2 Rule 102(e)(1)(ii) provides, in pertinent part, that: 
+ 
+ The Commission may censure a person or 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. 
+ 
+3  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. 
+ 
+4   See SEC v. LocatePlus Holdings Corp et. al., Docket No. 1:10-cv-11751 (DPW) (D. Mass.). 
+ 3
+created a fictitious customer called Omni Data Services, Inc. (“Omni Data”) and that LocatePlus 
+then improperly recognized revenue from Omni Data.  The improper Omni Data revenue was 
+included in LocatePlus’ financial statements that were part of quarterly and annual reports for 
+fiscal years 2005 and 2006 and were included in filings with the Commission.  In total, 
+LocatePlus falsely reported more than $6 million from Omni Data for fiscal years 2005 and 2006, 
+representing over 25% of LocatePlus’ total revenue for those two years.  On November 10, 2010, 
+the Commission amended its complaint to include charges against Jon R. Latorella, LocatePlus’ 
+former CEO, and James C. Fields, LocatePlus’ former CFO, alleging that, among other violations, 
+they each violated the antifraud provisions, and aided and abetted LocatePlus’ violations of the 
+reporting provisions, of the federal securities laws.  Also on November 10, 2010, an indictment 
+was unsealed in the District of Massachusetts charging Fields and Latorella with, among other 
+things, criminal violations of the federal securities laws stemming from the same conduct alleged 
+in the Commission’s complaint.5 
+ 
+4. During the course of L&H’s 2005 and 2006 year-end audits of LocatePlus, L&H, 
+Howley and Wood failed to include procedures designed to provide reasonable assurance of 
+detecting illegal acts that would have a direct and material effect on the determination of 
+financial statement amounts and thus each of them violated Section 10A(a)(1) of the Exchange 
+Act. 
+  
+5. During the course of L&H’s 2005 and 2006 year-end audits of LocatePlus, L&H, 
+Howley and Wood became aware of multiple allegations of illegal acts at LocatePlus, including 
+allegations that the Omni Data revenue was fictitious, yet they failed to determine whether it was 
+likely that an illegal act had occurred.  Based on this conduct, each of them violated Section 
+10A(b)(1) of the Exchange Act.  
+ 
+6. During the course of L&H’s 2005 and 2006 year-end audits of LocatePlus, L&H, 
+and Howley became aware of red flags indicating that the Omni Data revenue was fictitious yet 
+they failed to ensure that very risk area was properly audited.  Moreover, L&H and Howley 
+failed to properly plan the audits, adequately test the Omni Data revenue, obtain sufficient 
+competent evidential matter to serve as a basis for L&H’s audit reports, exercise due professional 
+care, apply skepticism, and properly assess the risks of material misstatement due to fraud.  
+Wood was also aware of the red flags indicating that the Omni Data revenue may be fictitious 
+and that these matters were unresolved, yet he concurred with the issuance of audit reports 
+containing unqualified opinions on LocatePlus’ 2005 and 2006 financial statements.  Based on 
+the Respondents’ highly unreasonable conduct, Respondents engaged in improper professional 
+conduct within the meaning of Rule 102(e)(ii). 
+    
+B. RESPONDENTS
+ 
+ 
+7. Kevin F. Howley , age 50 and a resident of Wrentham, Massachusetts, is a Certified 
+Public Accountant (“CPA”) licensed in Massachusetts, California and Vermont.  Howley served as 
+the engagement partner on LocatePlus’ audits and interim reviews for the years ended 2005 and 
+                                                                                                                                                             
+ 
+5 See United States v. Latorella, et. al, 10-CR-10388 (NRG) (D. Mass.).  
+ 4
+2006.  Howley generally serves as the engagement partner for all of L&H’s public company 
+clients.  Howley is an approximately two percent shareholder in L&H.  
+ 
+8. William W. Wood, Jr.
+, age 64 and a resident of Townsend, Massachusetts, is a CPA 
+licensed in Massachusetts.  Wood served as the concurring partner on the LocatePlus audits and 
+interim reviews for the years ended 2005 and 2006.  Wood also serves as L&H’s technical partner 
+and as the concurring partner for all of L&H’s SEC clients.  Wood is an approximately ten percent 
+shareholder in L&H. 
+ 
+9. Livingston & Haynes, P.C. 
+ is an accounting and auditing firm registered with the 
+Public Company Accounting Oversight Board (the “PCAOB”) based in Wellesley, Massachusetts.  
+The firm provides tax preparation services as well as services to public companies registered with 
+the Commission and to private equity clients.  L&H served as the auditors on LocatePlus’ audits 
+and interim reviews for the fiscal years-ended 2005 and 2006 from which L&H received 
+approximately $227,800 in fees.  
+ 
+C. OTHER RELEVANT PE RSONS AND ENTITIES
+ 
+ 
+10. James C. Fields , age 42, resides in Brookline, Massachusetts.  During the relevant 
+time period, Fields was a director of Paradigm Tactical Products, Inc. (“Paradigm”).  Fields also 
+held several positions with LocatePlus before resigning in early 2009, including Acting Chief 
+Financial Officer and Chief Executive Officer.  In testimony before the staff, he asserted his Fifth 
+Amendment privilege against self incrimination to all questions.   
+ 
+11. Jon R. Latorella , age 47, resides in Marblehead, Massachusetts.  Latorella was a 
+founder of Paradigm and, at various times between 2002 and early 2009, held different positions 
+with LocatePlus’ including Chief Executive Officer, President and Chairman of the Board.  He 
+resigned in early 2009.  In testimony before the staff, he asserted his Fifth Amendment privilege 
+against self incrimination to all questions. 
+ 
+ 12. LocatePlus Holdings Corporation
+, a Delaware corporation, is located in Beverly, 
+Massachusetts and provides online access to public record databases for investigative searches.  
+LocatePlus’ stock is registered pursuant to Section 12(g) of the Exchange Act and is currently 
+quoted on FINRA’s OTC Bulletin Board.  It has a fiscal year ending on December 31. 
+ 
+D. FACTS  
+ 
+ LocatePlus’ Fraud  
+  
+ 13. LocatePlus is a provider of public in formation made available via either a CD-
+ROM based product or via a proprietary internet accessible database.  The LocatePlus product 
+contains searchable information on individuals throughout the United States, including, for 
+example, social security numbers, prior residences and real estate holdings.  In addition to direct 
+purchasers, LocatePlus sells its product through "channel partner" arrangements, by which third 
+parties access their databases in consideration for a royalty. 
+ 5
+ 
+ 14.  In 2005 and 2006, Locat ePlus claimed to have secured a significant “channel 
+partner” arrangement with Omni Data, a company that purportedly conducted its business over the 
+Internet.  Under the terms of the alleged agreement, Omni Data had unlimited access to 
+LocatePlus’ data via the Internet in exchange for a royalty fee of $300,000 per month.  The 
+agreement also stated that LocatePlus would build and maintain a website for Omni Data in 
+exchange for $500,000. 
+ 
+ 15. In fact, Omni Data was a sham cust omer of LocatePlus created by Fields and 
+Latorella to record false revenue.  Through this fraudulent scheme, Omni Data would “buy” 
+services from LocatePlus and make purported “payments” to LocatePlus.  Fields and Latorella then 
+caused LocatePlus to record these fictitious payments as revenue in its financial results, which 
+were included in periodic filings with the Commission. 
+ 
+  16. To fund these purported payments to LocatePlus, Latorella and Fields funneled 
+approximately $2 million in cash to Omni Data through a series of transactions which included (1) 
+a “round trip” transaction in which LocatePlus made a $650,000 payment to an entity controlled by 
+Fields, who then transferred $600,000 to Omni Data, which then paid the  $600,000 back to 
+LocatePlus as purported payment for services; and (2) transferring at least $250,000 of the 
+proceeds from the unregistered sales of Paradigm stock first to Omni Data and then to LocatePlus, 
+again as payment for purported services. 
+ 
+17. LocatePlus made numerous false and misl eading statements regarding, among other 
+things, its revenue in a number of periodic filings with the Commission, including in its Forms 10-
+KSB and 10-QSB for fiscal years 2005 and 2006.   For fiscal years 2005 and 2006, LocatePlus 
+improperly recognized $3.6 million and $2.7 million, respectively, in fictitious revenue from Omni 
+Data.   This caused LocatePlus to overstate its 2005 annual results by 46% and its 2005 quarterly 
+results by 53% for the first quarter, 44% for the second quarter and 43% for the third quarter.   
+LocatePlus overstated its 2006 annual results by 28% and its 2006 quarterly results by 41% for the 
+first quarter, 34% for the second quarter and 36% for the third quarter.  
+ 
+ 18. L&H performed LocatePlus’ 2005 and 2006 year-end audits  and quarterly reviews.  
+The audit reports issued for both years included an explanatory paragraph stating that LocatePlus’ 
+substantial net losses raise substantial doubt about the Company’s ability to continue as a going 
+concern. 
+ 
+Events Leading Up to L&H’s Fiscal Year 2005 and 2006 Year-End Audits and Quarterly 
+Reviews of LocatePlus 
+ 
+ 19. On December 10, 2004, LocatePlus’ former auditor, resigned.  In a resignation 
+letter addressed to LocatePlus’ Audit Committee Chairman, and filed with LocatePlus’ December 
+13, 2004 Form 8-K/A, LocatePlus’ former auditor cited “concerns about the timeliness of 
+information we receive and about the reliability of certain representations of your company’s 
+management.” 
+ 
+ 6
+ 20.   In January 2005, Fields contacted  Howley to inquire about L&H becoming 
+LocatePlus’ new auditors. 
+ 
+ 21. On February 16,  2005, Howley and Wood visited the former auditor’s offices and 
+met with the partner formerly responsible for the LocatePlus engagement.  The former auditor’s 
+audit partner detailed multiple reasons for its resignation, including: (1) difficulty getting 
+information from management; (2) management providing contradictory explanations to its 
+questions; (3) management providing unsigned contracts as audit evidence; and, (4) difficulty 
+getting management to accept its proposed audit adjustments.  
+ 
+22. Following the February 16, 2005 meeting, LocatePlus’ former auditor provided 
+L&H with access to LocatePlus’ 2003 work papers and provided a copy of a February 4, 2005 
+letter from the former auditor to LocatePlus’ Audit Committee that described allegations by a 
+former member of LocatePlus’ management that Andover Secured Resources (“ASR”), an entity 
+to which LocatePlus purportedly loaned $2,000,000, was not a legitimate entity.   
+ 
+23. After L&H’s meeting with LocatePlus’ former auditor, Howley, Wood and L&H’s 
+President met and determined to accept LocatePlus as a client.  Because of the concerns expressed 
+by LocatePlus’ former auditor, however, L&H determined to “use extensive care” and treat 
+LocatePlus as a high risk audit client. 
+ 
+24. During the 2004 audit (which occu rred from March through May 2005), L&H 
+encountered difficulty verifying the existence and valuation of the ASR note receivable, so much 
+so that it was ultimately fully reserved for, meaning that the ASR note was ultimately valued at $0 
+on LocatePlus’ balance sheet. 
+ 
+25. Also during the 2004 au dit, L&H had difficulties getting information from 
+LocatePlus’ management about significant transactions, to the extent that, on April 11, 2005, L&H 
+pulled out of the field because they were unable to remain productive with the amount of 
+information they had to work with.  L&H also had difficulties confirming significant balance sheet 
+items, including the Paradigm and ASR notes receivable, which resulted in a valuation of the ASR 
+note at $0 on LocatePlus’ balance sheet. 
+ 
+ L&H Discovered Red Flags Du ring the 2005 Interim Reviews 
+ 
+ 
+ 26. During the course of its 2005 interi m reviews of quarterly filings, L&H became 
+aware of multiple red flags concerning the revenue recognized from Omni Data and the resulting 
+receivable on LocatePlus’ balance sheet.  In a June 1, 2005, e-mail from Howley to Fields, Howley 
+noted that: (1) L&H was unable to find records for Omni Data on the Connecticut Secretary of 
+State’s website (i.e.
+, the state where Omni Data was purportedly located); (2) that the alleged 
+President of Omni Data was not listed for any of the Omni Data entities that they did find; and (3) 
+that L&H could not locate a website for Omni Data, despite the fact that Omni Data was 
+purportedly a business doing data sales over the Internet. 
+ 
+ 7
+ 27.   Howley accepted management’s explanati ons for the inconsistencies.  For example, 
+in response to an L&H inquiry about the scarcity of information available on Omni Data, 
+LocatePlus’ in-house accountant told Howley in a June 7, 2005 e-mail that “we don’t make it 
+common practice to research companies extensively with which we do business.”   In addition, in a 
+June 9, 2005 e-mail, Fields claimed that “[Omni Data] does not have a corp[sic] web site because 
+they are trying to keep a low profile” and that Omni Data’s web site was, in fact, under the name 
+“findyourpeeps.com.” 
+ 
+ 28. As of June 30, 2005, the Omni Data receivabl e was approximately $1.8 million 
+reflecting revenue of the same amount recognized in 2005.  No collections had been received as of 
+June 30, 2005 from Omni Data for revenues earned in 2005.  
+   
+L&H Received Allegations of Illegal Acts Prior to and During the Course of the 2005 
+Audit 
+ 
+ 29. On or about August 26, 2005, Howley received a message that a former LocatePlus 
+Board member (“the informant”) wanted to speak with him.  During a telephone conversation with 
+Howley shortly thereafter, the informant made a number of allegations of wrongdoing by 
+LocatePlus, Fields and Latorella.  Among other things, the informant questioned the validity of the 
+Omni Data transactions and indicated that the alleged President of Omni Data was a former 
+girlfriend of Latorella.  Shortly after the telephone conversation, Howley relayed the substance of 
+the informant’s allegations to Wood. 
+ 
+ 30. Between at least Decemb er 2005 and March 2006, the informant contacted Howley 
+via telephone and e-mail on numerous occasions regarding his concerns about fraud at LocatePlus.  
+During the course of multiple e-mail exchanges with Howley, the informant provided the 
+following information (hereinafter the “informant’s allegations”):   
+ 
+a. that Omni Data revenue was phony and there was no evidence that Omni Data 
+existed; 
+b. that the Omni Data contract was signed five months before Delaware 
+incorporation records showed that the company was incorporated; 
+c. that the alleged President of Omni Data  was a “stooge set up by Latorella to mask 
+phony sales”; that she was, in fact, a ballet teacher and Latorella’s former 
+girlfriend; and, that when confronted by the informant, she admitted knowing 
+nothing about Omni Data;  
+d. that Latorella told the informant that Omni  Data was a start-up that “might not be 
+around”; 
+e. that LocatePlus’ Audit Committee Chairman had a conflict of interest because he 
+had pledged assets to secure a loan to Latorella; 
+f. that Latorella had been buying off LocatePlus’ Audit Committee Chairman 
+through extending him high interest loans (at 30% to 40%);  
+g. that Paradigm, which had a revolving lin e of credit with LocatePlus, and was not 
+identified as a related party, was owned and controlled by Fields and Latorella; 
+ 
+ 8
+ 31. Wood read the informant's e-mails and discussed them with Howley prior to and 
+during the course of the 2005 year-end audit. Wood also discussed the allegations with L&H's 
+President.  Howley forwarded the e-mails from the informant to LocatePlus’ Audit Committee 
+Chairman.  In e-mail correspondence Howley recommended to LocatePlus’ Audit Committee 
+Chairman that the Audit Committee Chairman should plan a meeting with the informant, the Audit 
+Committee’s legal counsel and Howley to address the informant’s allegations.  The meeting never 
+occurred. 
+ 
+ Failure to Adequately Test the Omni Data Revenue and Receivable 
+ 
+ 
+32. According to the AICPA Codification of  Statements on Auditing Standards (as 
+adopted and amended by the PCAOB in April 2003), the objective of the ordinary audit of 
+financial statements by the independent auditor is the expression of an opinion on the fairness with 
+which they present, in all material respects, financial position, results of operations, and its cash 
+flows in conformity with GAAP.  (See PCAOB Standards and Related Rules, AU § 110, 
+Responsibilities and Functions of the Independent Auditor, at .01.)6  The auditor has a 
+responsibility to 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.  (See 
+PCAOB Standards and Related Rules, AU § 110.02.)  “Sufficient competent evidential matter is to 
+be obtained” by the auditor “to afford a reasonable basis for an opinion regarding the financial 
+statements under audit.”  (See PCAOB Standards and Related Rules, AU § 326, Evidential Matter, 
+at .01.)  PCAOB Auditing Standards state 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.”  (See PCAOB Standards and Related Rules AU §333, 
+Management Representations, at .02.)  When fraud risk factors are present at a client, such as they 
+were at LocatePlus, and heighten the auditor’s concern about the risk of material misstatement, the 
+auditor should consider this in determining the nature, timing, or extent of procedures.  (See 
+PCAOB Standards and Related Rules AU § 312, Audit Risk and Materiality in Conducting an 
+Audit, at .16-.17.) 
+  
+33.   GAAP provides generally that revenue  may be recognized when:  1) persuasive 
+evidence of an arrangement exists; 2) delivery has occurred; 3) the seller’s price is fixed or 
+determinable; and 4) collectability is reasonably assured (see: AICPA Statement of Position 97-2, 
+Software Revenue Recognition; SEC Staff Accounting Bulletin (“SAB”) No. 101, Revenue 
+Recognition in Financial Statements (as superseded in part by SAB No. 104, Revenue 
+Recognition). 
+ 
+ 2005 Audit  
+ 
+34. L&H identified numerous risk factors indi cating that LocatePlus had a high risk for 
+fraud during the 2005 year-end audit (which occurred during March through May 2006).  In a 
+fraud “brainstorming” memo included in L&H’s 2005 audit work papers, L&H specifically 
+identified “overstated and/or fictitious revenues/accounts receivable” relative to Omni Data and 
+                                                 
+6 All references herein to PCAOB standards are to the PCAOB standards in effect at the time of the conduct.   
+ 9
+Paradigm as a particular risk for fraud.  The memo went on to state that “L&H will approach the 
+audit with much skepticism.” 
+ 
+ 35. Despite having identified th e Omni Data transactions as a high risk area and being 
+aware of the allegations that Omni Data was fictitious, L&H, under Howley’s direction, failed to 
+obtain sufficient competent evidential matter that LocatePlus had delivered its product to Omni 
+Data as required by the PCAOB standards.  Although L&H tested delivery of products and 
+services for other LocatePlus’ customers, it did not test delivery to Omni Data even though it 
+accounted for approximately one-third of LocatePlus’ revenue.  For other customers, L&H 
+compared the amounts billed and recognized as revenue to LocatePlus’ data usage logs to ensure 
+that the customer had agreed to purchase the product and had actually used it.  However, L&H 
+never looked at the usage logs for Omni Data.  Had L&H reviewed Omni Data’s usage logs, they 
+would have discovered that there was no activity or usage in 2005.  Instead, L&H relied upon the 
+executed agreement between LocatePlus and Omni Data and confirmation received from Omni 
+Data regarding the monies earned and owed. 
+ 
+  36. L&H’s concerns about the validity of  the Omni Data receivable caused it to 
+specifically require LocatePlus’ management to make representations about it in its 2005 
+management representation letter (dated March 22, 2006).  The letter, signed by Fields and 
+Latorella, stated, among other things, “I have no knowledge of any fraud or suspected fraud 
+affecting the Company,” “I have no knowledge of any allegations of fraud or suspected fraud 
+affecting the Company,” and “I did not personally benefit from the . . . Omni Data transaction[].” 
+ 
+ 37. Wood was involved in aud it planning discussions for the 2005 year-end audit, 
+including discussions about the design of testing for revenue recognition and, in particular, the 
+testing for the Omni Data receivable.  
+ 
+  2006 Audit  
+ 
+ 38. Questions persisted at L&H throughou t the 2006 year-end audit of LocatePlus 
+(which occurred during approximately March through May 2007) about the existence and 
+collectability of the growing Omni Data receivable balance.
+7  As of December 31, 2006, the Omni 
+Data receivable balance was $5.1 million representing approximately 88% of LocatePlus’ total 
+receivables.  In a work paper included in L&H’s 2006 year-end audit work papers, L&H noted that 
+“there is questionability regarding the Omni Data receivable and the existence of Omni Data 
+(whether it is a viable entity).”   The purported Omni Data agreement had been amended, as of 
+October 1, 2006, to extend Omni Data’s payment terms to $45,000 per month for the 
+approximately $4.2 million outstanding balance.  Under the original contract terms, payments were 
+due thirty days from the invoice date.  As a result of the Amendment, LocatePlus reclassified $3.8 
+million dollars of the Omni Data receivable from current accounts receivable to long-term accounts 
+receivable.  It also recorded a discount and an allowance on the receivable which was 
+approximately $1.9 million as of December 31, 2006.   
+ 
+                                                
+ 
+7 As noted above, determining that collectability is reasonably assured is the fourth criterion of revenue recognition. 
+ 10
+ 39. Again, during the 2006 year-end audit,  L&H required LocatePlus’ management to 
+include in its 2006 management representation letter, dated May 1, 2007, the statements, “I have 
+no knowledge of any fraud or suspected fraud affecting the Company,” “I have no knowledge of 
+any allegations of fraud or suspected fraud affecting the Company” and “I did not personally 
+benefit from the . . . Omni Data transaction[].” 
+ 
+ 40. Despite these developments and the open  question as to whether Omni Data was a 
+viable entity, L&H failed to obtain sufficient competent evidential matter that the Omni Data 
+transaction was properly stated in the financial statements.   
+ 
+ 41. An L&H document, draf ted by Howley and entitled “LocatePlus Memorandum – 
+Gallagher Allegations,” summarizes the allegations made by the informant and purports to recount 
+certain conversations Howley had with representatives at LocatePlus regarding those allegations.  
+Among other things, Howley wrote that he had discussed the allegations with the Audit Committee 
+Chairman and that the Audit Committee Chairman indicated he did not believe there was any basis 
+to the allegations.  Howley also wrote that he had discussed the allegations with LocatePlus’ 
+outside counsel who indicated that he had investigated the allegations, found no basis for them, and 
+that he believed the informant’s allegations were related to a personal debt between Latorella and 
+the Informant.  The document, however, is undated and was not contained in either L&H’s 2005 or 
+2006 LocatePlus work papers. 
+   
+ Failure to Adequately Plan the 2005 and 2006 Year-End Audits
+ 
+ 
+ 42.  When planning an a udit, “the auditor should consider, among other matters: 
+[c]onditions that may require extension or modification of audit tests, such as the risk of material 
+error or fraud. . .”  (See PCAOB Standards and Related Rules, AU § 311, Planning and 
+Supervision, at.03.)  
+ 
+ 43. L&H, under Howl ey’s direction, failed to adequately plan the 2005 and 2006 year-
+end audits of LocatePlus by designing procedures that would account for the heightened risk of 
+fraud and, specifically, for the possibility that the Omni Data revenue was fictitious, as had been 
+alleged.  L&H’s testing procedures for the Omni Data revenue included relying on the 
+confirmation process and the existence of an executed contract and checking cash receipts.  Omni 
+Data, however, was not paying within its contract terms and, as Wood acknowledged during 
+October 6, 2010 testimony before the Commission, if LocatePlus “set up a dummy company,” as 
+had been alleged, then the confirmation process “would not be adequate evidence.”
+8   
+ 
+ 44. Howley, as the engagement partner, was responsible for planning the 2005 and 
+2006 year-end audits.  Wood was also involved in planning the 2005 and 2006 year-end audits.     
+ 
+                                                
+ 
+8 The original Omni Data contract stated that payment was due 30 days from the invoice date.  If any payment was 
+not received within 60 days of the due date (or 90 days from the invoice date) Omni Data was required to pay a late 
+fee.   Only $250,000 in payments from Omni Data was collected out of approximately $3.6 in revenue recognized in 
+2005 despite the fact that Omni Data revenue was recognized ratably over the year 2005, including approximately 
+$1 million recognized in the first quarter ended March 31, 2005. 
+ 11
+ Failure to Competently Evaluate Eviden ce Obtained by the Confirmation Process 
+ 
+45. In general, it is presumed that “[a]udit evidence is more reliable when it is obtained 
+from knowledgeable independent sources outside the entity.” (See PCAOB Standards and Related 
+Rules, AU §326.21) 
+ 
+46. During the 2005 year-end audit, L&H failed to competently evaluate the reliability 
+of the audit evidence obtained by the confirmation process.  First, L&H initially sent its 
+confirmation to the President of Omni Data—a person alleged by the informant to be a “stooge” of 
+Latorella—at the address LocatePlus had provided.  Moreover, the confirmation was initially 
+returned to L&H by the U.S. Postal Service as “undeliverable.”  Ultimately, a confirmation was 
+received, signed by a person purporting to be President of Omni Data.   
+ 
+47. During the 2006 year-end audit, the co nfirmation sent to the Omni Data address 
+that LocatePlus had provided was again returned as “undeliverable.”  When Howley questioned 
+LocatePlus about the confirmation, he was told that Omni Data had a new President, and that it 
+was doing business under a completely different name: Economics Data Solutions.  Howley 
+researched the new President but was unable to confirm that he was related to Omni Data.  In fact, 
+the only research contained in L&H’s 2006 work papers regarding the alleged new President was a 
+December 8, 2005 newspaper article describing an individual by the same name as an attendee at 
+tryouts for the reality television show Ultimate Fighting.  L&H ultimately received a confirmation 
+signed by a person purporting to be the new President of Omni Data. 
+ 
+48. L&H, Howley and Wood had no reason to believe that  the successive Presidents of 
+Omni Data were knowledgeable (PCAOB Standards and Related Rules, AU § 330, The 
+Confirmation Process, at.26) or, in the case of the Omni Data President alleged to be a “stooge” of 
+Latorella, objective (PCAOB Standards and Related Rules, AU § 330.27). 
+  
+Failure to Assess the Risk of Material Misstatement Due to the Omni Data Transaction 
+ 
+ 
+ 49. AU § 316, Consideration of Fraud in a Financial Statement Audit, requires the 
+auditor to assess the risks of material misstatement due to fraud.  (See PCAOB Standards and 
+Related Rules, AU § 316.) 
+ 
+ 50. Although L&H became aw are of the informant’s allegations prior to and during the 
+course of the 2005 year-end audit, it took few steps to investigate the informant’s allegations 
+during the 2005 year-end audit.  Moreover, to the extent to which L&H developed any evidence 
+regarding the informant’s allegations, the evidence corroborated many of the informant’s claims.  
+For example, L&H searched Connecticut and Massachusetts corporate records, but found no 
+evidence that Omni Data was incorporated.   Howley attempted to contact the alleged President of 
+Omni Data, but was initially unable to reach her as the first confirmation sent to Omni Data was 
+returned as undeliverable.  With regard to Paradigm, a company that LocatePlus had represented 
+was independent from LocatePlus, Wood and Howley learned in September 2005 that Latorella 
+was listed as the registrant and administrative contact for Paradigm’s web site, suggesting that 
+Paradigm was, in fact, not independent from LocatePlus, just as the informant had alleged. 
+ 12
+ 
+51. In addition, L&H discovered additional red flags regarding the Omni Data 
+transaction during the 2005 interim reviews and year-end audit.  For example, L&H discovered:  
+ 
+a. that the Omni Data receivable comp rised approximately 76% of the overall 
+accounts receivable but LocatePlus had collected only $250,000 in payments in 
+2005 from Omni Data out of approximately $3.6 million in revenue recognized; 
+b. payments totaling approximately $10,000 from LocatePlus to the alleged 
+President of Omni Data, and;  
+c. payments totaling approximately $325,000 to Latorella. 
+ 
+52. Although L&H’s work papers document th e informant’s allegations, they do not 
+document the procedures specifically designed to assess these risks.  In fact, L&H’s “Fraud Risk 
+Assessment Form,” for the 2005 year-end audit, which lays out procedures intended to facilitate 
+compliance with AU Section 316, is blank. Moreover, an item on L&H’s audit program 
+(completed at the conclusion of the audit) specifically instructs “[i]f you believe that fraud or an 
+illegal act may have occurred, document the circumstances identified” and “apply the procedures 
+for potential fraud or illegal acts in additional procedures section of this audit program.”  The 
+work paper states “none noted” next to the proposed procedure indicating that L&H never 
+applied the additional procedures in its own audit program.  Howley testified that he reviewed 
+this work paper. 
+  
+53. L&H’s 2005 year-end work papers do not document that L&H came to any 
+conclusion about the merits of the informant’s allegations.  Indeed, L&H’s 2006 year-end work 
+papers document that the very existence of Omni Data was still an open question through the 
+2006 year-end audit and that L&H did not come to a final conclusion about the informant’s 
+allegations until, at the earliest, April 2007. 
+ 
+54. Despite the numerous red flags and lingering questions about th e existence of the 
+Omni Data receivable, L&H’s 2006 year-end work papers also do not document an assessment 
+of the risks of material misstatement due to fraud.  
+ 
+55. Despite being aware of the informant’s a llegations of fraud (and thus the risks of 
+material misstatement), Howley did not undertake adequate audit procedures during the 2005 or 
+2006 year-end audits to assess these risks. 
+ 
+Failure to Use Due Professional Care and Exercise Skepticism
+ 
+ 
+ 56. An auditor must exercise due professiona l care in the planning and performance of 
+the audit and the preparation of the audit report.  (See PCAOB Standards and Related Rules, AU § 
+230, Due Professional Care in the Performance of Work, at .01.)  Further, statements on auditing 
+standards note that “[d]ue professional care requires the auditor to exercise professional 
+skepticism,” (see PCAOB Standards and Related Rules, AU §  230.07) and “[i]n exercising 
+professional skepticism, the auditor should not be satisfied with less than persuasive evidence 
+because of a belief that management is honest,” (see PCAOB Standards and Related Rules, AU § 
+ 13
+230.09).  Professional skepticism is an attitude that includes a questioning mind and a critical 
+assessment of audit evidence.  (See PCAOB Standards and Related Rules, AU § 230.07)  The 
+auditor’s exercise of professional skepticism is important when considering the risk of material 
+misstatement due to fraud.  (See PCAOB Standards and Related Rules, AU § 316.13.) 
+ 
+ 57. L&H’s 2005 year-end audit work  papers document that L&H accepted 
+management’s explanations for the red flags without applying a high degree of skepticism.  For 
+example, with regard to the Omni Data receivable, Howley accepted LocatePlus’ management’s 
+representation that it was collectable despite L&H’s difficulties verifying its existence and Omni 
+Data’s failure to make payments under the terms of the purported contact.  With regard to the 
+Latorella payments, Howley accepted the explanation that the payments were “bonuses” approved 
+by the Board even though the bonuses did not go through LocatePlus’ payroll system.  In addition, 
+L&H did not obtain LocatePlus’ Board minutes to attempt to verify the explanation.  Finally, with 
+regard to the payments to the alleged President of Omni Data, Howley accepted LocatePlus’ 
+explanation that they were “referral fees” despite allegations that the alleged President was a 
+figurehead installed by Latorella.   
+ 
+ 58. When additional red flags arose durin g the 2006 year-end audit, L&H again failed 
+to exercise due care and professional skepticism and relied heavily on management representations 
+regarding the Omni Data receivable.   For example, L&H’s 2006 year-end audit work papers 
+indicate that L&H performed research on Omni Data to confirm its existence but was unable to 
+confirm that Omni Data was a registered business at the address that had been provided by 
+LocatePlus. 
+ 
+59. In yet another red flag example, L&H’ s 2006 year-end audit work papers document 
+that LocatePlus was mentioned in a September 2006 complaint by the Massachusetts Securities 
+Division (“MSD”) involving securities violations by a former LocatePlus vendor.  L&H’s work 
+papers also document that Latorella was deposed during the MSD investigation and that the 
+complaint was available on MSD’s website.  Howley never read the complaint publically available 
+on MSD’s web site.  The MSD’s complaint, dated September 6, 2006, contained allegations that, 
+“[e]ven the most cursory review of LocatePlus’ [sic] business would reveal that many aspects of its 
+business were either highly exaggerated or fictitious” and that, “[ASR] has never been incorporated 
+nor organized in any state and is a fictitious entity.” 
+ 
+60. Howley, as the engagement partner, knew that the 2005 and 2006 year-end audits 
+required a high level of skepticism, yet he did not undertake additional procedures to address the 
+red flags indicating that the Omni Data transaction was fictitious.  Wood was also aware of 
+management’s responses to the auditor’s inquiries during the 2005 and 2006 year-end audits. 
+ 
+Failure to Issue Accurate Audit Reports
+ 
+ 
+61. PCAOB standards require that the aud itor’s report contain an opinion on the 
+financial statements taken as a whole and contain a clear indication of the character of the 
+auditor’s work (See PCAOB Standards and Related Rules, AU § 508, Reports on Audited 
+Financial Statements, at.04).  The auditor can determine that he is able to issue an audit report 
+ 14
+only if he has conducted his audit in accordance with PCAOB standards and the financial 
+statements have been prepared in conformity with GAAP (See PCAOB Standards and Related 
+Rules, AU § 508.07.)  
+ 
+62. A concurring partner’s responsibilities ar e outlined in the Interim Quality Control 
+Standards adopted by the PCAOB in April 2003; specifically, AICPA SEC Practice Section 
+(“SECPS”) § 1000.08(f) and Appendix E of SECPS § 1000.39. 9  Pursuant to the Interim Quality 
+Control Standards, a concurring partner fulfills his or her responsibilities by (a) discussing 
+significant matters with the engagement partner (b) discussing the audit team’s identification and 
+audit of high-risk transactions and account balances, (c) reviewing documentation of the 
+resolution of significant matters, (d) reviewing a summary of unadjusted audit differences, 
+(e) reading the financial statements and auditor’s report, and (f) confirming with the audit partner 
+that there are no significant unresolved matters. 
+ 
+63. As the Engagement Partner on L&H’s 2005 and 2006 year-end audits of 
+LocatePlus, Howley reviewed L&H’s audit work papers.  As described above, the work papers 
+contained red flags requiring additional procedures to determine whether the Omni Data revenue 
+was fictitious, yet Howley approved the issuance of the 2005 and 2006 unqualified audit reports 
+(dated March 22, 2006 and May 1, 2007 respectively) that stated that audits had been 
+conducted 
+in accordance with PCAOB standards and that the financial statements had been prepared in 
+conformity with GAAP. 
+ 
+64. As the Concurring Partner on the year-e nd 2005 and 2006 LocatePlus audits, Wood 
+was aware of the informant’s allegations and of certain red flags requiring additional procedures to 
+determine whether the Omni-Data  revenue was fictitious.  He also was aware of L&H’s response 
+to the allegations and that the allegations, including the allegation that Omni Data was fictitious, 
+were unresolved, yet he concurred in the approval of the issuance of audit reports containing 
+unqualified opinions that stated that audits had been conducted in accordance with PCAOB standards 
+and that the financial statements had been prepared in conformity with GAAP.  
+E. VIOLATIONS   
+ 
+65. As a result of the conduct described above, Respondents engaged in improper 
+professional conduct within the meaning of Section 4C(a)(2) of the Exchange Act and Rule 
+102(e)(1)(ii) of the Commission’s Rules of Practice.  Section 4C and Rule 102(e)(1)(ii) provide, 
+in part, that the Commission may censure or deny, temporarily or permanently, the privilege of 
+appearing or practicing before the Commission to any person who is found by the Commission 
+to have engaged in improper professional conduct.  Rule 4C(b) and Rule 102(e)(1)(iv) define 
+improper professional conduct with respect to persons licensed to practice as accountants.  
+ 
+66. Under Rule 4C(b)(2) and Rule 102(e)(1)( iv)(B) the term “improper professional 
+conduct” means, in part, “[a] single instance of highly unreasonable conduct that results in a 
+                                                
+ 
+9 This references concurring partner review standards set by the AICPA which were adopted by the PCAOB 
+following the passage of the Sarbanes-Oxley Act of 2002.   
+ 
+ 15
+violation of applicable professional standards in circumstances in which an accountant knows, or 
+should know, that heightened scrutiny is warranted.”  
+ 
+ 67.  In light of the specific allegations that the Omni Data transaction was fictitious, 
+L&H’s and Howley’s failure to adequately design testing procedures to address that very risk, 
+and Wood’s concurrence in the approval of the issuance of L&H’s 2005 and 2006 audit reports 
+when he knew that significant matters were unresolved, constituted highly unreasonable conduct 
+that resulted in a violation of applicable professional standards in circumstances in which each 
+knew, or should have known, that heightened scrutiny was warranted.  The failure of L&H and 
+Howley to properly plan the audits, adequately test the Omni Data revenue, obtain sufficient 
+competent evidence to serve as a basis for L&H’s audit reports, exercise due professional care, 
+apply skepticism, and properly assess the risks of material misstatement due to fraud, and the 
+failure of Wood to address these deficiencies also constituted highly unreasonable conduct that 
+resulted in a violation of applicable professional standards in circumstances in which each knew, 
+or should have known, that heightened scrutiny was warranted. 
+ 
+68. As a result of the conduct alleged above, L&H, Howley and Wood violated 
+Section 10A(a)(1) of the Exchange Act, which requires each audit to include procedures 
+designed to provide reasonable assurance of detecting illegal acts that would have a direct and 
+material effect on the determination of financial statement amounts. 
+ 
+69. As a result of the conduct alleged above, L&H, Howley and Wood violated 
+Section 10A(b)(1) of the Exchange Act, which requires that if, in the course of conducting an 
+audit, the auditor becomes aware of information indicating that an illegal act “has or may have 
+occurred,” the auditor is required to “determine whether it is likely that an illegal act has 
+occurred” in that they each failed to determine whether it was likely that the Omni Data 
+transaction was fictitious.  
+ 
+F. FINDINGS
+  
+ 
+a. Based on the foregoing, the Commission finds that L&H, Howley and Wood 
+engaged in improper professional conduct pursuant to Rules 102(e)(1)(ii) of the Commission’s Rules 
+of Practice and Section 4C of the Exchange Act. 
+ 
+b.  Based on the foregoing, the Commission finds that L&H, Howley and Wood 
+violated Section 10A(a)(1) and 10A(b)(1) of the Exchange Act. 
+ 
+ G. UNDERTAKINGS 
+ 
+ L&H undertakes the following: 
+ 
+1.  Acceptance of New Public Company Audit Clients . The goal of this undertaking 
+is to provide adequate time for L&H to implement the undertakings concerning auditing and 
+professional development matters described below and implement such other adjustments to its 
+audit practice required by the suspension of Wood and Howley from appearing or practicing 
+before the Commission. L&H undertakes that, following the issuance of this Order, it will not 
+ 16
+accept new engagements for public company audits prior to the later of one (1) year from the 
+date of this Order, or the date that L&H certifies in writing compliance with each of the 
+undertakings in the form described in paragraph 5, below (the “Certificate of Compliance”). A 
+public company audit is defined as an engagement to audit the financial statements of an “issuer” 
+as that term is defined in Section 3(a)(8) of the Securities Exchange Act of 1934.  
+  
+2.  Auditing Matters . The goal of this undertaking is to require L&H to engage in an 
+internal review of its existing policies and procedures concerning compliance with the relevant 
+professional, regulatory and firm requirements with respect to public company audit 
+engagements.  Within 90 days of this Order, L&H will evaluate its existing system of quality 
+control in conducting an audit practice and revise, as may be necessary, and then engage in steps 
+to implement and enforce, such policies and procedures so as to provide reasonable assurance 
+that L&H will comply with its obligations under professional, regulatory and firm requirements 
+with respect to public company audit engagements.  L&H shall review its policies and 
+procedures concerning:  
+ 
+a.  Identification and monitoring of hi gh risk engagements, including policies 
+covering mandatory procedures for high risk engagements. Additionally, L&H 
+shall designate a partner, within the firm responsible for risk management, 
+including, but not limited to, client acceptance and continuance procedures. 
+ 
+b. Completion of planning prior to th e commencement of audit fieldwork. Such 
+policies and procedures shall provide reasonable assurance that, prior to the 
+commencement of any significant audit procedures:  
+ 
+(i) Work papers identifying significant audit areas, documenting risks of material 
+misstatements, and planned extent of testing are finalized and reviewed and 
+approved by the engagement partner, and, when appropriate, the engagement 
+quality reviewer; and  
+ 
+(ii) Written audit programs are tailored to address identified risks of material 
+misstatements and specify in reasonable detail the procedures expected to be 
+performed to accomplish the objectives of the audit. 
+ 
+c. Detection and Reporting of Illegal Client Activity (Section 10A Compliance)
+. 
+L&H shall make such revisions as may be necessary in order to adopt, implement 
+and enforce written policies and procedures providing reasonable assurance that 
+L&H complies with Section 10A of the Securities Exchange Act of 1934, as 
+amended, including without limitation, for each audit subject to Section 10A, 
+procedures designed to provide reasonable assurance of detecting illegal acts that 
+would have a direct and material effect on the determination of financial 
+statement amounts, and to comply with all requirements under the standards of 
+the Commission, the PCAOB, and Section 10A to determine whether or not it is 
+likely that an illegal act has occurred; and if so, determine and consider the 
+possible effect of the illegal act on the financial statements of the issuer, including 
+ 17
+any contingent monetary effects, such as fines, penalties, and damages, and report 
+suspected illegal acts.  
+  
+d. Engagement Quality Control
+. L&H shall undertake a review of its existing 
+procedures to provide reasonable assurance that it complies with the PCAOB’s 
+Auditing Standard No. 7, Engagement Quality Review.  
+ 
+e. Documentation
+. L&H shall implement enhanced documentation procedures to 
+provide reasonable assurance that L&H complies with Auditing Standard No. 3, 
+Audit Documentation, on each of its public company audit engagements. Such 
+procedures shall emphasize that documentation must be prepared in sufficient 
+detail to provide a clear understanding of its purpose, source, and the conclusions 
+reached and require that any additions made after the documentation date
+10  
+must 
+identify the date the information was added, the name of the person who prepared 
+the additional documentation, and the reason for adding it. Additionally, L&H 
+shall adopt a policy making it mandatory that engagement partners on public 
+company audit engagements review each audit area designated as having a 
+significant risk of material misstatement (whether due to fraud or error) to ensure 
+compliance with both PCAOB standards and related rules and firm policies and 
+procedures. 
+ 
+3.  Professional Development
+. The goal of this undertaking is to require L&H to 
+establish, implement, and enforce written policies and procedures designed to provide reasonable 
+assurance that L&H’s professionals serving public company audit clients participate in 
+professional development activities in accordance with firm guidelines, in subjects that are 
+relevant to their responsibilities, and will contribute to their technical training and proficiency as 
+an auditor. Within 90 days of this Order, L&H will evaluate its existing professional 
+development policy and shall make such revisions as may be necessary in order to adopt, 
+implement, and enforce written policies and procedures to provide that professionals serving 
+public company audit clients participate in professional development activities in accordance 
+with firm guidelines, in subjects that are relevant to their responsibilities, including, but not 
+limited to, revenue recognition,  and will contribute to their technical training and proficiency as 
+an auditor.  Additionally, prior to December 31, 2011, L&H will require each audit professional 
+serving public company audit clients to undergo: 
+  
+a. A Minimum of 16 Hours of Audit-Rela ted Training. The audit-related training 
+requirement shall cover topics including, but not limited to: (1) assessing risks of 
+                                                
+ 
+10 PCAOB Auditing Standard No. 3, paragraph 15, states, “A complete and final set of audit documentation should 
+be assembled for retention as of a date not more than 45 days after the report release date (documentation 
+completion date). If a report is not issued in connection with an engagement, then the documentation completion 
+date should not be more than 45 days from the date that fieldwork was substantially completed. If the auditor was 
+unable to complete the engagement, then the documentation completion date should not be more than 45 days from 
+the date the engagement ceased.” 
+ 
+ 
+ 
+ 18
+material misstatements and developing responsive audit plans, and (2) obtaining 
+and evaluating sufficient competent evidential matter, including corroboration of 
+management’s representations; (3) audit documentation relating to the above.  
+The audit-related training requirement may be fulfilled by participating in or 
+completing course(s) conducted by or offered by the American Institute of 
+Certified Public Accountants (AICPA) or another comparable organization.  
+ 
+b. A Minimum of 8 Hours of Fraud-Detection Training
+. L&H shall ensure that audit 
+professionals assigned to public company engagements undergo fraud detection 
+training conducted by the Association of Certified Fraud Examiners or another 
+comparable organization. The training will include techniques in detecting and 
+responding to possible fraud by audit clients or by employees, officers or directors of 
+audit clients.  
+ 
+4.  Cooperation . L&H agrees that L&H (including its partners, principals, officers, 
+agents and employees) shall cooperate fully with the Commission with respect to any matter 
+relating to the Commission's investigation of LocatePlus or its current or former officers, 
+directors or employees, including but not limited to any litigation or other proceeding related to 
+or resulting from that investigation, including litigation in SEC v. LocatePlus Holdings Corp et. 
+al., Docket No. 1:10-cv-11751 (DPW) (D. Mass.). Such cooperation shall include, but is not 
+limited to, upon reasonable notice, and without subpoena:  
+ 
+a. Producing any document, record, or other tangible evid ence reasonably requested 
+by Commission staff in connection with the Commission's investigation, litigation 
+or other proceedings;  
+ 
+b. Providing all information reasonably requested by Commission staff in 
+connection with the Commission's investigation; and  
+ 
+c. Using its best efforts to secure the at tendance and truthful statements or testimony 
+of any L&H partner, principal, officer, agent, or employee, excluding any such 
+person who is a party to litigation with the Commission, at any meeting, 
+interview, testimony, deposition, trial, or other legal proceeding reasonably 
+requested by the Commission staff.  
+ 
+5. Certification of Compliance
+. L&H shall certify, in writing, compliance with the 
+undertakings set forth above. The certification shall identify the undertakings, provide written 
+evidence of compliance in the form of a narrative, and be supported by exhibits sufficient to 
+demonstrate compliance. The Commission staff may make reasonable requests for further 
+evidence of compliance, and L&H agrees to provide such evidence.  The certification and 
+supporting material shall be submitted to LeeAnn G. Gaunt, Assistant Director, Boston Regional 
+Office or her successor, with copies to the Office of Chief Counsel of the Enforcement Division 
+no later than one (1) year from the date of this Order. 
+ 
+ In determining whether to accept the Offer of  L&H, the Commission has considered these 
+undertakings. 
+ 19
+ 
+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, effective immediately, that: 
+ 
+L&H 
+ 
+A. L&H shall cease and desi st from committing or causing any violations and any 
+future violations of Section 10A(a)(1) and 10A(b)(1) of the Exchange Act. 
+ 
+B. L&H shall pay a civil money penalty in  the amount of $130,000 to the United 
+States Treasury.  Payment shall be made in the following installments:  $65,000 to be paid with the 
+entry of this Order and $65,000 to be paid within one-year from the date of this Order.  If any 
+payment is not made by the date the payment is required by this Order, the entire outstanding 
+balance of civil penalties plus any additional interest accrued pursuant to 31 U.S.C. 3717, shall be 
+due and payable immediately, without further application.  Payments shall be: (A) made by wire 
+transfer, 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, 100 F Street, NE, Mail Stop 6042, Washington, DC 20549; and (D) submitted under 
+cover letter that identifies Livingston & Haynes 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 LeeAnn Gaunt, Division of Enforcement, Securities and Exchange Commission, Boston 
+Regional Office, 33 Arch Street, Boston, 23
+rd Floor, Boston, MA 02110.  
+ 
+C. L&H is censured pursuant to Rule 10 2(e)(ii) of the Commission’s Rules of 
+Practice; and 
+ 
+ D. L&H shall comply with the undertakin gs enumerated in Se ctions III.G.1-3 and 
+Section III.G.5 above. 
+ 
+Howley
+ 
+ 
+A. Howley shall cease and desist from committing or causing any violations and any 
+future violations of Section 10A(a)(1) and 10A(b)(1) of the Exchange Act. 
+ 
+ B. Howley is denied the privilege of app earing or practicing before the Commission as 
+an accountant.  
+ 
+ C. After three (3) years from  the date of this order, Howley 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: 
+ 20
+      
+       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 Howley’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) Howley, 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) Howley, or the registered pub lic 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 Howley’s or the firm’s quality control system that would indicate that Howley 
+will not receive appropriate supervision; 
+   (c) Howley has resolved all discip linary 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) Howley acknowledges his respon sibility, as long as Howley 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.   
+      
+D. The Commission will consider  an application by Howley 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 Howley’s character, 
+integrity, professional conduct, or qualifications to appear or practice before the Commission. 
+ 
+Wood
+ 
+ 
+A. Wood shall cease and desi st from committing or causing any violations and any 
+future violations of Section 10A(a)(1) and 10A(b)(1) of the Exchange Act. 
+ 
+ B. Wood is denied the privilege of appear ing or practicing before the Commission as 
+an accountant.  
+ 
+ 21
+ C. After three (3) years fr om the date of this order, Wood 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 Wood’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 ) Wood, 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) Wood, 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 Wood’s or the firm’s quality control system that would indicate that Wood will 
+not receive appropriate supervision; 
+   (c) Wood has resolved all discip linary 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) Wood acknowledges his respons ibility, as long as Wood 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.  
+ 22
+  
+      
+D. The Commission will consider an app lication by Wood 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 Wood’s character, 
+integrity, professional conduct, or qualifications to appear or practice before the Commission. 
+ 
+ 
+By the Commission.  
+ 
+ 
+Elizabeth M. Murphy 
+Secretary 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 23
+ 
+ 
+Service List 
+ 
+ Rule 141 of the Commission's Ru les of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the 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"), on the 
+Respondents  and their legal agent. 
+ 
+ The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+ 
+Honorable Brenda P. Murray    
+Chief Administrative Law Judge   
+Securities and Exchange Commission  
+100 F Street, N.E 
+Washington, DC 20549-2557  
+   
+Britt K. Collins, Esq.     
+Securities and Exchange Commission   
+Boston Regional Office 
+33 Arch Street, 23
+rd Floor  
+Boston, MA  02110 
+ 
+Mr. Kevin F. Howley 
+c/o Warren D. Hutchison, Esq. 
+LeClairRyan 
+One International Place 
+11
+th Floor 
+Boston, MA 02110 
+ 
+Mr. William W. Wood 
+c/o Warren D. Hutchison, Esq. 
+LeClairRyan 
+One International Place 
+11
+th Floor 
+Boston, MA 02110 
+ 
+Livingston & Haynes, P.C. 
+Attn:  Frederick D. Haynes 
+c/o Warren D. Hutchison, Esq. 
+LeClairRyan 
+One International Place 
+ 24
+11th Floor 
+Boston, MA 02110 
+ 
+ 
+Warren D. Hutchison, Esq. 
+LeClairRyan 
+One International Place 
+11
+th Floor 
+Boston, MA 02110 
+(Counsel for Livingston & Haynes, PC, Kevin F. Howley and William W. Wood)  
\ No newline at end of file
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+ 
+ 
+UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64621 / June 8, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3290 / June 8, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14416 
+ 
+                                                                    
+                                                               : 
+In the Matter of  :  ORDER OF FORTHWITH 
+ :   SUSPENSION PURSUANT TO RULE  
+Edwin Reese Davis, Jr. CPA              :  102(e) 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 Edwin Reese Davis, Jr. (“Respondent” or “Davis”) pursuant to 
+Rule 102(e)(2) of the Commission’s Rules of Practice. 1 
+ 
+II. 
+ 
+ The Commission finds that: 
+ 
+ A.  Respondent 
+ 
+ 1.  Edwin Reese Davis, Jr., age 62, of Cedar City, Utah, was a certified public accountant 
+(“CPA”) in Utah from October 29, 1977 until his license expired on September 30, 2008.  Davis 
+                                                 
+1 Rule 102(e)(2) provides, in relevant part, that “any person whose license to practice as an 
+accountant . . . has been revoked or suspended in any State; or 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 
+has never been licensed in any other state.  Davis is the sole principal of Davis Accounting Group 
+P.C. (“Davis Accounting”) and Etania Audit Group P.C. (“Etania,”) both Utah companies. 
+ 
+ B.  Davis’s License was Revoked on November 4, 2010.  
+ 
+ On November 4, 2010, Utah’s Division of Occupational & Professional Licensing revoked 
+Davis’ CPA license, for failure to pay required fees and for continuing to practice as a CPA after 
+his license had expired on September 30, 2008. 
+ 
+ C.  Davis Continued to hold Himself out as a CPA after his Licensed was Revoked. 
+ 
+ Despite having his license revoked, Davis continued to hold himself out to clients as a CPA 
+and to prepare audit reports that were filed with the Commission.  Davis prepared at least twenty-
+three audit reports that were filed with the Commission after his license had expired on September 
+30, 2008. 
+III. 
+ 
+ In view of the foregoing, the Commission finds that Davis’s license to practice as an 
+accountant has been revoked within the meaning of Rule 102(e)(2) of the Commission’s Rules of 
+Practice. 
+ 
+ Accordingly, IT IS ORDERED that Edwin Reese Davis, Jr. 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. 
+ 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+ 
+ 3 
+Service List 
+ 
+ Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly 
+authorized officer of the Commission, shall serve a copy of the Order of Forthwith Suspension 
+Pursuant to Rule 102(e) of the Commission’s Rules of Practice ("Order"), on the Respondent. 
+ 
+ The attached Order has been sent to the following parties and other persons entitled to 
+notice: 
+ 
+Honorable Brenda P. Murray    
+Chief Administrative Law Judge   
+Securities and Exchange Commission  
+100 F Street, N.E. 
+Washington, DC 20549-2557 
+    
+Tanya G. Beard, Esq.     
+Salt Lake Regional Office    
+Securities and Exchange Commission   
+15 West South Temple, Suite 1800 
+Salt Lake City, UT 84101 
+      
+Edwin Reese Davis, Jr., CPA    
+1957 W. Royal Hunte Drive, Suite 150 
+Cedar City, UT  84720 
+    
+ 
\ No newline at end of file
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+UNITED STATES OF AMERICA  
+Before the  
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No.  64668 / June 14, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT  
+Release No. 3291 / June 14, 2011 
+ADMINISTRATIVE PROCEEDING  
+File No. 3-11940 
+ 
+In the Matter of  
+John Van Fleet, 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 June 2, 2005, John Van Fleet, CPA (“Van Fleet”) was denied the privilege of 
+appearing or practicing before the Commission as an accountant as a result of settled public 
+administrative proceedings instituted by the Commission against Van Fleet pursuant to Rule 
+102(e)(1) of the Commission's Rules of Practice.
+1
+ The Commission found that Van Fleet, while serving as corporate controller of 
+Huntington Bancshares, Inc. (“Huntington”), willfully violated Sections 17(a)(2) and 17(a)(3) of 
+the Securities Act of 1933, Section 13(b)(5) of the Securities Exchange Act of 1934 (“Exchange 
+Act”), and Rule 13b2-1 thereunder.  The Commission further found that Van Fleet caused 
+Huntington’s violations of Sections 13(a) and 13(b)(2)(A) and (B) of the Exchange Act, and 
+Rules 12b-20 and 13a-1 thereunder.  The Commission’s findings related to inflated earnings 
+reported in Huntington’s financial statements filed with the Commission in annual reports for 
+fiscal years 2001 and 2002.  Huntington’s improper accounting allowed them to meet or exceed 
+Wall Street analyst earnings per share expectations and to meet internal targets that determined 
+the bonuses of senior management. 
+  Van Fleet consented to the entry of the order 
+without admitting or denying the findings therein.  This order is issued in response to Van Fleet’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. 
+                                                 
+1 See Accounting and Auditing Enforcement Release No. 2252 dated June 2, 2005.  Van Fleet was permitted, 
+pursuant to the order, to apply for reinstatement after two years upon making certain showings. 
+ 
+ 2 
+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, Van Fleet 
+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.  Van Fleet 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, Van Fleet’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 Van Fleet, it appears that he has complied with the terms of the June 2, 2005 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 Van Fleet, 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, 
+ 
+ORDERED pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice that John 
+Van Fleet, 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. 
+ 
+ 
+Elizabeth M. Murphy  
+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
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@@ -0,0 +1,102 @@
+   
+  
+ 
+UNITED STATES OF AMERICA  
+Before the  
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No. 64669 / June 14, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT  
+Release No. 3292 / June 14, 2011 
+ADMINISTRATIVE PROCEEDING  
+File No. 3-13711 
+ 
+In the Matter of  
+Gregory Pasko, 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 December 10, 2009, Gregory Pasko, CPA (“Pasko”) was suspended from appearing 
+or practicing before the Commission as an accountant as a result of settled public administrative 
+proceedings instituted by the Commission against Pasko pursuant to Rule 102(e)(3)(i) of the 
+Commission's Rules of Practice.1  Pasko consented to the entry of the order without admitting or 
+denying the findings therein but for the Commission’s finding that a final judgment and 
+permanent injunction and other relief had been previously entered against him.  This order is 
+issued in response to Pasko’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. 
+The Commission’s complaint alleged that SafeNet, Inc. engaged in a scheme to meet or 
+exceed quarterly earnings per share targets through the use of improper accounting adjustments 
+from the third quarter of 2004 through the second quarter of 2005.  During this period, Pasko 
+served as SafeNet’s Director of External Reporting from January 2005 through May 2005 and as 
+SafeNet’s U.S. controller beginning in May 2005.  The complaint alleged that Pasko and others 
+made, or caused others to make, certain improper accounting adjustments in SafeNet’s books and 
+records.  The complaint further alleged that, as a result of these inappropriate adjustments, 
+SafeNet’s periodic reports, registration statements, and press releases contained materially 
+misstated financial results and materially false and misleading information concerning SafeNet’s 
+financial condition. 
+                                                 
+1 See Accounting and Auditing Enforcement Release No. 3078 dated December 10, 2009.  Pasko was permitted, 
+pursuant to the order, to apply for reinstatement after one year upon making certain showings. 
+ 
+ 2 
+ 
+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, Pasko 
+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.  Pasko 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, Pasko’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 Pasko, it appears that he has complied with the terms of the December 10, 2009 order 
+suspending him from 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 Pasko, 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, 
+ 
+ORDERED pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice that 
+Gregory Pasko, 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. 
+ 
+ 
+Elizabeth M. Murphy  
+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). 
+ 
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+                U.S. Securities and Exchange Commission 
+
+ Litigation Release No. 22002 / June 16, 2011 
+
+ Accounting and Auditing Enforcement No. 3294 / June 16, 2011 
+
+  SEC v. Farkas , 1:10-CV-00667 (E.D. Va.)  
+SEC v. Brown , 1:11-CV-00192 (E.D. Va.)  
+SEC v. Kissick , 1:11-CV-00215 (E.D. Va.)  
+SEC v. Kelly , 1:11-CV-00268 (E.D. Va.) 
+
+ SEC Charges Former Officers and Supervisors at Taylor, Bean and Whitaker Mortgage Corp. and Colonial Bank with Securities Fraud and Related TARP Scheme 
+
+ On June 16, 2010 the Securities and Exchange Commission (SEC) charged Lee B. Farkas, the former chairman and majority owner of Taylor, Bean and Whitaker Mortgage Corp. (TBW), which was once the nation's largest non-depository mortgage lender, with orchestrating a large-scale securities fraud scheme and attempting to scam the U.S. Treasury's Troubled Asset Relief Program (TARP). 
+
+ On February 24, 2011, the SEC charged Desiree E. Brown, TBW's former treasurer, with aiding and abetting Farkas' securities fraud and TARP related schemes. 
+
+ On March 2, 2011, the SEC charged Catherine L. Kissick, a former vice president at Colonial Bank and the head of its mortgage warehouse lending division (MWLD) with being an active participant in Farkas' securities fraud scheme. 
+
+ On March 16, 2011, the SEC charged Teresa A. Kelly, a former operations supervisor at Colonial Bank's MWLD with being an active participant in Farkas and Kissick's securities fraud scheme. 
+
+ In the comprehensive scheme, the SEC alleged that Farkas, Kissick, Brown and Kelly (collectively, Defendants) conspired together to sell more than $1.5 billion worth of fabricated or impaired mortgage loans and securities from TBW to Colonial Bank. Those loans and securities were falsely reported to the investing public as high-quality, liquid assets. Farkas and Brown were also responsible for a bogus equity investment that caused Colonial Bank to misrepresent that it had satisfied a prerequisite necessary to qualify for TARP funds. When Colonial Bank's parent company â€" The Colonial BancGroup, Inc. â€" issued a press release announcing it had obtained preliminary approval to receive $550 million in TARP funds, its stock price jumped 54 percent in the remaining two hours of trading, representing its largest one-day price increase since 1983. 
+
+ According to the SEC's complaints, each filed in U.S. District Court for the Eastern District of Virginia, Defendants executed the fraudulent scheme from March 2002 until August 2009, when TBW â€" a privately-held company headquartered in Ocala, Florida â€" filed for bankruptcy. TBW was the largest customer of Colonial Bank's MWLD. Because TBW generally did not have sufficient capital to internally fund the mortgage loans it originated, it relied on financing arrangements primarily through Colonial Bank's MWLD to fund such mortgage loans. 
+
+ According to the SEC's complaints, TBW began to experience liquidity problems and overdrew its then-limited warehouse line of credit with Colonial Bank by approximately $15 million each day. The SEC alleges that Farkas pressured Kissick and Kelly to assist in concealing TBW's overdraws through a pattern of "kiting" whereby certain debits to TBW's warehouse line of credit were not entered until after credits due to the warehouse line of credit for the following day were entered. As this kiting activity increased in scope, TBW was overdrawing its accounts with Colonial Bank by approximately $150 million per day. 
+
+ The SEC alleges that in order to conceal this initial fraudulent conduct, Defendants jointly devised a plan for TBW to create and submit fictitious loan information to Colonial Bank. Defendants also directed the creation of fictitious mortgage-backed securities assembled from the fraudulent loans. By the end of 2007, the scheme consisted of approximately $500 million in fake residential mortgage loans and approximately $1 billion in severely impaired residential mortgage loans and securities. As a direct result of Defendants' misconduct, these fictitious and impaired loans were misrepresented as high-quality assets on Colonial BancGroup's financial statements. 
+
+ The SEC alleges that in addition to causing Colonial BancGroup to misrepresent its assets, Farkas and Brown caused BancGroup to misstate publicly that it had obtained commitments for a $300 million capital infusion, which would qualify Colonial Bank for TARP funding. Farkas falsely told BancGroup that a foreign-held investment bank had committed to financing TBW's equity investment in Colonial Bank. Farkas also issued a press release on behalf of TBW announcing that TBW had secured the necessary financing for BancGroup. Contrary to his representations to BancGroup and to the investing public, Farkas never secured financing or sufficient investors to fund the capital infusion. When BancGroup and TBW later mutually announced the termination of their stock purchase agreement, essentially signaling the end of Colonial Bank's pursuit of TARP funds, BancGroup's stock declined 20 percent. 
+
+ The SEC's complaint against Farkas charges him with violations of the antifraud, reporting, books and records and internal controls provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Exchange Act of 1934 (Exchange Act) and Rules 10b-5 and 13b2-1 thereunder and aiding and abetting violations of Sections 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. The SEC is seeking permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties against Farkas. The SEC also seeks an officer-and-director bar against Farkas as well as an equitable order prohibiting him from serving in a senior management or control position at any mortgage-related company or other financial institution and from holding any position involving financial reporting or disclosure at a public company. On November 5, 2010, at the request of Farkas, the court stayed the SEC's action against him pending resolution of the criminal case filed against him in the same district by the U.S. Department of Justice and the U.S. Attorney's Office for the Eastern District of Virginia. 
+
+ The SEC's complaint against Kissick charges her with violations of the antifraud, reporting, books and records and internal controls provisions of the federal securities laws. Without admitting or denying the SEC's allegations, Kissick consented to the entry of a judgment permanently enjoining her from violation 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, and from aiding and abetting violations of 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. Kissick also consented to an order barring her from acting as an officer or director of any public company that has securities registered with the SEC pursuant to Section 12 of the Exchange Act. Kissick also consented to an order prohibiting her from serving in a senior management or control position at any mortgage-related company or other financial institution or from holding any position involving financial reporting or disclosure at a public company. The proposed preliminary settlement, under which the SEC's requests for financial penalties against Kissick would remain pending, is subject to court approval. 
+
+ The SEC's complaint against Brown charges her with violations of the antifraud, reporting, books and records and internal controls provisions of the federal securities laws. Without admitting or denying the SEC's allegations, Brown consented to the entry of a judgment permanently enjoining her from violation of Rule 13b2-1 of the Exchange Act and from aiding and abetting violations of Sections 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. The proposed preliminary settlement, under which the SEC's requests for financial penalties against Brown would remain pending, is subject to court approval. 
+
+ The SEC's complaint against Kelly charges her with violations of the antifraud, reporting, books and records and internal controls provisions of the federal securities laws. Without admitting or denying the SEC's allegations, Brown consented to the entry of a judgment permanently enjoining her from violation of Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder, and from aiding and abetting violations of 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 preliminary settlement, under which the SEC's requests for financial penalties against Brown remain pending, was entered by the court on May 4, 2011. 
+
+ The SEC's investigation is ongoing. The SEC acknowledges the assistance of the Fraud Section of the U.S. Department of Justice's Criminal Division, the Federal Bureau of Investigation, the Office of the Special Inspector General for the TARP, the Federal Housing Finance Agency's Office of the Inspector General, the Federal Deposit Insurance Corporation's Office of the Inspector General, and the Office of the Inspector General for the U.S. Department of Housing and Urban Development. The SEC brought its enforcement actions in coordination with these other members of the  Financial Fraud Enforcement Task Force  ( http://www.stopfraud.gov/ ). 
+
+ For further information regarding this case, see: 
+
+   Press Release Concerning Farkas 
+( http://www.sec.gov/news/press/2010/2010-102.htm )  
+
+    Complaint Against Farkas 
+( http://www.sec.gov/litigation/complaints/2010/comp-pr2010-102.pdf )  
+
+    Remarks of SEC Deputy Director of Enforcement 
+( http://www.sec.gov/news/speech/2010/spch061610llr.htm )  
+
+    Press Release Concerning Brown 
+( http://www.sec.gov/news/press/2011/2011-49.htm )  
+
+    Complaint Against Brown 
+( http://www.sec.gov/litigation/complaints/2011/comp-pr2011-49.pdf )  
+
+    Press Release Concerning Kissick 
+( http://www.sec.gov/news/press/2011/2011-56.htm )  
+
+    Complaint Against Kissick 
+( http://www.sec.gov/litigation/complaints/2011/comp-pr2011-56.pdf )  
+
+    Press Release Concerning Kelly 
+( http://www.sec.gov/news/press/2011/2011-68.htm )  
+
+    Complaint Against Kelly 
+( http://www.sec.gov/litigation/complaints/2011/comp-pr2011-68.pdf )    
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diff --git a/raw/aaer/2011/AAER-3296.txt b/raw/aaer/2011/AAER-3296.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e83afcfb0c3ab4b5e0189e98c8ec259aba203c0e
--- /dev/null
+++ b/raw/aaer/2011/AAER-3296.txt
@@ -0,0 +1,915 @@
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64720 / June 22, 2011 
+  
+INVESTMENT ADVISERS ACT OF 1940 
+Release No. 3218 / June 22, 2011 
+ 
+INVESTMENT COMPANY ACT OF 1940 
+Release No. 29704 / June 22, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3296 / June 22, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-13847 
+ 
+ 
+In the Matter of 
+ 
+MORGAN ASSET MANAGEMENT, 
+INC.; MORGAN KEEGAN & 
+COMPANY, INC.;  
+JAMES C. KELSOE, JR.; and  
+JOSEPH THOMPSON WELLER, 
+CPA,  
+ 
+Respondents. 
+ 
+ 
+ 
+ 
+CORRECTED OR DE R  MAK ING FINDINGS 
+AND IMPOSING R E ME DIAL  SANCT IONS 
+AND A  CE ASE -AND -DE SIST  OR DE R  
+PURS UAN T TO S ECTION  1 5 ( b )  OF THE 
+S ECU RITIES  EXCHAN GE ACT OF  1934, 
+SE C T I O NS 203(e), 203(f)  A ND 203(k ) O F  T H E  
+INVE ST ME NT  ADVISE R S A C T  O F  1940, 
+AND SE CT I ONS 9(b) AND 9(f) OF T HE  
+I NV E ST M E NT  C O M PA NY  A C T  O F  1940, 
+AND IMPOSING SUSPE NSION PUR SUANT  
+TO S ECTION  4 C OF THE SE CUR IT IE S 
+EXCHANGE ACT  O F  1934 AND R UL E  
+102(e )(1)(iii) OF T HE  C OMMI SSI ON’S 
+R UL E S OF PR ACT ICE  
+ 
+   
+ 
+I. 
+ 
+ On  April 7, 2010, the  Commission instituted public administrative and cease-and-desist 
+proceedings pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”), Section 21C 
+of the Securities Exchange Act of 1934 (“Exchange Act”), and Sections 9(b) and 9(f) of the 
+Investment Company Act of 1940 (“Investment Company Act”) against Morgan Asset 
+Management, Inc. (“Morgan Asset”); Morgan Keegan & Company, Inc. (“Morgan Keegan”); 
+2 
+ 
+James C. Kelsoe, Jr. (“Kelsoe”); and Joseph Thompson Weller, CPA (“Weller”); pursuant to 
+Section 15(b)(4) of the Exchange Act against Morgan Keegan; pursuant to Section 15(b)(6) of 
+the Exchange Act against Morgan Asset, Kelsoe and Weller; pursuant to Sections 203(e) and 
+203(k) of the Investment Advisers Act of 1940 (“Advisers Act”) against Morgan Asset and 
+Morgan Keegan; pursuant to Sections 203(f) and 203(k) of the Advisers Act against Kelsoe and 
+Weller; and pursuant to Section 4C of the Exchange Act and Rule 102(e)(1)(iii) of the 
+Commission’s Rules of Practice against Weller.  Respondents Morgan Asset, Morgan Keegan, 
+Kelsoe and Weller (collectively “Respondents”) have submitted an Offer of Settlement which the 
+Commission has determined to accept. 
+ 
+II. 
+ 
+ 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 15(b)  of the Securities Exchange Act of 1934, Sections 203(e), 203(f)  and 203(k) 
+of the Investment Advisers Act of 1940, and Sections 9(b) and 9(f) of the Investment Company 
+Act of 1940, and Imposing Suspension Pursuant to Section 4C of the Securities Exchange Act of 
+1934 and Rule 102(e)(1)(iii) of the Commission’s Rules of Practice (“Order”), as set forth below.   
+ 
+III. 
+ 
+ On the basis of this Order and Respondent’s Offer, the Commission finds
+1
+ 
+ that,  
+A.  RESPONDENTS 
+ 
+1. Morgan Asset, incorporated in Tennessee on April 10, 1986, has been an 
+investment adviser registered with the Commission at all relevant times.  Morgan Asset’s principal 
+place of business is in Birmingham, Alabama.  Morgan Asset is a wholly-owned subsidiary of MK 
+Holding, Inc., which in turn is a wholly-owned subsidiary of Regions Financial Corporation.   
+ 
+2. Morgan Keegan, incorporated in Tennessee on June 27, 1969, has been registered 
+with the Commission as a broker-dealer at all relevant times and as an investment adviser since 
+July 27, 1992.  During the relevant time period, Morgan Keegan served as the principal 
+                                                 
+1         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.   
+ 
+ 
+3 
+ 
+underwriter and sole distributor of shares of the open-end Funds described in paragraph 5, below.  
+Morgan Keegan’s principal place of business is in Memphis, Tennessee.   
+ 
+3. Kelsoe, 49 years of age, is a resident of Memphis, Tennessee.  During 2007, Kelsoe 
+was the senior portfolio manager for Morgan Asset.  Kelsoe is a Chartered Financial Analyst and 
+previously held Series 7 and 65 licenses.  Kelsoe was associated with Morgan Keegan at all 
+relevant times, and was a registered representative of the firm from August 1994 through 
+November 2008. 
+ 
+4. Weller, 46 years of age, is a resident of Memphis, Tennessee.  Weller has been 
+employed by Morgan Keegan since 1992.  During the relevant period, he was Morgan Keegan’s 
+Controller and the head of its Fund Accounting Department reported to him.  He holds Series 7, 
+27, and 66 licenses and is a CPA who was previously licensed in the State of Tennessee.  That 
+license is currently lapsed.  Since at least January 1, 1993, Weller has been associated with the 
+investment adviser arm of Morgan Keegan.  Additionally, from at least December 1997 through 
+the present, Weller has been a registered representative associated with the broker-dealer arm of 
+Morgan Keegan.   
+ 
+B.  OTHER RELEVAN T EN TITIES  
+ 
+5. Helios Select Fund, Inc., formerly known as Morgan Keegan Select Fund, Inc. 
+(“Select Fund”), incorporated in Maryland on October 27, 1998, has been an investment company 
+registered with the Commission since its inception.  In 2007, the Select Fund contained three open-
+end portfolios: the Select High Income portfolio, the Select Intermediate Bond portfolio, and the 
+Select Short Term Bond portfolio.   
+ 
+6.  Helios High Income Fund, Inc., formerly known as RMK High Income Fund, Inc., 
+a closed-end fund incorporated in Maryland on April 16, 2003, has been an investment company 
+registered with the Commission since its inception. 
+ 
+7.  Helios Multi-Sector High Income Fund, Inc., formerly known as RMK Multi-
+Sector High Income Fund, Inc., a closed-end fund incorporated in Maryland on November 14, 
+2005, has been an investment company registered with the Commission since its inception.   
+ 
+8.  Helios Strategic Income Fund, Inc., formerly known as RMK Strategic Income 
+Fund, Inc., a closed-end fund incorporated in Maryland on January 16, 2004, has been an 
+investment company registered with the Commission since its inception.   
+ 
+9.  Helios Advantage Income Fund, Inc., formerly known as RMK Advantage Income 
+Fund, Inc., a closed-end fund incorporated September 7, 2004, has been an investment company 
+registered with the Commission since its inception.  
+ 
+4 
+ 
+ 
+C. FACTS 
+ 
+Overview 
+ 
+ 
+10.  Morgan Asset, through Kelsoe, as Portfolio Manager, managed the Helios Select 
+Fund, Inc., the Helios High Income Fund, Inc., the Helios Multi-Sector High Income Fund, Inc., 
+the Helios Strategic Income Fund, Inc., and the Helios Advantage Income Fund, Inc. (collectively, 
+the “Funds”) from at least November 2004 through July 29, 2008.   
+ 
+11. Respondent Morgan Keegan, a registered broker-dealer and registered investment 
+adviser, was the principal underwriter and distributor of shares of the open-ended Funds.  Each of 
+the Funds’ Boards of Directors was responsible for pricing the Funds’ securities in accordance with 
+the Funds’ valuation policies and procedures (“valuation procedures”).  Although the Funds’ 
+prospectuses stated that Morgan Asset would price the securities, each Fund’s Board of Directors 
+delegated the pricing responsibility to Morgan Keegan.  Morgan Keegan priced each Fund’s 
+securities and calculated the Fund’s daily net asset value
+2
+ 
+ (“NAV”) through its Fund Accounting 
+Department (“Fund Accounting”).  Weller was an officer and treasurer of the Funds.  Weller, 
+Morgan Keegan’s Controller, along with other Morgan Keegan personnel, staffed a “Valuation 
+Committee” that oversaw Fund Accounting’s processes and evaluated the prices assigned to 
+securities.  Morgan Keegan and Weller failed to adequately fulfill Morgan Keegan’s 
+responsibilities, as delegated to it by the Funds’ Boards of Directors, to price the Funds’ securities 
+in accordance with their valuation policies and procedures regarding valuation.  For example, at 
+various times from January 2007 through July 2007, Fund Accounting accepted unsubstantiated 
+“price adjustments,” submitted by Kelsoe, that inaccurately inflated the prices of certain securities, 
+contrary to the Funds’ valuation procedures.  Fund Accounting failed to document justifications for 
+such pricing adjustments.   
+12. The Funds’ valuation policies and procedures required the comparison of fair 
+values to prices provided by other sources. Pursuant to that requirement, Fund Accounting 
+periodically obtained broker-dealer price confirmations for certain fair valued securities.  
+Unbeknownst to Fund Accounting and the Funds’ independent auditor (“Independent Auditor”), 
+the Portfolio Manager, Kelsoe, actively screened and influenced a broker-dealer to change the 
+price confirmations that Fund Accounting and the Independent Auditor obtained from the broker-
+dealer. Kelsoe also failed to advise Fund Accounting or the Funds’ Boards of Directors when he 
+received information indicating that the Funds’ prices for certain securities should be reduced.   
+ 
+                                                 
+2  The “net asset value” or “NAV” of an investment company is the company’s total assets 
+minus its total liabilities.  An investment company calculates the NAV of a single share (or the 
+“per share NAV”) by dividing its NAV by the number of shares that are outstanding. 
+ 
+5 
+ 
+13. Each of the Funds held, in varying amounts, securities backed by subprime 
+mortgages, and the market for such securities deteriorated in the first half of 2007.  Morgan 
+Keegan utilized practices which were not reasonably designed to determine that the Funds’ NAVs 
+were accurate. Morgan Asset, through Kelsoe, engaged in actions that forestalled declines in the 
+NAVs of the Funds that would have occurred as a result of the deteriorating market, absent his 
+intervention.   
+    
+ 14. Many of the securities that were held by the Funds and backed by subprime 
+mortgages lacked readily available market quotations and, as a result, were required by the 
+Investment Company Act to be priced by the Funds’ Boards of Directors, using “fair value” 
+methods.  Under Section 2(a)(41)(B) of the Investment Company Act, the Funds were required to 
+use market values for portfolio securities with readily available market quotations and use fair 
+value for all other portfolio assets, as determined in good faith by the board of directors.  The fair 
+value of securities for which market quotations are not readily available is the price the Funds 
+would reasonably expect to receive on a current sale of the securities.3
+ 
+    
+ 15. The Funds adopted valuation procedures for pricing the Funds’ portfolio securities 
+and assigned the task of following those procedures to Morgan Keegan. The Funds’ valuation 
+procedures for fair-valued securities mandated that such securities should be valued in “good faith” 
+by the Valuation Committee, considering a series of general and specific factors including, among 
+others, “fundamental analytical data relating to the investment,” “an evaluation of the forces which 
+influence the market in which the securities are purchased or sold” and “events affecting the 
+security.”  The procedures required the Valuation Committee to maintain a written report 
+“documenting the manner in which the fair value of a security was determined and the accuracy of 
+the valuation made based on the next reliable public price quotation for that security.”  The 
+procedures also required that values assigned to securities be periodically validated through, 
+among other means, broker-dealer price confirmations.  Fund Accounting also used broker-dealer 
+price confirmations to set current values. The procedures specified that prices obtained from a 
+broker-dealer could only be overridden when there was “a reasonable basis to believe that the price 
+provided [did] not accurately reflect the fair value of the portfolio security.”  Whenever a price was 
+overridden, the procedures mandated the basis for overriding the price to be “documented and 
+provided to the Valuation Committee for its review.”   
+ 
+16.  In filings with the Commission, the Funds stated that the fair value of securities 
+would be determined by Morgan Asset’s Valuation Committee using procedures adopted by the 
+Funds’ board of directors.  In fact, the responsibility was delegated to Morgan Keegan, which 
+primarily staffed the Valuation Committee.  Morgan Keegan and the Valuation Committee did not 
+                                                 
+3   See AICPA Audit and Accounting Guide - Investment Companies (Sect. 2.35-2.39), 
+which incorporates Accounting Series Release No. 118 (“ASR 118”). The Commission has 
+provided interpretative guidance related to financial reporting in the Accounting Series Releases, 
+which is included in the Codification of Financial Reporting Policies. Thus, conformity with the 
+ASR 118 is required by Commission rules and complies with Generally Accepted Accounting 
+Principles (“GAAP”). See also
+ Articles 1-01(a) and 6.03 of Regulation S-X.    
+6 
+ 
+reasonably satisfy their responsibilities under the Funds’ procedures in several ways.  Among other 
+things: (i) the Valuation Committee left pricing decisions to lower level employees in Fund 
+Accounting who did not have the training or qualifications to make fair value pricing 
+determinations; (ii) Fund Accounting personnel relied on Kelsoe’s “price adjustments” to 
+determine the prices assigned to portfolio assets, without obtaining a reasonable basis for or 
+documentation supporting the price adjustments or applying the factors set forth in the procedures; 
+(iii) Fund Accounting personnel gave Kelsoe discretion beyond the parameters of the valuation 
+procedures in validating the prices of portfolio securities by allowing him to determine which 
+dealer price confirmations to use and which to ignore, without obtaining documentation to support 
+his adjustments; and (iv) the Valuation Committee and Fund Accounting did not ensure that the 
+fair value prices assigned to many of the portfolio securities were periodically re-evaluated, 
+allowing them to be carried at stale values for months at a time.   
+ 
+ 17.   Morgan Asset adopted its own procedures to determine the actual fair value to 
+assign to portfolio securities and to “validate” those values “periodically.”   Among other things, 
+those  procedures provided that  “[q]uarterly reports listing all securities held by the Funds that 
+were fair valued during the quarter under review, along with explanatory notes for the fair values 
+assigned to the securities, shall be presented to the Board for its review.”   Morgan Asset failed to 
+fully implement this provision of its pricing policy. 
+ 
+ 18. At various times between January 2007 and July 2007, Kelsoe had his assistant 
+send “price adjustments” to Fund Accounting.  The adjustments were communications by Kelsoe 
+to Fund Accounting concerning the values of specific portfolio securities.  In many instances, these 
+adjustments were arbitrary and did not reflect fair value.  The price adjustments were routinely 
+entered upon receipt by the staff accountant into a spreadsheet used to calculate the NAVs of the 
+Funds.    
+ 
+19. Fund Accounting did not generally request, and Kelsoe did not generally supply, 
+supporting documentation for his price adjustments.  Fund Accounting and the Funds did not 
+record which securities had been assigned values by Kelsoe.     
+ 
+ 20. As part of the Funds’ valuation procedures, Fund Accounting sometimes requested 
+third party broker-dealer price confirmations as a means to validate the values it had assigned to 
+the Funds’ fair valued securities.  The Funds’ Independent Auditor used similar requests for third 
+party broker-dealer price confirmations as part of its annual year-end audits of the Funds. Fund 
+Accounting or the Independent Auditor would periodically send such requests to broker-dealers 
+asking them to provide price confirmations for various portfolio securities.   
+ 
+ 21. During the period from January through July 2007, when month-end dealer price 
+confirmations were received by Fund Accounting, an employee of Fund Accounting performed a  
+review to estimate whether they contained any securities prices that varied from current portfolio 
+values by more than five percent.  If so, then Kelsoe determined whether the current values should 
+be maintained or a new value—which may or may not have been the price given by the broker-
+dealer—should be assigned to the security.  Thus, Fund Accounting generally allowed Kelsoe to 
+7 
+ 
+determine whether broker-dealer price confirmations were used or ignored.  In some instances, 
+when price confirmations were received that were substantially lower than current portfolio values, 
+Fund Accounting personnel, acting at the direction of Kelsoe, lowered values of bonds over a 
+period of days, in a series of pre-planned reductions to values at or closer to, but still above, the 
+price confirmations. As a result, during the interim days, Fund Accounting did not price those 
+bonds at their current fair value.      
+ 
+22. During the period from January through July 2007, Fund Accounting failed to 
+record which bond values were not adjusted in response to dealer price confirmations at Kelsoe’s 
+direction.   
+ 
+ 23. The head of Fund Accounting reported to Weller, and Weller was a member of the 
+Valuation Committee. He knew, or was reckless in not knowing, of the deficiencies in the 
+implementation of the valuation procedures set forth above, and failed to remedy them or 
+otherwise make sure fair-valued securities were accurately priced and the Funds’ NAVs were 
+accurately calculated. During the period from January through July 2007, Weller was aware that: 
+(i) the Valuation Committee did not adequately supervise Fund Accounting’s application of the 
+valuation factors;  (ii) Kelsoe was supplying fair value price adjustments for specific securities to 
+Fund Accounting but the members of the Valuation Committee did not generally know which 
+securities Kelsoe supplied fair values for or what those fair values were, and did not generally 
+receive supporting documentation for those values; and (iii) the only other pricing test regularly 
+applied by the Valuation Committee  was a “look back” test, which compared the sales price of 
+any security sold by a Fund to the valuation of that security used in the NAV calculation for the 
+five business days preceding the sale.  The test only covered securities after they were sold; thus, at 
+any given time, the Valuation Committee never knew how many securities’ prices could ultimately 
+be validated by it.  Weller nevertheless signed the Funds’ annual and semi-annual financial reports 
+on Forms N-CSR, filed with the Commission, including certifications pursuant to Sections 302 and 
+906 of the Sarbanes-Oxley Act of 2002.   
+ 
+ 24. During the period from January 2007 through July 2007, Morgan Keegan, acting 
+through Weller and Fund Accounting, failed to employ reasonable procedures to price the Funds’ 
+portfolio securities and, as a result of that failure, did not calculate current NAVs for the Funds.  
+Despite these failures, Morgan Keegan published daily NAVs of the Funds which it could not 
+know were accurate and, as distributor of the open-end portfolios, sold and redeemed shares to 
+investors based on those NAVs.   
+ 
+25. On various dates from January 2007 through July 2007, Morgan Asset, through 
+Kelsoe, screened and influenced the price confirmations obtained from at least one broker-dealer 
+(“the Submitting Firm”).  Among other things, the Submitting Firm was induced to provide interim 
+price confirmations that were lower than the values at which the Funds were valuing certain bonds, 
+but higher than the initial confirmations that the Submitting Firm had intended to provide.  The 
+interim price confirmations enabled the Funds to avoid marking down the value of securities to 
+reflect current fair value.  Kelsoe was aware that use of the interim price confirmations was 
+inconsistent with the valuation procedures and did not reflect fair value, that the Submitting Firm 
+8 
+ 
+would be providing lower price confirmations in response to future pricing validation requests, and 
+that the Funds would be required to further mark down the value of the securities to reflect their 
+already diminished value, but that information was not disclosed to Fund Accounting, the Funds’ 
+Boards of Directors or the Independent Auditor.  In some instances, even after causing the 
+Submitting Firm to increase its price confirmations, Kelsoe subsequently provided price 
+adjustments to Fund Accounting that were higher than even the Submitting Firm’s increased price 
+confirmations.  These adjustments were not consistent with the Funds’ procedures.  In other 
+instances, the Submitting Firm was induced to not provide price confirmations to Fund Accounting 
+(or, depending on the period, to the Independent Auditor), where those price confirmations would 
+have been significantly lower than the Funds’ current valuations of the relevant bonds.  Fund 
+Accounting and the Funds’ Boards were not advised that the Submitting Firm had proposed price 
+confirmations which were lower than the current valuations recorded by the Funds, and that the 
+Submitting Firm had refrained from submitting price confirmations to Fund Accounting or had 
+submitted price confirmations at higher prices than it had originally planned.   
+ 
+ 26. I n each of the Funds’ annual and semi-annual reports filed with the Commission on 
+Forms N-CSR during the relevant period (including, among others, the Annual Report for the 
+Morgan Keegan Select Fund, Inc. for the year-ended June 30, 2007 filed with the Commission on 
+October 4, 2007), Kelsoe included a signed letter to investors reporting on the Funds’ performance 
+“based on net asset value.”  In fact, the performance reported was materially misstated.  Untrue 
+statements of material fact concerning the Funds’ performance were made in the Funds’ annual 
+and semi-annual reports filed with the Commission on Forms N-CSR.  Morgan Asset, through 
+Kelsoe, also provided a quarterly valuation packet reflecting inflated prices for certain securities to 
+the Funds’ Boards, failed to disclose to the Funds’ Boards information indicating that the Funds’ 
+NAVs were inflated and that broker-dealer price confirmations were being screened and caused to 
+be altered, and provided Fund Accounting with unsubstantiated price adjustments.  In addition, the 
+prospectuses incorrectly described Morgan Asset as responsible for fair valuation of the Funds’ 
+portfolios. 
+D. VIOLATIONS 
+ 
+ 27. Investment advisers owe their clients, including investment company clients, a 
+fiduciary duty. Transamerica Mortgage Advisers, Inc. v. Lewis, 444 U.S.11, 17 (1979); SEC v. 
+Capital Gains Research Bureau, Inc. 375 U.S. 180, 195-97 (1963). Misstatements or omissions of 
+fact by an investment adviser, such as those made to the Funds’ boards, violate an adviser’s 
+fiduciary duty and constitute fraud when they are material. Similarly, the failure to disclose to the 
+Funds’ boards that Morgan Asset and Morgan Keegan were not complying with stated valuation 
+procedures constitutes fraud.  In addition, the knowing or reckless failure to value securities, for 
+which market quotations are not readily available, consistent with fair value requirements under the 
+Investment Company Act and that materially affects a fund’s NAV constitutes fraud. See, In re 
+Piper Capital Management, Inc., Exch. Act. Rel.48409 (August 26, 2003). Section 206(1) of the 
+Advisers Act makes it unlawful for an investment adviser to employ any device, scheme or artifice 
+to defraud any client or prospective client.  Section 206(2) makes it unlawful for an investment 
+adviser to engage in any transaction, practice or course of business that operates as a fraud or 
+deceit upon any client or prospective client.   As a result of the conduct described above, 
+9 
+ 
+Respondent Morgan Asset willfully violated, and Kelsoe willfully aided and abetted and caused 
+violations of, Sections 206(1) and 206(2) of the Advisers Act. 
+  
+ 28. Section 206(4) of the Advisers Act prohibits fraudulent, deceptive or manipulative 
+practices or courses of business by an investment adviser.  Rule 206(4)-7 requires investment 
+advisers to “[a]dopt and implement written policies and procedures reasonably designed to prevent 
+violation” of the Advisers Act and the rules thereunder by their supervised persons.  An adviser’s 
+failure “to have adequate compliance policies and procedures in place will constitute a violation of 
+our rules independent of any other securities law violation.”  Compliance Programs of Investment 
+Companies and Investment Advisers, Advisers Act Release No. 2204, 68 F.R. 74714, 74715 (Dec. 
+24, 2003) (“Compliance Programs Release”).  As a result of the conduct described above, 
+Respondent Morgan Asset willfully violated, and Respondent Kelsoe willfully aided and abetted 
+and caused violations of, Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. 
+ 29. Section 34(b) of the Inve stment Company Act prohibits untrue statements of 
+material fact or omissions to state facts necessary in order to make the statements made, in the 
+light of the circumstances under which they were made, not misleading, in any registration 
+statement, report or other document filed pursuant to the Investment Company Act or the 
+keeping of which is required pursuant to Section 31(a) of the Investment Company Act.  Any 
+person who makes a material misrepresentation concerning a Fund’s performance in the Fund’s 
+annual and semi-annual reports filed with the Commission, or in the records required to be 
+maintained by the Fund, or submits inflated prices to be included in the Fund’s NAV calculations 
+and the records forming the basis for the Fund’s financial statements, violates Section 34(b). As 
+a result of the conduct described above, Respondents Morgan Asset and Kelsoe willfully 
+violated, and Respondent Morgan Keegan willfully aided, abetted, and caused violations of, 
+Section 34(b) of the Investment Company Act. 
+ 
+30. R ule 22c-1 under the Investment Company Act prohibits the sale or redemption of 
+shares in a registered investment company “except at a price based on the current net asset value of 
+such security which is next computed after receipt of a tender of such security for redemption or of 
+an order to purchase or sell such security.”  For an NAV to be deemed current, Section 2(a)(41) of 
+the Investment Company Act and Rule 2a-4 thereunder require portfolio securities for which 
+market quotations are not readily available to be valued at fair value. As a result of the conduct 
+described above, Respondent Morgan Keegan willfully violated,
+ 4
+ 
+  and Respondents Morgan Asset, 
+Kelsoe and Weller willfully aided and abetted and caused violations of, Rule 22c-1 promulgated 
+under the Investment Company Act.  
+31. Rule 38a-1 under the Investment Company Act requires that a registered 
+investment company adopt and implement written policies and procedures reasonably designed to 
+prevent violation of the federal securities laws by the fund and to provide for oversight of 
+compliance by the fund’s investment adviser.  Failure of a fund to have adequate compliance 
+                                                 
+4  A willful violation of the securities laws means merely “‘that the person charged with the duty 
+knows what he is doing.’” Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting 
+Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). 
+10 
+ 
+policies and procedures in place and/or to implement them will constitute a violation of Rule 38a-1 
+independent of any other securities law violations. Compliance Programs Release. Morgan 
+Keegan and Morgan Asset knowingly and substantially assisted the Funds’ failure to implement 
+fair valuation procedures, which resulted in prices that did not reflect current NAVs.  Morgan 
+Keegan, Morgan Asset, Kelsoe and Weller thereby willfully aided and abetted and caused the 
+Funds’ violations of Rule 38a-1. 
+ 
+UNDE R T AK INGS       
+ 
+32. Respondent Morgan Keegan undertakes as follows: 
+ 
+ A.  Morgan Keegan shall not, for a period of three years from the date of the Order, be 
+involved in, or responsible for, recommending to, or determining on behalf of, a registered 
+investment company’s board of directors or trustees or such company’s valuation committee, the 
+value of any portfolio security for which market quotations are not readily available.  
+  
+B. If, after three years but within six years from the date of the Order, Morgan Keegan 
+becomes involved in, or responsible for, determining or recommending determinations to a 
+registered investment company’s board of directors or trustees or valuation committee of the value 
+of any portfolio security for which market quotations are not readily available and which are held 
+by or on behalf of such registered investment company, Morgan Keegan shall promptly notify 
+Commission counsel identified below or his successor and within 30 days of beginning such 
+valuation activity, shall hire, at its expense, an Independent Consultant (“Consultant”) not 
+unacceptable to the Commission’s staff, to review the valuations provided by Morgan Keegan to 
+any registered investment company for the next two quarters following the beginning of such 
+valuation activity, and make an Initial Report with recommendations thereafter on Morgan 
+Keegan’s policies, procedures and practices with regard to such valuations.  The Initial Report 
+shall describe the review performed and the conclusions reached, and will include any 
+recommendations deemed necessary to make the policies, procedures, and practices adequate and 
+consistent with GAAP and the Investment Company Act. Morgan Keegan shall cooperate fully 
+with the Consultant and shall provide the Consultant with access to its files, books, records, and 
+personnel as reasonably requested for the review.  Morgan Keegan shall cause the review to begin 
+no later than 60 days after beginning such valuation activity. 
+ 
+            C. At the end of that review, and in no event more than 200 days from after 
+beginning such valuation activity, to require the Consultant to submit the report and 
+recommendations to Morgan Keegan and to William P. Hicks of the Commission’s Atlanta 
+Regional Office or his successor. 
+ 
+D. Within 30 days of receipt of the Initial Report, Morgan Keegan shall in  
+writing respond to the Initial Report.  In such response, Morgan Keegan shall advise the Consultant 
+and the Commission’s staff of the recommendations from the Initial Report that it has determined 
+to accept and the recommendations that it considers to be unduly burdensome. With respect to any 
+11 
+ 
+recommendation that Morgan Keegan deems unduly burdensome, Morgan Keegan may propose an 
+alternative policy, procedure or system designed to achieve the same objective or purpose.   
+ 
+            E.  Morgan Keegan shall attempt in good faith to reach agreement with the 
+Consultant within 60 days of the date of the receipt of the Initial Report with respect to any 
+recommendation that Morgan Keegan deems unduly burdensome.  If the Consultant and Morgan 
+Keegan are unable to agree on an alternative proposal, Morgan Keegan shall abide by the 
+recommendation of the Consultant. 
+ 
+             F.  Within 90 days of the date of the receipt of the Initial Report, Morgan Keegan 
+shall, in writing, advise the Consultant and the Commission's staff of the recommendations and 
+proposals that it is adopting. 
+ 
+G.       No later than one year after the date of the Consultant’s Initial Report, Morgan 
+Keegan shall cause the Consultant to conduct a follow-up review of Morgan Keegan’s efforts to 
+implement the recommendations contained in the Initial Report, and Morgan Keegan shall cause 
+the Consultant to submit a Final Report to the Commission’s staff.  The Final Report shall set forth 
+the details of Morgan Keegan’s efforts to implement the recommendations contained in the Initial 
+Report, and shall state whether Morgan Keegan has fully complied with the recommendations in 
+the Initial Report.  
+ 
+           H. Morgan Keegan shall cause the Consultant to complete the aforementioned 
+review and submit a written Final Report to Morgan Keegan and to the Commission’s staff 
+within 400 days of the date of the Initial Report.  The Final Report shall recite the efforts the 
+Consultant undertook to review Morgan Keegan’s policies, procedures, and practices; set forth 
+the Consultant’s conclusions and recommendations; and describe how Morgan Keegan is 
+implementing those recommendations. 
+I. Morgan Keegan shall take all necessary and appropriate steps to adopt and 
+implement all recommendations contained in the Consultant’s Final Report.  
+             
+ J. To ensure the independence of the Consultant, Morgan Keegan: (a) shall not have 
+the authority to terminate the Consultant without the prior written approval of the Commission’s 
+staff; (b) shall compensate the Consultant, and persons engaged to assist the Consultant, for 
+services rendered pursuant to this Order at their reasonable and customary rates; (c) shall not be in 
+and shall not have an attorney-client relationship with the Consultant and shall not seek to invoke 
+the attorney-client or any other privilege or doctrine to prevent the Consultant from transmitting 
+any information, reports, or documents to the Commission staff; and (d) during the period of 
+engagement and for a period of two years after the engagement, shall not enter into any 
+employment, customer, consultant, attorney-client, auditing, or other professional relationship with 
+the Consultant.   
+ 
+K. Morgan Keegan shall cause the Consultant to enter into an agreement that provides 
+that for the period of engagement and for a period of two years from completion of the 
+engagement, the Consultant shall not enter into any employment, consultant, attorney-client, 
+12 
+ 
+auditing or other professional relationship with Morgan Keegan, or any of its present or former 
+affiliates, directors, officers, employees, or agents acting in their capacity.  The agreement will also 
+provide that the 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 Consultant in performance of his/her 
+duties under this Order shall not, without prior written consent of the Atlanta Regional Office 
+Commission staff, enter into any employment, consultant, attorney-client, fiduciary, auditing or 
+other professional relationship with Morgan Keegan, 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.  Notwithstanding the foregoing, 
+the Consultant may serve as a Consultant for Morgan Asset, pursuant to paragraph 34 below. 
+ 
+L. Certification of Compliance by Respondent.  Morgan Keegan shall certify, in 
+writing, compliance with the undertaking(s) set forth above.  The certification shall identify the 
+undertaking(s), provide written evidence of compliance in the form of a narrative, and be supported 
+by exhibits sufficient to demonstrate compliance.  The Commission staff may make reasonable 
+requests for further evidence of compliance, and Respondent agrees to provide such evidence.  The 
+certification and supporting material shall be submitted to William P. Hicks, Associate Regional 
+Director in the Commission’s Atlanta Regional Office, or any other member of the Commission’s 
+staff identified to receive the report by the staff, with a copy to the Office of Chief Counsel of the 
+Enforcement Division, no later than sixty (60) days from the date of the completion of the 
+undertakings.   
+ 
+ 33.  Morgan Keegan further undertakes as follows:   
+ 
+ Ongoing Cooperation by Morgan Keegan
+  
+. Morgan Keegan undertakes to cooperate fully 
+with the Commission in any and all investigations, litigations or other proceedings relating to or 
+arising from the matters described in this Order or involving, directly or indirectly, trading in or 
+valuation of, the securities of the funds described in this Order. In connection with such cooperation, 
+Morgan Keegan has undertaken:  
+ To produce, without service of a notice or subpoena, any and all documents and other 
+information reasonably requested by the Commission’s staff, or by the Distribution Agent to be 
+appointed pursuant to the Order, with a custodian declaration as to their authenticity, if requested;  
+  
+  
+ To use its best efforts to cause its employees and former employees to be interviewed by the 
+Commission’s staff, at the option of the staff with representatives of other government agencies 
+present, at such times and places as the staff reasonably may direct. Live interviews on 72 hours 
+notice at the Commission’s Atlanta office or its headquarters office, or at any U.S or state 
+government office in Memphis Tennessee, and telephone interviews on 48 hours notice, at the option 
+of the staff, shall be deemed to be reasonable.  
+  
+ To use its best efforts to cause its employees to appear and testify truthfully and completely 
+without service of a notice or subpoena in such investigations, depositions, hearings or trials as may 
+be requested by the Commission’s staff; and  
+13 
+ 
+  
+In connection with any interviews of Morgan Keegan employees to be conducted pursuant to 
+this undertaking, requests for such interviews may be provided by the Commission’s staff to 
+Morgan Keegan’s General Counsel, or such other counsel that may be substituted by Morgan 
+Keegan. 
+  
+34. Respondent Morgan Asset undertakes as follows: 
+ 
+ A.  Morgan Asset shall not, for a period of three years from the date of the Order, be 
+involved in, or responsible for, recommending to, or determining on behalf of, a registered 
+investment company’s board of directors or trustees or such company’s valuation committee, the 
+value of any portfolio security for which market quotations are not readily available.  
+ 
+B. If, after three years but within six years from the date of the Order, Morgan Asset 
+becomes involved in, or responsible for, determining or recommending determinations to a 
+registered investment company’s board of directors or trustees or valuation committee of the value 
+of any portfolio security for which market quotations are not readily available and which are held 
+by or on behalf of such registered investment company, Morgan Asset shall promptly notify 
+Commission counsel identified below or his successor and within 30 days of beginning such 
+valuation activity, shall hire, at its expense, an Independent Consultant (“Consultant”) not 
+unacceptable to the Commission’s staff, to review the valuations provided by Morgan Asset to any 
+registered investment company for the next two quarters following the beginning of such valuation 
+activity, and make an Initial Report with recommendations thereafter on Morgan Asset’s policies, 
+procedures and practices with regard to such valuations.  The Initial Report shall describe the 
+review performed and the conclusions reached, and will include any recommendations deemed 
+necessary to make the policies, procedures, and practices adequate and consistent with GAAP and 
+the Investment Company Act.  Morgan Asset shall cooperate fully with the Consultant and shall 
+provide the Consultant with access to its files, books, records, and personnel as reasonably 
+requested for the review.  Morgan Asset shall cause the review to begin no later than 60 days after 
+beginning such valuation activity. 
+ 
+            C. At the end of that review, and in no event more that 200 days from after 
+beginning such valuation activity, to require the Consultant to submit the report and 
+recommendations to Morgan Asset and to William P. Hicks of the Commission’s Atlanta 
+Regional Office or his successor. 
+ 
+D. Within 30 days of receipt of the Initial Report, Morgan Asset shall in  
+writing respond to the Initial Report.  In such response, Morgan Asset shall advise the Consultant 
+and the Commission’s staff of the recommendations from the Initial Report that it has determined 
+to accept and the recommendations that it considers to be unduly burdensome. With respect to any 
+recommendation that Morgan Asset deems unduly burdensome, Morgan Asset may propose an 
+alternative policy, procedure or system designed to achieve the same objective or purpose.   
+ 
+            E.  Morgan Asset shall attempt in good faith to reach agreement with the Consultant 
+within 60 days of the date of the receipt of the Initial Report with respect to any recommendation 
+14 
+ 
+that Morgan Asset deems unduly burdensome.  If the Consultant and Morgan Asset are unable to 
+agree on an alternative proposal, Morgan Asset shall abide by the recommendation of the 
+Consultant. 
+ 
+             F.  Within 90 days of the date of the receipt of the Initial Report, Morgan Asset  
+shall, in writing, advise the Consultant and the Commission's staff of the recommendations and 
+proposals that it is adopting. 
+ 
+G.       No later than one year after the date of the Consultant’s Initial Report, Morgan 
+Asset shall cause the Consultant to conduct a follow-up review of Morgan Asset’s efforts to 
+implement the recommendations contained in the Initial Report, and Morgan Asset shall cause the 
+Consultant to submit a Final Report to the Commission’s staff.  The Final Report shall set forth the 
+details of Morgan Asset’s efforts to implement the recommendations contained in the Initial 
+Report, and shall state whether Morgan Asset has fully complied with the recommendations in the 
+Initial Report.  
+ 
+           H. Morgan Asset shall cause the Consultant to complete the aforementioned review 
+and submit a written Final Report to Morgan Asset and to the Commission’s staff within 400 
+days of the date of the Initial Report.  The Final Report shall recite the efforts the Consultant 
+undertook to review Morgan Asset’s policies, procedures, and practices; set forth the 
+Consultant’s conclusions and recommendations; and describe how Morgan Asset is 
+implementing those recommendations. 
+I. M organ Asset shall take all necessary and appropriate steps to adopt and implement 
+all recommendations contained in the Consultant’s Final Report.  
+             
+ J. To ensure the independence of the Consultant, Morgan Asset: (a) shall not have the 
+authority to terminate the Consultant without the prior written approval of the Commission’s staff; 
+(b) shall compensate the Consultant, and persons engaged to assist the Consultant, for services 
+rendered pursuant to this Order at their reasonable and customary rates; (c) shall not be in and shall 
+not have an attorney-client relationship with the Consultant and shall not seek to invoke the 
+attorney-client or any other privilege or doctrine to prevent the Consultant from transmitting any 
+information, reports, or documents to the Commission staff; and (d) during the period of 
+engagement and for a period of two years after the engagement, shall not enter into any 
+employment, customer, consultant, attorney-client, auditing, or other professional relationship with 
+the Consultant.   
+ 
+K. Morgan Asset shall cause the Consultant to enter into an agreement that provides 
+that for the period of engagement and for a period of two years from completion of the 
+engagement, the Consultant shall not enter into any employment, consultant, attorney-client, 
+auditing or other professional relationship with Morgan Asset, or any of its present or former 
+affiliates, directors, officers, employees, or agents acting in their capacity.  The agreement will also 
+provide that the 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 Consultant in performance of his/her 
+duties under this Order shall not, without prior written consent of the Atlanta Regional Office 
+15 
+ 
+Commission staff, enter into any employment, consultant, attorney-client, fiduciary, auditing or 
+other professional relationship with Morgan Asset, 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.  Notwithstanding the foregoing, 
+the Consultant may serve as a Consultant for Morgan Keegan, pursuant to paragraph 32 above. 
+ 
+L. Certification of Compliance by Respondent.  Morgan Asset shall certify, in writing, 
+compliance with the undertaking(s) set forth above.  The certification shall identify the 
+undertaking(s), provide written evidence of compliance in the form of a narrative, and be supported 
+by exhibits sufficient to demonstrate compliance.  The Commission staff may make reasonable 
+requests for further evidence of compliance, and Respondent agrees to provide such evidence.  The 
+certification and supporting material shall be submitted to William P. Hicks, Associate Regional 
+Director in the Commission’s Atlanta Regional Office, or any other member of the Commission’s 
+staff identified to receive the report by the staff, with a copy to the Office of Chief Counsel of the 
+Enforcement Division, no later than sixty (60) days from the date of the completion of the 
+undertakings.   
+ 
+35. Morgan Asset further undertakes as follows: 
+ 
+Ongoing Cooperation by Morgan Asset
+  
+. Morgan Asset undertakes to cooperate fully with the 
+Commission in any and all investigations, litigations or other proceedings relating to or arising from 
+the matters described in this Order or involving, directly or indirectly, trading in or valuation of, the 
+securities of the funds described in this Order. In connection with such cooperation, Morgan Asset 
+has undertaken:  
+ To produce, without service of a notice or subpoena, any and all documents and other 
+information reasonably requested by the Commission’s staff or by the Distribution Agent to be 
+appointed pursuant to the Order, with a custodian declaration as to their authenticity, if requested;  
+  
+ To use its best efforts to cause its employees and former employees to be interviewed by the 
+Commission’s staff, at the option of the staff with representatives of other government agencies 
+present, at such times and places as the staff reasonably may direct. Live interviews on 72 hours 
+notice at the Commission’s Atlanta office or its headquarters office, or at any U.S or state 
+government office in Memphis Tennessee, and telephone interviews on 48 hours notice, at the option 
+of the staff, shall be deemed to be reasonable.  
+  
+ To use its best efforts to cause its employees to appear and testify truthfully and completely 
+without service of a notice or subpoena in such investigations, depositions, hearings or trials as may 
+be requested by the Commission’s staff; and  
+  
+ In connection with any interviews of Morgan Asset  employees to be conducted pursuant to 
+this undertaking,
+ requests for such interviews may be provided by the Commission’s staff to 
+Morgan Asset’s General Counsel, or such other counsel that may be substituted by Morgan Asset. 
+ 
+16 
+ 
+36. Morgan Keegan and Morgan Asset undertake to, pursuant to and in compliance with 
+this Order and with orders being entered in Joint Administrative Proceedings (File Nos. SC-2010-0016 
+(Alabama), 2010-AH-021 (Kentucky) and 08011 (South Carolina), and the separate Tennessee 
+matter File No. 12.06-107077J (collectively “the State Proceedings”), and the sanctions described 
+in Financial Industry Regulatory Authority Letter of Acceptance, Waiver and Consent No. 
+2007011164502, jointly and severally pay the total sum of $200 million, including the disgorgement, 
+interest and penalties to be ordered in this matter. 
+ 
+37. Kelsoe undertakes to, pursuant to and in compliance with this Order and with 
+orders being entered in the State Proceedings, to pay $500,000 in penalties, including the penalties 
+to be ordered in this matter pursuant to paragraph IV. L. 
+ 
+In determining whether to accept the Offer, the Commission has considered the 
+undertakings in paragraphs 33, 35, 36 and 37, above.   
+ 
+IV. 
+ 
+In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanctions agreed to in Respondents’ Offer. 
+ 
+ Accordingly, pursuant to Sections 4C and 15(b) of the Exchange Act, S ections 203(e), 
+203(f) and 203(k) of the Advisers Act, Sections 9(b) and 9(f) of the Investment Company Act, 
+and Rule 102(e)(1)(iii) of the Commission’s Rules of Practice, it is hereby ORDERED that: 
+  
+ A. Respondents Morgan Keegan and Morgan Asset are censured. 
+ 
+B. Respondent Morgan Keegan shall cease and desist from committing or causing any 
+violations and any future violations of, Section 34(b) of the Investment Company Act and  Rules 
+22c-1 and 38a-1 promulgated under the Investment Company Act.  
+ 
+C. Respondent Morgan Asset shall cease and desist from committing or causing any 
+violations and any future violations of Sections 206(1), 206(2) and 206(4) of the Advisers Act and 
+Rule 206(4)-7 thereunder, and Section 34(b) of the Investment Company Act and Rules 22c-1 and 
+38a-1 promulgated under the Investment Company Act. 
+ 
+D. Respondent Kelsoe shall cease and desist from committing or causing any violations 
+and any future violations of Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 
+206(4)-7 thereunder, and Section 34(b) of the Investment Company Act and Rules 22c-1 and 38a-1 
+promulgated under the Investment Company Act. 
+ 
+E. Respondent Weller shall cease and desist from committing or causing any violations 
+and any future violations of Rules 22c-1 and 38a-1 promulgated under the Investment Company 
+Act.  
+ 
+17 
+ 
+F. Respondent Kelsoe be, and hereby is barred from association with any broker, 
+dealer,  investment adviser, municipal securities dealer, municipal advisor, transfer agent, or 
+nationally recognized statistical rating organization, and is prohibited from serving or acting as an 
+employee, officer, director, member of an advisory board, investment adviser or depositor of, or 
+principal underwriter for, a registered investment company or affiliated person of such investment 
+adviser, depositor, or principal underwriter. 
+ 
+Any reapplication for association by the Respondent will be subject to the applicable laws 
+and regulations governing the reentry process, and reentry may be conditioned upon a number of 
+factors, including, but not limited to, the satisfaction of any or all of the following:  (a) any 
+disgorgement ordered against the Respondent, whether or not the Commission has fully or partially 
+waived payment of such disgorgement; (b) any arbitration award related to the conduct that served 
+as the basis for the Commission order; (c) any self-regulatory organization arbitration award to a 
+customer, whether or not related to the conduct that served as the basis for the Commission order; 
+and (d) any restitution order by a self-regulatory organization, whether or not related to the conduct 
+that served as the basis for the Commission order. 
+ 
+G. Respondent Kelsoe be, and hereby is, barred from participating in any offering of a 
+penny stock, including: acting as a promoter, finder, consultant, agent or other person who engages 
+in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny 
+stock, or inducing or attempting to induce the purchase or sale of any penny stock. 
+ 
+H. Respondent Weller be, and hereby is suspended from association in a supervisory 
+capacity with any broker, dealer,  investment adviser, municipal securities dealer, municipal 
+advisor, transfer agent, or nationally recognized statistical rating organization, for a period of 12 
+months, effective on the second Monday following the entry of this Order, and is prohibited from 
+serving or acting as an employee, officer, director, member of an advisory board, investment adviser 
+or depositor of, or principal underwriter for, a registered investment company or affiliated person of 
+such investment adviser, depositor, or principal underwriter, for a period of 12 months, effective on 
+the second Monday following the entry of this Order. 
+ 
+I. Respondent Weller be, and hereby is, suspended from participating in any offering 
+of a penny stock, including: acting as a promoter, finder, consultant, agent or other person who 
+engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any 
+penny stock, or inducing or attempting to induce the purchase or sale of any penny stock for a 
+period of 12 months, effective on the second Monday following the entry of this Order. 
+ 
+J. Respondent Weller is denied the privilege of appearing or practicing before the 
+Commission as an accountant.   
+ 
+ After two years from the date of this Order, Respondent Weller 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: 
+      
+18 
+ 
+       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 Weller’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 Weller, 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 Weller, 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 Weller 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 Weller 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.   
+      
+The Commission will consider an application by Respondent Weller 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. 
+ 
+K.   Respondents Morgan Keegan and Morgan Asset shall jointly and severally pay 
+disgorgement of $20,500,000 and prejudgment interest of $4,500,000 to the Securities and 
+Exchange Commission, and a civil penalty of $75,000,000 to the Securities and Exchange 
+Commission, within ten (10) business days of the entry of this Order.  
+ 
+L. Respondent Kelsoe shall pay a civil penalty of $250,000 to the Securities and 
+Exchange Commission, within ten (10) days of this Order. 
+ 
+19 
+ 
+M. Respondent Weller shall pay a civil penalty of $50,000 to the Securities and 
+Exchange Commission, within ten (10) days of this Order. 
+ 
+N.      All payments pursuant to paragraphs IV. K, L and M, above, shall be made by 
+certified check, bank cashier's check, or United States postal money order payable to the 
+Securities and Exchange Commission.  The payment shall be delivered or mailed to the Office of 
+Financial Management, Accounts Receivable, Securities and Exchange Commission, 100 F 
+Street, NE, Stop 6042, Washington DC 20549, and shall be accompanied by a letter identifying 
+Respondent as a respondent in these proceedings; setting forth the file number of these 
+proceedings; and specifying that payment is made pursuant to this Order, a copy of which cover 
+letter and money order or check shall be sent to William P. Hicks, Associate Regional 
+Administrator, Securities and Exchange Commission, 3475 Lenox Rd., N.E., Suite 500, Atlanta, 
+GA 30326-1232.  If timely payment is not made, additional interest shall accrue pursuant to 31 
+U.S.C. § 3717 and/or SEC Rule of Practice 600.     
+ 
+ Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, a Fair Fund is 
+created for the disgorgement, interest, and penalties described in Paragraphs IV. K, L and M and 
+any funds paid in connection with related actions pursuant to Paragraph III. 36, above.  Regardless 
+of whether any such distribution is made from such Fair Fund, amounts ordered to be paid as civil 
+money penalties pursuant to this Order shall be treated as penalties paid to the government for all 
+purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, 
+Respondents agree that in any Related Investor Action, they shall not argue that they are entitled 
+to, nor shall they benefit by, offset or reduction of any award of compensatory damages by the 
+amount of any part of Respondent’s payment of a civil penalty in this action ("Penalty Offset").  If 
+the court in any Related Investor Action grants such a Penalty Offset, Respondents agree that any 
+Respondent receiving such offset shall, within 30 days after entry of a final order granting the 
+Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty 
+Offset to the United States Treasury or to a Fair Fund, as the Commission directs.  Such a payment 
+shall not be deemed an additional civil penalty and shall not be deemed to change the amount of 
+the civil penalty imposed in this proceeding.  For purposes of this paragraph, a "Related Investor 
+Action" means a private damages action brought against any of the Respondents by or on behalf of 
+one or more investors based on substantially the same facts as alleged in the Order instituted by the 
+Commission in this proceeding. 
+ 
+O. The disgorgement, interest, civil penalties, and any other funds which may be 
+paid to the Fair Fund through or as the result of related actions, shall be aggregated in the Fair 
+Fund, which shall be maintained in an interest-bearing account, and shall be distributed pursuant 
+to a distribution plan (the "Plan") to be administered in accordance with the Commission Rules 
+on Fair Fund and Disgorgement Plans.  A Fund Administrator (the “Administrator”) shall be 
+appointed by the Commission.  The Administrator shall identify the investors in the Funds who 
+suffered losses as a result of the violations determined herein, evaluate investor claims and 
+propose and effectuate a plan to distribute the Fair Fund resulting from this order. The Fair Fund 
+shall be used to compensate injured customers for their loss.  Under no circumstances shall any 
+part of the Fair Fund be returned to Morgan Keegan, Morgan Asset, Kelsoe or Weller.  
+20 
+ 
+Respondent Morgan Keegan shall pay all reasonable costs and expenses of such distribution 
+within thirty (30) days after receipt of an invoice for such services. 
+   
+      P. Morgan Keegan shall comply with the undertakings specified in Paragraph 32 
+above. 
+ 
+     Q. Morgan Asset shall comply with the undertakings specified in Paragraph 34 above. 
+ 
+ By the Commission. 
+ 
+ 
+ 
+        
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+ 
\ No newline at end of file
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+                U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22023 / July 1, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3298 / July 1, 2011 
+
+  Securities and Exchange Commission v. Fernando J. Espuelas et al. , Civil Action No. 06 CV 2435 (RJH) (S.D.N.Y. filed Mar. 29, 2006)  
+
+ FORMER STARMEDIA CEO AGREES TO SETTLEMENT IN SEC LITIGATION 
+
+ The U.S. Securities and Exchange Commission today announced that on June 30, 2011, the U.S. District Court for the Southern District of New York entered a settled final judgment as to Fernando J. Espuelas, a co-founder of StarMedia Network, Inc. and the company's former Chief Executive Officer.  StarMedia is a now-defunct Internet portal that was based in New York City.  The Commission's amended complaint alleges that for fiscal year 2000 and the first two quarters of fiscal year 2001, StarMedia's books and records, and its filings with the Commission, misstated the quality and amount of the company's revenue.  The amended complaint also alleges that StarMedia executives made misstatements regarding the company's revenue to certain entities from which it was attempting to obtain financing.  In its amended complaint, the Commission alleged violations of the federal securities laws by eight former StarMedia executives. 
+
+ Without admitting or denying the allegations in the amended complaint, Espuelas consented to the entry of the Final Judgment permanently enjoining him from future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and Rule 13b2-1 promulgated under the Securities Exchange Act of 1934 (Exchange Act), 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 and 13a-1, and ordering him to pay a civil penalty in the amount of $40,000. 
+
+ Espuelas is the fourth defendant to settle with the Commission.  See Litigation Releases No.  21880  (Mar. 9, 2011); No. 19627  (Mar. 29, 2006); No.  19839  (Sept. 20, 2006). 
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diff --git a/raw/aaer/2011/AAER-3299.txt b/raw/aaer/2011/AAER-3299.txt
new file mode 100644
index 0000000000000000000000000000000000000000..926aa06b02c1ea55c428221fd306f6587d9c87dc
--- /dev/null
+++ b/raw/aaer/2011/AAER-3299.txt
@@ -0,0 +1,1393 @@
+
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+   
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+     SEC.gov | John Raffle, David Applegate and Kathy Raffle 
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+              John Raffle, David Applegate and Kathy Raffle
+           
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+        John Raffle, David Applegate and Kathy Raffle
+       
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+                        
+                   U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22027 / July 5, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3299 / July 5, 2011 
+
+  Securities and Exchange Commission v. John Raffle, David Applegate and Kathy Raffle (Relief Defendant) , Civil Action No. 1:11-cv-540 (W.D. Tex.) 
+
+ On June 27, 2011, the Securities and Exchange Commission filed a settled civil action in United States District Court in Austin, Texas against John Raffle and David Applegate, two former senior vice presidents of ArthroCare Corporation.  The Commission alleges that, between 2006 and the first quarter of 2008, Raffle and Applegate caused ArthroCare to improperly record revenue from shipments of spine products to various distributors, even though the distributors often did not need the products or have the ability to pay for them.  Most of the improper transactions occurred at or near the end of quarters and were intended to enable ArthroCare to satisfy external revenue and earnings targets.  As a result of these transactions, ArthroCare's publicly reported revenue and earnings were materially misstated.  The Commission further alleges that Raffle misled ArthroCare's accountants and auditor about aspects of these transactions. 
+
+ Raffle and Applegate agreed to settle the Commission's charges, without admitting or denying the complaint's allegations.  Under the settlement, Raffle consents to a judgment permanently enjoining him from violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 13b2-1, and 13b2-2 thereunder, and from aiding and abetting violations of Exchange Act Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B), and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder.  The judgment also orders him to pay $1,782,742.43 in disgorgement plus prejudgment interest of $329,230.44, but waives payment of all but $175,000 of this amount, and does not impose a civil penalty, based upon his sworn financial statements.   
+
+ Applegate has consented to a judgment permanently enjoining him from violating Section 17(a) of the Securities Act and aiding and abetting violations of 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 and 13a-13 thereunder.  The judgment orders him to pay $621,754.60 in disgorgement plus prejudgment interest of $106,469.70, but waives payment of all but $55,000 of this amount, and does not impose a civil penalty, based upon his sworn financial statements. 
+
+ Under the settlement, Raffle and Applegate both will be barred from serving as officers or directors of public companies for five years. 
+
+ The Commission also settled with Raffle's ex-wife, Kathy Raffle, to recover $200,000 of incentive compensation and profits from sales of ArthroCare stock John Raffle obtained during the course of the earnings management scheme, which Kathy Raffle received in a divorce agreement.  The Commission does not allege any wrongdoing by Kathy Raffle. 
+
+ The proposed judgments are subject to court approval. 
+
+ The Commission previously settled charges against ArthroCare.  See Rel. No.  34-63883  (February 9, 2011). 
+
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+   SEC Complaint in this matter  
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diff --git a/raw/aaer/2011/AAER-3300.pdf b/raw/aaer/2011/AAER-3300.pdf
new file mode 100644
index 0000000000000000000000000000000000000000..521b7b779f3632af378a41010ca678140b7e63b3
Binary files /dev/null and b/raw/aaer/2011/AAER-3300.pdf differ
diff --git a/raw/aaer/2011/AAER-3300.txt b/raw/aaer/2011/AAER-3300.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5d2a9f54f89d0fd78b57cfa8b0906a606da75c21
--- /dev/null
+++ b/raw/aaer/2011/AAER-3300.txt
@@ -0,0 +1,169 @@
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITES EXCHANGE ACT OF 1934 
+Release No. 64808 / July 5, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3300 / July 5, 2011 
+ 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14451 
+ 
+ 
+ 
+ 
+In the Matter of 
+ 
+Lawrence Collins,  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 
+Lawrence Collins (“Respondent”) 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 Commission finds that: 
+ 
+  
+1. Respondent, age 61, a resident of Maine, was hired by Cabletron Systems, 
+Inc. (“Cabletron”) and thereafter Enterasys Networks, Inc. (“Enterasys”) and worked in the finance 
+department from March 2000 through December 2001.  Respondent was licensed as a certified 
+public accountant (“CPA”) in Maine from 1984 through 1987.       
+ 
+2. At all relevant times, Cabletron was a Delaware corporation with its 
+principal place of business in Rochester, New Hampshire.  Cabletron was a holding company that 
+provided worldwide telecommunications and networking services and products through four 
+operating subsidiaries, including Enterasys.  Cabletron’s common stock was registered pursuant to 
+Section 12(b) of the Securities Exchange Act of 1934 (“Exchange Act”).  The company filed 
+annual, quarterly, and current reports with the Commission on Forms 10-K, 10-Q, and 8-K, 
+respectively.  At all relevant times, Cabletron stock was traded on the New York Stock Exchange.  
+On August 6, 2001 Cabletron was merged into Enterasys and Cabletron ceased to exist.         
+ 
+3. On February 9, 2007, the Commission filed its complaint against 
+Respondent in the United States District Court for New Hampshire (Civil Action No. 1:07-cv-
+00039).  An Amended Complaint was filed on October 15, 2008.  On June 24, 2011, the court 
+entered an order permanently enjoining Collins, by consent, from future violations of Sections 
+17(a)(2) and 17(a)(3) of the Securities Act of 1933 and Section 13(b)(5) of the Exchange Act  and 
+Rule 13b2-1, thereunder.  By consent, the court further ordered that Respondent pay $12,000 in 
+disgorgement; $2,443.54 in prejudgment interest; and a $10,000 civil money penalty.   
+ 
+4. The Commission’s amended complaint alleged, among other things, that 
+Respondent and others at Cabletron and Enterasys reported revenues of the companies that did not 
+qualify as revenue under generally accepted accounting principles (“GAAP”), while representing 
+to the public that the companies reported revenue according to GAAP.  The conduct hid from the 
+ 
+ 3 
+investing public the true financial state of the company by filing materially false and misleading 
+statements in the company’s annual reports on Forms 10-K, quarterly reports on Forms 10-Q, and 
+current reports on Forms 8-K for fiscal years 2001 and 2002.   
+ 
+ 
+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 two (2) 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 
+ 
+ 4 
+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. 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+ 
+ 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3301.txt b/raw/aaer/2011/AAER-3301.txt
new file mode 100644
index 0000000000000000000000000000000000000000..86f1ad4956fbc5e33d676204e76f9dabe879b332
--- /dev/null
+++ b/raw/aaer/2011/AAER-3301.txt
@@ -0,0 +1,1386 @@
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+              Peter L. Jensen and Thomas C. Tekulve, Jr.
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+                U.S. Securities and Exchange Commission 
+
+ Litigation Release No. 22014 / June 27, 2011 
+
+ Accounting and Auditing Enforcement No. 3301 / June 27, 2011 
+
+  Securities and Exchange Commission v. Peter L. Jensen and Thomas C. Tekulve, Jr. , Civil Action No. CV 11-05316-R (AGRx) (C.D. Cal.) 
+
+ SEC CHARGES TWO SENIOR EXECUTIVES WITH ACCOUNTING FRAUD AT SOUTHERN CALIFORNIA-BASED WATER TREATMENT COMPANY 
+
+ The Securities and Exchange Commission today announced charges against two former Basin Water, Inc. executives with fraudulently inflating its revenues, beginning with the company's first financial report after it went public. 
+
+ The SEC alleges that former Basin Water chief executive officer Peter L. Jensen and former chief financial officer Thomas C. Tekulve, Jr. improperly recognized revenue to disguise the company's true financial performance in its 2006 and 2007 quarterly and annual reports. The SEC also alleges that Jensen sold and donated his own Basin Water shares before the company's true financial condition was revealed, reaping millions of dollars in trading profits and tax benefits. Basin Water built, sold, and leased water treatment systems that cleaned contaminated groundwater. 
+
+ The SEC's complaint, filed June 24, 2011, alleges that Jensen and Tekulve improperly included revenue from six sales transactions in Basin Water's financial reports filed with the Commission. The SEC alleges that, depending upon the transaction, the sale was not final; did not have the customer's required acceptance of the system; allowed the customer to pay nothing until the customer resold the system, even though there was no resale; did not provide enough assurance that the customer would pay for the system; or where the company had not shipped the system. The SEC alleges that as a result Basin Water overstated its 2006 revenues by 13% and its 2007 revenues by 74% and overstated its quarterly 2006 and 2007 revenues by 10% to 161%. The SEC further alleges that, before the company's true financial condition was revealed, Jensen sold or donated approximately 1.9 million Basin Water shares for over $9.1 million in trading profits and tax deductions. 
+
+ In February 2009, Basin Water restated its financial results. In July 2009, the Rancho Cucamonga, Calif.-based company declared Chapter 11 bankruptcy and is now defunct. 
+
+ The SEC's complaint charges Jensen and Tekulve with violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Securities Exchange Act 1934 ("Exchange Act") and Rules 10b-5, 13a-14, 13b2-1, and against Tekulve only, 13b2-2 thereunder. The complaint also alleges control person liability, pursuant to Section 20(a) of the Exchange Act, against Jensen and Tekulve for violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder. The complaint further charges Jensen and Tekulve with aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. The complaint also alleges that Jensen and Tekulve failed to comply with Section 304 of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act"). The complaint seeks against each defendant permanent injunctive relief, an officer and director bar, disgorgement of ill-gotten gains plus prejudgment interest, a financial penalty, and Sarbanes-Oxley Act reimbursement.   
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diff --git a/raw/aaer/2011/AAER-3302.txt b/raw/aaer/2011/AAER-3302.txt
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+++ b/raw/aaer/2011/AAER-3302.txt
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+              Armor Holdings, Inc.
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+                U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22037 / July 13, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3302 / July 13, 2011  
+
+  Securities and Exchange Commission v. Armor Holdings, Inc. , Case No. 1:11-cv-01271(D. D.C.)(ESH) (filed July 13, 2011) 
+
+ SEC FILES SETTLED ANTI-BRIBERY, BOOKS AND RECORDS, AND INTERNAL CONTROLS CHARGES AGAINST ARMOR HOLDINGS, INC.  
+
+ The Securities and Exchange Commission ("Commission") today filed a settled civil enforcement action against Armor Holdings, Inc. ("Armor Holdings"), alleging violations of the anti-bribery, books and records, and internal controls provisions of the Foreign Corrupt Practices Act ("FCPA"). Armor Holdings, a manufacturer of military and law enforcement safety equipment based in Jacksonville, Florida, agreed to pay a total of $5,690,744 in disgorgement, prejudgment interest, and civil penalties in order to resolve the Commission's charges. In a related matter, Armor Holdings will pay a $10,290,000 fine to the U.S. Department of Justice ("DOJ"). 
+
+ According to the Commission's complaint: 
+
+ From 2001 to 2006, certain agents of Armor Holdings participated in a bribery scheme to help a U.K. subsidiary of Armor Holdings, Armor Products International, Ltd. ("API"), obtain contracts for the supply of body armor to be used in United Nations ("U.N.") peacekeeping missions. These agents of Armor Holdings caused API to enter into a sham consulting agreement with a third-party intermediary for purportedly legitimate services in connection with the sale of goods to the U.N. 
+
+ In September 2001, the third-party intermediary instructed API to provide a signed, but otherwise blank, pricing sheet that the intermediary would complete after learning from a U.N. procurement official about non-public bids submitted by competitors for the contract. In October 2001, the U.N. awarded API a multi-year contract for the supply of body armor. In February 2003, an agent of Armor Holdings asked the third-party intermediary how API could win a renewal contract to sell body armor to the U.N. The intermediary responded that the same rules would apply to the 2003 tender as applied to the 2001 tender. In August 2003, API received another three-year contract from the U.N. In 2006, API received an additional one-year supply extension from the U.N. on the 2003 contract, without assistance from the third-party intermediary. 
+
+ By late 2006, API had made at least ninety-two payments to the intermediary, totaling approximately $222,750. Agents of Armor Holdings caused API to wire payments to the intermediary with the understanding that part of these payments would be offered to a U.N. official who could help steer business to API. From the 2001 and 2003 U.N. contracts, together with the extension granted in 2006, Armor Holdings derived gross revenues of approximately $7,121,237, and net profits of approximately $1,552,306. 
+
+ From 2001 through June 2007, a U.S. subsidiary of Armor Holdings, Armor Holdings Products, LLC ("AHP"), employed a separate accounting practice that disguised in the books and records of Armor Holdings approximately $4,371,278 in commissions paid to intermediaries who brokered the sale of goods to foreign governments. Despite internal and external admonitions that this practice violated U.S. Generally Accepted Accounting Principles, AHP failed to record commissions in at least 92 transactions through June 2007â€"resulting in approximately $4,371,278 of undisclosed commissions on the books and records of Armor Holdings. 
+
+ On July 31, 2007, after the conduct in the Commission's complaint had occurred, Armor Holdings was acquired by BAE Systems, Inc.â€"an indirect wholly-owned U.S. subsidiary of Britain's BAE Systems PLC. Accordingly, Armor Holdings is no longer an issuer of securities. 
+
+ Without admitting or denying the allegations in the Commission's complaint, Armor Holdings has consented to a court order permanently enjoining it from violating Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act; ordering it to pay disgorgement of $1,552,306, together with prejudgment interest of $458,438; imposing on it a civil penalty of $3,680,000; and ordering it to comply with certain undertakings regarding its FCPA compliance program. The proposed settlement is subject to court approval. 
+
+ Armor Holdings conducted a thorough internal investigation to determine the scope of the improper payments and cooperated with the Commission's inquiry. 
+
+ The Commission acknowledges the assistance of the Fraud Section of DOJ's Criminal Division and the Federal Bureau of Investigation. The Commission's investigation is continuing.   
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diff --git a/raw/aaer/2011/AAER-3303.txt b/raw/aaer/2011/AAER-3303.txt
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+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES ACT OF 1933 
+Release No. 9237 / July 14, 2011 
+INVESTMENT ADVISERS ACT OF 1940 
+Release No. 3239 / July 14, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3303 / July 14, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14467 
+In the Matter of 
+Joseph F. Sofo, CPA, 
+Respondent. 
+ORDER INSTITUTING CEASE-AND-
+DESIST PROCEEDINGS PURSUANT TO 
+SECTION 8A OF THE SECURITIES ACT 
+OF 1933 AND SECTION 203(k) OF THE 
+INVESTMENT ADVISERS ACT OF 1940,  
+MAKING FINDINGS, AND IMPOSING A 
+CEASE-AND-DESIST ORDER 
+I. 
+The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
+and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 
+of 1933 (“Securities Act”) and Section 203(k) of the Investment Advisers Act of 1940 (“Advisers 
+Act”) against Joseph F. Sofo (“Sofo” 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 Pursuant to Section 8A of the Securities Act of 1933 and Section 203(k) of 
+the Investment Advisers Act of 1940, Making Findings, and Imposing a Cease-and-Desist Order 
+(“Order”), as set forth below.   
+1 
+
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+                                                 
+   
+    
+III. 
+On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 
+Introduction 
+1. Sofo, age 49, is a certified public accountant who resides in Roslyn Heights, New  
+York, and is licensed to practice in New York and the U.S. Virgin Islands.  Sofo was the audit 
+engagement partner for Kurcias, Jaffe & Co. LLP (“Kurcias Jaffe”), a Great Neck, New York 
+accounting firm that conducted yearly audits of the North American Globex Fund, L.P. (“Fund” or 
+“Globex Fund”).  Sofo was responsible for the Fund’s audits from 2001 through February 2009.  
+These proceedings arise out of Sofo’s false statements that the 2005 and 2006 year-end audits of the 
+Globex Fund were conducted in accordance with Generally Accepted Auditing Standards 
+(“GAAS”) and that the financial statements had been presented in accordance with Generally 
+Accepted Accounting Principles (“GAAP”). 
+Findings 
+2. Northstar International Group, Inc. (“Northstar”) is a Nevada corporation located   
+in Oceanside, New York.  It is the general partner and, thus, the investment adviser of the Globex 
+Fund, a Nevada limited partnership and a pooled investment vehicle through which the assets of its 
+limited partners are invested in a wide variety of securities and other financial instruments.  The 
+Globex Fund purported to keep the vast majority of its holdings in a related entity known as the 
+North American Globex Group, Inc. (“Group” or “Globex Group”).  James M. Peister founded 
+Northstar in 2000 and has served as its president and CEO since then. 
+3. From 2003 until April 2009, Peister and Northstar intentionally overstated the  
+assets of the Globex Fund, resulting in the dissemination of materially false and misleading asset 
+values and performance figures to investors and prospective investors.  Peister and Northstar 
+concealed the true state of the Fund’s finances by maintaining the Fund’s assets in the Globex 
+Group, and keeping the Group’s bank and brokerage statements secret from the auditors.  Peister 
+controlled all of the operations and activities of the Globex Fund, Northstar and the Globex Group.  
+Sofo was aware of Peister’s control of these three entities, and that the Fund and the Group were 
+related parties.  Sofo also knew that the vast majority of the Fund’s assets were purportedly held by 
+the Globex Group. Neither Peister nor any of the entities mentioned here have been registered as 
+an investment company or investment adviser with the Commission or any state. 
+4. During the relevant period, Peister and Northstar made claims of  
+extraordinarily consistent returns and provided this information to investors and potential 
+investors through reports, account statements, audited financial statements and internet hedge 
+fund websites. These returns were based in larg e part on the assets the Fund claimed to hold in 
+the Group. 
+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
+ 
+ 
+ 
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+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+5. The chart below shows the assets the Fund claimed were held at Globex Group  
+and the verifiable approximate total investments actually held by the Group.    
+Year Assets the Fund Claimed 
+to Hold at the Globex Group 
+Total Investment Assets Actually 
+Held By the Globex Group 
+2004 $9,551,802 (85% of the Fund’s total assets) $455,000 
+2005 $10,842,625 (70% of the Fund’s total assets $65,000 
+2006 $13,213,249 (89% of the Fund’s total assets) $73,000 
+2007 $14,564,461 (94% of the Fund’s total assets) $6,000 
+2008 $6,129,486 (87% of the Fund’s total assets) $8,000 
+6. As a result of the overstatement of assets held at the Globex Group, investors  
+received materially false account statements about the Globex Fund’s value and performance.  
+These inflated assets and performance calculations were reflected in audited year-end financial 
+statements, among other places. 
+7. On the basis of this conduct, Peister and Northstar are the subject of an  
+enforcement action by the Commission and have agreed to be enjoined from future violations of 
+certain provisions of the securities laws. 
+8. Kurcias Jaffe was hired to audit the financial statements of the Globex Fund  
+for the year ended December 31, 2001.  They issued an unqualified opinion on that year and every 
+year thereafter, ending with their opinion on the 2006 financial statements, which were issued on 
+December 11, 2007.  Before taking on this engagement, Kurcias Jaffe did not have any expertise in 
+auditing hedge funds.  In fact, the Globex Fund was its only hedge fund client.   
+9. As the engagement partner for Kurcias Jaffe, Sofo represented that the audits were 
+conducted in accordance with GAAS, and was required, among other things, to ensure that the 
+audit work was adequately performed and supported the conclusions presented in Kurcias Jaffe’s 
+audit opinions. 
+10. Kurcias Jaffe’s audit opinions stated that the financial statements  
+were prepared in conformity with GAAP and had been audited in accordance with GAAS.  In fact, 
+the Globex Fund’s financial statements were not prepared in conformity with GAAP and had not 
+been audited in accordance with GAAS.  The audit reports were nonetheless provided to investors 
+and prospective investors, and thus permitted Peister’s and Northstar’s fraud to continue.   
+3
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+     
+ 
+ 
+ 
+ 
+Audit of the North American Globex Fund for 2004-05 
+11. In conducting the audits in question, Sofo ignored the requirements of GAAS and  
+relied on a flawed confirmation process.  Though Sofo understood the Fund and the Group were 
+related parties and that both entities were controlled by Peister, the audits in years 2004-2005 were 
+quite limited.  Sofo merely obtained representations from Peister, in his role as the Group’s 
+president, “confirming” the value of the Fund’s assets being held by the Group.  Sofo did no 
+further work to verify these balances. 
+12. These confirmations were of almost no value from an audit perspective because 
+GAAS requires that “[t]he auditor should direct the confirmation request to a third party who the 
+auditor believes is knowledgeable about the information to be confirmed.”  AU § 330.26, The 
+Confirmation Process (emphasis added).  The confirmation requests to the Group were sent to a 
+related party—in substance, the very same party—in clear contravention of GAAS.   
+13. Though Sofo understood that Peister controlled both the Fund and the Group and 
+that the Fund and the Group were related parties, he accepted the assertions of Peister as the only 
+audit evidence for the balance of the Fund’s assets held by the Group.  GAAS requires that “[a]fter 
+identifying related party transactions, the auditor should apply the procedures . . . directed toward 
+obtaining and evaluating sufficient appropriate audit evidence and should extend beyond inquiry 
+of management.”  AU § 334.09, Related Parties. But relying solely on an assertion from the Fund 
+management is precisely what Sofo did, without obtaining any other audit evidence. 
+14. For the 2004-05 audit, Sofo failed to exercise due care, appropriate professional 
+skepticism, or obtain sufficient competent evidential matter.  In the planning phases of the audit, 
+Globex Group was identified as a fraud risk yet the additional steps listed in the audit workpapers 
+for the 2005 audit to combat this risk were not taken.    
+15. The result was the Fund’s audited financial statements were materially misstated.  
+The statements for 2004 and 2005 show the balance in the “Due from North American Globex 
+Group” line item to be $9,551,802 for 2004 and $10,842,625 for 2005.  In reality, the actual 
+verifiable investment assets held by the Group were about $455,000 at the end of 2004 and 
+$65,000 at the end of 2005 — much less than what were repo rted in the audited statements. 
+Audit of the North American Globex Fund for 2005-06 
+16. For the 2005-06 audit, Sofo again failed to exercise due care, appropriate 
+professional skepticism, or to obtain sufficient competent evidential matter.  Once again, in the 
+planning phases of the audit, Globex Group was identified as a fraud risk yet the additional steps 
+listed in the audit workpapers for the 2006 audit to combat this risk were not taken.    
+17. In 2006, Sofo changed his approach in form but not in substance as to the 
+confirmation of the Fund’s assets held at the Group.  Sofo attempted to get confirmation of the 
+Fund’s balance held at the Group from the Group’s accountant, who was also Peister’s personal 
+4
+ 
+ 
+                         
+ 
+   
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+accountant.  Under GAAS, confirmation from the accountant did not constitute sufficient audit 
+evidence because the accountant was not a third party as required by GAAS.  AU § 330.26.           
+18. Still, Kurcias Jaffe staff first reached out to the accountant on May 2, 2007.  After 
+several exchanges between Kurcias Jaffe and the accountant spanning five months, Sofo had still 
+not received what he considered to be a sufficient confirmation from the accountant. 
+19. On October 16, 2007 the accountant wrote with respect to the supposed $13,213,249 
+balance due to the Fund from the Group:  “The balance is correct based on statements provided to me 
+by North American Globex Group.  I have not audited nor reviewed this information and therefore 
+cannot make any opinion on it.”  Sofo was aware he could not rely on this statement as a 
+confirmation.   
+20. On November 13, 2007, the accountant slightly revised his October 16 statement 
+regarding the supposed $13,213,249: “The balance is correct based on statements provided to me 
+by North American Globex Group.  These statements from [the Group] that I provide for [the 
+Fund] are generated from the electronic online printout of the consolidated online brokerage 
+statements provided by Technicom.”  Sofo understood from Fund insiders that Technicom was an 
+on-line consolidation of all the brokerage accounts at the Group and that the accountant had access 
+to this. However, Technicom was not an on-line consolidation of all the brokerage accounts held 
+at the Group.  Regardless of what he was told, Sofo should have learned for himself what 
+Technicom was, but he did not.  Auditing guidance states that “the auditor should perform audit 
+procedures in addition to the use of inquiry to obtain sufficient appropriate audit evidence.” AU § 
+326.35, Audit Evidence. 
+21. On November 15, 2007, Sofo emailed Peister and others stating that he wanted the 
+year-end statements for the Group accounts that were holding the Fund’s assets.  He also requested 
+the contact information for the brokers of the accounts so he could get confirmation from them 
+directly. Sofo noted that “[d]ue to the relationship between Globex Fund and Globex Group, as well 
+as the fact that the majority of the Funds [sic] assets are held with the Group, these audit procedures 
+are necessary in order for us to issue an audit opinion on the Fund.”  However, Peister declined to 
+give these items to Sofo, and Sofo did not pursue the matter further.    
+22. On December 11, 2007, the accountant sent Kurcias Jaffe a compilation report along 
+with the Group’s balance sheet, which showed $13,213,249 was due to the Fund.  The accountant 
+also sent a list of brokerage accounts with corresponding dollar figures that totaled $13,213,249.  
+Even though the accountant stated in his compilation report that “[a] compilation is . . . the 
+representation of management” and that he did “not express an opinion or any other form of 
+assurance on [the accompanying balance sheet],” Sofo was satisfied with this audit evidence, and 
+that day issued an unqualified opinion of the financial statements for 2006 and 2005.   
+23. In the end the accountant’s “confirmation” was inadequate, and the compilation of 
+the Group’s balance sheet the accountant prepared did not offer any audit assurance.  In sum, Sofo 
+failed to exercise due professional care, professional skepticism, and failed to obtain sufficient 
+competent evidential matter to support Kurcias Jaffe’s unqualified audit opinions. 
+5
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+  
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+24. The result was the Fund’s audited financial statements were materially misstated.  
+The 2006 audited financial statements showed the balance in the “Investments held by North 
+American Globex Group Inc.” line item to be $13,213,249 for 2006.  In fact, the total verifiable 
+investment assets actually held by the Group were approximately $73,000 as of December 2006— 
+much less than what was reported in the statements.   
+25. Sofo also allowed the Fund to make materially false representations in the footnotes 
+to the 2006 financial statements.  Note J of those statements stated, “NAGG [the Group] is not 
+independently audited.  However, our auditors have received confirmation from NAGG’s 
+independent accountant confirming NAGG’s assets and liabilities as of December 31, 2006 and the 
+changes in NAGG’s net assets for the year ended December 31, 2006.”  Sofo allowed the language 
+“independent accountant” and “confirmation” even though (1) the accountant was not independent of 
+the Group, and (2) the accountant had not confirmed anything.  Kurcias Jaffe did not receive a 
+confirmation of the Group’s assets and liabilities but a compilation, which explicitly offered no 
+assurance to the reader of the financial statements. 
+26. Sofo also added an emphasis-of-a-matter paragraph to the unqualified audit opinion 
+drawing attention to Note J.  This action, in effect, gave the appearance that the information 
+contained in Note J was particularly informative when in fact, the information was materially 
+inaccurate.   
+27. Sofo was aware that the Fund’s private placement memorandum, which names 
+Sofo explicitly and which Kurcias Jaffe had a copy of in its audit workpapers, stated that the 
+limited partners were supposed to receive a copy of the audited financial statements.  Also, in at 
+least one instance Sofo himself sent the 2006 audit opinion and audited financial statements to a 
+limited partner.  
+28. As a result of the conduct described above, Sofo was a cause of Peister’s and 
+Northstar’s violations of Sections 17(a)(2) and (3) of the Securities Act.  Section 17(a)(2) of the 
+Securities Act specifically prohibits any untrue statements of material fact or material omissions in 
+the offer or sale of securities.  Section 17(a)(3) of the Securities Act prohibits engaging in a course 
+of business which operates as a fraud or deceit in the offer or sale of securities
+. 
+29. As a result of the conduct described above, Sofo was a cause of Peister’s and 
+Northstar’s violations of Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder which 
+prohibits fraudulent conduct and makes it fraudulent, deceptive, or manipulative act, practice, or 
+course of business for any investment adviser to a pooled investment vehicle to make false or 
+misleading statements to investors or prospective investors in the pooled investment vehicle. 
+IV. 
+In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent Sofo’s Offer. 
+Accordingly, it is hereby ORDERED that: 
+6
+ 
+ 
+ 
+   
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+ 
+A. Pursuant to Section 8A of the Securities Act, Respondent Sofo cease and desist from 
+committing or causing any violations and any future violations of Sections 17(a)(2) and (3) of the 
+Securities Act, and pursuant to Section 203(k) of the Advisers Act, Respondent Sofo cease and 
+desist from committing or causing any violations and any future violations of Section 206(4) of the 
+Advisers Act and Rule 206(4)-8 thereunder. 
+B. Respondent shall, within 14 days of the entry of this Order, pay disgorgement  
+of $4,521 and prejudgment interest of $1,117 to the United States Treasury.  If timely payment is 
+not made, additional interest shall accrue pursuant to SEC Rule of Practice 600.  Payment shall be: 
+(A) made by wire transfer, 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 Securities and Exchange Commission, Office of Financial 
+Management, 100 F St., NE, Stop 6042, Washington, DC 20549; and (D) submitted under cover 
+letter that identifies Sofo as a Respondent in these proceedings, the file number of these 
+proceedings, a copy of which cover letter and wire transfer, money order or check shall be sent to 
+Thomas Sporkin, Chief of the Office of Market Intelligence, Division of Enforcement, Securities 
+and Exchange Commission, 100 F St., NE, Washington, DC 20549-5990.   
+ By the Commission.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+7
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3304.txt b/raw/aaer/2011/AAER-3304.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5708a4d451d6dd492f22d2f271bddbde07a9278d
--- /dev/null
+++ b/raw/aaer/2011/AAER-3304.txt
@@ -0,0 +1,1385 @@
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+        Robert D. Orr, Leland G. Orr, Michael S. Lowry, Michael S. Hess, Kyle L. Garst, and Travis W. Vrbas
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+             
+                        
+                  U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22046 / July 18, 2011 
+
+ Accounting and Auditing Enforcement  Release No. 3304 / July 18, 2011 
+
+  SEC v. Robert D. Orr, Leland G. Orr, Michael S. Lowry, Michael S. Hess, Kyle L. Garst, and Travis W. Vrbas , Case No. 11-CV-2251 WEB/KGG (D. Kansas May 4, 2011) 
+
+ Judgments Entered Against Five Former Executives of the Brooke Companies for Financial and Disclosure Fraud 
+
+ 
+
+ The Securities and Exchange Commission announced today that the United States District Court for the District of Kansas entered judgments, dated July 13, 2011, against five former senior executives of Kansas-based Brooke Corporation and its other, publicly-traded subsidiaries, Brooke Capital Corporation, an insurance agency franchisor, and Aleritas Capital Corporation, a lender to insurance agency franchises and other businesses.  Robert D. Orr, Leland G. Orr, Michael S. Lowry, Michael S. Hess, and Travis W. Vrbas, without admitting or denying the Commission's allegations, consented to judgments enjoining them from future violations of the federal securities laws, barring them from serving as officers or directors of public companies, and requiring the payment of disgorgement and penalties.  The SEC Complaint alleges that in SEC filings and other public statements for year-end 2007, and the first and second quarters of 2008, senior executives at the Brooke companies misrepresented, among other things, the number of Brooke Capital franchisees, and their financial health, the deterioration of Aleritas' corresponding loan portfolio, and the increasingly dire liquidity and financial condition of the Brooke companies. 
+
+ According to the SEC's Complaint, Brooke Capital's former management inflated the number of franchise locations by including failed and abandoned locations in totals.  They also concealed the nature and extent of Brooke Capital's financial assistance to its franchisees, which included making franchise loan payments on behalf of struggling franchisees.  Aleritas' former management hid the company's inability to repurchase millions of dollars of short-term loans sold to its network of regional lenders.  They also sold or pledged the same loans as collateral to more than one lender, and improperly diverted payments from borrowers for the company's operating expenses.  Aleritas' former management also concealed the rapid deterioration of the company's loan portfolio by falsifying loan performance reports to lenders, understating loan loss reserves, and by failing to write-down its residual interests in securitization and credit facility assets. 
+
+ The positions held by the former Brooke executives were: 
+
+ 
+ 	Robert D. Orr, founder and former chairman of the board of Brooke Corporation, former chief executive officer and chairman of the board of Brooke Capital, and former chief financial officer of Aleritas  
+ 	Leland G. Orr, former chief executive officer, chief financial officer, and vice-chairman of the board of Brooke Corporation, and former chief financial officer of Brooke Capital 
+ 	Michael S. Lowry, former chief executive officer and member of the board of Aleritas 
+ 	Michael S. Hess, former chief executive officer and member of the board of Aleritas 
+ 	Travis W. Vrbas, former chief financial officer of Brooke Corporation and Brooke Capital 
+ 
+
+ The judgments enjoin each of the defendants from violating Sections 17(a)(1) and 17(a)(3) 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 from aiding and abetting violations Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder.  The judgments further enjoin Robert Orr, Leland Orr, Lowry, and Hess from violating Exchange Act Rule 13b2-2; Robert Orr, Leland Orr, Hess, and Vrbas from violating Exchange Act Rule 13a-14 and from aiding and abetting violations of Rule 13a-1; Robert Orr and Hess from aiding and abetting violations of Exchange Act Rule 13a-11; and Robert Orr from violating Exchange Act Section 16(a) and Rule 16a-3 thereunder. 
+
+ In addition to the injunctions, the judgments bar the defendants from serving as an officer or director of a public company.  Lowry's judgment requires him to pay a $175,000 civil penalty and disgorgement of $214,500, with prejudgment interest of $24,004.91. Hess' judgment requires him to pay a $250,000 civil penalty, and Vrbas' judgment requires him to pay a $130,000 civil penalty.  The judgments against Robert Orr and Leland Orr require them to pay civil penalties and disgorgement in amounts to be determined by the Court. 
+
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diff --git a/raw/aaer/2011/AAER-3305.pdf b/raw/aaer/2011/AAER-3305.pdf
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+ 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No.  64941 / July 21, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No.  3305 / July 21, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14480
+       
+      :  
+ :  
+ :   
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+      : PROCEEDINGS PURSUANT TO RULE 
+ JOHN N. IRWIN, 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 John N. 
+Irwin, CPA (“Respondent” or “Irwin”) 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.2. 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. Irwin, age 73, is and has been a certified public accountant licensed to 
+practice in the Commonwealth of Pennsylvania.   
+2. On July 12, 2011, a judgment was entered against Irwin, permanently 
+enjoining him from future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 
+1933, and granting other relief, in the civil action entitled SEC v. John N. Irwin, et al.
+, Civil Action 
+Number 11-CV-4429 (PD), in the United States District Court for the Eastern District of 
+Pennsylvania.   
+3. The Commission’s complaint (the “Irwin Complaint”) alleged that Irwin 
+made materially false and misleading statements to investors in connection with a Ponzi scheme 
+orchestrated by Joseph Forte (“Forte”).  From 1995 through 2008, Forte operated a Ponzi scheme 
+through Forte, LP (the “Fund”), a limited partnership he established with Irwin’s assistance.  The 
+Ponzi scheme ended in January 2009 following the Commission’s filing of an emergency action, 
+SEC v. Forte, et al.
+, Civil Action Number 2:09-cv-00063-PD (filed Jan. 7, 2009), charging Forte 
+and the Fund with fraudulently raising over $50 million from approximately 80 investors.   
+4. The Irwin Complaint alleged that, in connection with the scheme, Irwin 
+made materially false and misleading statements to existing and potential investors about, among 
+other things, the Fund’s current value and growth, historical positive performance, and 
+conservative trading strategy.  In addition, the Irwin Complaint alleged that Irwin failed to disclose 
+to investors that he was receiving a percentage of Forte’s fees as compensation for helping to 
+establish the Fund.   
+ 
+ 
+ 
+ 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 Irwin’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately, that: 
+ 
+ Irwin is suspended from appearing or practicing before the Commission as an accountant.   
+ 
+ 
+ By the Commission. 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3306.txt b/raw/aaer/2011/AAER-3306.txt
new file mode 100644
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--- /dev/null
+++ b/raw/aaer/2011/AAER-3306.txt
@@ -0,0 +1,1126 @@
+       INITIAL DECISION RELEASE NO. 420 
+       ADMINISTRATIVE PROCEEDING 
+       FILE NO. 3-13997 
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ Washington, D.C. 20549 
+___________________________________  
+In the Matter of     :  
+      :  
+DOHAN + COMPANY CPA,   :  INITIAL DECISION AS TO  
+STEVEN H. DOHAN, CPA,    :  EREZ BAHAR, CA
+1
+NANCY L. BROWN, CPA, and   :  June 27, 2011 
+ 
+EREZ BAHAR, CA     :  
+___________________________________  
+ 
+APPEARANCES: Lloyd A. Farnham and Jason M. Haber meyer for the 
+Division of Enforcement, Securities and Exchange Commission 
+ 
+Christopher B. Wells of Lane Powell PC for 
+Respondent Erez Bahar, CA 
+ 
+BEFORE:  Carol Fox Foelak, Administrative Law Judge 
+ 
+SUMMARY 
+ 
+ This Initial Decision  sanctions Erez Bahar, CA ( Bahar) in connection with his role as 
+manager of the audit of the 2007 financial statements of International Commercial Television  
+Inc. (ICTV).  The Initial Decision denies him the privilege of appearing or practicing before the 
+Securities and Exchange Commission (Commission) as an accountant for a period of two years. 
+I.  INTRODUCTION 
+ 
+A.  Procedural Background 
+ 
+The Commission instituted this proceeding with an Order Instituting Proceedings (OIP) 
+on August 9, 2010, pursuant to Section 4C of the Securities Exchange Act of 1934 (Exchange 
+Act) and Rule 102(e) of the Commission’s Rules of Practice (Rule 102(e)).  
+ 
+The undersigned held five days of hearings in Seattle, Washington, on January 24 -28, 
+2011.  The Division of Enforcement (Division) called eight  witnesses from whom testimony was 
+                                                 
+1 The proceeding has ended as to the remaining captioned Respondents.  Dohan + Company 
+CPA, 100 SEC Docket 37027 (Jan. 20, 2011). 
+       
+ 2 
+taken, including an expert witness.  Respondent  Bahar testified in his own case and called two  
+additional witnesses , including an expert witness.  Numerous exhibits were admitted into 
+evidence.2
+ 
+ 
+The findings and conclusions in this Initial Decision are based on the record.  
+Preponderance of the evidence was applied as the standard of proof.  See  Steadman v. SEC, 450 
+U.S. 91 (1981).  Pursuant to the Administrative Procedure Act, 3
+ 
+ the following post -hearing 
+pleadings were considered: (1) the Division’s March 1, 2011, Proposed Findings of Fact and 
+Conclusions of Law and Post -Hearing Memorandum of Law; (2) Respondent ’s March 18, 2011, 
+Proposed Findings of Fact and Conclusions of Law  and March 21, 2011, Revised Post -Hearing 
+Brief wit h Table of Contents and Table of Authority ; and  (3) the Division’s March 29, 2011, 
+Reply.  All arguments, proposed findings, and conclusions that are inconsistent with this Initial 
+Decision were considered and rejected. 
+B.  Allegations and Arguments of the Parties 
+ 
+ Bahar is charged with improper professional conduct, within the meaning of Exchange 
+Act Section 4C and Rule 102(e) (1)(ii) and (iv), in connection with his role as manager of the 
+audit of the financial statements of ICTV, for 2007.
+  Specifically, the OIP alleges that Bahar  
+failed to comply with Public Company Accounting Oversight Board (PCAOB) auditing 
+standards, including  what were known as generally accepted auditing s tandards (GAAS) , 
+because he failed to uncover improper revenue recognition by  ICTV that materially overstated 
+revenue and net income.4
+                                                 
+2 Citations to the transcript of the hearing will be noted as “Tr. ___.”  Citations to exhibits 
+offered by the Division and Respondent will be noted as “Div. Ex. ___” and “Resp. Ex.___,” 
+respectively.   
+  The Division urges that Bahar be denied the privilege of appearing or 
+practicing before the Commission as an accountant for a period of three years.  Bahar argues that 
+his supervision as manager of  the accountant who performed the fieldwork was reasonable  and, 
+further, that he was not acting as an auditor subject to PCAOB standards on the engagement, 
+       
+3  See 5 U.S.C. § 557(c). 
+ 
+4  Pursuant to the PCAOB’s Auditing Standard No. 1, GAAS were adopted as PCAOB standards, 
+subject to being superseded going forward.  Pub. Co. Accounting Oversight Bd.; Order 
+Approving Proposed Auditing Standard No. 1, 69 Fed. Reg. 29149 (May 20, 2004).  GAAS were 
+the standards prescribed by the Auditing Standards Board of the American Institute of Certified 
+Public Accountants (AICPA) for the conduct of auditors in the performance of an examination of 
+management’s financial statements.  See
+ SEC v. Arthur Young & Co. , 590 F.2d 785, 788 n.2 
+(9th Cir. 1979).  The ten GAAS are further defined or interpreted by Statements on Auditing 
+Standards (SAS), which are codified in the Codification of Statements on Auditing Standards
+, as 
+“AU § ___.”  “PCAOB Standards” and “GAAS” were used interchangeably in the evidence of 
+record in this proceeding.   
+ 
+ 3 
+such that he did not engage in improper professional conduct  within the meaning of Exchange 
+Act Section 4C and of Rule 102(e); he asks that the proceeding be dismissed.5
+ 
+   
+II.  FINDINGS OF FACT 
+ 
+A.  Respondent and Other Relevant Individuals and Entities 
+ 
+1.  Erez Bahar  
+ 
+ Bahar has been licensed as a Chartered Accountant (CA) in Canada since 2004 and has 
+worked as an accountant at Davidson & Company LLP (Davidson)  for about eleven years , 
+starting as a staff accountant; he is currently a partner.  Tr. 766.  His role in the ICTV audit as 
+manager was as a supervisor of the fieldwork in the 2007 and previous  ICTV audits.  Tr. 611-13, 
+771, 777-78.  Since the events at issue, Bahar has taken a number of professional education 
+courses, including on revenue recognition, and supplemented the courses with self -study.  Tr. 
+1145-46; Resp. Ex. 45.  He intends to take the U.S. CPA examination in the future.  Tr. 1147; 
+Resp. Ex. 45.  Bahar continues to audit U.S. public companies as audit manager or engagement 
+partner.  Tr. 1210.      
+ 
+2.  ICTV  
+ 
+ ICTV’s business consists of selling  products through infomercials and the like.  Tr. 37.  
+Its flagship product is the DermaWand, a beauty  appliance; 90% to 95% of ICTV’s revenues are 
+derived from the sale of DermaWands .  Tr. 37- 38, 223.   Headquartered in Bainbridge Island, 
+Washington, ICTV  currently has one employee there, one in Vancouver, British Columbia, 
+Canada, two in Pennsylvania, and one in the Philippines.  Tr. 38.  I CTV has been a public 
+company since 2002.  Tr. 40.  According to the Commission’s public official records, of which 
+official notice is taken pursuant to 17 C.F.R. § 201.323, ICTV has filed periodic reports since 
+2002.  ICTV settled charges arising out of the events at issue in this proceeding in a civil action 
+brought by the Commission; the court enjoined ICTV from violating the reporting and record-
+keeping provisions of the Exchange Act.  SEC v. Int’l Commercial Television, Inc.
+, No. 3:10-cv-
+05555-BHS (W.D. Wash. Sept. 8, 2010). 
+ 
+ During the time at issue Karl Redekopp (Redekopp) was ICTV’s chief financial officer.
+6
+                                                 
+5 Bahar also requests an award of costs, legal fees, and damages.  Such a request, which is 
+premature, can only be made under the Equal Access to Justice Act (EAJA), 5 U.S.C. § 504, and 
+Sections 201.31-.59 of the Commission’s Rules, 17 C.F.R. §§ 201.31- .59.  The EAJA and the 
+cited Commission Rules specify the circumstances under which an award of fees and expenses 
+will be made to a party. 
+  
+Tr. 44.  Kelly Willett (Willett) was, and is, director of sales.  Tr. 34- 35.  Richard Ransom 
+ 
+6 The Commission brought an action arising out of the events at issue against Redekopp, alleging 
+that he violated the antifraud provisions; that action is pending.  SEC v. Redekopp , No. 3:10-cv-
+05557 (W.D. Wash.). 
+ 
+ 4 
+(Ransom) replaced Redekopp, who departed in August 2008.  Tr. 215- 18.  Before he left, 
+Redekopp explained ICTV’s accounting system to Ransom and gave him the laptop on which  
+ICTV’s accounting files reside d – contracts between ICTV and various parties, two years’ of 
+accounts payable transactions, and all bank statements.  Tr. 218-19.   Additional paper files that 
+Ransom identified that were in the Vancouver office were also provided to him.  Tr. 372.  
+ 
+3.  Dohan + Company CPA  
+ 
+ Dohan + Company CPA (Dohan + Co.) is a small accounting firm in Miami, Florida, 
+with only a handful of accountants during the time at issue.  Tr. 441-4 3, 599.  Dohan + Co. 
+audited ICTV’s financial statements for the years 2004 through 2007.  Tr. 445.  Nancy L. Brown, 
+CPA (Brown), was the engagement partner on the audits, and Steven H. Dohan, CPA (Dohan),  
+was the concurring partner.  Tr. 445, 467-68, 607.  Dohan was introduced to ICTV as a potential 
+client by Davidson.  Tr. 445, 605-06, 1022-25.  Dohan + Co. and Davidson had been 
+collaborating on audits for several years.
+7
+ 
+  Tr. 600-04.        
+4.  Davidson & Company LLP  
+ 
+ Davidson is a  Canadian chartered  accounting firm located in Vancouver, British 
+Columbia, Canada, and is registered w ith the PCAOB.  Tr. 600.  Davidson is a much larger firm 
+than Dohan + Co., and had thirty to fifty licensed accountants when it started working on ICTV 
+engagements in 2004.  Tr. 1023.  Although it was PCAOB-registered and performing audits of 
+U.S. public c ompanies at the time of the 2007 ICTV audit, it was not performing such audits 
+when it  first started performing fieldwork for Dohan + Co.
+8
+                                                 
+7 Dohan had become acquainted with Davidson accountants through their membership in an 
+accounting organization.  Tr. 602.  In their collaboration,  Dohan + Co. would be the auditor and 
+engage Davidson to perform the fieldwork for companies that were in Davidson’s general 
+geographic area.  Tr. 601.  Dohan + Co. used Davidson as subcontractors to perform fieldwork, 
+including the review of the fieldwork.  Tr. 448.  The two firms were not performing joint audits; 
+Dohan + Co. was the primary auditor and subcontracted with Davidson to perform the fieldwork.  
+Tr. 450-51.  Davidson performed such work for Dohan + Co. on twenty or thirty audits of ten to 
+fifteen companies.  Tr. 454, 602.  Dohan + Co. would participate in the planning meetings by 
+telephone or by reviewing Davidson workpapers  documenting a planning meeting held at 
+Davidson’s office.  Tr. 452-53.   
+  Tr. 447.  Davidson introduced 
+Dohan + Co. to ICTV so that Dohan + Co. could sign off as auditor for financial statem ents that 
+were to be filed with the Commission.  Tr. 519.  There was no written agreement between the 
+two firms specifying the duties and responsibilities  of each .  Tr. 452.  However, Dohan and 
+Brown considered Davidson personnel to be part of the engagement team and assumed that 
+ 
+8 During 2007 ICTV and Davidson discussed replacing Dohan + Co. with Davidson as ICTV’s 
+auditor.  Tr. 835-36; Div. Ex. 40.   
+ 
+ 5 
+Davidson was to apply U.S. auditing standards, referred to as GAAS or PCAOB auditing 
+standards, to its fieldwork.9
+ 
+  Tr. 448, 453-54, 610.       
+ Michael Winstanley (Winstanley) , employed at Davidson from September 2003 through 
+October 2010, was licensed as a CA in Canada in 2006 and as a CPA in the U.S. in 2009.  Tr. 
+646-47.  He performed the fieldwork on the 2007 engagement and on the previous audits and 
+quarterly reviews as well.  Tr. 650 -52, 655-56.  Bahar was the manager on the  engagement and 
+Winstanley was the senior.  Tr. 468. 
+ 
+B.  ICTV Booked Revenue Improperly 
+ 
+ It is undisputed that, throughout 2007 and the first half of 2008, ICTV violated Generally 
+Accepted Accounting Principles (GAAP)
+10 by improperly recording revenue.  T he result was an 
+overstatement of revenues in the 2007 financial statements of about $2.8 million, which was 
+reversed in two restatements.
+11
+ 
+  The improper accounting was discovered by Ransom as he 
+prepared for the 2008 third quarter review.  Tr. 241-42.    
+1.  ICTV’s Sales of DermaWands  
+ 
+ The parties  generally agree  on the following facts concerning ICTV’s sales of 
+DermaWands during the period at issue. 
+ 
+ The DermaWands a re manufactured in Tianjin, China.  Tr. 223.  ICTV stored them at 
+Christopher Morgan, a public warehouse, also referred to as a fulfillment house, located outside 
+Chicago, Illinois, in New Berlin, Wisconsin.  Tr. 43, 223- 24.  Christopher Morgan shipped the 
+products to the ultimate retail customers who purchased them.  Tr. 43-44.     
+ 
+ ICTV sold products through two sales channels  relevant here: direct response and a 
+partnership with Home Shopping Network (HSN).  Tr. 40, 220.  For direct response, ICTV 
+created an infomercial, bought television air time, and employed operators to take orders.  Tr. 37.  
+ICTV’s arrangement with HSN started in 2007.  Tr. 146.  The first transaction with HSN was  a 
+so-called guaranteed sale, for which the purchase order bore the notation “Guaranteed Sale ” – 
+ICTV delivered DermaWands to HSN’s own warehouse before HSN  aired a DermaWand 
+session, HSN took title to the goods on receipt and was required to pay ICTV thirty days after it 
+                                                 
+9 Bahar concedes that he never told Brown or Dohan that  PCAOB audit standards and U.S. 
+Generally Accepted Accounting Principles would not apply to his work.  Tr. 1155-56. 
+ 
+10 GAAP are the basic postulates and broad principles of accounting pertaining to business 
+enterprises.  These principles establish guidelin es for measuring, recording, and classifying the 
+transactions of a business entity.   See SEC v. Arthur Young & Co., 590 F.2d at 789 n.4.   
+ 
+11 Official notice is taken of ICTV’s Forms 10 and 8 pertaining to the events at issue, which are 
+in the Commission’ s public official records, pursuant to 17 C.F.R. § 201.323.  The Forms are 
+also in evidence as Div. Exs. 78 through 93.   
+ 
+ 6 
+sold the goods to the ultimate customer.  Tr. 310-23; Div. Ex. 106.  That is, the goods were 
+received into HSN’s warehouse but HSN was not obligated to pay, and did not pay, until it sold 
+the goods.  Tr. 304.  HSN also had 135 days to return any product that the customers returned.  
+Div. Ex. 101 at 2, Div. Ex. 102 at 2.  This arrangement was governed by the contract titled 
+Master Terms and Co nditions for Purchase Orders with HSN LP  (traditional agreement).  Div. 
+Exs. 101, 102.   
+ 
+ Following the initial guaranteed sale transaction,  ICTV and HSN moved to a drop-ship 
+arrangement whereby ICTV guaranteed that sufficient inventory for an upcoming ai r date would 
+be held at Christopher Morgan for HSN.  Tr. 56-58, 236-37, 323-328; Divs. Exs. 103, 104, 115.  
+This arrangement was governed by the contract titled Master Terms and Conditions for Drop 
+Ship Vendors (drop-ship agreement).  Div. Exs. 103, 104.  HSN and ICTV would communicate 
+ahead of a planned DermaWand air date, and Christopher Morgan would segregate the quantity 
+of goods HSN needed from ICTV’s other goods in the warehouse; the quantity and date would 
+be memorialized in what witnesses referred to as a “PO worksheet” that bore the notation “T HIS 
+IS NOT A PURCHASE ORDER .” Tr. 305-06, 328-30; Div. Ex. 107.  With the drop-ship 
+arrangement, HSN never took title or possession of the goods; HSN took orders and sent the m to 
+Christopher Morgan, which shipped  the goods to the customers; invoices were triggered by 
+shipment.  Tr. 235-36, 305-09.  At that point HSN became obligated  to pay for the goods; terms 
+of payment were thirty days from that date. Tr. 308-09; Div. Ex. 103 at 4, Div. Ex. 104 at 4.     
+ 
+2.  ICTV Booked Revenue Improperly  
+ 
+  The audited financial statements in ICTV’s Form 10 -KSB for 2007, which contained a 
+going concern statement, showed net sales of $11.3 million for 2007, as compared with $2.97 
+million for the previous year.  Div. Ex. 82 a t F -3.  The increase coincided with ICTV’s new 
+relationship with HSN.   Tr. 146.  However, the $11.3 million figure was overstated through 
+improper booking of revenue from both direct response sales and sales through HSN.   
+ 
+ ICTV booked revenue related to direct response sales improperly by prematurely 
+recognizing revenue of approximately $550,000 on orders that were subject to a thirty -day free 
+trial period and by understating returns by approximately $860,000.  Tr. 173- 74, 415; Div. Ex. 
+47, Div. Ex. 87 at F-8, Div. Ex. 91, Div. Ex. 100 at 2. 
+ 
+ ICTV also booked revenue related to HSN improperly largely because it recognized 
+revenue under the drop-ship arrangement at the time that it agreed to have a given amount of 
+DermaWands set aside for  HSN to sell , rather than at the time that DermaWands sold  by HSN 
+were shipped to customers.  For example, it booked $990,000 on December 21, 2007, for the sale 
+of DermaWands that were shipped to customers in 2008, if ever.
+12
+                                                 
+12 There is some conflict in the evidence as to whether this was a guaranteed sale or a drop -ship 
+sale.  Tr. 78-81; Div. Ex. 109.  However, there is no doubt that the goods were not shipped to any 
+customer in 2007.   
+  Tr. 335-36; Div. Exs. 109, 
+111.  Additionally, it booked over $93,000 in revenue in November 2007 for sale of a new 
+product, Cell R x, that was rejected by HSN in December 2007 because it  failed HSN’s quality 
+ 
+ 7 
+assurance test; it was never sold to or by HSN. 13
+ 
+  Tr. 77- 78, 331-34; Div. Exs. 108, 111, 113, 
+117.  
+3.  Restatements   
+ 
+ When Ransom was preparing trial balances for the third quarter of 2008, he found that 
+Redekopp had overbooked HSN sales for 2007 and the first two quarters of 2008  in that 
+Redekopp had recorded sales based on quantities , as specified in PO worksheets, that ICTV was 
+to keep available for drop-shipping.  Tr. 240-42; Div. Ex. 47 at 2.  Ransom’s investigation began 
+because a large accounts receivable as of June 30, 2008, did not match with what Redekopp had 
+told him concerning sales.  Tr. 228-31, 366-68; Div. Ex. 47 at 2.  He had asked Redekopp for all 
+agreements but was not given either HSN “Master Terms and Conditions” agreement.  Tr. 238, 
+372-73.  He cannot recall exactly how he found them, perhaps in an  e-mail or computer file.  Tr. 
+238-39, 372, 401-02.  He believes that he began looking for the drop- ship agreement after he 
+became aware that ICTV had a drop -ship arrangement.  Tr. 381.  Ransom never found the drop-
+ship agreement in hard copy.  Tr. 372.   
+ 
+ Ransom also found overbooking of accounts receivable in the direct response business 
+due to improper booking of returns and bad debts.
+14  Tr. 242-43; Div. Ex. 47 at 1.  This came to 
+light in September 2008 when ICTV transitioned from Christopher Morgan to a new fulfillment 
+house, Moti vational Ful fillment and Logistics Services.   Tr. 249- 50.  Upon inventorying the 
+goods to be moved, ICTV discovered about 50,000 to 60,000 DermaWands that had been 
+returned.  Tr. 249- 50.  In the first restatement of the 2007 financial statements, the previ ously 
+reported $11,323,505 in sales was reduced by about $2.2 million.  Tr. 256; Div. Ex s. 48, 86, 
+91.
+15
+ 
+   
+                                                 
+13 Redekopp told Winstanley that HSN would be advertising Cell Rx sometime in 2008.  Tr. 674-
+75.  The record also contains evidence that ICTV was overstating revenue intenti onally, 
+including for the purpose of obtaining financing from Wells Fargo, which had questioned 
+whether ICTV’s revenue recognition was in accordance with GAAP.  Resp. Exs. 1, 2, 3.   
+ 
+14 Additionally, Ransom knew that some payment options for DermaWand purc hases included a 
+thirty-day free trial period, but he was not aware that ICTV was accounting incorrectly for such 
+sales.  Tr. 292.   
+ 
+15 Ransom discussed the accounting problems in a phone conversation that included Bahar and a 
+representative of Dohan + Co.  Tr. 243-44.  Bahar, who had not previously met Ransom and had 
+no understanding of the potential magnitude of the error, asked whether a restatement was 
+necessary or whether the problem accounting could be corrected in a subsequent quarter’s filing.  
+Tr. 245, 1132-33.  Ransom’s view was that the amount was too large and material to adjust in 
+one quarter and that it had to be adjusted in the quarters where the errors occurred, which dated 
+back to the second quarter of 2007.  Tr. 245; Div. Ex. 47.   
+ 
+ 8 
+ In 2009 ICTV replaced Dohan + Co. with Amper, Politziner & Mattia (Amper), 16
+ 
+ which 
+started by working on the audit of the 2008 financial statements.  Tr. 160- 63.  T o obtain 
+information to support the opening balances, Amper reviewed  Dohan + Co.’s workpapers for 
+ICTV for the year ended December 31, 2007, and the first two quarters of 2008, as well as for 
+the first restatement.  Tr. 164 -67; Div. Ex. 96.  Amper concluded that it could rely on the prior 
+auditor’s work in the areas of cash, prepaid expenses, fixed assets, accounts payable/accrued 
+expenses, taxes, and equity , but that it could not rely on the prior auditor’s work in the areas of 
+accounts receivable and inventory due to lack of sufficient documentation in the files.  Tr. 167-
+68; Div. Ex. 96.  Amper performed additional procedures in the areas of bad debts, returns, 
+revenue recognition, and inventory.  Tr. 168- 69.  This resulted in additional adjustments.  Div. 
+Ex. 94.  Eventually, 2007 was restated again and the first two quarters of 2008 were restated.  Tr. 
+267.  An additional downward adjustment of approximately $600,000 in sales for 2007 was 
+taken.  Tr. 269; Div. Ex. 87 at F-8, Div. Ex. 100 at 2. 
+C.  The Audit of ICTV’s 2007 Financial Statements 
+ 
+ As with the previous ICTV audits, Davidson was engaged to perform the fieldwork for 
+the 2007 audit.  Tr. 457- 59, 607.  Winstanley performed the fieldwork, supervised by Bahar as 
+manager; the fieldwo rk was  to include inquiry of the client, understanding of the client, 
+substantive testing, and documenting the work in workpapers, including  the steps and tests to be 
+performed, who performed them, and the results.  Tr. 459- 60, 611-13, 771, 778; Div. Ex. 1- A at 
+84-85.  Bahar reviewed the workpapers  and submitted them to Brown for review.  Tr. 459, 618-
+19.  Davidson’s work program, which outlines the work steps, was used with Dohan + Co.’s 
+approval; it was similar to Dohan’s and consistent with GAAS.  Tr. 45 9-60, 652- 53, 772-73, 
+1059.  Dohan + Co. understood that Davidson would apply U.S. GAAP and GAAS  in its 
+fieldwork.  Tr. 460-61, 610.    
+ 
+ Davidson personnel spent 133.75 hours on the 2007 audit, including 69.25 by 
+Winstanley
+17 and 32.50 by Bahar.18  Div. Ex. 34 at 10.  After the work was completed, Davidson 
+submitted its invoice to Dohan + Co., which billed ICTV for the audit without referring to 
+Davidson; after ICTV paid Dohan + Co., Dohan + Co. paid Davidson the amount it was owed.  
+Tr. 619.  ICTV paid $35,522 to Dohan + Co. for the 2007 audit, which included $27,250 for 
+Davidson’s services.
+19
+                                                 
+16 Following a merger, the firm is now known as Eisner Amper LP.  Tr. 160.   
+  Tr. 514-16; Div. Ex. 124.      
+ 
+17 Winstanley spent one or two days of that time at ICTV’s Vancouver office.  Tr. 716; Div. Ex. 
+43.   
+ 
+18 The audit plan for the engagement budgeted fifty -one hours for Winstanley, including six 
+hours for “income,” and seventeen hours for Bahar, with $18,135 as the total dollar budget for 
+Davidson’s services.  Div. Ex. 66 at 152.   
+ 
+19 By comparison, ICTV pays Amper approximately $55,000 for the annual audit, and about 
+$10,000 for each quarterly review.  Tr. 272.    
+ 
+ 9 
+ 
+ Redekopp was ICTV’s exclusive contact person for the fieldwork.  Tr. 820.  Redekopp 
+signed the HSN drop-ship agreement on behalf of ICTV, and CEO Kevin Claney signed the 
+HSN traditional agreement.  Div. Exs. 102, 104.  It is undisputed that Redekopp did not provide 
+the HSN agreements to the Davidson accountants, despite a request for all written agreements.  
+Tr. 797-99.      
+ 
+ Bahar knew that the audit had to meet PCAOB standards , and both he and Winstanley 
+believe that they took no shortcuts and strove to perform the fieldwork to the level of quality of 
+an audit engagement .  Tr. 697- 98, 1059-60, 1157.  Winstanley considered himself to be  an 
+auditor on the engagement, and that PCAOB auditing standards and U.S. GAAP applied to the 
+engagement.  Tr. 697, 712; Div. Ex. 23 at 54.  However, Bahar maintains that his association 
+with the engagement was not that of an auditor  and that he was not required to follow PCAOB 
+standards or apply U.S. GAAP.  Tr. 1125; Resp. Ex. 29.  Nonetheless, the forms supplied by 
+Davidson that ICTV sent to confirm account balance information with financial institutions 
+included the language “Please return this form directly to our accountants: Attn: Erez Bahar, ” 
+and those that ICTV sent to related parties to confirm balances due referred to Davidson as “our 
+auditors.”
+20
+ 
+  Tr. 1167- 70; Div. Ex. 17.  W hen Ransom was preparing trial balances for the third 
+quarter of 2008, Bahar never told Ransom that he was not an auditor or that he was not part of 
+the audit team or that Ransom should talk about accounting issues with someone else.  Tr. 232-
+33.  T he workpapers refer to PCAOB standards and U.S. GAAP.  Tr. 712- 14; Div. Ex. 1- A at 
+114, 182.   
+1.  Planning  
+ 
+ The planning meeting took place at Davidson on March 7, 2008; Brown and Dohan’s 
+participation consisted of reviewing the workpapers documenting the planning .
+21
+ 
+  Tr. 480-82, 
+774-75, 1035; Div. Ex. 1 -A at 57-58.  Audit planning entails brainstorming on how fraud might 
+be committed, determining what steps and testing will be done, assessing risk, performing walk-
+throughs, determining materiality, understanding the client business and new material 
+relationships, and performing anal ytical procedures to identify material accounts.  Tr. 479 -80.  
+Materiality was determined to be $85,000.  Tr. 775-76; Div. Ex. 1-A at 57; Resp. Ex. 9. 
+ “No” was answered on the fraud risk memo to all listed risk factors related to financial 
+reporting.  Tr. 745 -46; Div. Ex. 66 at 131- 33.  “No” was answered on the risk control memo to 
+                                                 
+20 Bahar testified that these were standard Davidson templates and that he did not have them 
+changed, indicating that to do so would waste time and that “a confirmation template that would 
+have stated our subcontracting auditors could have reduced the value of the confirmation.”  Tr. 
+1167-70.    
+ 
+21 A separate meeting was held at Dohan + Co. during the planning stage of the audit, on March 
+3, 2008, in which Brown, Dohan, and others discussed the risk of material misstatement due to 
+fraud and due to error.  Resp. Ex. 8.  However, there is no indication in the record that the results 
+of the meeting were communicated to Davidson.    
+ 
+ 10 
+the possibility of such risk factors as fictitious sales or unsupported sales recorded, 
+shipment/sales recorded in wrong period, and revenue recognition policies not followed.  Tr. 
+746; Div. Ex. 66 at 136.  Bahar did not question Winstanley about these  assessments.  Tr. 745-
+47.  In commenting on the risk assessment procedures worksheet for workpaper 522 contained in 
+Respondent Exhibit 10, Bahar maintained that there were no significant changes in the corporate 
+structure or personnel, the company was selling similar products as in previous years, and that 
+while sales had increased, the operations of the company and, to the best of their knowledge at 
+the time, the way it was conducting its business was similar to the year before.   Tr. 1045-46. 
+ 
+2.  Walk-Through  
+ 
+ Winstanley did not perform a walk- through of ICTV’s revenue system or sales cycle, of 
+HSN, or of Christopher Morgan, and there is no indication in the workpapers that any  walk-
+throughs were performed except for a box checked “yes.”  Tr. 727-32; Div. Ex. 1-A at 33.  Bahar 
+did not instruct him to conduct such walk -throughs.  Tr. 731- 32.  The lack of walk -throughs 
+contributed directly to the accountants’ failure to detect the  overbooking of revenue.  While 
+Bahar maintained that Christopher Morgan did not hold inventory for ICTV, even at the time of 
+the hearing, he was uncertain as to the process by which the DermaWands travelled from the 
+manufacturer to the ultimate customers and where the  DermaWands were located when 
+Christopher Morgan shipped them to the customers; he was also unsure as to where product 
+returns were held.  Tr. 784-85, 844, 1188-92. 
+ 
+3.  Revenue  
+ 
+ The workpapers disclose that ICTV entered an agreement with HSN during 2007 to sell 
+ICTV’s product.
+22  Div. Ex. 14, Div. Ex. 20 at 411.  The revenue lead sheet , which Bahar 
+reviewed, shows a dramatic 280% increase in revenue over the prior year and states, with respect 
+to HSN sales, “The company records the sale once HSN has placed the order and the order has 
+been shipped.  However, HSN does not pay until they have sold the products.  This process 
+sometimes takes a few months as HSN will preorder for future shows.”  Div. Ex. 20 at 411.
+23  
+Bahar did not ask Winstanley about this statement.  Tr. 725.  Bahar never discussed with him the 
+pertinent accounting guidance concerning revenue recognition .
+24
+                                                 
+22 At the hearing Winstanley did not recall whether he asked ICTV specifically for a copy of the 
+agreement or its terms.  Tr. 721, 759.  He does not recall whether Bahar asked him about the 
+HSN agreement during the engagement or even at the time of the first restatement.  Tr. 722-24.      
+  Tr. 726.  Winstanley tested 
+ 
+23 The revenue lead sheet is at both Division Exhibit 20 and Division Exhibit 1- A at 411, which 
+are the same.      
+ 
+24 The pertinent guidance, SEC Staff Accounting Bulletin No. 101 (SAB 101), “Revenue 
+Recognition in Financial Statements,” and the Financial Accounting Standards Board Statement 
+of Financial Accounting Standards No. 48 (FAS 48), “Revenue Recognition When Right of 
+Return Exists,” which are found in Division Exhibits Nos. 52 and 53, respectively, is discussed 
+infra
+ in the Conclusions of Law.      
+ 
+ 11 
+sales to a few individuals each month such that a low percentage of actual sales was tested.  Tr. 
+749-54; Div. 20.  Winstanley  believed that HSN had its own  section in the Christopher Morgan 
+warehouse, and for HSN sales, goods w ere shipped from ICTV’s section to HSN’s section. Tr. 
+760.  Bahar did not believe there was a written agreement between ICTV a nd HSN but believed 
+that, essentially, HSN bought product from ICTV and habitually paid late.  Tr. 797-810; Div. Ex. 
+1-A at 259, 411.  While the accountants asked ICTV for all written agreements, Bahar did not 
+ask specifically for a copy of any HSN agreeme nt.   Tr. 1178-79.  Bearing on any attempt to 
+locate an HSN agreement, Winstanley stated that he had reviewed all of the minutes of the board 
+and resolutions.  Tr. 705; Resp. Ex. 14 at 1.  H owever, he did not summarize his review of board 
+minutes in the workpapers, which would be a usual procedure to support that audit step.  Tr. 754-
+55. 
+ 
+ In the workpaper  checklists pertaining to revenue, Winstanley recorded “none noted” 
+concerning “sales recorded before goods are shipped,” “large volume of sales transacti ons 
+around period end,” “unusual or long payment terms,” and “buyer conditions which must be met 
+in order to complete the sale.”  Div. Ex. 20 at 411.   Bahar never asked him about these.  Tr. 737-
+38.   
+ 
+ Bahar never discussed with Winstanley the apparent change in revenue recognition 
+policy between the second
+25 and third26
+ 
+ quarters of 2007, as memorialized in ICTV’s Forms 10-
+QSB and 10 -KSB.  Tr. 733- 36; Div. Ex. 80 at 8, Div. Ex. 81 at 8, Div. Ex. 82 at F -8.  Bahar 
+considers that the revision was a change in wording, not a change in revenue recognition policy .  
+Tr. 821-31. 
+4.  Accounts Receivable  
+ 
+ Winstanley did not send an accounts receivable confirmation to HSN. Tr. 742.  The 
+accounts receivable lead sheet, which Bahar reviewed, states:  
+ 
+                                                 
+25 “Product sales revenue is recognized upon shipment of the product to the customer.”  Div. Ex. 
+80 at 8.      
+ 
+26 After the relationship with HSN commenced, ICTV’s Forms 10- QSB for the third quarter and 
+10-KSB for the year of 2007 stated: 
+ 
+For our direct response television sales generated by our infomercials, product 
+sales revenue is recognized upon shipment of the product to the customer. . . . 
+Revenue related to sales to our wholesale customers is recognized when each of 
+the following conditions is met:  Persuasive evidence of an arrangement exists, 
+transfer of the benefit  of ownership of the products has occurred, our price to the 
+customer is fixed and determinable and collectability is reasonably assured.”   
+ 
+Div. Ex. 81 at 8, Div. Ex. 82 at F-8.      
+ 
+ 12 
+[C]onfirmations were not sent out as the Company has two main customers, 
+Christopher Morgan and Home Shopping Network and both pay their outstanding 
+balances on a regular basis. . . .  Therefore it was determined to not be necessary 
+to send out these confirmations.  In previous years we have sent confirmations to 
+confirm AR but because of the nature of the customers we did not receive any 
+responses.  Therefore we used alternative subsequent procedures testing. 
+ 
+Div. Ex. 18,
+27 Div. Ex. 66 at 324. 28  However, the workpapers do not fully document that 
+alternative procedures were performed.  Tr. 747 -48; Div. Ex. 1- A at 259-71.  To the extent that 
+subsequent cash receipts testing was performed and documented, it covered only a small 
+percentage of the receivables.29
+ 
+  Tr. 747-48; Div. Ex. 1-A at 270-71.   
+ The accounts receivable lead sheet describes Christopher Morgan both as a customer and 
+as the fulfillment agent.  Div. Ex. 18, Div. Ex. 66 at 324.  Bahar did not ask Winstanley about the 
+discrepancy.  Tr. 732-33.  Bahar was aware that Christopher Morgan was a fulfillment center for 
+ICTV.  Tr. 778-79.   
+ 
+5.  Inventory  
+ 
+ The inventory lead sheet , which Bahar reviewed,  states that inventory is material.  Tr. 
+743; Div. Ex. 1-A at 273, Div. Ex. 19.
+30  Winstanley did not attend a physical count of inventory, 
+which he believed was held in the United Kingdom and Hong Kong, and he did not send an 
+inventory confirmation to Christopher Morgan.  Tr. 743- 44; Div. Ex. 19 at 278.  Bahar never 
+asked him about this.  Tr. 743-44.  In Bahar’s view, a p hysical count or confirmation was not 
+necessary because he believed the inventory was not held for resale.  Tr. 788- 94, 841; Div. Ex. 
+19 at 292.  Bahar did not understand that Christopher Morgan held inventory for ICTV.  Tr. 770, 
+786.  However, Bahar concedes the possibility tha t Christopher Morgan held returns.31
+                                                 
+27 The accounts receivable lead sheet is at both Division Exhibit 18 and Division Exhibit 1 -A at 
+259, which are the same.  Division Exhibit 66 at 324 is also the accounts receivable lead sheet 
+with the addition of Brown’s initials indicating that she reviewed it as engagement partner.      
+  Tr. 843-
+ 
+28 Dohan and Brown agreed that, because of HSN’s large size, sending confirmations to HSN 
+would be fruitless and unlikely to generate a response.   Tr. 615-16.      
+ 
+29 Indeed, the Receivables Reconciliation worksheet states, as to over $1 million in HSN 
+receivables, that HSN will pay once th e products have been sold.  Div. Ex. 1- A at 270- 71.  Of 
+course, subsequent cash receipts testing cannot be performed on receipts that have not been 
+received.      
+ 
+30 The inventory lead sheet is at both Division Exhibit 19 and Division Exhibit 1-A at 273, which 
+are the same.      
+ 
+31 Bahar contends that the Christopher Morgan reports were inaccurate and untimely.  However, 
+there is no evidence of record concerning this.      
+ 
+ 13 
+44.  Winstanley used alternate procedures in lieu of attending a physical count.  Tr. 677-78; Div. 
+Ex. 19 at 292.  The alternate procedures consisted of reviewing purchase orders (by which ICTV 
+purchased the inventory) to ensure that ICTV received the inventory  before year end and then 
+agreeing ICTV’s purchases to sales invoices showing the goods were shipped after year end.  Tr. 
+678-79; Div. Ex. 19 at 292. 
+ 
+6.  Returns  
+ 
+There was a discrepancy between the disclosure in ICTV’s Form 10- K , which stated that 
+the allowance for customer return s was based on past experience of returns of 11% to 17%  of 
+sales, and the revenue lead sheet , which indicates that ICTV provided an allowance of 7% for 
+refunds and 2.5% for chargebacks.  Div. Ex. 20 at 411, Div. Ex. 82 at 9, F -8.  Bahar never asked 
+Winstanley about this.   Tr. 739.  Bahar noted that the reported lower return ratio was estimated 
+based on actual returns during the month following December 2007 in light of the company’s 30-
+day return policy, which he considered reasonable.  Tr. 883-84, 890-92.  Winstanley  did not test 
+whether ICTV adhered to the stated 30 -day return policy.  Tr. 741.  Bahar did not ask him to do 
+so; because subsequent cash receipts testing indicated  that the receivables were correct,
+32
+ 
+ there 
+was no indication that ICTV was not following the 30-day policy.  Tr. 741, 892-93. 
+D.  Expert Testimony33
+ 
+ 
+ Albert A. Vondra (Vondra ), CPA, a partner with PricewaterhouseCoopers (PwC) , 
+testified for the Division.  Tr. 894-959; Div. Ex. 123.  He has been associated with PwC or its 
+predecessor since 1979, has been an auditor, served in a position where he fielded complex 
+accounting and auditing questions from the field, and presently is a member  of the forensic 
+services practice where he is involved in investigations of fraud and financial reporting fraud.  
+Tr. 895-96. 
+ 
+ Generally, Vondra opined that Bahar was performing auditing work in support of Dohan 
++ Co.’s audit report and was required to follow PCAOB auditing standards.  Tr. 900-02; Div. Ex. 
+123 at 10- 15.  Referencing SAB 101, pertaining to revenue recognition, FAS 48, pertaining to 
+the right of return, and AU 316, pertaining to fraud, he opined that Winstanley failed to assess 
+their applicability to the engagement and Bahar did not guide him.  Tr. 902-08, 913; Div. Ex. 123 
+at 16-24.  Additionally Vondra noted a number of items on the work program that should have 
+been considered but were noted “Not applicable” or “No.”  He noted a lack of understanding of 
+the roles of Christopher Morgan and HSN.  Tr. 932.  He opined that insufficient resources were 
+devoted to Davidson’s work – 133 hours invoiced for $27,000.  Tr. 934-35.  He opined that when 
+things change  – in this case, a new contract with HSN, dramatically increased sales, and 
+                                                 
+32 As noted supra , the workpapers show that subsequent cash receipts testing covered only a 
+small percentage of the receivables and that it could not have been performed as to most of the 
+balance.      
+ 
+33 To the extent that the experts’ evidence does not lead to findings of fact, it will be summarized 
+here and referred to as appropriate in the Conclusions of Law section of this Initial Decision. 
+ 
+ 14 
+increased accounts receivable – the auditor should be alert to an increased risk of misstatements .  
+Tr. 938. 
+  
+ John Curran, CPA  (Curran), testified for Bahar.  Tr. 970-1016; Resp. Ex. 49.  He was 
+accepted as an exper t in the topics on which he opined.  Tr. 987; Resp. Ex. 49 at 7-8.  Curran 
+began his career as an auditor at a “Big 8” firm in 1962; later he became a partner in what is now 
+Ernst & Young, LLP, which he left in 2005 to join Hagen Streiff Newton & Oshiro Ac countants 
+P.C. in Seattle, Washington.  Tr. 972-75; Resp. Ex. 49 at 3.  In addition to auditing engagements, 
+he has prepared  or reviewed over 1,000 insurance related business interruption claims for a 
+variety of industries; one of the major considerations in such claims is the volume and timing of 
+actual sales based on prior and post loss revenue recognition and a projection of lost revenues in 
+compliance with GAAP.  Tr. 974; Resp. Ex. 49 at 3.   
+ 
+ Curran opined that Dohan + Co. was the responsible auditor on the engagement and, in 
+any event, Bahar’s actions were reasonable.  Tr. 976, 983- 96; Resp. Ex. 49 at 7- 16.  He 
+specifically opined that in Bahar’s role as supervisor, it was reasonable to review and accept a 
+staff’s statements, testing procedures, audit  marks, audit workpapers, and procedure sign- offs 
+rather than duplicate the testing.  Resp. Ex. 49 at 7.  Curran noted that, as established by the 
+evidence of record, Redekopp did not disclose the drop-ship agreement to Dohan + Co. or 
+Davidson.  Resp. Ex. 49 at 10.  Curran did not opine as to whether the totality of Bahar’s conduct 
+regarding the 2007 ICTV audit complied with PCAOB standards.  Tr. 996-97. 
+ 
+III.  CONCLUSIONS OF LAW 
+ 
+Bahar is charged, pursuant to Section 4C of the Exchange Act and Rule 102(e)( 1)(ii) of 
+the Commission’s Rules of Practice, 17 C.F.R. § 201.102(e) (1)(ii), with improper professional 
+conduct.
+34
+                                                 
+34 Exchange Act Section 4C, which was added by the Public Company Accounting Reform and 
+Investor Protection Act of 2002, known as the Sarbanes -Oxley law, codified Rule 102(e), which 
+had been in existence for many years, and provided specific statutory authority for its provisions.  
+Because of this history and the precedent concerning Rule 102(e), the discussion herein will cite 
+Rule 102(e) rather than the identical provisions of Exchange Act Section 4C.  “It is well 
+established that when Congress revisits a statute giving rise to a longstanding administrative 
+interpretation without pertinent change, the ‘congressional failure to revise or repeal the agency's 
+interpretation is persuasive evidence that the interpretation is the one intended by Congress.’”  
+CFTC v. Schor
+, 478 U.S. 833, 846 (1986) (citations omitted); see also  Lorillard v. Pons , 434 
+U.S. 575, 580- 81 (1978) (“Congress is presumed to be aware of an administrative or judicial 
+interpretation o f a statute and to adopt that interpretation when it re -enacts a statute without 
+change [and] where, as here, Congress adopts a new law incorporating sections of a prior law, 
+Congress normally can be presumed to have had knowledge of the interpretation given to the 
+incorporated law, at least insofar as it affects the new statute.”) (citations omitted);  Cf.
+ Herman 
+& MacLean v. Huddleston , 459 U.S. 375, 384- 85 (1983) (Congress’s decision to leave Section 
+10(b) intact while comprehensively revising the securi ties laws suggested that Congress ratified 
+the well -established judicial interpretation of the implied private right of action under Section 
+10(b)); Davis v. Michigan Dep’t of Treasury , 489 U.S. 803, 813 (1989) (“When Congress 
+  The charges are based on Bahar’s alleged improper professional practices during the 
+ 15 
+audit of ICTV’s 2007 financial statements.  The Division argues that his conduct violated 
+PCAOB auditing standards and was reckless, or, in the alternative, highly unreasonable, or, in 
+the alternative, constituted repeated instances of unreasonable conduct.  Bahar contends that his 
+participation in the ICTV enga gement was not subject to the PCAOB standards, and that, in any 
+event, was within professional standards.  In this section it is concluded that his conduct violated 
+PCAOB auditing standards and constituted repeated instances of unreasonable conduct. 
+ 
+A.  Rule 102(e)(1)(ii) 
+ 
+Rule 102(e)(1)(ii) provides for sanctions against accountants who “have engaged in . . . 
+improper professional conduct.”   
+ 
+[W]ith respect to persons licensed to practice as accountants, “improper 
+professional conduct” under Rule 102(e)(1)(ii) means: 
+(A)  intentional or knowing conduct, including reckless conduct, that results in 
+a violation of applicable professional standards; or 
+(B) either of the following two types of negligent conduct: 
+(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.   
+(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. 
+ 
+17 C.F.R. § 201.102(e)(1)(iv). 
+ 
+Both the Division and Bahar cite Robert W. Armstrong, III , 85 SEC Docket 3011 (June 
+24, 2005) in support of their respective positions that Bahar was, or was not, appearing or 
+practicing before the Commission within the meaning of Rule 102(e).  Armstrong
+ articulates an 
+expansive reading of Rule 102(e).  It is clear that Bahar is subject to Rule 102(e).  Id. at 3030-35.   
+ 
+1.  Reckless Conduct 
+The Commission defines recklessness under Rule 102(e) to be the same as recklessness 
+under the antifraud provisions (for the purpose of consistency in the federal securities laws; 
+“professional standards” are not fraud -based).  Thus, r ecklessness is “an extreme departure from 
+the standards of ordinary care, . . . which presents a danger of misleading buyers or sellers that is 
+either known to the [actor] or is so obvious that the actor must have been aware of it.”  
+Amendment to Rule 102( e) of the Commission’s Rules of Practice
+, 63 Fed. Reg. 57164, 57167 
+(Oct. 26, 1998) ( Rule 102(e) Amendment ).  It is “a lesser form of intent,” “not merely a 
+heightened form of ordinary negligence.”  Id. (internal citations and quotations omitted).   
+ 
+                                                                                                                                                             
+codifies a judicially defined concept, it is presumed, absent an express statement to the contrary, 
+that Congress intended to adopt the interpretation placed on that concept by the courts.”).   
+ 
+ 16 
+Rule 102(e)(1)(iv)(A) codified the Commission’s longstanding recklessness standard in 
+1998.  See  Russell Ponce, 54 S.E.C. 804, 823 n.52 (2000) (holding that the 1998 amendment 
+adding new subsection (iv)(A) to Rule 102(e)(1) merely codified the Commission’s long standing 
+recklessness standard), aff’d , 345 F.3d 722 (9th Cir. 2003); accord  Albert Glenn Yesner, CPA , 
+54 S.E.C. 414, 417 (1999).  
+ 
+Recklessness is more than a misapplication of accounting principles; the Division must 
+prove that Bahar’s “accounting practices were so deficient that the audit amounted to no audit at 
+all, or an egregious refusal to see the obvious, or to investigate the doubtful, or that the 
+accounting judgments . . . were such that no reasonable accountant would have made the same 
+decision if confronted with the same facts”; reasonable accountants can differ, and evidence 
+indicating that questioned accounting decisions were reasonable negates an attempt to establish 
+scienter.  See
+ Worlds of Wonder Sec. Litig., 35 F.3d 1407, 1426 (9th Cir. 1994), quoting  SEC v. 
+Price Waterhouse , 797 F. Supp. 1217, 1240 (S.D.N.Y. 1992) (internal quotations omitted); 
+accord Software Toolworks Inc. , 50 F.3d 615, 627 (9th Cir. 1994) (“The mere publication of 
+inaccurate accounting figures, or a failure to follow GAAP, without more, does not establish 
+scienter.”) (citations and internal quotation marks omitted).  Violations of GAAP or GAAS in 
+themselves do not constitute recklessness.  See
+ Chill v. General Elec. Co., 101 F.3d 263, 270 (2d 
+Cir. 1996) (“Allegations of a  violation of GAAP provisions or SEC regulations, without 
+corresponding fraudulent intent, are not sufficient.”).  “Subjective good faith is inconsistent with 
+a finding of knowing or intentional, including reckless, conduct.”  Rule 102(e) Amendment
+, 63 
+Fed. Reg. at 57170. 
+  
+2.  Highly Unreasonable Conduct 
+ 
+“Highly unreasonable” was first defined in Rule 102(e) Amendment  as a new concept.  It 
+is higher than ordinary negligence but lower than recklessness.  It is measured by the degree of 
+departure from professional standards and not the intent of the accountant.  It is not judged by 
+hindsight, but compares actions taken by an accountant at the time of the violation with the 
+actions a reasonable accountant should have taken.   Id.
+ at 57167-68.  A single instance of highly 
+unreasonable conduct when an accountant knows, or should know, that heightened scrutiny is 
+warranted conclusively demonstrates a lack of competence to practice before the Commission. 
+Id.
+ at 57164.  A single judgment error, even if unreasonable  when made, may not indicate a lack 
+of competence to practice before the Commission and not pose a future threat to the 
+Commission’s processes requiring Commission action.  Id.
+ at 57166 & n.28, 57167. 
+ 
+3.  Repeated Instances of Unreasonable Conduct  
+ 
+ “Unreasonable” connotes an ordinary negligence standard.  Rule 102(e) Amendment , 63 
+Fed. Reg. at 57169.  “‘[R]epeated’ may encompass as few as two separate instances of 
+unreasonable conduct occurring within one audit, or separate instances of unreasonable conduct 
+within different audits [such as] fail[ure] to gather evidential matter for more than two accounts, 
+or certific[ation of] accounting inconsistent with GAAP in more than two accounts.” Id.
+  “[Since] 
+‘repeated instances’ may not always demonstrate a lack  of competence to practice before the 
+Commission . . . this subparagraph requires . . . a specific finding that the conduct indicates a 
+lack of competence.”  Id.
+   
+ 17 
+ 
+4.  Applicable Professional Standards 
+ 
+An auditor does not guarantee that financial statements are free of material misstatement; 
+his or her “responsibility [is] to 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 § 110.02.  During the time at issue, applicable professional standards included 
+GAAP, PCAOB auditing standards, including GAAS, the American Institute of Certified Public 
+Accountants (AICPA) Code of Professional Conduct, and Commission regulations.
+35
+ 
+  Rule 
+102(e) Amendment, 63 Fed. Reg. at 57166.    
+Dohan + Co. was the auditor, while Davidson was a subcontractor, not a co- auditor, on 
+the ICTV engagement.  Bahar argues that he was not acting as an auditor and thus was not 
+subject to PCAOB standards.  He reasons that, w hile he was associated with Davidson and 
+Davidson was associated with Dohan + Co., the auditor, he was not associated with Dohan + Co. 
+so as to be subject to PCAOB standards, based on PCAOB Release 2003- 011D titled 
+“Frequently Asked Questions Regarding Registration with the Board.”  However, that document 
+merely gives guidance on registration,
+36
+ 
+ not on the standards to apply in audits.  Indeed it is not 
+believable that Dohan + Co. would contract with Davidson for fieldwork that was not to be 
+performed according to PCAOB standards.  Moreover, Dohan, Brown, Winstanley, and Bahar all 
+assumed that the audit was subject to PCAOB standards, and Winstanley and Bahar attempted to 
+conform to those standards.  Further, assuming, arguendo
+, that PCAOB standards did not a pply 
+to Bahar, he has not articulated what standards would apply.  Cf.  Jean-Paul Bolduc, 55 S.E.C. 
+1060, 1062 n.9 (2002), 54 S.E.C. 437 (1999) (ordering a hearing to address the nature of any 
+professional standards to which the controller of a non- public subsidiary of a public corporation, 
+an accountant who was not licensed as a CPA, was subject under Rule 102(e)).    
+Thus, to conclude that Bahar engaged in improper professional conduct within the 
+meaning of Rule 102(e), it is necessary to conclude, first, that he violated GAAS and, second, 
+that the GAAS violation[s] resulted from reckless or highly unreasonable conduct, or repeated 
+instances of unreasonable conduct by him.  A GAAS violation in itself is not improper 
+professional conduct within the meaning of Rule 102(e). 
+ 
+Bahar’s conduct must be compared with actions a reasonable accountant would have 
+taken at the time of the audit, without the benefit of hindsight, and evaluated in light of standards 
+                                                 
+35 The ten basic GAAS standards are listed in AU § 150.02, and detailed interpretations fol low.  
+Those at issue in this proceeding are the third general standard (AU § 230 Due Professional 
+Care) and the third standard of field work, sufficient competent evidential matter (AU § 311, 
+Planning and Supervision; AU § 316, Consideration of Fraud in a Financial Statement Audit; AU 
+§ 326, Evidential Matter; AU § 330, The Confirmation Process; and AU § 331, Inventories).   
+ 
+36 PCAOB Release 2003 -011D, as applicable here, provides only that an accountant such as 
+Bahar who was associated with Davidson, which had been engaged by Dohan + Co. as an 
+independent contractor, need not himself be registered as an associated person by Dohan + Co.     
+ 
+ 18 
+in effect for calendar year 2007 audits.  During the relevant period AU § 316 was based on SAS 
+No. 99, Consideration of Fraud in a Financial Statement Audit .37
+ 
+  SAS No. 99 requires a 
+brainstorming session by the audit team during initial audit planning to determine the different 
+ways the client might perpetrate fraud, with an emphasis on the possibility of improper revenue 
+recognition, which is presumed to be a fraud risk.  In essence, SAS No. 99 requires the auditor to 
+assume that the client is engaged in fraud, particularly with regard to revenue recognition.   
+In sum, it is concluded that Bahar is subject to the provisions of Rule 102(e) and that 
+PCAOB standards applied to his role in the fieldwork of the 2007 ICTV audit. 
+ 
+B.  The Audit Violated  PCAOB Auditing Standards and Bahar Engaged in Improper 
+Professional Conduct within the Meaning of Rule 102(e) 
+ 
+ It is undisputed that ICTV materially overstated revenue in its 2007 financial statements.  
+Bahar’s failure to detect this resulted from shortfalls in planning and reviewing the fieldwork.  
+Because of the fai lure to conduct walk- throughs of ICTV’s revenue system or sales cycle, 
+including its relationship with HSN and Christopher Morgan, Bahar and Winstanley did not 
+understand when and to what extent revenue should have been recognized.  Any understanding 
+that Bahar may have gained through work on ICTV’s previous years’ audits did not apply to the 
+new circumstances presented by HSN. 
+ 
+The parties accept that the following guidance applied to revenue recognition by ICTV.  
+Pursuant to SAB 101 the following four cri teria must be met before revenue is recognized: (i) 
+persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been 
+rendered; (iii) the seller’s price to the buyer is fixed or determinable; and (iv) collectibility is 
+reasonably assured.  FAS 48 requires that sales revenue and cost of sales be reduced to reflect 
+estimated returns.  Revenue related to HSN sales was booked improperly as to both the initial 
+guaranteed sale and subsequent drop- ship transactions.  Revenue should not  have been booked 
+under SAB 101 when the DermaWands were shipped to, or set aside for, HSN because HSN’s 
+obligation to pay ICTV was contingent on their resale to the ultimate purchasers.  Concerning the 
+direct response sales, revenue was overbooked because  of failure to take account of the 30- day 
+free trial period, where applicable, and underestimating returns in violation of FAS 48. 
+ 
+1.  Planning Failures 
+ 
+AU § 311 requires the auditor to consider the entity’s accounting policies and procedures, 
+to inquire  about current business developments affecting the entity, and to obtain a level of 
+knowledge of the entity’s business to enable him to obtain an understanding of the events, 
+transactions, and practices that, in his judgment may have a significant effect on the financial 
+statements.  AU § 311.03, .04, .06. 
+                                                 
+37 SAS No. 99, issued in 2002, resulted from the Sarbanes -Oxley law, which mandated 
+procedures to reduce accounting fraud in the wake of Enron and other accounting fraud scandals. 
+It increased the requirement for professional skepticism and required substantial additional 
+procedures to make it more likely that material fraud would be detected.   
+ 
+ 19 
+ 
+AU §§ 316.14, .17 provide that key members of the audit team should participate in 
+brainstorming concerning how the financial statements might be susceptible to material 
+misstatement due to fraud, including how management could perpetrate and conceal fraudulent 
+financial reporting.  Yet Bahar did not question Winstanley about his “No” answers on the fraud 
+risk memo to all listed risk factors related to financial reporting.  Nor did he ask Winstanley 
+about his “No” answers on the revenue checklist.  Bahar’s contention is that nothing had changed 
+as compared to previous years except that sales and cost of sales had increased. 
+ 
+Bahar was aware that ICTV had begun an arrangement with HSN during 2007 and that 
+reported revenues had skyrocketed as a result.  Had a walk -through been conducted, the 
+accountants would have discovered that revenues were overstated.  Bahar was also aware that 
+ICTV had not been asked to produce its agreement or agreements with HSN and did not insist 
+that they do so.  The failure to conduct a walk- through and the failure to ask specifically for and 
+obtain the agreement or agreements with HSN constitute significant planning and due 
+professional care failures.  Further, because of their fail ure to understand ICTV’s sales process , 
+the accountants did not understand that ICTV h eld substantial inventory at Christopher Morgan 
+and thus did not confirm the inventory or attend a physical count there.
+38
+ 
+  Had Winstanley 
+attended a physical count, he would have observed the large volume of unaccounted-for returns.   
+AU § 316.12 states, “[E]ven a properly planned and performed audit may not detect a 
+material misstatement resulting from fraud.”  Contrary to Bahar’s argument, this was not such an 
+audit.  Bahar suggests that Redekopp withheld the drop- ship agreement from the accountants to 
+avoid detection of ICTV’s fraudulent inflation of revenue, intended to deceive Wells Fargo 
+bankers from whom ICTV was seeking financing.  This suggestion ignores the fact that Bahar 
+did not ask for, or insist that Winstanley ask for, a copy of ICTV’s agreement with HSN, despite 
+knowledge of the arrangement .  Bahar cannot argue that ICTV deceived the accountants by 
+failing to produce a document which they had not specificall y requested.  While Bahar notes that 
+the accountants asked for all written agreements and were not provided with the HSN agreement, 
+this in itself should have given rise to further inquiry.  AU § 316.11 states, “Although fraud 
+usually is concealed and mana gement’s intent is difficult to determine, the presence of certain 
+conditions may suggest to the auditor the possibility that fraud may exist.  For example, an 
+important contract may be missing.”      
+ 
+2.  Additional “Red Flags”  
+ 
+AU § 230.07- .09 requires “professional skepticism” as part of Due Professional Care.  
+Bahar failed to investigate several red flags that would have led a reasonable accountant to 
+uncover the overstatement of revenue, notwithstanding the planning shortfalls discussed above.  
+The revenue lead sheet, which he reviewed, states “HSN does not pay until they have sold the 
+                                                 
+38 AU § 331 provides that an auditor must justify the decision not to observe inventories and that 
+if inventories are in public warehouses or other outside custodians, the auditor ordinarily would 
+obtain confirmation from the custodian, and, possibly, observe a physical count.  § 330.34, .35.  
+Winstanley and Bahar did neither. 
+ 
+ 20 
+products [which] sometimes takes a few months.”  The accounts receivable lead sheet, which 
+Bahar reviewed, states with reference to determining not to send a confirmation to HSN, “In 
+previous years we have sent confirmations to confirm AR but . . . did not receive any 
+responses.”
+39
+ 
+  This statement could not be true as to HSN since ICTV’s relationship with HSN 
+only began in 2007.  Had a confirmation been sent to HSN and had  HSN responded, the 
+accountants would have learned that accounts receivable were much lower than ICTV booked 
+since HSN was obligated to pay only for those DermaWands that it had sold to customers.   
+Bahar also failed to question the change in ICTV’s revenue recognition policy between 
+the second and third quarters of 2007.  He now explains it as a change in wording, but a 
+comparison shows that it is not.  The earlier version simply states that “revenue is recognized 
+upon shipment of the product to the customer”; the later version adds the new category of sales 
+to “wholesale customers” and copies the criteria of SAB 101 with the important exception of 
+replacing “delivery has occurred” with “transfer of the benefit of ownership of the products has 
+occurred” – a transparent attempt to conceal the non -occurrence of “delivery.”  Had Bahar 
+questioned this or instructed Winstanley to do so, they would have uncovered the fact that , under 
+both HSN sales arrangements , revenue should not have been booked until sale of the product to 
+the actual customer. 
+ 
+3.  Bahar Engaged in Improper Professional Conduct within the Meaning of Rule 102(e) 
+ 
+In sum, the audit was not performed in accordance with PCAOB standards, and Bahar’s 
+participation in the engagement included “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” within the meaning of Rule 102(e)(iv)(B)(2).  The planning 
+failures – failing to c onsider the possibility of fraud in financial reporting, to conduct a walk-
+through, or to ask specifically for a copy of any agreement with HSN – constitute one course of 
+such conduct.  The failure to respond to red flags on review of the workpapers, speci fically the 
+revenue and accounts receivable lead sheets, constitutes a second course of conduct.  In the 
+alternative, Bahar’s entire course of conduct regarding Davidson’s failure to detect ICTV’s 
+overstatement of revenue, taken as a whole, constituted “a single instance of highly unreasonable 
+conduct” within the meaning of Rule 102(e)(iv)(B)(1).
+40
+                                                 
+39 AU § 326.21(a) provides, “When evidential matter can be obtained from independent sources 
+outside an entity, it provides greater assurance of reliability for the purposes of an independent 
+audit than that secured solely within the entity.”  AU § 330 provides that there is a presumption 
+that the auditor will request the confirmation of accounts receivable unless accounts receivable 
+are immaterial, the use of confirmations would be ineffective, or the level of inherent and control 
+risk is low, and that an auditor who has not requested confirmations should document how he 
+overcame this presumption.  AU § 330.34, .35.  Additionally, although the accounts receivable 
+lead sheet refers to alternative procedures, thes e are not fully documented in the workpapers or 
+are otherwise insufficient. 
+  
+ 
+40 The dramatic increase in revenue in 2007 associated with ICTV’s new relationship with HSN 
+required heightened scrutiny.  The Division also argues that Bahar’s conduct was reckle ss.  
+However, in view of Amper’s conclusion that it could rely on the prior auditor’s work in some 
+ 21 
+ 
+IV.  SANCTIONS 
+ 
+The Division asks that Bahar be denied the privilege of practicing or appearing before the 
+Commission for at least three years.  Bahar requests that the proceeding be dismissed.  For the 
+reasons discussed below, he will be denied the privilege of appearing or practicing before the 
+Commission for two years. 
+ 
+The purpose of Rule 102 sanctions is not to punish, but to protect the public from future 
+reckless or negligent conduct by professionals who practice before the Commission and to 
+encourage more rigorous compliance with auditing standards in future audits.  McCurdy v. SEC , 
+396 F.3d 1258, 1264- 65 (D.C. Cir. 2005).  Analogizing to the so- called Steadman factors,41
+ 
+ 
+Bahar’s revenue recognition lapses, which were at least negligent, occurred in a single audit.  He 
+continues to audit U.S. public companies and intends to take the CPA examination, so his 
+occupation will present opportunities for future violations.  Consistent with a vigorous defense of 
+the charges against him, Bahar has not recognized the unreasonable nature of his conduct.  
+Concerning egregiousness, Bahar’s conduct fell short of professional standards in two princip al 
+ways.  The first was a fundamental planning failure that led directly to the failure to uncover the 
+overstatement of revenues:  Bahar failed to obtain a basic understanding of ICTV’s sales cycle, 
+particularly the effect of I CTV’s new relationship with HSN.  Despite know ing about the 280% 
+increase in revenues associated with the  new HSN relationship, Bahar failed to require that 
+Winstanley obtain and review the HSN agreements.  Second, Bahar failed to identify and follow 
+up on red flags contained in workpapers he reviewed, none more obvious to a reasonable 
+accountant than the fact that HSN’s obligation to pay for the DermaWands was contingent upon 
+HSN’s sale through to the end customer, which should have raised revenue recognition concerns 
+under SAB 101.      
+Bahar’s representation that he will continue professional education, including on revenue 
+recognition, as well as prepare for the CPA examination, is praiseworthy but does not obviate the 
+need for a sanction.  Bahar argues that none of the Davidson auditing engagements on which he 
+worked has been the subject of any regulatory complaint; however, a lack of a disciplinary 
+record is not an impediment to imposing sanctions for a respondent’s first adjudicated 
+disciplinary violation.  See
+ Robert Bruce Lohmann , 56 S.E.C. 573, 582 ( 2003); Martin R. 
+                                                                                                                                                             
+areas – cash, prepaid expenses, fixed assets, accounts payable/accrued expenses, taxes, and 
+equity – the undersigned is hesitant to conclude that Bahar’s “accounting practices were so 
+deficient that the audit amounted to no audit at all.”  Worlds of Wonder Sec. Litig. , 35 F.3d at 
+1426. 
+ 
+41 Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979) (quoting SEC v. Blatt , 583 F.2d 1325, 
+1334 n.29 (5th Cir. 1978)).  The  Division cites the Steadman  factors in requesting a three -year 
+suspension.  It is noted that, while Administrative Law Judges have cited the Steadman factors in 
+Rule 102(e) proceedings against CPAs, the Commission has not.  See  Horton & Co. , 77 SEC 
+Docket 3677 (A.L.J. July 2, 2002); Barry C. Scutillo, CPA , 74 SEC Docket 2497, 2555- 57 
+(A.L.J. May 3, 2001), aff’d in part , 56 S.E.C. 714 (2003); Carroll A. Wallace, CPA , 73 SEC 
+Docket 3969, 4034-37 (A.L.J. Dec. 18, 2000), aff’d, 56 S.E.C. 865 (2003). 
+ 22 
+Kaiden, 54 S.E.C. 194, 209 (1999). A two -year suspension is an appropriate sanction and 
+consistent with Commission precedent.42
+ 
+ 
+V.  RECORD CERTIFICATION 
+ 
+ Pursuant to Rule 351(b) of the Commission’s Rules of Practice, 17 C.F.R. § 201.351(b), 
+it is certified that the record includes the items set forth in the record index issued by the 
+Secretary of the Commission on April 20, 2011. 
+ 
+VI.  ORDER 
+ 
+ IT IS ORDERED that, pursuant to Section 4C of the Exchange Act and Rule 102(e)(1)(ii) 
+of the Comm ission’s Rules of Practice, 17 C.F.R. § 201.102(e) (1)(ii), EREZ BAHAR, CA, IS 
+DENIED TEMPORARILY the PRIVILEGE OF APPEARING OR PRACTICING BEFORE 
+THE COMMISSION AS AN ACCOUNTANT for a period of TWO YEARS. 
+                                                 
+42 See Gregory M. Dearlove, CPA , 92 SEC Docket 1867 (Jan. 31, 2008) (ordering a bar with 
+right to reapply in four years and cease- and-desist order; engagement partner on audit of 
+Adelphia Communications Corporation failed to detect improper accounting of enormous rel ated 
+party transactions and other matters prior to entity’s implosion); James Thomas McCurdy, CPA , 
+57 S.E.C. 277 (2004), pet. den. , 396 F.3d 1258 (D.C. Cir. 2005) (denying CPA privilege of 
+appearing or practicing before the Commission for one year; auditor  of a mutual fund failed to 
+obtain sufficient evidence regarding the collectability of a receivable that comprised 25% of the 
+fund’s assets); Barry C. Scutillo
+, 56 S.E.C. 714 (2003) (ordering a bar with right to reapply in 
+three years; auditor in high risk engagement essentially accepted management’s valuation of 
+assets, which consisted of purported gold mining properties and CDs purportedly issued by a 
+Russian bank in an unusual transaction);  Russell Ponce
+, 54 S.E.C. 804 (2000) (ordering a bar 
+with right to reapply in five years and cease-and-desist order; CPA violated antifraud provisions, 
+lacked independence due to unpaid fees, changed properly expensed costs to capitalize them 
+based solely on management representations, and inflated value of intangible asset); Robert D. 
+Potts, CPA, 53 S.E.C. 187 (1997), aff’d , 151 F.3d 810 (8th Cir. 1998), cert. denied, 526 U.S. 
+1097 (1999) (suspending concurring partner for nine months; accounting for asset not in accord 
+with GAAP and contrary to documentary evidence in file he reviewed); Bill R. Thomas
+, 48 
+S.E.C. 1007 (1988) (barring, permanently, CPA who violated antifraud provisions, owned stock 
+in firm he audited, and concealed this from his employer, a national accounting firm); Gary L. 
+Jackson, 48 S.E.C. 435 (1986) (barring, permanently, CPA who aided and abetted firm’s filing of 
+materially false reports and knowingly accepted firm’s valuation of worthless mining claims and 
+of an asset based on a sham transaction with no economic substance); Russell G. Davy
+, 48 
+S.E.C. 138 (1985) (barring, permanently, CPA who violated antifraud provisions,  accepted 
+management representations about sham transactions despite red flags and ignored information 
+that he actually knew); Ernst & Ernst
+, 46 S.E.C. 1234 (1978) (suspending enga gement partner 
+for one year, audit manager, for three months, and censuring CPA firm; materially false and 
+misleading financial statements contained sham and improperly accounted for acquisitions, and 
+respondents lacked independence in repeated dependence on management representations 
+concerning significant information despite red flags).  
+ 
+ 23 
+ 
+ This Initial Decision shall become effective in ac cordance with and subject to the 
+provisions of Rule 360 of the Commission’s Rules of Practice, 17 C.F.R. § 201.360.  Pursuant to 
+that Rule, a party may file a petition for review of this Initial Decision within twenty -one days 
+after service of the Initial Decision.  A party may also file a motion to correct a manifest error of 
+fact within ten days of the Initial Decision, pursuant to Rule 111 of the Commission’s Rules of 
+Practice, 17 C.F.R. § 201.111.  If a motion to correct a manifest error of fact is file d by a party, 
+then that party shall have twenty -one days to file a petition for review from the date of the 
+undersigned’s order resolving such motion to correct a manifest error of fact.  The Initial 
+Decision will not become final until the Commission ente rs an order of finality.  The 
+Commission will enter an order of finality unless a party files a petition for review or a motion to 
+correct a manifest error of fact or the Commission determines on its own initiative to review the 
+Initial Decision as to a pa rty.  If any of these events occur, the Initial Decision shall not become 
+final as to that party. 
+ 
+ 
+       ____________________________ 
+       Carol Fox Foelak 
+       Administrative Law Judge 
\ No newline at end of file
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+ 
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 64978 / July 27, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3307 / July 27, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-14490 
+ 
+ 
+In the Matter of 
+ 
+DIAGEO plc, 
+ 
+Respondent. 
+ 
+ 
+ORDER INSTITUTING CEASE-AND-
+DESIST PROCEEDINGS PURSUANT 
+TO SECTION 21C OF THE 
+SECURITIES EXCHANGE ACT OF 
+1934, MAKING FINDINGS, AND 
+IMPOSING A CEASE-AND-DESIST 
+ORDER AND A CIVIL PENALTY 
+ 
+ 
+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 Diageo plc (“Diageo” or 
+“Respondent”). 
+ 
+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 the Respondent and the 
+subject matter of these proceedings, which are admitted, the Respondent consents to the 
+entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the 
+Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order 
+and a Civil Penalty (“Order”), as set forth below. 
+ 
+ 
+ 2 
+III. 
+ 
+On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 
+ 
+Summary 
+ 
+ This matter concerns multiple violations of the Foreign Corrupt Practices Act 
+(“FCPA”) by Respondent Diageo, one of the world’s largest producers of premium alcoholic 
+beverages.  Over more than six years, Diageo, through its subsidiaries, paid over $2.7 million 
+to various government officials in India, Thailand, and South Korea in separate efforts to 
+obtain lucrative sales and tax benefits.   
+ 
+ In India, from 2003 through mid-2009 Diageo made over $1.7 million in illicit 
+payments to hundreds of Indian government officials responsible for purchasing or 
+authorizing the sale of its beverages.  Increased sales from these payments yielded more than 
+$11 million in ill-gotten gains.  In Thailand, from 2004 through mid-2008, Diageo paid 
+approximately $12,000 per month – totaling nearly $600,000 – to retain the consulting 
+services of a Thai government and political party official.  This official lobbied extensively 
+on Diageo’s behalf in connection with multi-million dollar pending tax and customs 
+disputes, contributing to Diageo’s receipt of certain favorable dispositions by the Thai 
+government.  With respect to South Korea, in 2004, Diageo paid 100 million won (KRW) 
+(over $86,000) to a customs official as a reward for his role in the government’s decision to 
+grant Diageo significant tax rebates.  Diageo also paid over $100,000 in travel and 
+entertainment expenses for South Korean customs and other government officials involved 
+in these
+ tax negotiations.  Separately, Diageo made hundreds of gift payments totaling over 
+$230,000 to South Korean military officials in order to obtain and retain liquor business. 
+ 
+ Diageo and its subsidiaries failed to account accurately for the se illicit payments in 
+their books and records.  Exercising lax oversight, Diageo also failed to devise and maintain 
+internal accounting controls sufficient to detect and prevent the payments. 
+ 
+Respondent 
+ 
+ Diageo , headquartered in London, United Kingdom, is a leading producer and/or 
+distributor of premium branded spirits, beer, and wine, including Johnnie Walker, Smirnoff, 
+J&B, Baileys, Captain Morgan, Tanqueray, and Guinness.  Through its various direct and 
+indirect subsidiaries, Diageo maintains operations in more than 180 countries.  Diageo’s 
+American Depository Shares are registered with the Commission pursuant to Section 12(b) 
+of the Exchange Act and trade on the New York Stock Exchange under the symbol DEO.  
+As a foreign private issuer, Diageo files annual reports with the Commission on Form 20-F.   
+ 
+                                                 
+1  The findings herein are made pursuant to Respondent’s Offer and are not binding on any other person 
+or entity in this or any other proceeding. 
+ 
+ 
+ 3 
+Other Relevant Entities 
+ 
+ Diageo India Pvt. Ltd.  (“DI”) is a wholly-owned indirect subsidiary of Diageo, and 
+is based in Mumbai, India.  Throughout the relevant period, Diageo incorporated DI’s 
+financial results into the consolidated financial statements that it filed with the Commission. 
+ 
+ Diage o Moet Hennessy Thailand (“DT”) is a joint venture of Diageo, and is based 
+in Bangkok, Thailand.  Throughout the relevant period, Diageo had an indirect majority 
+economic interest in, and operational control of, DT and incorporated DT’s financial results 
+into the consolidated financial statements that it filed with the Commission.   
+ 
+ Diageo Korea Co. Ltd. (“DK”) is a wholly-owned indirect subsidiary of Diageo, 
+and is based in Seoul, South Korea.  Throughout the relevant period, Diageo incorporated 
+DK’s financial results into the consolidated financial statements that it filed with the 
+Commission.  
+ 
+Facts 
+ 
+A. Background 
+ 
+ Diageo’s history of rapid multinational expansion through mergers and acquisitions 
+contributed to defects in its FCPA compliance programs.  Diageo was formed in 1997 from 
+the merger of Guinness plc and Grand Metropolitan plc.  As a result of that merger, Diageo 
+acquired its Indian subsidiary, DI, and an indirect majority economic interest in, and 
+operational control of, its Thai joint venture, DT.  Diageo acquired its South Korean 
+subsidiary, DK, in 2001 as part of a larger acquisition of the spirits and wine business of The 
+Seagram Company Ltd.  At the time of these acquisitions, Diageo recognized that its new 
+subsidiaries had weak compliance policies, procedures, and controls.  Nevertheless, Diageo 
+failed to make sufficient improvements to these programs until mid-2008 in response to the 
+discovery of the illicit payments described below.   
+ 
+B. India  
+ 
+ For many years, Diageo, through DI, engaged in a pervasive practice of making illicit 
+direct and indirect payments to government officials throughout India to obtain and retain 
+liquor sales.  As a result, Diageo was unjustly enriched by $11,306,081 from increased sales.   
+ 
+Payments to Employees of Government Liquor Stores 
+ 
+ From at least 2003 through June 2009, DI paid an estimated $792,310 in improper 
+cash payments through its third-party distributors to 900 or more employees of government 
+liquor stores in and around New Delhi.  DI also paid an estimated $186,299 (representing 
+23% of the payments) in “cash service fees” to the distributors as compensation for 
+advancing the funds.  DI made the payments to increase government sales orders of its 
+products, and to secure favorable product placement and promotion within the stores.  
+ 
+ 4 
+Although the improper payments continued for at least six years, it was not until July 2009 
+that DI instructed its distributors to discontinue them. 
+ 
+ DI failed properly to account for either its reimbursement of the illicit payments or 
+the associated “cash service fees.”  DI’s distributors sought recompense by either submitting 
+debit notes or requesting increases in their per-case commissions.  Each of the debit notes 
+falsified or obscured the nature of the payments by purporting to be for “market scheme 
+settlement,” “deposit[s] with Delhi Excise,” “incentives,” “special incentives,” or 
+“promotions.”  By recording its reimbursement of the debit notes as “promotion” or “special 
+incentive” expenses in innocuously labeled accounts – “Promotions-Outlet,” “Promotions,” 
+“Secondary,” or “Trade Incentives” – DI concealed the underlying payments’ purpose and 
+recipients.   Nor did DI’s practice of recording the increased per-case commissions under the 
+generic rubric of “commissions” in any way indicate that they constituted reimbursement for 
+cash payments to government employees. 
+ 
+Payments to Employees of India’s Canteen Stores Department 
+ 
+ During the same six-year period (2003 – 2009) , Diageo, through DI, also reimbursed 
+an estimated $530,955, and made plans to reimburse an additional $79,364, in improper cash 
+payments made by third-party sales promoters to government employees of the Indian 
+military’s Canteen Stores Department (“CSD”).  The payments, made with DI’s knowledge 
+and authorization, were designed to:  (i) foster the promotion of Diageo products in the 
+CSD’s canteen stores (analogous to the U.S. military’s post exchanges); (ii) obtain initial 
+listings and annual label registrations for Diageo brands, price revision approvals, and 
+favorable factory inspection reports; (iii) secure the release of seized shipments of Diageo 
+products; and (iv) promote good will through the distribution of Diwali and New Year’s 
+holiday gifts to CSD employees.   
+ 
+ DI’s accounting for its reimbursement of payments to CSD employees bore the same 
+defects as that for the government liquor stores.  From June 2003 through June 2007, DI’s 
+sales promoters submitted debit notes mischaracterizing the payments as “business 
+promotion expenses,” “miscellaneous expenses,” “expenses incurred on your behalf,” 
+“factory expenses,” “travelling expenses,” or “telephone expenses.”  DI recorded its 
+reimbursements as “scheme” or “special scheme” payments.  After June 2007, DI 
+reimbursed the payments through increased per-case commissions which it recorded as “DIF 
+– selling commission.”  
+The nondescript terms used by DI on its books and records 
+concealed the fact that DI was reimbursing its promoters for wrongful cash payments to CSD 
+employees. 
+ 
+Payments to Label Registration and Excise Officials 
+ 
+ Diageo failed to ensure that DI properly accounted for a number of additional, 
+improper payments to government officials who controlled administrative functions vital to 
+DI’s business.  From at least 2003 through 2008, Diageo, through DI, reimbursed an 
+estimated $98,310 in cash payments made by its third-party promoters and distributors to 
+government officials in the North Region of India and in the State of Assam for the purpose 
+ 
+ 5 
+of securing label registrations for Diageo products.2  The distributors submitted debit notes to 
+DI that described the payments as “special rebates” or as “an incentive for reaching sales 
+targets.”  DI recorded the reimbursements as “special rebates” or “trade incentives,” thereby 
+masking the fact that they represented recompense for illicit payments to government 
+employees. 
+ 
+ In addition, from at least 2003 through June 2009, Diageo, through DI, paid an 
+estimated $78,622 in extra commissions to its distributors in the North Region to reimburse 
+them for payments made to Excise officials to secure import permits and other administrative 
+approvals.  DI again hid the fact that it was reimbursing the distributors for improper 
+payments to government employees by recording them on its books of account as “DIF – 
+selling commission.” 
+ 
+C. Thailand  
+ 
+ From April 2004 through July 2008 , 
+Diageo, through DT, retained the services of a 
+Thai government and foreign political party official (the “Thai Official”) to lobby other Thai 
+officials to adopt Diageo’s position in several multi-million dollar tax and customs disputes.  
+For this retainer DT paid approximately $12,000 per month for 49 months, for a total of 
+$599,322.  DT compensated the Thai Official through 49 direct payments to a political 
+consulting firm (the “Consulting Firm”) for which the Thai Official acted as a principal.  
+Most, if not all, of the $599,322 paid to the Consulting Firm was for the Thai Official’s 
+services and accrued to his benefit. 
+ 
+ The Thai Official served as a Thai government and/or political party official 
+throughout the relevant period (April 2004 – July 2008) in which he received compensation 
+from DT.  At various times the Thai Official served as Deputy Secretary to the Prime 
+Minister, Advisor to the Deputy Prime Minister, and Advisor to the Ministry of Agriculture 
+and Cooperatives.  The Thai Official also served on a committee of the ruling Thai Rak Thai 
+political party, and as a member and/or advisor to several state-owned or state-controlled 
+industrial and utility boards.  DT’s senior management knew that the Thai Official was a 
+government officer during its engagement of the Consulting Firm.  The Thai Official was the 
+brother of one of DT’s senior officers at that time.  Several members of Diageo’s global and 
+regional management attended meetings with the Thai Official and senior members of the 
+Thai government.    
+ 
+ The Thai Official provided extensive lobbying services on behalf of Diageo and DT 
+in connection with several important tax and customs disputes that were pending between 
+Diageo and the Thai government.  For example, with respect to excise taxes,
+3 the Thai 
+Official coordinated and attended numerous meetings between senior Thai government 
+                                                 
+2  The North Region of India includes the following thirteen states:  Bihar, Chandigarh, Chattisgarh, 
+Delhi, Haryana, Punjab, Himachal Pradesh, Jammu, Jharkhand, Madhya Pradesh, Rajasthan, Uttar Pradesh, and 
+Uttaranchal. 
+ 
+3  An excise tax refers to a tax on a good produced for sale, or sold, within a country. 
+   
+ 
+ 6 
+officials and senior Diageo and DT management, including two meetings in April and May 
+2005 with Thailand’s then Prime Minister.  In May 2005, shortly following the meetings 
+arranged by the Thai Official, the Prime Minister made a radio address publicly endorsing 
+Diageo’s position in favor of a “specific” approach (based on quantity) rather than an “ad 
+valorem” approach (based on price) to calculating excise taxes.   
+ 
+ On Diageo’s behalf, the Thai Official also met repeatedly with senior commerce, 
+finance, and customs authorities in charge of the transfer pricing and import tax disputes,
+4 as 
+well as with members of the Thai parliament. The Thai Official’s services contributed to 
+Diageo’s successful resolution of several components of these
+ disputes.  For example, during 
+2004 and 2005 Diageo and DT were actively engaged in a dispute with the Thai government 
+over the appropriate transfer pricing formula applied to One Liter bottles of Johnnie Walker 
+Red Label and Black Label Scotch whiskey.  Based in part on the Thai Official’s lobbying 
+efforts, the Thai government accepted important aspects of DT’s transfer pricing method and 
+released over $7 million in bank guarantees that DT had been required to post while the tax 
+dispute was pending.   
+ 
+ DT improperly accounted for the monthly retainer that it paid to the Thai Official 
+through his Consulting Firm.  The bulk of the payments assumed the form of monthly 
+disbursements of $11,989 to the Consulting Firm for advisory fees and out-of-pocket 
+expenditures.  Approximately $15,169 of the payments was for reimbursement of 
+entertainment expenses, including those incurred on behalf of government officials.  DT 
+recorded the payments under one of the following generically-labeled accounts:  (i) “Outside 
+Services”; (ii) Corporate Social Responsibility”; (iii) Corporate Communications”; (iv) “EA 
+[External Affairs] Project”; or (v) “Stakeholder Engagement.”  Typically, DT charged 
+payments to the Consulting Firm against the same account for a period of time, and then 
+switched to another account without any discernible rationale for the change in accounting 
+treatment.  DT’s books and records did not reflect the fact that DT was paying a Thai 
+government and political party official to lobby in connection with multimillion dollar tax 
+and customs disputes. 
+ 
+D. South Korea  
+ 
+Reward Payment to a Korean Customs Official 
+ 
+ As in Thailand, Diageo had significant tax and customs issues in South Korea .  In 
+April 2003, DK, under Diageo’s direction, requested from South Korea a more advantageous 
+formula for calculating the transfer pricing, for tax purposes, of Windsor Scotch whiskey that 
+DK was importing into South Korea.  As part of those negotiations, DK also sought tens of 
+millions of dollars in tax rebates based on a claim that DK had overpaid under the then 
+existing transfer pricing formula.  In April 2004, following a year of intense negotiations and 
+                                                 
+4  Transfer pricing refers to the cost that individual entities within multinational firms charge for the 
+goods and services that they supply to one another. 
+ 
+ 7 
+lobbying by DK, the South Korean government granted DK a rebate of approximately $50 
+million.5  
+ 
+ In July 2004, three months after DK received the tax rebates, a DK manager (the 
+“Manager”) paid an apparent reward of 100 million KRW ($86,339) to a Korean Customs 
+Service official (the “Customs Official”) who had played a key role in the transfer pricing 
+negotiations.  With the approval of DK’s then chief financial officer, the Manager generated 
+60 million KRW ($51,802) of the payment by means of a surreptitious cash kickback 
+scheme.  The Manager solicited an inflated invoice from DK’s third-party customs brokerage 
+firm (the “Customs Broker”), which had provided DK
+ with consulting services during the 
+transfer pricing negotiations.  As orchestrated, DK paid an inflated invoice amount to the 
+Customs Broker, which then gave 60 million KRW ($51,802) in cash back to the Manager.  
+The Manager funded the remaining 40 million KRW ($34,537) of the total reward amount 
+from personal sources.  The Manager then provided the Customs Official with 100 million 
+KRW ($86,339) in the form of ten bank checks of approximately 10 million KRW ($8,634) 
+each.  
+ 
+ Diageo, through DK, improperly and falsely accounted for the cash reward payment 
+to the Customs Official.  DK booked the invoice from the Customs Broker which it had used 
+to fund 60% of the payment to a general ledger account for professional services and 
+consulting fees.  DK also described the expense as relating to the Customs Broker’s work on 
+the transfer pricing negotiations.  DK
+’s books and records, however, do not reveal that DK 
+solicited the invoice to generate a cash payment to the Customs Official, or that the Customs 
+Broker had failed to render the full services reflected on the invoice.  Nor do DK’s books and 
+records show that the Manager had personally funded the remainder of the cash reward. 
+ 
+Payments for Travel and Entertainment for  
+Korean Customs Service Officials 
+ 
+ During the course of the transfer pricing negotiations in 2003 and 2004, DK also paid 
+$109,253 in travel and entertainment costs for Korean customs and other government 
+officials.  Some of these expenses were unapproved and constituted improper inducements of 
+the South Korean officials.  For example, in December 2003, the Customs Official and 
+several official colleagues traveled to Scotland with DK employees.  The purported reason 
+for the trip was to inspect Diageo’s Windsor Scotch production facilities as part of the 
+transfer pricing negotiations.  During the course of this apparently legitimate trip, DK’s chief 
+financial officer and the Manager took the South Korean officials on a purely recreational 
+side-trip to Prague and Budapest. 
+ 
+ DK failed properly to account for the $109,253 in travel and entertainment related 
+expenses.  The company booked 46 of the related accounting entries to a general ledger 
+account entitled “Entertainment – Customer,” thereby hiding the fact that it was furnishing 
+the travel and entertainment to government officials.  DK intended the false accounting 
+treatment to prevent the South Korean authorities, including the Korean National Tax 
+                                                 
+5  The South Korean government is currently in the process of reevaluating the appropriate transfer price 
+for Diageo’s Windsor Scotch whiskey. 
+ 
+ 8 
+Service, from detecting the officials’ acceptance of the travel and entertainment.  DK failed 
+to record an additional seven expenses related to entertainment connected to the transfer 
+pricing project.  Diageo also failed to implement a system of internal accounting controls 
+that reasonably could have prevented DK’s concealment of these expenditures. 
+ 
+Gift Payments to Military Officials 
+ 
+ From at least 2002 through at least 2006 , Diageo, through DK, routinely made 
+hundreds of small payments to South Korean military officers for the purpose of obtaining or 
+maintaining business and securing a competitive business advantage.  The payments 
+assumed two forms:  (i) holiday and vacation gifts known as “rice cake” payments; and (ii) 
+business development gifts, called “Mokjuksaupbi” payments. 
+ 
+  Rice cake payments were customary and traditional presents that Diageo, through 
+DK, provided to scores of military officers – many of whom were responsible for procuring 
+liquor – several times each year during holidays and vacations.  From 2002 through 2006, 
+DK made approximately 400 rice cake payments, totaling at least $64,184, in the form of 
+cash or gift certificates ranging in value between $100 and $300 per recipient.  In October 
+2004, a senior officer within Diageo’s global compliance department explicitly approved the 
+practice of making rice cake payments after a DK employee explained that the company 
+would face a competitive disadvantage if it refrained.   
+ 
+ Over the same four-year period, Diageo, through DK, also spent approximately 
+$165,287 on hundreds of non-traditional, non-seasonal gifts and entertainment for the 
+military.  
+Of these so-called “Mokjuksaupbi” payments (a term that was broadly intended by 
+DK to refer to “payments for relationships with customers”), approximately $106,051 were 
+for the purpose of influencing specific purchasing decisions.  For example, in 2003, DK 
+personnel requested approval of approximately $2,600 to entertain army personnel “for their 
+cooperation” in connection with the re-selection of Windsor Scotch.   
+ 
+ Diageo failed to ensure that DK properly accounted for the rice cake and 
+Mokjuksaupbi payments.   During 2002 and 2003, DK used fake vendor invoices to generate 
+cash for the rice cake payments and, in 2002, failed to record any of the rice cake payments 
+on its general ledger.  DK incorrectly recorded subsequent rice cake payments, and all of the 
+Mokjuksaupbi payments, under general ledger accounts for expenses such as sales, 
+promotion, or customer entertainment.  Diageo thereby concealed the fact that it was 
+providing gifts to military personnel from South Korean government auditors. 
+ 
+FCPA Violations 
+ 
+ Section 13(b)(2)(A) of the Exchange Act requires public companies to make and 
+keep books, records, and accounts that, in reasonable detail, accurately and fairly reflect the 
+transactions and dispositions of the issuer’s assets.   
+ 
+ Diageo’s books and records did not accurately reflect illicit payments that it made, 
+through its subsidiaries, to Indian, Thai, and South Korean government and military officials.  
+ 
+ 9 
+Instead, Diageo, through DI, DT, and DK, disguised the improper payments as legitimate 
+vendor expenses or recorded them under misleading rubrics such as “factory expenses,” 
+“telephone expenses,” “shareholder stake,” and “sales support.”  In several instances, the 
+illicit payments were not recorded at all.  As a result, Diageo violated Section 13(b)(2)(A) of 
+the Exchange Act. 
+ 
+ Section 13(b)(2)(B) of the Exchange Act requires companies to devise and maintain 
+a system of internal accounting controls sufficient to provide reasonable assurances that 
+transactions:  (i) are executed in accordance with management’s general or specific 
+authorization; and (ii) 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. 
+ 
+ As evidenced by the extent and duration of the wrongful payments and their 
+improper recordation, Diageo failed to devise and maintain sufficient internal accounting 
+controls.  Accordingly, Diageo violated Section 13(b)(2)(B) of the Exchange Act. 
+ 
+Diageo’s Cooperation and Remedial Efforts 
+ 
+ In determining to accept the Offer, the Commission considered the cooperation 
+afforded the Commission staff and certain remedial measures undertaken by Diageo, 
+including employee termination and significant enhancements to its compliance program. 
+ 
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate to impose the 
+sanctions agreed to in Respondent Diageo’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED that: 
+ 
+ A. Pursuant to Section 21C of the Exchange Act, Respondent Diageo cease and 
+desist from committing or causing any violations and any future violations of Sections 
+13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act; 
+ 
+ B. Respondent shall, within 30 days of the entry of this Order, pay disgorgement 
+of $11,306,081 and prejudgment interest of $2,067,739 to the United States Treasury.  If 
+timely payment is not made, additional interest shall accrue pursuant to SEC Rule of Practice 
+600.  Payment shall be: (A) made by wire transfer, 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 Securities and 
+Exchange Commission, Office of Financial Management, 100 F St., NE, Stop 6042, 
+Washington, DC 20549; and (D) submitted under cover letter that identifies Diageo plc 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 Scott F. Weisman, Assistant Director, 
+Division of Enforcement, Securities and Exchange Commission, 100 F Street, N.E., 
+Washington, DC 20549. 
+ 
+ 10 
+ 
+ C. Respondent shall, within 30 days of the entry of this Order, pay a civil money 
+penalty in the amount of $3,000,000 to the United States Treasury.  If timely payment is not 
+made, additional interest shall accrue pursuant to 31 U.S.C. 3717.  Payment shall be:  (A) 
+made by wire transfer, 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 Securities and Exchange Commission, Office of 
+Financial Management, 100 F St., NE, Stop 6042, Washington, DC 20549; and (D) sub-
+mitted under cover letter that identifies Diageo plc 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 Scott F. Weisman, Assistant Director, Division of Enforcement, Securities 
+and Exchange Commission, 100 F Street, N.E., Washington, DC 20549. 
+ 
+ D. Respondent acknowledges that the Commission is not imposing a civil 
+penalty in excess of $3,000,000 based upon its cooperation in a Commission investigation.  
+If at any time following the entry of the Order, the Division of Enforcement (“Division”) 
+obtains information indicating that Respondent knowingly provided materially false or 
+misleading information or materials to the Commission or in a related proceeding, the 
+Division may, at its sole discretion and without prior notice to the Respondent, petition the 
+Commission to reopen this matter and seek an order directing that the Respondent pay an 
+additional civil penalty.  Respondent may not, by way of defense to any resulting 
+administrative proceeding:  (1) contest the findings in the Order; or (2) assert any defense to 
+liability or remedy, including, but not limited to, any statute of limitations defense. 
+ 
+ By the Commission. 
+ 
+ 
+ 
+      Elizabeth M. Murphy 
+      Secretary 
\ No newline at end of file
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+
+
+ 
+ 
+   
+     
+ 
+ 
+ 
+ 
+ 
+ 
+
+     
+     
+     SEC.gov | James E. Koenig 
+     
+     
+     
+     
+     
+     
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+                U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22054 / July 29, 2011  
+
+ Accounting and Auditing Enforcement Release No. 3308 / July 29, 2011 
+
+  Securities and Exchange Commission v. James E. Koenig , 02 C 2180 (N.D. Ill. filed Mar. 26, 2002) 
+
+ Former CFO of Waste Management Ordered to Pay $2.5 Million  
+
+ The Securities and Exchange Commission announced today that on July 28, 2011, the United States District Court for the Northern District of Illinois entered an Amended Final Judgment against James E. Koenig, the former Chief Financial Officer of Waste Management Corporation, ordering that he pay $2.5 million in  SEC v. James E. Koenig , 02 C 2180 (N.D. Ill. filed Mar. 26, 2002). Koenig was ordered to make an upfront payment of $1.25 million and to pay the remaining $1.25 million in regular installments over the next two years. The Commission's complaint alleged that beginning in 1992 and continuing into 1997, Koenig and others engaged in a systematic scheme to falsify and misrepresent Waste Management's financial results with profits being overstated by $1.7 billion. In June 2006, after an 11-week trial, a jury returned a verdict in the Commission's favor against Koenig on all 60 violations charged, including securities fraud, falsifying company books and records, making false statements in filings with the Commission, lying to auditors, and aiding and abetting the company's violations. On December 21, 2007, following a two-day bench trial on remedies, the district court entered a Final Judgment against Koenig that permanently barred him from acting as an officer or director of a public company, and enjoined him from violating, or aiding and abetting violations of, Sections 10(b), 13(a), and 13(b)(2)(A) of the Securities Exchange Act of 1934; Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-1, and 13b2-2 thereunder; and Section 17(a) of the Securities Act of 1933. The judgment also required Koenig to pay disgorgement, prejudgment interest, and civil penalties. On February 26, 2009, the U.S. Court of Appeals for the Seventh Circuit affirmed all issues of liability and trial procedure, but remanded for further proceedings with respect to the monetary amount of the judgment. On November 23, 2009, the district court on remand reaffirmed its prior Final Judgment, and Koenig appealed. The Amended Final Judgment represents a compromise reached through mediation before the Seventh Circuit's Settlement Conference Office while the case was on appeal. The permanent officer and director bar and injunction remain unchanged and in full force and effect. 
+
+ For additional information, see Litigation Release Nos.  20420  (Jan. 3, 2008) and  17435  (Mar. 26, 2002). 
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diff --git a/raw/aaer/2011/AAER-3309.pdf b/raw/aaer/2011/AAER-3309.pdf
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@@ -0,0 +1,178 @@
+ 
+ 
+  UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65030 / August 4, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3310 / August 4, 2011   
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14500  
+ 
+ 
+In the Matter of 
+ 
+KARLHEINZ REDEKOPP, 
+CGA, 
+ 
+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 
+Karlheinz Redekopp, CGA (“Respondent” or “Redekopp”) 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. 
+ 
+  
+ 
+2 
+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. Redekopp, age 40, is the former Chief Financial Officer of International 
+Commercial Television, Inc. (“ICTV”), having served in that capacity from approximately March 
+2006 to August 2008, when he tendered his resignation.  Redekopp holds an active Certified 
+General Accountant designation issued in 1998 in British Columbia, Canada.  Redekopp is a 
+resident of Vancouver, Canada. 
+ 
+ 2. ICTV was, at all relevant times, a Nevada corporation headquartered in Bainbridge 
+Island, Washington.  Founded in 2001, the Company sells health and beauty products 
+internationally via infomercials and through various televised shopping networks.  ICTV’s 
+common stock is registered under Section 12(g) of the Securities Exchange Act of 1934 
+(“Exchange Act”) and is quoted on the Pink Sheets under the symbol “ICTL.” 
+ 
+ 3. On July 26, 2011, a final judgment was entered against Redekopp, permanently 
+enjoining him from future violations of Section 17(a) of the Securities Act of 1933, Sections 10(b) 
+and 13(b)(5) of the Exchange Act and Rules 10b-5, 13a-14 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 and 13a-13 thereunder, in the civil action entitled Securities and Exchange 
+Commission v. Karlheinz Redekopp, Civil Action Number 3:10-cv-05557, in the United States 
+District Court for the Western District of Washington.  The final judgment also prohibits Redekopp 
+from acting as an officer or director of a public company for a period of 5 years. 
+ 
+ 4. The Commission’s complaint alleged, among other things, that Redekopp engaged 
+in a financial reporting fraud which caused ICTV to materially overstate revenue and net income in 
+periodic reports filed with the Commission during a six-quarter period in 2007 and 2008.  The 
+Complaint alleged that Redekopp engaged in a number of improper accounting practices that 
+materially increased ICTV’s annual and quarterly revenue and net income in a departure from 
+Generally Accepted Accounting Principles.  These practices included, among other things, 
+recognizing revenue on sales that did not exist, prematurely recognizing revenue on product sales 
+through the Home Shopping Network, improperly recognizing revenue on sales made directly to 
+consumers prior to expiration of a free trial period, failing to establish a return allowance, and 
+failing to properly recognize returns on direct consumer sales.  During the relevant period, ICTV 
+sold securities in a private placement, and the related subscriptions agreements, counter-signed by 
+ 
+  
+ 
+3 
+Redekopp on behalf of ICTV, included the materially false representation that “[a]ll of the accounts 
+receivable and net receivables of the Company are valid and enforceable claims, are subject to no 
+known set-off or counterclaim, and to the knowledge of the Company are fully collectible in the 
+normal course of business.”   
+ 
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanction agreed to in Respondent Redekopp’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately, that: 
+ 
+ A. Redekopp 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 
+ 
+  
+ 
+4 
+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 CGA designation is 
+current and he has resolved all other disciplinary issues with the applicable boards of 
+accountancy.  However, if his CGA designation 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. 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+ 
+ 
+ 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3311.txt b/raw/aaer/2011/AAER-3311.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4f0b3d027c5d5c1bc2fb4ab29f762ff1825c9d7e
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@@ -0,0 +1,1378 @@
+
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+     SEC.gov | Karlheinz Redekopp 
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+                   U.S. Securities and Exchange Commission 
+
+ LITIGATION RELEASE NO. 22060 / August 4, 2011 
+
+ ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 3311 / August 4, 2011 
+
+ JUDGMENT OF PERMANENT INJUNCTION AND OTHER RELIEF ENTERED AGAINST DEFENDANT KARLHEINZ REDEKOPP AND ORDER INSTITUTING ADMINISTRATIVE PROCEEDINGS, MAKING FINDINGS AND IMPOSING SANCTIONS  
+
+  Securities and Exchange Commission v. Karlheinz Redekopp , Civil Action No. 3:10-cv-05557-RBL (W.D. Wash.) 
+
+ The United States Securities and Exchange Commission ("Commission") announced that on July 26, 2011, the Honorable Ronald B. Leighton, United States District Court Judge for the Western District of Washington, entered a judgment of permanent injunction against Defendant Karlheinz Redekopp. 
+
+ The final judgment enjoins Redekopp 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, 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, 13a-1 and 13a-13 thereunder.  Additionally, the final judgment bars Redekopp from serving as an officer or director of a public company for five years pursuant to Section 21(d)(2) of the Exchange Act. 
+
+ On August 9, 2010, the Commission filed its complaint against Redekopp, who lives in Vancouver, B.C.  The complaint alleges that Redekopp, the former CFO of International Commercial Television Inc. ("ICTV"), turned millions of dollars of quarterly losses into profits by falsely accounting for ICTV's sales of the Derma Wand, a skin care appliance that purports to reduce wrinkles and improve skin appearance.  Redekopp improperly recognized revenue before the Home Shopping Network had actually sold or delivered the product to viewers.  The complaint also alleges that Redekopp recorded "sales" of products that had not been shipped or that the customer was not obligated to pay for.  Redekopp's fraudulent accounting resulted in ICTV adjusting net sales by more than $3.7 million over a five-quarter period in 2007 and 2008, negating all originally reported net income for those periods to restated net losses.   
+
+ In addition to the relief described above, Redekopp consented to the entry of an order, without admitting or denying any of the findings in the Order, in a separate Commission administrative proceedings suspending him, pursuant to Rule 102(e) of the Commission's Rules of Practice, from appearing or practicing as an accountant before the Commission with the right to apply for reinstatement after three years. 
+
+ For more information on earlier actions in this case, see  LR-21622  (August 9, 2010)  
+
+ 
+  SEC Complaint in this matter  
+  -->
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diff --git a/raw/aaer/2011/AAER-3312.pdf b/raw/aaer/2011/AAER-3312.pdf
new file mode 100644
index 0000000000000000000000000000000000000000..e103297351da278216d920aadfd16f56190a33ce
Binary files /dev/null and b/raw/aaer/2011/AAER-3312.pdf differ
diff --git a/raw/aaer/2011/AAER-3312.txt b/raw/aaer/2011/AAER-3312.txt
new file mode 100644
index 0000000000000000000000000000000000000000..37a391d551edccb887453e380a13ef1e297e21cd
--- /dev/null
+++ b/raw/aaer/2011/AAER-3312.txt
@@ -0,0 +1,115 @@
+ 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65051 / August 5, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3312 / August 5, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14501 
+       
+      :  
+ :  
+ :   
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+      : PROCEEDINGS PURSUANT TO RULE 
+ STEVEN SCOPPETUOLO, 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 Steven 
+Scoppetuolo (“Respondent” or “Scoppetuolo”) 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 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. Scoppetuolo is a certified public accountant licensed to practice in the State 
+of New Jersey.  He served as Chief Financial Officer of World Fuel Services Corporation’s (“World 
+Fuel”) Marine Segment from 2006 until September 2009. 
+ 
+  2. World Fuel has, at all relevant times, been 
+headquartered in Miami, Florida.  
+At all relevant times, World Fuel’s common stock has been quoted on the New York Stock 
+Exchange, under the ticker symbol “INT,” and its options are listed on the Chicago Board of 
+Options Exchange and other exchanges. 
+ 
+ 3. On February 16, 2010, the Commission filed a complaint against 
+Scoppetuolo in SEC v. Steven Scoppetuolo, et al. (Civil Action No. 10-CV-20475).  On April 15, 
+2011, the Court entered an order permanently enjoining Scoppetuolo, by consent, from future 
+violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and 
+Section 17(a) of the Securities Act of 1933.  The Court also imposed an officer-and-director bar 
+and a civil penalty and disgorgement to be determined based upon the Commission’s motion.   
+ 
+  4. The Commission’s complaint alleged, among other things, that Scoppetuolo 
+engaged in illegal insider trading in the securities of his employer, World Fuel.  Scoppetuolo tipped 
+his friend, Robert Tocci, and broker, Sarang Ahuja, about World Fuel’s worse-than-expected 
+earnings in advance of World Fuel’s May and August 2007 earnings announcements.  Before the 
+announcements, Tocci and Ahuja purchased put options and Tocci sold short World Fuel 
+securities.  After the announcements, Tocci and Ahuja sold their put options and Tocci covered his 
+short position for profits. 
+ 
+ 
+ 
+ 
+ 
+ 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 Scoppetuolo’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately, that: 
+ 
+ A. Scoppetuolo is suspended from appearing or practicing before the Commission as 
+an accountant.   
+ 
+ 
+ By the Commission. 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+ 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3313.txt b/raw/aaer/2011/AAER-3313.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7322dcc7c53e27aa07c3fa24905ac1b24bb0206b
--- /dev/null
+++ b/raw/aaer/2011/AAER-3313.txt
@@ -0,0 +1,1362 @@
+
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+        Michael Strauss, Stephen Hozie and Robert Bernstein
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+                U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22067 / August 15, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3313 / August 15, 2011 
+
+  Securities and Exchange Commission v. Michael Strauss, Stephen Hozie and Robert Bernstein , Civil Action No. 09-cv-4150 (S.D.N.Y. April 28, 2009) 
+
+ On March 8, 2011 the Court entered an order (the "Order") sought by the Commission authorizing the establishment of a Fair Fund comprised of approximately $1.6 million dollars in disgorgement, post judgment interest and penalties paid by defendants Michael Strauss and Stephen Hozie.  The Order provided that the Fair Fund would be distributed, net of a reserve for taxes, fees and expenses, to a sub-set of a certified class in a settled class action in the United States District Court for the Eastern District of New York,  In re American Home Mortgage Securities Litigation , 07-MD-1898 (TCP) (E.D.N.Y.).  The sub-set consists of all shareholders who purchased American Home Mortgage Investment Corp. ("AHM") common and/or preferred stock on or after April 30, 2007, when AHM announced its earnings for the first quarter of 2007 and who held those shares through June 27, 2007, the day before AHM withdrew its earnings guidance and announced the establishment of additional reserves.  The Order provides that the funds shall be distributed to the sub-set in accordance with the class action's Plan of Allocation approved by the class action court's January 14, 2010 order.  These funds are now being distributed. 
+
+ The Commission has settled with all defendants in this case.  In its complaint, the Commission had alleged that Strauss and Hozie fraudulently understated AHM's first quarter 2007 loan loss reserves by tens of millions of dollars, converting the company's loss into a fictional profit.  The Commission also alleged, among other conduct, that Strauss and Hozie made misleading disclosures concerning the company's financial condition including misrepresenting the company's liquidity and failing to adequately disclose the riskiness of the mortgages American Home Mortgage originated and held.   
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diff --git a/raw/aaer/2011/AAER-3314.txt b/raw/aaer/2011/AAER-3314.txt
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index 0000000000000000000000000000000000000000..910267ddba0898d7825186735e743aff06965701
--- /dev/null
+++ b/raw/aaer/2011/AAER-3314.txt
@@ -0,0 +1,1384 @@
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+                U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22074 / August 30, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3314 / August 30, 2011 
+
+  Securities and Exchange Commission v. James O'Leary , Case No. 1:11-cv-2901 (N.D. Ga.) 
+
+ On August 30, 2011, the Securities and Exchange Commission filed an action against James O'Leary, the former Chief Financial Officer of Beazer Homes USA, Inc., an Atlanta, Georgia-based homebuilder, seeking to recover, pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, bonuses and other incentive-based and equity-based compensation and stock sale profits received while the Company was committing accounting fraud. 
+
+ Section 304 of Sarbanes-Oxley requires reimbursement by chief executive officers and chief financial officers of certain compensation and stock sale profits they received while their companies were in material non-compliance with financial reporting requirements due to misconduct, as well as profits from stock sales during that same period.  This can include an individual who has not been personally charged with the underlying misconduct or alleged to have otherwise violated the federal securities laws. 
+
+ The SEC's complaint, filed in federal district court in Atlanta, Georgia, does not allege that O'Leary participated in any misconduct.  But the complaint alleges that O'Leary is still required, under Section 304 of Sarbanes-Oxley, to reimburse Beazer more than $1.4 million that he received after Beazer filed materially false financial statements during fiscal year 2006. 
+
+ Without admitting or denying the Commission's allegations, O'Leary agreed to reimburse Beazer $1,431,022 in cash within 30 days of entry of the Court order approving the settlement.  This amount represents O'Leary's entire fiscal year 2006 incentive bonus:  $1,024,764 in cash incentive compensation and $131,733 previously received from Beazer in exchange for all restricted stock units he received as additional incentive compensation for fiscal year 2006.  The settlement amount also includes $274,525 in stock sale profits.  The settlement with O'Leary is subject to court approval. 
+
+ This is the fourth enforcement action that the Commission has brought arising out of Beazer's accounting misconduct.  Earlier this year, the Commission reached a settlement with Beazer's then-CEO Ian McCarthy to recover, pursuant to Section 304 of Sarbanes-Oxley, several million dollars in bonus compensation and stock profits received.   See  Lit. Rel. No.  21873  (Mar. 4, 2011).  Beazer settled an enforcement action in September 2008,  see  Rel. No.  33-8960  (Sep. 24, 2008), and the Commission charged Beazer's former chief accounting officer Michael Rand in July 2009.   See  Lit. Rel. No.  21114  (Jul. 1, 2009). 
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diff --git a/raw/aaer/2011/AAER-3315.txt b/raw/aaer/2011/AAER-3315.txt
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@@ -0,0 +1,1396 @@
+
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+ 
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+              James Li, Thomas Chow, Roger Kao, and Wayne A. Pratt
+           
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+        James Li, Thomas Chow, Roger Kao, and Wayne A. Pratt
+       
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+                U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22075 / August 31, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3315 / August 31, 2011 
+
+  Securities and Exchange Commission v. James Li (A/K/A Ching Hua Li), Thomas Chow (A/K/A Man Kit Chow), Roger Kao (A/K/A Chao Chun Kao), Christopher Liu (A/K/A Chi Lei Liu), And Wayne A. Pratt , Civil Action No. CV-11-1712-PHX-SRB (SRB) (D. Ariz.) (Filed Aug. 30, 2011) 
+
+ SEC CHARGES FIVE SENIOR EXECUTIVES WITH FINANCIAL FRAUD AT SYNTAX-BRILLIAN CORPORATION 
+
+ On August 30, 2011, the U.S. Securities and Exchange Commission filed charges in connection with a financial fraud perpetrated by senior management and members of the Board of Directors of Syntax-Brillian Corporation, a developer and distributor of high-definition LCD (liquid crystal display) televisions under the Olevia brand name.  The SEC's Complaint alleges that the scheme was orchestrated by James Li, a Syntax Director who at times was also its President, Chief Operating Officer and Chief Executive Officer, and Thomas Chow, a Syntax Director and its Chief Procurement Officer. 
+
+ According to the SEC's Complaint, from at least June 2006 through April 2008, Li and Chow engaged in a complex scheme to overstate Syntax's financial results by publicly reporting significant sales of LCD televisions in China, when in fact the vast majority of these sales never occurred.  Li and Chow initially concealed the scheme through the use of fake shipping and sales documents.  As the scheme progressed, Li and Chow developed a circular cash flow scheme involving Syntax's primary manufacturer, Taiwan Kolin Co., Ltd., and its purported customer in Hong Kong, South China House of Technology Consultants Co. Ltd. (SCHOT).  Kolin's Chairman of the Board, Christopher Liu, and Kolin's executive and board member, Roger Kao, assisted in the scheme, which created the fa§ade of substantial revenues from Syntax's purported sales in China.  Under the guise of paying various invoices, Li and Chow funneled millions of dollars from Syntax to Kolin.  Liu and Kao then authorized the transmittal of these funds to SCHOT, which then transferred the funds back to Syntax.  Syntax recorded these cash transfers as payments for the previously recorded fictitious sales. 
+
+ The SEC alleges that Wayne Pratt, Syntax's Chief Financial Officer, ignored red flags of improper revenue recognition and participated in preparing backdated documentation that was provided to Syntax's auditors to support fictitious fiscal 2006 year-end sales.  Pratt also ignored indications of impaired assets, agency sales, and potential collectability issues. 
+
+ The SEC's Complaint alleges that between June 30, 2006, and September 30, 2007, Li, Chow, Liu, and Pratt signed various filings with the SEC containing material misstatements.  In addition, Li, Chow, and Pratt signed management representation letters for Syntax's auditors that contained material misstatements regarding, among other things, sales to SCHOT, purchases from Kolin, and the relationships between Syntax, SCHOT, and Kolin.  Li and Chow also engaged in insider trading. 
+
+ The SEC's Complaint charges Chow with violations of 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, and that he aided and abetted violations of Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13.  In connection with its civil action against Chow, the SEC is seeking a permanent injunction, disgorgement with prejudgment interest, a civil penalty up to a maximum of three times trading profits pursuant to Section 21A(a)(2) of the Exchange Act, a civil penalty pursuant to Section 20(d) of the Securities Act and Section 21(d)(3)(A) of the Exchange Act, and a bar against service as an officer or director of a public company ("officer and director bar").  Without admitting or denying the allegations in the SEC's Complaint or the Commission's findings, all of the other defendants have reached settlements with the SEC, as described below. 
+
+  Li consented to the entry of a final judgment permanently enjoining 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, 13a-14, 13b2-1 and 13b2-2, and aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13, imposing a permanent officer and director bar against him, and providing that, upon motion of the Commission, the court shall order disgorgement of ill-gotten gains, prejudgment interest thereon, and a civil penalty in amounts the court deems to be appropriate.   
+
+ Kao consented to the entry of a final judgment permanently enjoining him from aiding and abetting violations of Sections 10(b), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act and Exchange Act Rules 10b-5, 13b2-1 and 13b2-2, and ordering him to pay a civil penalty of $100,000.   
+
+ Liu consented to the entry of a final judgment permanently enjoining him from violating  Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5, and aiding and abetting violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5, 12b-20 and 13a-1, ordering him to pay a civil penalty of $100,000, and imposing a permanent officer and director bar against him.   
+
+ Pratt consented to the entry of a final judgment permanently enjoining 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, 13a-14, 13b2-1 and 13b2-2, and aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13, ordering him to pay disgorgement in the amount of $88,000 and prejudgment interest of $17,000, a civil penalty of $90,000, and imposing a five-year officer and director bar against him.  Pratt also consented to the institution of settled administrative proceedings pursuant to Rule 102(e)(3) of the Commission's Rules of Practice  suspending him from appearing or practicing before the Commission as an accountant for a period of five years, based on the anticipated entry of an injunction against him. 
+  The SEC acknowledges the assistance and cooperation of the Securities and Futures Commission (Hong Kong). 
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diff --git a/raw/aaer/2011/AAER-3316.pdf b/raw/aaer/2011/AAER-3316.pdf
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+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+      
+ 
+      
+ 
+  
+ 
+      
+    
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+          
+       
+       
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+   
+ 
+ 
+ 
+ 
+   
+  
+                                                 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65254 / September 2, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3316 / September 2, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14527 
+: 
+: 
+: 
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+: PROCEEDINGS PURSUANT TO RULE 
+TRAVIS W. VRBAS, : 102(e) OF THE COMMISSION’S RULES OF 
+: PRACTICE, MAKING FINDINGS, AND 
+Respondent. : IMPOSING REME DIAL 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 Travis 
+W. Vrbas (“Respondent” or “Vrbas”) 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.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 Respondent’s Offer, the Commission finds that:  
+A. Vrbas served as chief financial officer of Brooke Corporation (“Brooke”) from 
+March 10, 2008 until October 30, 2008, and as chief financial officer of Brooke Capital Corp. 
+(“Brooke Capital”) from August 15, 2008 until October 30, 2008.  Prior to August 15, 2008, Vrbas 
+was the primary accountant in charge of preparing Brooke Capital’s financial statements. 
+B. Brooke was, at all relevant times, a Kansas corporation with its principal place of 
+business in Overland Park, Kansas.  Brooke was a provider of banking, insurance, and other 
+financial services.  At all relevant times, Brooke’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 NASDAQ Global Market.  Brooke Capital was, at all relevant times, a Kansas 
+corporation with its principal place of business in Overland Park, Kansas.  Brooke Capital operated 
+a franchise network of insurance agents.  At all relevant times, Brooke Capital’s common stock was 
+registered with the Commission pursuant to Section 12(b) of the Exchange Act, and traded on the 
+American Stock Exchange. 
+C. On July 13, 2011, a final judgment was entered against Vrbas, permanently 
+enjoining him from future violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act of 
+1933 (“Securities Act”), Sections 10(b) and 13(b)(5) of the Exchange Act, Rules 10b-5, 13a-14, 
+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 and 13a-13 thereunder, in the civil 
+action entitled Securities and Exchange Commission v. Travis W. Vrbas, Case No. 11-CV-2251 
+WEB/KGG, in the United States District Court for the District of Kansas.  Vrbas was also ordered 
+to pay a $130,000 civil money penalty. 
+D. The Commission’s complaint alleged, among other things, that Vrbas was 
+responsible for Brooke filing materially false and misleading financial statements in the company’s 
+Form 10-K for the fiscal year ended December 31, 2007, and in the company’s Forms 10-Q for the 
+period ended March 31, 2008, the period ended June 30, 2008 and Amended 2008 Form 10-Q for 
+that period, and Form S-3 filed May 28, 2008, and for Brooke Capital filing materially false and 
+2
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+  
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+  
+misleading financial statements in the company’s Form 10-K for the fiscal year ended December 
+31, 2007, and in the company’s Forms 10-Q for the periods ended March 31, 2008 and June 30, 
+2008. The Complaint alleged th at Vrbas knew that Brooke Capital had improperly recognized 
+loan fee revenue on unfunded loans in a departure from generally accepted accounting principles 
+(“GAAP”), which materially misstated the net income of Brooke and Brooke Capital.     
+E. In addition, the Complaint alleged that Vrbas made certifications of Brooke’s 
+Form 10-K for the fiscal year ended December 31, 2007, and in the company’s Forms 10-Q for the 
+period ended March 31, 2008, the period ended June 30, 2008 and Amended 2008 Form 10-Q for 
+that period, and Brooke Capital’s Form 10-Q for the period ended June 30, 2008, which contained 
+untrue statements of material fact, and omitted material facts necessary to make the statements 
+made therein, in light of the circumstances under which the statements were made, not misleading.   
+F. In addition, the Complaint alleged that Vrbas reviewed and signed Brooke’s Form 
+10-K for the period ended December 31, 2007, Forms 10-Q for the period ended March 31, 2008, 
+the period ended June 30, 2008 and Amended 2008 Form 10-Q for that period, and Form S-3 filed 
+May 28, 2008, and Brooke Capital’s Form 10-Q for the period ended June 30, 2008, which 
+contained material misrepresentations and omitted material facts. Those misrepresentations and 
+omissions included, among other things: 
+1.	 the extent to which franchise location numbers and growth included abandoned 
+and failed locations;  
+2.	 the nature and extent of Brooke Capital’s financial assistance to franchisees, 
+including, the number of franchisees receiving financial assistance, the long-
+term and recurring nature of such financial assistance to some franchisees, the 
+dependence of some franchisees on such financial assistance to continue 
+operations, and Brooke Capital’s payment of principal and interest on some 
+franchisee loans to Aleritas; and  
+3.	 the extent to which Brooke and Brooke Capital were profitable, liquid, and able 
+to cash flow. 
+G. In addition, the Complaint alleged that Vrbas failed to make and keep accurate 
+books and records of Brooke and Brooke Capital with regards to the misstatements of their 
+financial statements. 
+H. In addition, the Complaint alleged that Vrbas failed to devise and maintain a system 
+of internal accounting controls sufficient to prevent, detect and correct the misstatements of the 
+financial statements of Brooke and Brooke Capital. 
+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 Vrbas’ Offer. 
+Accordingly, it is hereby ORDERED, effective immediately, that: 
+Vrbas is suspended from appearing or practicing before the Commission as an accountant.   
+ By the Commission.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+4
+ 
\ No newline at end of file
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@@ -0,0 +1,228 @@
+ 
+ 
+ 
+ 
+ 
+ 
+       
+      
+   
+ 
+ 
+      
+  
+      
+   
+      
+        
+       
+   
+ 
+ 
+ 
+   
+ 
+  
+                                                
+ 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65260 / September 2, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3317 / September 2, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14528 
+: 
+:
+ : 
+In the Matter of : ORDER INSTITUTING 
+: ADMINISTRATIVE PROCEEDINGS 
+LELAND G. ORR, CPA, : PURSUANT TO RULE 102(e) OF THE 
+: COMMISSION’S RULES OF  
+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 Leland 
+G. Orr (“Respondent” or “Orr”) 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. 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:  
+A. Orr served as chief financial officer of Brooke Corporation (“Brooke”) from 1995 
+until March 11, 2008, and as chief executive officer of Brooke from March 11, 2008 until October 
+17, 2008. Orr served as chief financial officer of Brooke Capital Corp. (“Brooke Capital”) from 
+November 15, 2007 until August 15, 2008.  Orr is and has been a certified public accountant 
+licensed in the state of Kansas.   
+B.  Brooke was, at all relevant times, a Kansas corporation with its principal place of 
+business in Overland Park, Kansas.  Brooke was a provider of banking, insurance, and other 
+financial services.  At all relevant times, Brooke’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 NASDAQ Global Market.  Brooke Capital was, at all relevant times, a Kansas 
+corporation with its principal place of business in Overland Park, Kansas.  Brooke Capital operated 
+a franchise network of insurance agents.  At all relevant times, Brooke Capital’s common stock was 
+registered with the Commission pursuant to Section 12(b) of the Exchange Act, and traded on the 
+American Stock Exchange. 
+C. On July 13, 2011, a judgment was entered against Orr, permanently enjoining him 
+from future violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933 (“Securities 
+Act”), Sections 10(b) and 13(b)(5) of the Exchange Act, 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. Leland G. Orr, Case Number 11-CV-2251 WEB/KGG, in 
+the United States District Court for the District of Kansas.   
+D. The Commission’s complaint alleged, among other things, that Orr was responsible 
+for Brooke filing materially false and misleading financial statements in the company’s Form 10-K 
+for the fiscal year ended December 31, 2007, and in the company’s Forms 10-Q for the period 
+ended March 31, 2008, the period ended June 30, 2008 and Amended 2008 Form 10-Q for that 
+period, and Form S-3 filed May 28, 2008, and for Brooke Capital filing materially false and 
+2
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+ 
+    
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+misleading financial statements in the company’s Form 10-K for the fiscal year ended December 
+31, 2007, and in the company’s Forms 10-Q for the periods ended March 31, 2008 and June 30, 
+2008. The Complaint alleged that Orr engaged in a number of improper accounting practices that 
+materially misstated the net income of Brooke and Brooke Capital in a departure from generally 
+accepted accounting principles (“GAAP”), including, among other things, improperly recognizing 
+loan fee revenue on unfunded loans, and failing to adjust and to record adequate reserves for 
+uncollectable franchise accounts receivable which were commonly referred to as statement and 
+non-statement balances. 
+E. In addition, the Complaint alleged that Orr allowed consolidation of Aleritas 
+Capital Corporation’s (“Aleritas”) financial statements into Brooke’s financial statements, with 
+knowledge that Aleritas  improperly reduced second quarter collateral preservation expenses and 
+established a collateral recovery asset during the second quarter of 2008, thereby materially 
+misstating the financial statements contained in Brooke’s Form 10-Q for the period ended June 30, 
+2008 and Amended 2008 Form 10-Q for that period. 
+F. In addition, the Complaint alleged that Orr made certifications of Brooke’s Form 
+10-K for the fiscal year ended December 31, 2007, and in the company’s Forms 10-Q for the 
+period ended March 31, 2008, the period ended June 30, 2008 and Amended 2008 Form 10-Q for 
+the that period, and Brooke Capital’s Form 10-K for the period ended December 31, 2007, and 
+Forms 10-Q for the periods ended March 31, 2008 and June 30, 2008, which contained untrue 
+statements of material fact, and omitted material facts necessary to make the statements made 
+therein, in light of the circumstances under which the statements were made, not misleading.   
+G. In addition, the Complaint alleged that Orr reviewed and signed Brooke’s Form 
+10-K for the period ended December 31, 2007, Forms 10-Q for the period ended March 31, 2008, 
+the period ended June 30, 2008 and Amended 2008 Form 10-Q for that period, and Form S-3 filed 
+May 28, 2008, and Brooke Capital’s Form 10-K for the period ended December 31, 2007, and 
+Forms 10-Q for the periods ended March 31, 2008 and June 30, 2008, which contained material 
+misrepresentations and omitted material facts.  Those misrepresentations and omissions included, 
+among other things: 
+1.	 the extent to which franchise location numbers and growth included abandoned 
+and failed locations;  
+2.	 the nature and extent of Brooke Capital’s financial assistance to franchisees, 
+including, the number of franchisees receiving financial assistance, the long-
+term and recurring nature of such financial assistance to some franchisees, the 
+dependence of some franchisees on such financial assistance to continue 
+operations, and Brooke Capital’s payment of principal and interest on some 
+franchisee loans to Aleritas;  and 
+3.	 the extent to which Brooke and Brooke Capital were profitable, liquid, and able 
+to cash flow. 
+3
+ 
+ 
+  
+ 
+ 
+ 
+     
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+        
+ 
+ 
+   
+ 
+H. In addition, the Complaint alleged that Orr made false or misleading statements and 
+failed to disclose information to the independent auditors and accountants of Brooke and Brooke 
+Capital about certain of the companies’ fraudulent accounting practices.  
+I. In addition, the Complaint alleged that Orr failed to make and keep accurate books 
+and records of Brooke and Brooke Capital with regards to the misstatements of their financial 
+statements. 
+J. In addition, the Complaint alleged that Orr failed to devise and maintain a system of 
+internal accounting controls sufficient to prevent, detect and correct the misstatements of the 
+financial statements of Brooke and Brooke Capital. 
+IV. 
+In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanction agreed to in Respondent Orr’s Offer. 
+Accordingly, it is hereby ORDERED, effective immediately, that: 
+Orr is suspended from appearing or practicing before the Commission as an accountant.   
+ By the Commission.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+4
+ 
\ No newline at end of file
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+ 
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65271 / September 6, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3318 / September 6, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-14532 
+ 
+ 
+In the Matter of 
+ 
+RAN H. FURMAN, CPA 
+ 
+             Respondent. 
+ 
+ 
+ORDER INSTITUTING PUBLIC 
+ADMINISTRATIVE PROCEEDINGS AND 
+IMPOSING TEMPORARY SUSPENSION 
+PURSUANT TO RULE 102(e)(3) OF THE 
+COMMISSION’S RULES OF PRACTICE 
+                    
+ 
+ 
+I. 
+ 
+ T he Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
+public interest that public administrative proceedings be, and hereby are, instituted pursuant to 
+Rule 102(e)(3)
+1
+ 
+ of the Commission’s Rules of Practice against Ran H. Furm an (“Respondent” or 
+“Furman”).   
+II. 
+The Commission finds that: 
+ 
+A. RESPONDENT 
+ 
+                                                
+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 rea son 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 
+1. Furman, age 42, resides in San Diego, California.  From September 2003 
+through January 2005, Furman was the Chief Financial Officer ( “CFO”) of Island Pacific, Inc.  
+(“Island Pacific”), whose 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 American Stock 
+Exchange until it was delisted on October 25, 2005, as a result of the company’s failure to file 
+periodic reports.  As Island Pacific’s CFO, Furman oversaw Island Pacific’s financial operations, 
+participated in the preparation of Island Pacific’s financial statements, and certified the accuracy of 
+Island Pacific’s quarterly and annual reports, which were filed with the Commission.  Furman was 
+licensed as a certified public a ccountant (“CPA”) in 1991 by the State of Washington  and was 
+employed as an auditor by a public accounting firm for two years.  Both prior to and subsequent to 
+his employment with Island Pacific, Furman was the CFO of other public companies.  Presently, he 
+performs consulting work through his own company, Black Rock Management, providing interim 
+finance and CFO -type services to smaller companies, including a public co mpany where he 
+previously was the CFO. 
+   
+ B. CIVIL INJUNCTION 
+ 
+ 1. On July 8, 2011, the United States District Court for the Southern District of 
+California entered a final judgment against Furman, permanently enjoining him from future 
+violations, direct or indirect, of Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 
+13a-14, 13b2-1, and 13b2-2 thereunder, and from aiding and abetting violations of Section 13(a) of 
+the Exchange Act and Rules 12b -20, 13a-1, and 13a -13 thereunder, in the civil action entitled 
+Securities and Exchange Commission v. Retail Pro, Inc. (fka Island Pacific, Inc.), et al. , Civil 
+Action Number 08 CV 1620 WQH (RBB).  The final judgment also prohibits Furman for a period 
+of seven years from serving as an officer or director of a public company and orders him to pay a 
+third-tier civil penalty of $75,000. 
+ 
+2. On November 18, 2009, the Court entered an Order granting partial 
+summary judgment in the Commission’s favor, holding that Furman had violated Section 13(b)(5) 
+of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder.  On February 25, 2011, following 
+trial, a jury returned a verdict in the Commission’s favor on its remaining claims for relief, finding 
+that Furman had violated Section 10(b) of the Exchange Act and Rule s 10b -5 and 13a -14 
+thereunder, and had aided and abetted one or more violations by Island Pacific of Section 13(a) of 
+the Exchange Act and Rules 12b -20, 13a-1, and 13a -13 thereunder.  Subsequently, on June 23, 
+2011, the Court entered Orders in support of the above final judgment and making findings of fact 
+and conclusions of law concerning the relief sought by the Commission and then awarded by the 
+Court.  The  Court found that the evidence presented at trial and on summary judgment 
+demonstrated that “Furman played an essential and knowing role in the securities law violations at 
+issue.”  The Court found, among other things, that: 
+ 
+• Furman knowingly participated in and facilitated the alteration of a 
+license agreement , which permitted Island Pacific to imprope rly 
+record revenue of $3.9 million in its fiscal second quarter 2004 , and 
+then directed Island Pacific to record a second transaction in its fiscal 
+ 
+ 3 
+third quarter 2004 that offset the $3.9 million receivable issued in the 
+prior quarter, based on a sublicense agreement Furman knew was not 
+finalized, and that Furman further knew it was improper to record 
+under both Generally Accepted Accounting Principles (“GAAP”) 
+and Island Pacific’s own revenue recognition policy; 
+• Furman drafted or was responsible for the means by which Island 
+Pacific’s fiscal 2004 second and third quarter and annual financial 
+information was disseminated to the investing public and knew that 
+this information materially misrepresented Island Pacific’s financial 
+results and also contained material omissions; 
+• Furman knowingly and willingly participated in the termination of a 
+whistleblower employee and subsequent efforts to conceal the 
+whistleblower’s concerns and allegations of potential fraud from the 
+company’s auditors; 
+• Furman knowingly withheld and concealed other material 
+information from the auditors, including the various versions of the 
+license and sublicense agreements  and documents showing that 
+neither transaction was finalized by the end of the quarter in which 
+the transaction was reported; 
+• Furman signed management representation letters knowing they 
+contained false and/or misleading statements , including that he had 
+no knowledge of any allegations of fraud or suspected fraud affecting 
+the company received in communications from employees or former 
+employees, even though he had received an email from the 
+whistleblower explaining in detail why “certain transactions…appear 
+to be structured in a manner that is intended to inflate revenues for 
+the purpose of boosting the share price,” and had responded by firing 
+the whistleblower the next day -- just a few days before signing one 
+management representation letter;  
+• Furman knowingly circumvented the company’s system of 
+accounting controls by signing false ma nagement representation 
+letters; 
+• At each step in the process, Furman had the opportunity to refuse to 
+continue to participate in the infractions and/or concealment of the 
+infractions; and 
+• The nature of Furman’s work a s a  consultant performing “officer-
+like” activities presents an ongoing opportunity for him to violate the 
+securities laws. 
+ 
+III. 
+ 
+Based upon the foregoing, the Commission finds that a court of competent jurisdiction has 
+permanently enjoined Furman , a CPA,  from violating the F ederal securities laws within the 
+meaning of Rule 102(e)(3)(i)(A) of the Commission’s Rules of Practice.  In view of these findings, 
+ 
+ 4 
+the Commission deems it appropriate and in the public interest that Furman  be temporarily 
+suspended from appearing or practicing before the Commission. 
+   
+ IT IS HEREBY ORDERED t hat Furman be, and hereby is, temporarily suspended from 
+appearing or practicing before the Commission.  This Order shall be effective upon service on the 
+Respondent. 
+ 
+ IT IS FURTHER ORDERED that Furman may within thirty days after service of this 
+Order file a petition with the Commission to lift the temporary suspension.   If the Commission 
+within thirty days after service of the Order receives no petition, the suspension shall become  
+permanent pursuant to Rule 102(e)(3)(ii). 
+ 
+ If a petition is received within thirty days after service of this Order, the Commission shall, 
+within thirty days after the filing of the petition, either lift the temporary suspension, or set the 
+matter down for hearing at a time and place to be designated by the Commission, or both .  If a 
+hearing is ordered, following the hearing, the Commission may lift the suspension, censure the  
+petitioner, or disqualify the petitioner from appearing or practicing before the Commission for a 
+period of time, or permanently, pursuant to Rule 102(e)(3)(iii). 
+ 
+This Order shall be served upon Furman  personally or by certified mail at his last known 
+address. 
+ 
+ By the Commission. 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3319.txt b/raw/aaer/2011/AAER-3319.txt
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+              Deloitte Touche Tohmatsu CPA Ltd.
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+                U.S. SECURITIES & EXCHANGE COMMISSION 
+
+ Litigation Release No. 22088 / September 8, 2011 
+
+ Accounting Auditing and Enforcement Release No. 3319 / September 8, 2011 
+
+  Securities and Exchange Commission v. Deloitte Touche Tohmatsu CPA Ltd. , File No. 1:11-MC-00512 (D.D.C. filed September 8, 2011) 
+
+ SEC Files Subpoena Enforcement Action Against Deloitte & Touche in Shanghai 
+
+ The Securities and Exchange Commission today filed a subpoena enforcement action against Deloitte Touche Tohmatsu CPA Ltd. for failing to produce documents related to the SEC's investigation into possible fraud by the Shanghai-based public accounting firm's longtime client Longtop Financial Technologies Limited. 
+
+ According to the SEC's application and supporting papers filed in U.S. District Court for the District of Columbia, the SEC issued a subpoena on May 27, 2011, and D&T Shanghai was required to produce documents by July 8, 2011. Although D&T Shanghai is in possession of vast amounts of documents responsive to the subpoena, it has not produced any documents to the SEC to date. As a result, the Commission is unable to gain access to information that is critical to an investigation that has been authorized for the protection of public investors. 
+
+ According to the court papers, D&T Shanghai was Longtop's auditor since at least 2007, and the firm consented that its audit reports for Longtop could be filed annually with the SEC while knowing full well that they would be relied upon by U.S. investors. On May 22, D&T Shanghai resigned as Longtop's auditor after discovering numerous improprieties during an audit for the year ended March 31, 2011. In its resignation letter, which was included in a Form 6-K furnished by Longtop on May 23, D&T Shanghai identified numerous indicia of financial fraud at Longtop and indicated that D&T Shanghai's prior year audit reports for Longtop could no longer be relied upon by investors. 
+
+ As part of the Longtop investigation, the SEC staff issued and served the subpoena on D&T Shanghai seeking production of documents related to the incomplete audit of Longtop for the year ended March 31 as well as prior year audits that D&T Shanghai completed. According to the court papers, these documents may reveal information about D&T Shanghai's discovery of false financial records at Longtop, how any fraud schemes at Longtop were able to continue undetected, and basic information necessary to ferret out whether there was a fraud, who was behind it, how significant it was, and how it was conducted. 
+
+ The SEC's court papers note that Longtop is a foreign private issuer whose American depositary shares (ADSs) traded on the NYSE from the date of its initial public offering in October 2007 until May 17, 2011, when the NYSE halted trading prior to delisting Longtop's securities in August 2011. When trading was halted, Longtop's ADSs were priced at $18.93 per share with 57 million shares outstanding, resulting in a market capitalization of approximately $1.08 billion. 
+
+ Pursuant to its application filed in court, the SEC is seeking a court order directing D&T Shanghai to show cause why the court should not enter an order requiring D&T Shanghai to produce documents responsive to the subpoena. 
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diff --git a/raw/aaer/2011/AAER-3320.pdf b/raw/aaer/2011/AAER-3320.pdf
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+ 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65377 / September 21, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3322 / September 21, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14558
+       
+      :  
+ :  
+ :   
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+      : PROCEEDINGS PURSUANT TO RULE 
+ LARRY LEE CRAWFORD (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 Larry 
+Lee Crawford (“Respondent” or “Crawford”) 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 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. Crawford, 63, is and has been a certified public accountant licensed to 
+practice in North Carolina, New Jersey, and Pennsylvania.  He was Escala Group, Inc.’s (“Escala”) 
+Chief Financial Officer and Executive Vice President from April 2001 until May 2006.   
+ 
+ 2. Escala, which was known as Greg Manning Auctions, Inc. until September 
+28, 2005, was a Delaware corporation.  Escala was a global network of companies in the 
+collectibles market.  Escala’s common stock was listed on the NASDAQ National Market until 
+February 7, 2007.  In May, 2009, Escala changed its name to Spectrum Group International, Inc. 
+(“Spectrum”).   Spectrum’s common stock is now traded over-the-counter and quoted on the Pink 
+Sheets under the trading symbol SPGZ.PK.   
+ 
+ 3. On September 9, 2011, a final judgment was entered against Crawford, 
+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, 13b2-1, 13b2-2, and 13a-14 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. Escala Group, Inc., et al., Civil Action Number 09-cv-2646, in the 
+United States District Court for the Southern District of New York.  Crawford was also ordered to 
+pay $43,495 in disgorgement, and $21,089.75 in prejudgment interest, and a $100,000 civil money 
+penalty. 
+ 
+  4. The Commission’s complaint alleged, among other things, that  Crawford 
+violated the antifraud and reporting provisions of the federal securities laws by:  (1) failing to 
+disclose the related-party status of the company that owned and published the Brookman 
+Catalogue, resulting in control of that catalogue and failing to disclose the revenues obtained by 
+virtue of Escala’s former parent and its former CEO’s control of the prices in the Brookman 
+Catalogue for stamp collections that Escala sold to its former parent; (2) falsely representing that 
+Escala sold its former parent company several large stamp archives at prices determined by 
+ 
+ 3 
+reference to independent stamp catalogues and appraisals when in fact Escala’s former CEO set 
+the catalogue prices and influenced and edited the appraisals; and (3)  improperly booking the 
+sale of certain antiques. 
+ 
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanction agreed to in Respondent Crawford’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately, that: 
+ 
+ A. Crawford 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 
+ 
+ 4 
+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. 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3323.pdf b/raw/aaer/2011/AAER-3323.pdf
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@@ -0,0 +1,295 @@
+ 
+ 
+  
+UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65409 / September 27, 2011 
+ 
+INVESTMENT ADVISERS ACT OF 1940 
+Release No. 3290 / September 27, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3323 / September 27, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14565 
+ 
+ 
+In the Matter of 
+ 
+ 
+LPB Capital d/b/a Family Office 
+Group, LLC and Gary J. Pappas 
+ 
+Respondents. 
+ 
+ 
+ 
+ 
+ 
+ 
+ORDER INSTITUTING 
+ADMINISTRATIVE AND 
+CEASE-AND-DESIST 
+PROCEEDINGS PURSUANT 
+TO SECTIONS 203(e), 203(f) 
+AND 203(k) OF THE 
+INVESTMENT ADVISERS ACT 
+OF 1940 AND RULE 102(e) OF 
+THE COMMISSION’S RULES 
+OF PRACTICE AND NOTICE 
+OF HEARING 
+  
+I. 
+ 
+ The Securities and Exchange Commission (“Commission”) deems it appropriate 
+and in the public interest that public administrative and cease-and-desist proceedings be, 
+and hereby are, instituted against LPB Capital d/b/a Family Office Group, LLC (“Family 
+Office”) pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 
+(“Advisers Act”), and against Gary J. Pappas (“Pappas”) pursuant to Sections 203(f) and 
+203(k) of the Advisers Act and Rule 102(e)(1)(iii) of the Commission’s Rules of Practice.
+1
+  
+   
+                                                
+1 Rule 102(e)(1)(iii) 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 willfully violated, or willfully aided and 
+abetted the violation of any provision of the Federal securities laws or the rules and regulations thereunder. 
+ 
+2 
+ 
+ 
+ 
+II. 
+ 
+ After an investigation, the Division of Enforcement alleges that:  
+ 
+A. RESPONDENTS 
+  
+ 1. LPB Capital d/b/a Family Office Group, LLC  is a Delaware limited 
+liability company and registered investment adviser headquartered in Pinehurst, North 
+Carolina.  As of September 30, 2009, Family Office was providing discretionary advisory 
+services to 104 accounts belonging mostly to individuals.  Beginning in 2008, Family 
+Office was required to be regulated as an investment adviser in North Carolina.  Family 
+Office was not an adviser to a registered investment company. 
+ 
+ 2. Gary J. Pappas (“Pappas”), age 49, is Family Office’s founder, majority 
+owner, and Chief Executive Officer.  At all relevant times, Pappas served as Family 
+Office’s Chief Compliance Officer.  Pappas never held any securities licenses.  He was 
+licensed as a Certified Public Accountant in the state of New Jersey from April 6, 1990 to 
+December 31, 2008, but that license is currently expired. 
+ 
+B. FAMILY OFFICE AND PAPPAS MISREPRESENTED FAMILY 
+OFFICE’S ASSETS UNDER MANAGEMENT 
+ 
+3. Between June 2008 and May 2010, Family Office misrepresented its assets 
+under management in various Forms ADV filed with the Commission and signed by 
+Pappas. 
+ 
+4.  Family Office registered with the Commission as an investment adviser on 
+June 11, 2008.  At that time, Family Office invoked Rule 203A-2(d), a registration 
+prohibition exemption, thereby effectively representing that the firm expected to have $25 
+million in assets under management within 120 days.   
+ 
+5. On November 3, November 4, November 19, and December 26, 2008, 
+Family Office filed amended Forms ADV in which the company claimed that it was 
+eligible to remain registered with the Commission because it had $30 million in assets 
+under management in 80 advisory accounts.  
+ 
+6. On March 27, August 6, and August 24, 2009, Family Office filed amended 
+Forms ADV in which the company claimed that it had $72 million in assets under 
+management in 689 advisory accounts. 
+ 
+7. On March 30 and May 11, 2010, Family Office filed amended Forms ADV 
+in which the company claimed to have $128.6 million of assets under management in 1,564 
+advisory accounts.    
+ 
+3 
+ 
+8. In October 2009, Commission staff conducted an examination of Family 
+Office.  On October 16, 2009, at the commencement of the examination, Pappas signed and 
+sent a letter to the Commission staff representing that Family Office had $98 million in 
+assets under management as of September 30, 2009.  In support of the letter, on behalf of 
+Family Office, Pappas provided the examination staff with a spreadsheet that falsely 
+identified as assets under management various client accounts and underlying assets that 
+were not, in fact, managed by the firm.   The spreadsheet was a document that Family 
+Office was required to maintain pursuant to Rule 204-2(a)(8). 
+ 
+9. The disclosures described in Paragraphs 3 to 8 herein were false.  In an 
+October 1, 2010 letter to the Commission staff, Family Office acknowledged that it “fails 
+to satisfy the $25 million threshold set forth in Section 203A of the Advisers Act.”  In that 
+same letter, Family Office provided certain revised calculations of the firm’s assets under 
+management as follows:  
+ 
+ 
+ 
+Date  Number of Advisory 
+Accounts 
+Assets Under Management 
+September 30, 2009 
+ 
+103 $6,124,645 
+December 31, 2009 
+ 
+169 $11,513,859 
+March 31, 2010 
+ 
+189 $13,230,722 
+ 
+  
+10.   Pappas knowingly inflated Family Office’s assets under management by, 
+among other things, including estimated values of prospective clients’ assets in various 
+calculations of Family Office’s assets under management, which were included in Family 
+Office’s Form ADV filings described above in Paragraphs 4 through 7 and the October 16, 
+2009 letter and supporting spreadsheet described above in Paragraph 8. 
+ 
+11. Between June 2008 and May 2010, Pappas was responsible for all 
+compliance functions at Family Office, including the calculation and reporting of assets 
+under management to be included in Family Office’s Forms ADV. 
+ 
+C.   FAMILY OFFICE FAILED TO DISLCOSE INFORMATION ABOUT 
+ITS POOR FINANCIAL CONDITION  
+ 
+12. As of August 31, 2009, around the time of the cause examination, Family 
+Office had only approximately $3,000 in cash and cash equivalents.  For its fiscal year 
+2009 (ended December 31, 2009), with total revenues of just $147,384, Family Office 
+realized a net loss of $436,277.  During 2010, several employees left the firm because it 
+could not afford to pay their salaries and consultant fees.  However, Family Office did not 
+disclose its precarious financial condition to its clients.   
+4 
+ 
+ 
+D. VIOLATIONS  
+ 
+  13. As a result of the conduct described above, Family Office willfully violated, 
+and Pappas willfully aided and abetted, and/or caused violations of Section 203A of the 
+Advisers Act, which generally prohibits an adviser that is regulated or required to be 
+regulated in the state in which it has its principal office and place of business from 
+registering with the Commission, unless it has assets under management in excess of $25 
+million or advises a registered investment company.        
+ 
+ 14. As a result of the conduct described above, Family Office willfully violated, 
+and Pappas willfully aided and abetted, and/or caused violations of Section 204 of the 
+Advisers Act and Rule 204-2(a)(8) thereunder.   Section 204 of the Advisers Act requires 
+every registered investment adviser to make and keep “such reports as the Commission, by 
+rule, may prescribe as necessary or appropriate in the public interest or for the protection of 
+investors.”  Such records are subject to periodic examinations by the Commission.  Rule 
+204-2 promulgated thereunder requires that an investment adviser “make and keep, true, 
+accurate and current” books and records relating to its advisory business.  Rule 204-2(a)(8) 
+specifically requires an investment adviser to keep a “list or other record of all accounts in 
+which the investment adviser is vested with any discretionary power with respect to the 
+funds, securities or transactions of any client.” 
+ 
+ 15. As a result of the conduct described above, Family Office willfully violated, 
+and Pappas willfully aided and abetted and/or caused violations of Section 206(4) and Rule 
+206(4)-4(a)(1).
+2
+ 
+  Section 206(4) of the Advisers Act prohibits an investment adviser from 
+engaging “in any act, practice, or course of business which is fraudulent, deceptive or 
+manipulative.”  Section 206(4) also authorizes the Commission to define, by rule, what 
+acts, practices, or courses of business constitute fraudulent conduct.  During the relevant 
+period, Rule 206(4)-4(a)(1) provided that a registered investment adviser with discretionary 
+authority over client funds or securities violates Section 206(4) if it fails to disclose to 
+clients or prospective clients all material facts regarding the financial condition of the 
+adviser that are reasonably likely to impair the adviser’s ability to meet its contractual 
+commitments to clients. 
+ 16. As a result of the conduct described above, Family Office and Pappas 
+willfully violated Section 207 of the Advisers Act, which makes it unlawful “for any 
+person willfully to make any untrue statements of material fact in any registration 
+application or report filed with the Commission under Section 203 or 204, or willfully to 
+omit to state in any such application or report any material fact which is required to be 
+stated therein.”   
+ 
+                                                
+2  Rule 206(4)-4(a)(1) under the Advisers Act was repealed in Advisers Act Release 
+No. 3060 (Sept. 13, 2010) (effective Oct. 12, 2010).  Comparable requirements are now 
+in Form ADV, Part 2A, Items 9 and 18. 
+ 
+5 
+ 
+ 17. As a result of the conduct described above, Pappas willfully violated and 
+willfully aided and abetted Family Office’s violations of the Federal securities laws and the 
+rules and regulations thereunder pursuant to Rule 102(e)(1)(iii) of the Commission’s Rules 
+of Practice.   
+ 
+III. 
+ 
+ In view of the allegations made by the Division of Enforcement, the Commission 
+deems it in the public interest that public administrative and cease-and-desist proceedings 
+be instituted to determine: 
+ 
+ A.  Whether the allegations set forth in Section II hereof are true and, in 
+connection therewith, to afford Respondents an opportunity to establish any defenses to 
+such allegations;  
+ 
+ B.  What, if any, remedial action is appropriate in the public interest against 
+Pappas pursuant to Section 203(f) of the Advisers Act including, but not limited to, civil 
+penalties pursuant to Section 203(i) of the Advisers Act;  
+ 
+ C. What, if any, remedial action is appropriate in the public interest against 
+Family Office pursuant to Section 203(e) of the Advisers Act including, but not limited to, 
+civil penalties pursuant to Section 203(i) of the Advisers Act;  
+ 
+ D. Whether, pursuant to Section 203(k) of the Advisers Act, Family Office 
+should be ordered to cease and desist from committing or causing violations of and any 
+future violations of Sections 203A, 204, 206(4) and 207 of the Advisers Act and Rules 204-
+2(a)(8) and 206(4)-4(a)(1)
+ thereunder; and 
+ 
+ E. Whether, pursuant to Section 203(k) of the Advisers Act, Pappas should be 
+ordered to cease and desist from committing or causing violations of and any future 
+violations of Sections 203A, 204, 206(4), and 207 of the Advisers Act and Rules 204-
+2(a)(8) and 206(4)-4(a)(1) thereunder.   
+ 
+ F. Whether, pursuant to Rule 102(e)(1)(iii), Pappas should be denied the 
+privilege of appearing or practicing before the Commission as an accountant.  
+ 
+IV. 
+ 
+ IT IS ORDERED that a public hearing for the purpose of taking evidence on the 
+questions set forth in Section III hereof shall be convened not earlier than 30 days and not 
+later than 60 days from service of this Order at a time and place to be fixed, and before an 
+Administrative Law Judge to be designated by further order as provided by Rule 110 of the 
+Commission's Rules of Practice, 17 C.F.R. § 201.110.   
+ 
+6 
+ 
+ IT IS FURTHER ORDERED that Respondents shall file an Answer to the 
+allegations contained in this Order within twenty (20) days after service of this Order, as 
+provided by Rule 220 of the Commission's Rules of Practice, 17 C.F.R. § 201.220.  
+ 
+ If Respondents fail to file the directed answer, or fail to appear at a hearing after 
+being duly notified, the Respondents may be deemed in default and the proceedings may be 
+determined against them upon consideration of this Order, the allegations of which may be 
+deemed to be true as provided by Rules 155(a), 220(f), 221(f) and 310 of the Commission's 
+Rules of Practice, 17 C.F.R.  §§ 201.155(a), 201.220(f), 201.221(f) and 201.310. 
+ 
+ This Order shall be served forthwith upon Respondents personally or by  
+certified mail. 
+ 
+ IT IS FURTHER ORDERED that the Administrative Law Judge shall issue an 
+initial decision no later than 300 days from the date of service of this Order, pursuant to 
+Rule 360(a)(2) of the Commission’s Rules of Practice.  
+ 
+ In the absence of an appropriate waiver, no officer or employee of the Commission 
+engaged in the performance of investigative or prosecuting functions in this or any factually  
+related proceeding will be permitted to participate or advise in the decision of this matter,  
+except as witness or counsel in proceedings held pursuant to notice.  Since this proceeding is 
+not “rule making” within the meaning of Section 551 of the Administrative Procedure Act, it 
+is not deemed subject to the provisions of Section 553 delaying the effective date of any 
+final Commission action. 
+ 
+  
+ By the Commission. 
+ 
+ 
+ 
+ 
+        Elizabeth M. Murphy 
+        Secretary 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3324.txt b/raw/aaer/2011/AAER-3324.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e746761033232e52452d18ad5b7e057cd69c5d7d
--- /dev/null
+++ b/raw/aaer/2011/AAER-3324.txt
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+               Home 
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+              John Michael Kelly, Steven E. Rindner, Joseph A. Ripp, and Mark Wovsaniker
+           
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+             
+        John Michael Kelly, Steven E. Rindner, Joseph A. Ripp, and Mark Wovsaniker
+       
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+                U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22109 / September 29, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3324 / September 29, 2011 
+
+  SEC v. John Michael Kelly, Steven E. Rindner, Joseph A. Ripp, and Mark Wovsaniker , Civil Action No. 08 CV 4612 (CM)(GWG) (S.D.N.Y. filed May 19, 2008) 
+
+ SEC Settles Litigation With Former CFO of AOL Time Warner Inc. and With Former CFO of the AOL Division 
+
+   The U.S. Securities and Exchange Commission today announced that, on September 6, 2011, the United States District Court for the Southern District of New York entered a settled final judgment against J. Michael Kelly, the former Chief Financial Officer of AOL Time Warner Inc. and that on July 19, 2010, the district court entered a settled final judgment against Joseph A. Ripp, the former Chief Financial Officer of the AOL Division of AOL Time Warner, in SEC v. John Michael Kelly, Steven E. Rindner, Joseph A. Ripp, and Mark Wovsaniker, Civil Action No. 08 CV 4612 (CM)(GWG) (S.D.N.Y. filed May 19, 2008). 
+
+ The final judgments resolve the Commission's case against Kelly and Ripp.  The Commission's complaint alleges that, from at least mid-2000 to mid-2002, AOL Time Warner overstated the company's online advertising revenue with a series of round-trip transactions.  The complaint further alleges that the defendants participated in this effort and that their actions contributed to this overstatement.  Online advertising revenue was a key measure by which analysts and investors evaluated the company. 
+
+ Without admitting or denying the allegations in the complaint, Kelly consented to entry of a final judgment permanently enjoining him from future violations of Section 17(a)(2) and (3) of the Securities Act of 1933 and ordering him to pay disgorgement of $200,000 and a civil penalty of $60,000.  Without admitting or denying the allegations in the complaint, Ripp consented to the entry of a final judgment permanently enjoining him from future violations of Rule 13b2-1 promulgated under the Securities Exchange Act of 1934 (Exchange Act) and from aiding and abetting violations of Exchange Act Section 13(b)(2)(A) and ordering him to pay disgorgement of $130,000 and a civil penalty of $20,000. 
+
+ Steven E. Rindner and Mark Wovsaniker remain as defendants in the Commission's action. 
+
+ See Litigation Release No.  20586  (May 19, 2008).  
+
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diff --git a/raw/aaer/2011/AAER-3325.pdf b/raw/aaer/2011/AAER-3325.pdf
new file mode 100644
index 0000000000000000000000000000000000000000..e05d241d9b69083efd9b2903d01a69245ae20328
Binary files /dev/null and b/raw/aaer/2011/AAER-3325.pdf differ
diff --git a/raw/aaer/2011/AAER-3325.txt b/raw/aaer/2011/AAER-3325.txt
new file mode 100644
index 0000000000000000000000000000000000000000..152afaafaf052d5c8562bc66bc527b160a7a45f3
--- /dev/null
+++ b/raw/aaer/2011/AAER-3325.txt
@@ -0,0 +1,113 @@
+ 
+ 
+UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65466 / October 3, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3325 / October 3, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-14575
+       
+      :  
+ :  
+ :   
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+      : PROCEEDINGS PURSUANT TO RULE 
+       THOMAS Y. JIMENEZ  (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 Thomas 
+Y. Jimenez (“Respondent” or “Jimenez”) 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 . . . 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 
+ 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.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 Respondent’s Offer, the Commission finds that: 
+ 
+ 1. Thomas Y. Jimenez (“Jimenez”) was chief financial officer of GlobeTel 
+Communications Corp. and its predecessor from October 1999 until April 2006, when he retired.  
+Jimenez is a CPA currently licensed in New York State, although the license has lapsed.  Jimenez, 
+49, is a resident of Broward County, Florida. 
+ 
+ 2. GlobeTel Communications Corp. (“GlobeTel”) was a Delaware corporation 
+with securities registered pursuant to Sections 12(b) or 12(g) and with a headquarters in Pembroke 
+Pines, Florida during the relevant time period.   
+ 
+ 3. On May 1, 2008, the Commission filed a complaint against Jimenez in the 
+civil action now entitled Securities and Exchange Commission v. GlobeTel Communications, et 
+al., Civil Action 08-cv-60646.  On November 12, 2008, the Court consolidated that civil action 
+into Civil Action 07-cv-61693.  On March 24, 2009, the Court granted the Commission’s motion 
+to amend and filed a First Amended Complaint in that consolidated action.  On June 5, 2009, the 
+Commission filed a Second Amended Complaint. 
+ 
+ 4. On March 19, 2010, the Court entered a judgment by consent against 
+Jimenez, that permanently enjoined him from future violations of the securities laws, including 
+Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act and Rule 10b-5 
+thereunder and that imposed an officer and director bar.   
+ 
+ 5. The Commission’s First Amended Complaint and Second Amended 
+Complaint alleged that Jimenez created millions of dollars in false invoices in 2002-04 and knew 
+or should have known that other GlobeTel agents and officers were creating millions of dollars in 
+false invoices in 2004-06.  The complaints allege that Jimenez approved or caused entries in 
+GlobeTel’s financial records based on those invoices resulting in GlobeTel reporting, inter alia, 
+materially false revenue in filings from at least November 2002 through December 2007.  They 
+also allege that, from about September 2004 until March 2006, Jimenez made or approved entries 
+in GlobeTel’s general ledger that eliminated the accounts receivable and liabilities caused by the 
+ 
+ 3 
+false invoices even though there was no basis for making the entries and the entries were 
+inconsistent with generally accepted accounting principles. 
+ 
+ 
+ 4 
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanction agreed to in Respondent Jimenez’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately, that Jimenez is suspended 
+from appearing or practicing before the Commission as an accountant. 
+ 
+ 
+ By the Commission. 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3326.txt b/raw/aaer/2011/AAER-3326.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7a1e77f5f045c81d589b4d34913a42df01c31613
--- /dev/null
+++ b/raw/aaer/2011/AAER-3326.txt
@@ -0,0 +1,1388 @@
+
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+              Christopher Sells and Timothy Murawski
+           
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+       
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+                U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22116 / October 6, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3326 / October 6, 2011 
+
+  Securities and Exchange Commission v. Christopher Sells and Timothy Murawski , Civil Case No. CV-11-4941-HRL (N.D. Cal., filed October 6, 2011)    
+
+ SEC CHARGES SILICON VALLEY MEDICAL TECHNOLOGY EXECUTIVES IN FRAUDULENT SALES SCHEME 
+
+ The Securities and Exchange Commission today filed fraud charges against two former sales executives with Mountain View, Calif. medical equipment company Hansen Medical, Inc., alleging they orchestrated fraudulent transactions to inflate the company's reported revenues. In a separate proceeding, the SEC also filed settled charges against Hansen Medical for providing misleading financial information to public investors. 
+
+ The SEC's complaint, filed in federal district court in San Francisco, alleges that Christopher Sells, Hansen Medical's former Vice President of Commercial Operations, and Timothy Murawski, a former Vice President of Sales who reported to Sells, participated in multiple improper sales transactions in 2008 and 2009. The SEC alleges the individuals engaged in the scheme as Hansen Medical underwent efforts to raise additional capital from investors. 
+
+ According to the SEC's complaint, on multiple occasions Sells of Dallas, Tex., and Murawski of Lake Zurich, Ill., schemed to have Hansen Medical personnel temporarily install the company's robotic catheter system at a customer site before the customer was ready for it so that Hansen Medical could record the product sale. Hansen Medical personnel would then immediately dismantle the equipment and put it in storage until months later, when they would return to reinstall the equipment. The SEC further alleges that, in a sales transaction in the final days of December 2008, Sells and Murawski instructed Hansen Medical personnel to forge a customer signature on certain required documents to allow the company to record the revenue that quarter. According to the SEC, Sells and Murawski's schemes were intended to circumvent revenue recognition rules and to fool Hansen Medical's finance personnel and auditors into believing that the sales had been completed and revenue could be recorded. 
+
+ The SEC's complaint charges Sells and Murawski with violations of Sections 17(a)(1) and (3) of the Securities Act, and Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5 and 13b2-1 thereunder, 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. The SEC also charges Sells with violations of Rules 13b2-2 under the Exchange Act. The SEC seeks permanent injunctions and financial penalties against Sells and Murawski, and also seeks to bar Sells from serving as an officer or director of a public company. 
+
+ In a separate administrative proceeding, Hansen Medical consented (without admitting or denying the SEC's findings) to the entry of a Order that requires that Hansen Medical to cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act, and 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 considering whether to accept Hansen Medical's settlement offer, the Commission took into consideration Hansen Medical's cooperation with the Commission's investigation and its remedial efforts once the fraud came to light. 
+
+ The case was investigated by Cameron Hoffman, Kristin Snyder, Ron Baer and Tracy Davis of the San Francisco Regional Office. The SEC's litigation efforts will be led by Susan LaMarca and Sheila O'Callaghan. 
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diff --git a/raw/aaer/2011/AAER-3327.txt b/raw/aaer/2011/AAER-3327.txt
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+++ b/raw/aaer/2011/AAER-3327.txt
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+
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+     SEC.gov | Thomas S. Wu, Ebrahim Shabudin, Thomas T. Yu, and Craig S. On 
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+                   U.S. SECURITIES AND EXCHANGE COMMISSION
+
+ Litigation Release No. 22121 / October 11, 2011
+
+ Accounting and Auditing Enforcement Release No. 3327 / October 11, 2011
+
+  Securities and Exchange Commission v. Thomas S. Wu, Ebrahim Shabudin, Thomas T. Yu, and Craig S. On , Civil Case No. CV-11-4988 LB (N.D. Cal.)
+
+ SEC CHARGES BANK EXECUTIVES WITH HIDING MILLIONS OF DOLLARS OF LOSSES DURING 2008 FINANCIAL CRISIS 
+
+     The Securities and Exchange Commission today charged former bank executives with misleading investors about mounting loan losses at San Francisco-based United Commercial Bank during the height of the financial crisis in 2008 and 2009.  The SEC alleges that the bank's former Chief Executive Officer, Thomas Wu, Chief Operating Officer Ebrahim Shabudin, and senior officer Thomas Yu concealed losses on loans and other assets from the bank's auditors, causing the bank's public holding company UCBH Holdings, Inc. (UCBH) to understate 2008 operating losses by at least $65 million (approximately 50 percent).  A few months later, continued declines in the value of the bank's loans led the bank to fail, and the California Department of Financial Institutions closed the bank and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.  United Commercial Bank was one of the 10 largest bank failures of the recent financial crisis, causing a loss of $2.5 billion to the FDIC's insurance fund. 
+
+ In a complaint filed in federal court in San Francisco, the SEC alleges that Wu, Shabudin, and Yu deliberately delayed the proper recording of loan losses, and that each committed securities fraud by making false and misleading statements to investors and UCBH's independent auditors.  During December 2008 and the first three months of 2009 as the company prepared its 2008 financial statements, Wu, Shabudin, and Yu were aware of significant losses on several large loans.  Among other things, these executives allegedly learned about dramatically reduced property appraisals and worthless collateral securing the loans, yet they repeatedly hid this information from UCBH's auditors and investors. 
+
+ The SEC's complaint also alleges that the bank's former Chief Financial Officer Craig On acted negligently by misleading the company's outside auditors and aiding the filing of false financial statements.  On agreed to settle the SEC charges without admitting or denying the allegations.  He will be permanently enjoined from violating certain antifraud, reporting, record-keeping, and internal controls provisions of the federal securities laws and will pay a $150,000 penalty. On also consented to an administrative order suspending him from appearing or practicing before the SEC as an accountant, with a right to apply for reinstatement after five years.   
+
+ The SEC's complaint charges Wu with knowingly violating the antifraud provisions of 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 charges Shabudin and Yu with knowingly violating Sections 17(a)(1) and 17(a)(3) of the Securities Act and Section 10(b) and Rule 10b-5 of the Exchange Act.  Wu, Shabudin, and Yu are charged with aiding and abetting UCBH's violation of Section 10(b) and Rule 10b-5 of the Exchange Act.  The complaint charges On with violating Sections 17(a)(2) and 17(a)(3) of the Securities Act.   Each of the defendants is charged with aiding and abetting UCBH's violation of its periodic reporting requirements under Section 13(a) and Rules 12b-20, 13a-1, and 13a-11of the Exchange Act, aiding and abetting UCBH's violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and falsifying books and records and making false or misleading statements to auditors in violation of Exchange Act Rules 13b2-1 and 13b2-2.  The SEC's complaint seeks permanent injunctive relief, a judgment barring Wu, Shabudin, and Yu from serving as officers or directors of any public company, and civil money penalties. 
+
+ Cary Robnett, Lloyd Farnham, Michael Fortunato, Jason Habermeyer, and Cary Robnett of the SEC's San Francisco Regional Office conducted the SEC's investigation. The SEC's litigation will be handled by Lloyd Farnham and Robert Mitchell. 
+
+ The SEC acknowledges the assistance of the FDIC, U.S. Attorney's Office for the Northern District of California, Federal Bureau of Investigation, Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), FDIC's Office of Inspector General, and Office of Inspector General for the Board of Governors of the Federal Reserve System. 
+
+   SEC Complaint in this matter  
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diff --git a/raw/aaer/2011/AAER-3328.pdf b/raw/aaer/2011/AAER-3328.pdf
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@@ -0,0 +1,343 @@
+  
+ 
+ 
+UNITED STATES OF AMERICA 
+Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No.  65555 / October 13, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3328 / October 13, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-14585 
+In the Matter of, 
+Watts Water Technologies, Inc. and 
+Leesen Chang,  
+Respondents.  
+ORDER INSTITUTING CEASE-AND-
+DESIST PROCEEDINGS PURSUANT TO 
+SECTION 21C OF THE SECURITIES 
+EXCHANGE ACT OF 1934, MAKING 
+FINDINGS, AND IMPOSING CEASE-AND-
+DESIST ORDERS AND CIVIL 
+PENALTIES 
+ 
+ 
+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 Watts Water Technologies, Inc. and 
+Leesen Chang (collectively “Respondents”).  
+ 
+II. 
+ 
+In anticipation of the institution of these proceedings, Respondents have submitted Offers 
+of Settlement (the “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 themselves and the subject 
+matter of these proceedings, which are admitted, Respondents consent to the entry of this Order 
+Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange 
+Act of 1934, Making Findings, and Imposing Cease-and-Desist Orders and Civil Penalties 
+(“Order”), as set forth below.  
+  
+ -2- 
+III. 
+On the basis of this Order and Respondents’ Offers, the Commission finds1
+ 
+ that:  
+Summary 
+ 
+1. This matter concerns violations of the books and records and internal controls 
+provisions of the Foreign Corrupt Practices Act (“FCPA”) by Watts Water Technologies, Inc 
+(“Watts”) and Leesen Chang (“Chang”).  The violations took place at Watts Valve Changsha 
+Co., Ltd., (“CWV”) a wholly-owned Chinese subsidiary that Watts established in November 
+2005 to purchase the assets and businesses of Changsha Valve Works (“Changsha Valve”).  
+CWV acquired Changsha Valve in April 2006 and Watts sold CWV in January 2010.  CWV 
+produced and supplied large valve products for infrastructure projects in China.  Infrastructure 
+projects in China are mostly developed, constructed, and owned by state-owned entities (“Project 
+SOEs”).  Project SOEs routinely retain state-owned design institutes to assist in the design and 
+construction of their projects.  Employees of CWV made improper payments to employees of 
+certain design institutes.  The purpose and effect of those payments was to influence the design 
+institutes to recommend CWV valve products to Project SOEs and to create design specifications 
+that favored CWV valve products.  CWV’s improper payments generated profits for Watts of 
+more than $2.7 million. 
+2. The payments were disguised as sales commissions in CWV’s books and records, 
+thereby causing Watts’ books and records to be inaccurate.  Watts failed to devise and maintain a 
+system of internal accounting controls sufficient to prevent and detect the payments. 
+3. Respondent Chang, a U.S. citizen and the former interim general manager of 
+CWV and vice president of sales for Watts’ management subsidiary in China, approved many of 
+the payments to the design institutes and knew or should have known that the payments were 
+improperly recorded on Watts’ books as commissions.  
+ 
+Respondents  
+ 
+4. Watts Water Technologies, Inc. is a Delaware corporation with its headquarters 
+in North Andover, Massachusetts.  Watts designs, manufactures, and sells water valves and 
+related products through its wholly-owned subsidiary Watts Regulator Co., and maintains 
+operations in North America, Europe, and China.  Watts manages its Chinese subsidiaries 
+through Watts (Shanghai) Management Co., Ltd. (“Watts China”) headquartered in Shanghai.  
+Watts’ common stock is registered with the Commission pursuant to Section 12(b) of the 
+Exchange Act and is listed on the New York Stock Exchange.  
+                                                 
+1  The findings herein are made pursuant to the Respondent’s Offers and are not binding on any other person 
+or entity in this or any other proceeding. 
+  
+ -3- 
+5. Leesen Chang, age 51, is a U.S. citizen and was the vice president of sales at 
+Watts China between November 2008 and June 2009.  Chang also served as interim general 
+manager of CWV from April to November 2008.  Chang maintains a residence in Los Angeles, 
+California but lives most of the year in China where he is currently employed.  
+ 
+Other Relevant Entities  
+ 
+6. Watts Valve (Changsha) Co., Ltd. (or as defined above, “CWV”) was a wholly 
+foreign owned enterprise limited liability company (“WFOE”)2
+ 
+ established by Watts in China for 
+the purpose of purchasing Changsha Valve.  CWV purchased Changsha Valve in April 2006 and 
+operated as a valve manufacturing subsidiary of Watts until January 2010 when Watts sold the 
+business to a privately-held Hong Kong company.  Watts consolidated CWV’s books and 
+records into its financial statements and CWV’s revenues accounted for approximately 1% of 
+Watts’ gross revenues. 
+7. Watts (Shanghai) Management Co., Ltd. ( or as defined above “Watts China”), 
+is a Watts’ WFOE headquartered in Shanghai that manages the operations of Watts’ 
+manufacturing subsidiaries located in China, including CWV during the period of Watts’ 
+ownership. Watts China is solely a management subsidiary and had no ownership interest in 
+CWV. 
+ 
+Facts 
+ 
+A. CWV’s Acquisition of Changsha Valve 
+ 
+8. CWV completed its acquisition of Changsha Valve in April 2006.  Although 
+Watts had significant operations in China prior to CWV’s purchase of Changsha Valve, CWV 
+was Watts’ first experience with a Chinese subsidiary that conducted business predominantly 
+with SOEs.  Watts’ other Chinese subsidiaries are primarily engaged in the manufacture of 
+products destined for sale or distribution to non-governmental entities in China, the U.S. and 
+Europe.   
+9. Watts failed to implement adequate internal controls to address the potential 
+FCPA problems posed by its ownership of CWV – a subsidiary that sold its products almost 
+exclusively to SOEs.  In addition, although Watts implemented an FCPA policy in October 2006, 
+Watts failed to conduct adequate FCPA training for its employees in China until July 2009.  
+ 
+                                                 
+2  The WFOE corporate structure under Chinese law permits foreign investors to establish and operate 
+business enterprises in China that are capitalized exclusively with foreign funds.  In addition, foreign investors who 
+establish a WFOE in China can exercise control over the management and day-to-day operations of their WFOE.   
+  
+ -4- 
+B. CWV Made Improper Payments to Design Institutes 
+ 
+10. During the period of Watts’ ownership, CWV sales personnel made payments to 
+employees of certain design institutes to influence the design institutes to recommend CWV 
+products to Project SOEs and to include specifications in their design proposals that would 
+increase the likelihood that Project SOEs would select CWV products.  
+11. The improper payments were facilitated by a sales incentive policy created by 
+Changsha Valve prior to its acquisition by CWV, and adopted by CWV in December 2006 (the 
+“CWV Sales Policy”).  The CWV Sales Policy provided, among other things, that all sales-
+related expenses, including travel, meals, entertainment, and payment of “consulting fees” to 
+design institutes, would be borne by the CWV sales employees out of their commissions, which 
+were equal to 7% to 7.5% of the contract price, depending on the size of the contract.  The CWV 
+Sales Policy further provided that sales personnel at CWV could utilize their commissions to 
+make payments to design institutes of up to 3% of the total contract amount.  As a result, the 
+payments to design institutes were improperly recorded in Watts’ books and records as sales 
+commissions.  The CWV Sales Policy was never translated into English or submitted to Watts’ 
+management in the U.S.  
+ 
+C. Chang’s Role in the Violations 
+ 
+12. As vice president of sales at Watts China and interim general manager of CWV, 
+Chang was among those responsible for maintaining and enforcing Watts’ policies and 
+procedures, including the company’s general prohibition against improper payments to SOEs.  
+Nonetheless, Chang approved commission payments to CWV sales personnel that he knew 
+included payments to design institutes.  In fact, Chang signed commission payment approval 
+requests that explicitly itemized payments of 3% to design institutes.  Chang also knew that 
+Watts’ management in the U.S. was unaware of the CWV Sales Policy that facilitated the 
+improper payments and he resisted at least one attempt by several of his colleagues at Watts 
+China to have the policy translated and submitted to Watts’ senior management for approval.  In 
+an email discussing this issue, Chang stated that “China sale policy should stay in control within 
+China regional operation” because involving Watts’ management in the U.S. might cause CWV 
+to “lose many flexibility [sic] on working with sale, sale agent and end buyer.”  Accordingly, 
+Chang knew or should have known that, pursuant to the CWV Sales Policy, payments to design 
+institutes were recorded in Watts’ books and records as sales commissions.  In addition, Chang’s 
+resistance to efforts to have the Sales Policy translated and submitted to Watts’ management in 
+the U.S. was a cause of Watts’ internal control violations, since it prevented the parent company 
+from discovering the improper payments. 
+ 
+D. Discovery, Internal Investigation and Self Reporting 
+ 
+13. In March 2009, Watts’ General Counsel learned of a Commission enforcement 
+action against another company that involved unlawful payments to employees of Chinese 
+design institutes.  Because Watts’ senior management in the U.S. knew that CWV’s customers 
+included Project SOEs, Watts implemented anti-corruption and FCPA training for its Chinese 
+subsidiaries.  This training took place starting in the Spring of 2009.  In July 2009, following 
+FCPA training sessions for certain management of Watts China, Watts China’s in-house 
+  
+ -5- 
+corporate counsel became aware of potential FCPA violations at CWV through conversations 
+with CWV sales personnel who were participating in the training.  Shortly thereafter, the in-
+house lawyer notified Watts’ management in the U.S. of the potential violations.  
+14. On July 21, 2009, Watts retained outside counsel to conduct an internal 
+investigation of CWV’s sales practices.  Watts’ outside counsel subsequently retained forensic 
+accountants to assist with the investigation.   
+15. On August 6, 2009, Watts self-reported its internal investigation to the staff.  As 
+the internal investigation progressed, Watts shared the results of the investigation with its outside 
+auditors and the staff through periodic reports, and undertook the remedial measures described 
+below.  
+ 
+E. Watts’ Remedial Measures 
+ 
+16. Since July 2009 when the conduct was discovered, Watts has taken the following 
+remedial steps.  At the start of its internal investigation, Watts directed all of its sales and finance 
+employees at CWV and Watts China to stop all payments of any kind to SOEs.  While the 
+internal investigation was ongoing, Watts eliminated commission-based compensation at CWV 
+to ensure that no further improper payments were made by CWV sales personnel and disclosed 
+the internal investigation in its August 7, 2009 Form 10-Q.  In addition, Watts retained additional 
+outside counsel to draft and implement enhanced anti-corruption policies and procedures, 
+including an enhanced Anti-Bribery Policy, a Business Courtesy Policy designed to ensure that 
+any payments made to customers comply with the FCPA, an enhanced Travel and Entertainment 
+Expense Reimbursement Policy for its Chinese subsidiaries, and enhanced intermediary due 
+diligence procedures.  
+17. In conjunction with its internal investigation, Watts conducted a worldwide anti-
+corruption audit.  As part of its anti-corruption audit, Watts conducted additional FCPA and anti-
+corruption training for Watts China and the company’s locations in Europe, conducted a risk 
+assessment and anti-corruption compliance review of Watts’ international operations in Europe, 
+China, and any U.S. location with international sales, and conducted anti-corruption testing at 
+seven international Watts sites, including each of the manufacturing and sales locations in China.  
+In an effort to ensure FCPA compliance and training going forward, Watts contracted with an 
+online global training organization to provide regular anti-corruption training and hired a 
+Director of Legal Compliance, a new position that reports to Watts’ General Counsel regarding 
+issues under the Code of Conduct and Anti-Bribery Policy.  
+ 
+Legal Standards and Violations  
+ 
+A. Standard for the Issuance of a Cease-and Desist Order  
+ 
+18. Under Section 21C(a) of the Exchange Act, the Commission may impose a cease-
+and-desist order upon any person who is violating, has violated, or is about to violate any 
+provision of the Exchange Act or any rule or regulation thereunder, and upon any other person 
+that is, was, or would be a cause of the violation, due to an act or omission the person knew or 
+should have known would contribute to such violation.  
+  
+ -6- 
+ 
+B. The Requirements of Sections 13(b)(2)(A) and 13(b)(2)(B) of the 
+Exchange Act and Rule 13b2-1 thereunder  
+ 
+19. The FCPA, enacted in 1977, added Section 13(b)(2)(A) to the Exchange Act to 
+require 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.  
+15 U.S.C. § 78m(b)(2)(A).  
+20. The FCPA also added Section 13(b)(2)(B) to the Exchange Act to require public 
+companies to, among other things, devise and maintain a system of internal accounting controls 
+sufficient to provide reasonable assurances that transactions: (i) are executed in accordance with 
+management’s general or specific authorization; and (ii) are recorded as necessary to permit 
+preparation of financial statements in conformity with generally accepted accounting principles 
+(“GAAP”) or any other criteria applicable to such statements, and to maintain accountability for 
+assets.  15 U.S.C.  § 78m(b)(2)(B).   
+21. Rule 13b2-1 prohibits a person from, directly or indirectly, falsifying or causing 
+to be falsified any book, record, or account subject to Section 13(b)(2)(A) of the Exchange Act. 
+17 CFR § 240.13b2-1. 
+ 
+C. Watts Violated Sections 13(b)(2)(A) and 13(b)(2)(B)  
+ 
+22. Watts’ subsidiary, CWV, made improper payments to design institutes.  The 
+payments were improperly recorded in CWV’s books and records as sales commissions.  CWV’s 
+books and records were consolidated into Watts’ books and records.  Accordingly, as a result of 
+the misconduct of its subsidiary, Watts failed to make and keep books, records, and accounts 
+which, in reasonable detail, accurately and fairly reflect its transactions and the disposition of its 
+assets as required by Section 13(b)(2)(A) of the Exchange Act. 
+23. As evidenced by the extent and duration of the improper payments and the fact 
+that Watts management was unaware of the CWV Sales Policy that facilitated the improper 
+payments, Watts failed to devise and maintain a system of internal accounting controls sufficient 
+to provide reasonable assurances that it maintained accountability for its assets, and that its 
+transactions were executed in accordance with management’s authorization and recorded as 
+necessary to permit the preparation of financial statements in conformity with GAAP.  Watts 
+also failed to implement an FCPA compliance and training program commensurate with the 
+extent of its international operations and its ownership of CWV, a subsidiary that sold its 
+products almost exclusively to SOEs.  Accordingly, Watts violated Section 13(b)(2)(B) of the 
+Exchange Act.  
+D. Chang Violated Rule 13b2-1 and Was a Cause of Watts’ Violations of 
+Sections 13(b)(2)(A) and 13(b)(2)(B) 
+ 
+24. Chang knew that CWV sales personnel made payments to design institutes out of 
+their sales commissions pursuant to the CWV Sales Policy and he signed commission payment 
+approval requests that explicitly itemized payments of 3% to design institutes.  Under these 
+  
+ -7- 
+circumstances, Chang knew or should have known that the sales commission payments he 
+approved contained payments to design institutes that were improperly recorded in Watts’ books 
+and records as sales commissions.  Accordingly, Chang was a cause of Watts’ failure 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 company as required by Section 13(b)(2)(A) 
+of the Exchange Act.  By this same conduct, Chang was a cause of Watts’ failure to maintain 
+accurate books and records and thereby violated Exchange Act Rule 13b2-1. 
+25. As described more fully above, Chang knew that Watts’ senior management was 
+unaware of the CWV Sales Policy that facilitated the falsifications of its books and records and 
+he resisted attempts by his colleagues at Watts China to have the CWV Sales Policy translated 
+and submitted to Watts’ senior management for approval.  By these actions and others described 
+herein, Chang was a cause of Watts’ failure to devise and maintain a sufficient system of internal 
+accounting controls as required by Section 13(b)(2)(B) of the Exchange Act.  
+ 
+Commission Consideration of 
+Watts’ Remedial Efforts and Cooperation  
+ 
+26. In determining to accept Watts’ Offer of Settlement, the Commission considered 
+remedial acts promptly undertaken by Watts and the cooperation afforded the staff.  
+  
+IV. 
+ 
+In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondents Offers of Settlement.  
+Accordingly, it is hereby ORDERED that:  
+A. Pursuant to Section 21C of the Exchange Act: 
+ 
+1. Respondents Watts and Chang cease and desist from committing or causing any 
+violations and any future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of 
+the Exchange Act;  
+ 
+2. Respondent Chang cease and desist from committing or causing any 
+violations and any future violations of Exchange Act Rule 13b2-1.  
+ 
+B. Within fourteen days of the entry of this Order: 
+ 
+1. Respondent Watts shall pay to the United States Treasury disgorgement of 
+$2,755,815, prejudgment interest of $820,791 and a civil money penalty of 
+$200,000; and  
+ 
+2. Respondent Chang shall pay to the United States Treasury a civil money 
+penalty of $25,000.  
+ 
+  
+ -8- 
+If timely payment is not made, additional interest shall accrue pursuant to SEC 
+Rule of Practice 600 and 31 U.S.C. § 3717.  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, 100 F St., NE, Stop 6042, Washington, DC 20549; and 
+(D) submitted under cover of a letter that identifies the payer 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 Antonia Chion, Associate 
+Director, Division of Enforcement, Securities and Exchange Commission, 
+100 F St., NE, Washington, DC 20549.  
+ 
+C. Respondent Watts acknowledges that the Commission is not imposing a civil 
+penalty in excess of $200,000 based upon its cooperation in a Commission 
+investigation.  If at any time following the entry of the Order, the Division of 
+Enforcement (“Division”) obtains information indicating that Respondent 
+knowingly provided materially false or misleading information or materials to the 
+Commission or in a related proceeding, the Division may, at its sole discretion 
+and without prior notice to the Respondent, petition the Commission to reopen 
+this matter and seek an order directing that the Respondent pay an additional civil 
+penalty.  Respondent may not, by way of defense to any resulting administrative 
+proceeding: (1) contest the findings in the Order; or (2) assert any defense to 
+liability or remedy, including, but not limited to, any statute of limitations 
+defense.  
+ 
+By the Commission.  
+ 
+Elizabeth M. Murphy 
+Secretary 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3329.pdf b/raw/aaer/2011/AAER-3329.pdf
new file mode 100644
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@@ -0,0 +1,110 @@
+ 
+UNITED STATES OF AMERICA  
+Before the  
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No. 65600 / October 20, 2011  
+ACCOUNTING AND AUDITING ENFORCEMENT  
+Release No. 3329 / October 20, 2011  
+ADMINISTRATIVE PROCEEDING  
+File No. 3-10937 
+ 
+In the Matter of  
+Michael G. Horsey, CPA  
+ 
+: 
+: 
+: 
+: 
+: 
+: 
+ORDER GRANTING APPLICATION FOR 
+REINSTATEMENT TO APPEAR AND PRACTICE 
+BEFORE THE COMMISSION AS AN ACCOUNTANT 
+ 
+On November 18, 2002, Michael G. Horsey (“Horsey”) was denied the privilege of 
+appearing or practicing before the Commission as an accountant as a result of settled public 
+administrative proceedings instituted by the Commission against Horsey pursuant to Rule 102(e) 
+of the Commission's Rules of Practice.
+1
+ 
+  Horsey consented to the entry of the 2002 Order 
+without admitting or denying the findings therein.  This order is issued in response to Horsey’s 
+application for reinstatement to practice before the Commission as an accountant. 
+At all times relevant to the 2002 Order, Horsey was a certified public accountant who 
+was duly licensed by the Commonwealth of Pennsylvania, and a partner with Mitchell & Titus 
+LLP (“Mitchell & Titus”).  Horsey was the engagement partner for his firm’s audits of the 
+financial statements of MERL Holdings Inc.com (“MERL”) for its fiscal years ended December 
+31, 1997 and December 31, 1998.  The Commission alleged that Horsey (in his capacity as the 
+engagement partner), the concurring review partner, and the senior manager failed to conduct 
+their fiscal 1997 and 1998 audits of MERL’s financial statements in accordance with Generally 
+Accepted Auditing Standards (“GAAS”), and issued an audit report which wrongly stated that 
+MERL’s financial statements were prepared in conformity with Generally Accepted Accounting 
+Principles (“GAAP”).  Specifically, the Commission alleged that because they failed to exercise 
+due professional care and maintain an attitude of professional skepticism, failed to obtain 
+sufficient competent evidential matter, and failed to staff the audits with accountants who had 
+                                                 
+1 See Accounting and Auditing Enforcement Release No. 1667 dated November 18, 2002 (the “2002 Order”).  
+Horsey was permitted, pursuant to the order, to apply for reinstatement after two years upon making certain 
+showings. 
+adequate technical training and audit proficiency, Horsey, the concurring review partner, and the 
+senior manager engaged in improper professional conduct. 
+ 
+Horsey 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, among others the 
+requirements relating to registration, inspections, concurring partner reviews and 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, Horsey agrees to have his work reviewed by the independent audit committee of 
+the public company for which he works, or in some other manner acceptable to the Commission.  
+ 
+Horsey is currently subject to probation under the Pennsylvania State Board of 
+Accountancy that is scheduled to end in January, 2013. Failure to abide by the terms of his 
+probation could result in the suspension of Horsey’s CPA license. Horsey has attested that he 
+will notify the Commission if he is found to have violated the terms of the probation. He also has 
+attested that he understands that the suspension of his CPA license could result in the revocation 
+of the reinstatement of his privilege to appear or practice before the Commission as an 
+accountant. 
+ 
+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 Horsey, it appears that he has complied with the terms of the 2002 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 
+Horsey, 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 by undertaking to comply with all requirements of the 
+Commission and the Public Company Accounting Oversight Board, including among others, the 
+requirements relating to 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, 
+                                                 
+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 
+Michael G. Horsey, CPA is hereby reinstated to appear and practice before the Commission as 
+an accountant. 
+ 
+By the Commission. 
+ 
+ 
+ 
+ 
+Elizabeth M. Murphy 
+Secretary  
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3330.txt b/raw/aaer/2011/AAER-3330.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2f1a8818a108aeed8ee941dd62a9f8995c85ea61
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+++ b/raw/aaer/2011/AAER-3330.txt
@@ -0,0 +1,1402 @@
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+                U. S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22138 / October 24, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3330 / October 24, 2011 
+
+  SEC v. Koss Corporation and Michael J. Koss , Civil Case No. 2:11-cv-00991, USDC, E.D., Wisc. 
+
+ SEC FILES COMPLAINT AND PROPOSED SETTLEMENT AGAINST KOSS CORPORATION AND MICHAEL J. KOSS, ITS CEO AND FORMER CFO, WHO HAS AGREED TO REIMBURSE INCENTIVE-BASED COMPENSATION 
+
+ The Securities and Exchange Commission ("Commission") on October 24, 2011, filed a Complaint against, and proposed settlement with, Koss Corporation ("Koss"), located in Milwaukee, Wisconsin, and Michael J. Koss, its CEO and former CFO, based on Koss Corporation's preparation of materially inaccurate financial statements, book and records, and lack of adequate internal controls from fiscal years 2005 through 2009. During this period, Sujata Sachdeva ("Sachdeva"), Koss's former Principal Accounting Officer, Secretary, and Vice-President of Finance, and Julie Mulvaney ("Mulvaney"), Koss's former Senior Accountant, engaged in a wide-ranging accounting fraud to cover up Sachdeva's embezzlement of over $30 million from Koss. The Commission's Complaint alleges that: 
+
+     The yearly amounts stolen were significant relative to Koss's sales and shareholders' equity. For example, during fiscal year 2009, Sachdeva stole approximately $8.5 million, while Koss reported total sales of approximately $41.7 million and retained earnings of approximately $17.1 million at year-end. 
+
+    Sachdeva and Mulvaney were able to hide the substantial embezzlements in Koss's financial records in part because Koss and Michael J. Koss did not adequately maintain internal controls to reasonably assure the accuracy and reliability of financial reporting. 
+
+    While Koss's internal controls policy required Michael J. Koss to approve invoices of $5,000 or more for payment, its controls did not prevent Sachdeva and Mulvaney from processing large wire transfers and cashier's checks outside of the accounts payable system to pay for Sachdeva's personal purchases without seeking or obtaining Michael J. Koss's approval. 
+
+    As a result, Sachdeva, with Mulvaney's assistance, was able both to initiate and authorize wire transfers of Koss's funds to her personal creditors totaling approximately $16.3 million, and to order cashier's checks payable to credit card companies and her designated payees totaling approximately $15.5 million. 
+
+    Koss's computerized accounting systems were almost 30 years old and access to the accounting systems could not be locked at the end of the month and there was no audit trail. Sachdeva and Mulvaney were thus able to make undetected post-closing changes to the books and bypass an internal control requiring Michael J. Koss to authorize those changes. 
+
+    Many account reconciliations were either not prepared or were not maintained as part of Koss's accounting records. To the extent that reconciliations were conducted, they were improperly performed by the same persons who initiated or recorded the transactions ( i.e.  Sachdeva or Mulvaney), enabling those persons to make modifications to the reconciliations to cover up fraudulent entries. 
+
+    While Sachedeva provided Michael J. Koss with reporting certifications for his review, he did not conduct an adequate review of Koss's accounting in connection with these certifications. 
+
+    Based on the fraudulent accounting books and records prepared by Sachdeva and Mulvaney, Koss prepared, and Michael J. Koss certified, materially inaccurate audited financial statements and materially inaccurate current, quarterly and annual reports.   After discovering the embezzlement, Koss reported the occurrence to its shareholders and enforcement authorities, and amended and restated its financial statements for fiscal years 2008 and 2009 and the first three quarters of fiscal year 2010. 
+
+ Koss and Michael J. Koss have consented to the entry of an injunctive order without admitting or denying the allegations in the Commission's complaint. The proposed order would: 
+
+     Enjoin Koss from violating and Michael J. Koss from aiding and abetting violations of the reporting, books and records and internal controls provisions (Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, 13a-11 and 13a-13) of the federal securities laws and Michael J. Koss from violating the certification provision (Section 13a-14 of the Exchange Act) and 
+
+    Order Michael J. Koss to reimburse Koss $242,419 in cash and 160,000 of options pursuant to Section 304 of the Sarbanes-Oxley Act. This bonus reimbursement, together with his previous voluntary reimbursement of $208,895 in bonuses to Koss Corporation represents his entire fiscal year 2008, 2009 and 2010 incentive bonuses.   In a related criminal matter in the U.S. District Court for the Eastern District of Wisconsin, on November 17, 2010, Sachdeva pleaded guilty to six counts of wire fraud and was ordered to pay $34 million in restitution and was sentenced to 11 years in prison. 
+
+ The Commission acknowledges the assistance of the U.S. Attorney's Office for the Eastern District of Wisconsin, the Federal Bureau of Investigation and the Public Company Accounting Oversight Board. The Commission considered the cooperation of Koss Corporation and Michael J. Koss in determining to accept their settlement. 
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diff --git a/raw/aaer/2011/AAER-3331.pdf b/raw/aaer/2011/AAER-3331.pdf
new file mode 100644
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@@ -0,0 +1,89 @@
+ 
+ 
+ 
+ 
+  
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65620 / October 25, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3331 / October 25, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-14602 
+______________________________ 
+:  
+In the Matter of   : 
+     : ORDER OF SUSPENSION PURSUANT 
+ANTHONY J. CUTI, 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 Anthony J. Cuti 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. Cuti is a cert ified public accountant, licensed in New York, although his license 
+has lapsed.   
+ 
+2. On September 7, 2011, an amended judgment of conviction was entered against 
+                         
+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 fro m appearing or practicing before the 
+Commission.” 
+ 
+ 
+ 
+ 
+2 
+ 
+Cuti in United States v. Anthony Cuti, No. 08 CR 972 (DAB), in the United States District Court 
+for the Southern District of New York, finding him guilty of one count of conspiracy to commit 
+false statements in SEC filings, false statements to auditors, and false books and records; one 
+count of securities fraud and three counts of false filings with the SEC in connection with his 
+role as Chairman of the Board, Chief Executive Officer and President of Duane Reade Inc. and 
+its successor Duane Reade Holdings Corp. 
+ 
+3. As a result of this conviction, Cuti was sentenced to 36 months imprisonment in a 
+federal penitentiary and three years supervised release and ordered to pay a criminal fine of $5 
+million.  The Court has ordered that restitution may be ordered at a later date.   
+ 
+ 
+III. 
+ 
+In view of the foregoing, the Commission finds that Cuti 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 Anthony Cuti 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. 
+ 
+ 
+ 
+Elizabeth M. Murphy 
+Secretary 
+ 
+ 
+ 
+ 
+ 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3332.pdf b/raw/aaer/2011/AAER-3332.pdf
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new file mode 100644
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--- /dev/null
+++ b/raw/aaer/2011/AAER-3332.txt
@@ -0,0 +1,86 @@
+ 
+ 
+ 
+ 
+  
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65621 / October 25, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3332 / October 25, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-14603 
+______________________________ 
+:  
+In the Matter of   : 
+     : ORDER OF SUSPENSION PURSUANT 
+WILLIAM J. TENNANT, 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 William J. Tennant, CPA, 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. Tennant is a certified public accountant, licensed in New York, although his 
+license has lapsed.   
+ 
+2. On September 7, 2011, a judgment of conviction was entered against Tennant 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 
+ 
+United States v. William Tennant, No. 08 CR 972 (DAB), in the United States District Court for 
+the Southern District of New York, finding him guilty of one count of securities fraud in 
+connection with his role as an officer of, and then consultant to, Duane Reade Inc. and its 
+successor Duane Reade Holdings Corp. 
+ 
+3. As a result of this conviction, Tennant was sentenced to time served and three 
+years of supervised release and was ordered to pay a criminal fine of $10,000.   
+ 
+ 
+III. 
+ 
+In view of the foregoing, the Commission finds that Tennant 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 William Tennant 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. 
+ 
+ 
+ 
+Elizabeth M. Murphy 
+Secretary 
+ 
+ 
+ 
+ 
+ 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3334.pdf b/raw/aaer/2011/AAER-3334.pdf
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--- /dev/null
+++ b/raw/aaer/2011/AAER-3334.txt
@@ -0,0 +1,156 @@
+UNITED STATES OF AMERICA
+ 
+before the 
+SECURITIES AND EXCHANGE COMMISSION
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Rel. No. 65680 / November 3, 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Rel. No. 3334 / November 3, 2011 
+Admin. Proc. File No. 3-14532 
+In the Matter of ORDER DENYING MOTION 
+TO LIFT TEMPORARY SUSPENSION 
+RAN H. FURMAN AND DIRECTING HEARING 
+On September 6, 2011, we issued an order instituting proceedings ("OIP") against Ran H. 
+Furman, formerly a certified public accountant ("CPA"), pursuant to Commission Rule of 
+1Practice 102(e)(3)  that temporarily suspended him from appearing or practicing before the
+1 Rule of Practice 102(e)(3)(i), 17 C.F.R. § 201.102(e)(3)(i), provides, in pertinent 
+part, that: 
+(i) The Commission, with due regard to the public interest and without preliminary 
+hearing, may, by order, temporarily suspend from appearing or practicing before it any . . . 
+accountant . . . who has been by name: 
+(A)  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; or 
+(B)  found by any court of competent jurisdiction in an action brought by the 
+Commission to which he or she is a party or found by the Commission in any 
+administrative proceeding to which he or she is a party to have violated (unless the 
+violation was found not to have been willful) or aided and abetted the violation of 
+any provision of the Federal securities laws or of the rules and regulations 
+thereunder. 
+  
+     
+     
+ 
+2
+ 
+Commission as an accountant.2   Furman has filed a petition, pursuant to Rule 102(e)(3)(ii), 3 
+requesting that his temporary suspension be lifted. 
+Furman, who was the chief financial officer of Island Pacific, Inc. ("Island Pacific"), 
+oversaw the company's financial operations, participated in the preparation of its financial 
+statements, and certified the accuracy of the company's quarterly and annual reports that were 
+filed with the Commission.
+4   On September 4, 2008, the Commission filed a complaint in the 
+United States District Court for the Southern District of California alleging that Furman, among 
+other things, engaged in a fraudulent scheme to overstate Island Pacific's financial results for the 
+quarters ended September 30, 2003 and December 31, 2003, and its fiscal year ended 
+March 31, 2004.
+5 
+On November 18, 2009, the district court entered an order granting partial summary 
+judgment in the Commission's favor, holding that Furman violated Exchange Act 
+Section 13(b)(5) (internal controls requirements) and Exchange Act Rules 13b2-1 (recordkeeping 
+requirements) and 13b2-2 (misrepresentations to accountants).
+6   On February 25, 2011, following 
+a trial on the Commission's remaining claims, a jury found that Furman violated Exchange Act 
+Section 10(b) and Exchange Act Rule 10b-5 and 13a-14 by engaging in fraudulent conduct and 
+falsely certifying certain Forms 10-Q.  The jury also found that Furman aided and abetted one or 
+more violations by Island Pacific of Exchange Act Section 13(a) and Exchange Act Rules 
+12b-20, 13a-1, and 13a-13 in connection with the company's issuer reporting requirements.  On 
+July 8, 2011, the district court entered a final judgment against Furman permanently enjoining 
+him from future violations of Exchange Act Section 10(b) and 13(b)(5) and Exchange Act Rules 
+10b-5, 13a-14, 13b2-1, and 13b-2-2, and from aiding and abetting violations of Exchange Act 
+Section 13(a) and Exchange Act Rules 12b-20, 13a-1, and 13a-13.
+7   The final judgment further 
+2 Ran H. Furman, CPA, Securities Exchange Act Rel. No. 65271 (Sept. 6, 2011),    
+SEC Docket , 2011 WL 3911514, at *3 (Sept. 6, 2011). 
+3 17 C.F.R. § 201.102(e)(3)(ii). 
+4 Furman, SEC Docket at , 2011 WL 3911514, at *4. 
+5 SEC v. Retail Pro, Inc. (fka Island Pacific, Inc.), et al., No. 08-CV-1620 WQH 
+(RBB), available at http://www.sec.gov/litigation/complaints/2008/comp20703.pdf. 
+6 Furman, SEC Docket at , 2011 WL 3911514, at *1. 
+7 Id. 
+ 
+ 
+3
+ 
+prohibited Furman from serving as an officer or director of a public company for seven years and 
+ordered him to pay a third-tier civil money penalty of $75,000.8 
+In issuing the OIP, we found it "appropriate and in the public interest" that Furman be 
+temporarily suspended from appearing or practicing before the Commission, based on the district 
+court's final judgment.  We stated that the temporary suspension would become permanent unless 
+Furman filed a petition challenging it within thirty days of service of the order, pursuant to Rule 
+of Practice 102(e)(3)(ii).  We further advised that, pursuant to Rule of Practice 102(e)(3)(iii), 
+upon receipt of such petition, we would either "lift the temporary suspension, or set the matter 
+down for hearing . . . , or both." 
+In his petition, Furman states that he challenged the jury verdict and the district court's 
+final judgment, "yet the court denied both motions by an order dated September 28, 2011."   
+Furman also states that he "will appeal the verdict and the court's rulings imposing the injunction 
+and other relief to the Ninth Circuit, and, if necessary, to the United States Supreme Court." 
+Furman argues that the current suspension is not in the public interest because "(1) the 
+restrictions already imposed on him provide substantial assurance that he will not violate the 
+securities laws; (2) he has a strong reputation for honest and diligent performance of his 
+professional duties as an accountant and executive; (3) he would be substantially prejudiced if he 
+were suspended while the judgment could be (and very likely will be) overturned on appeal; and 
+(4) numerous factors mitigate Furman's purported misconduct."  The Division of Enforcement 
+and the Office of the Chief Accountant (collectively, the "Division") oppose Furman's petition. 
+Rule 102(e)(3)(i) permits the Commission to suspend any accountant or other 
+professional or expert who has been "permanently enjoined . . . from violating . . . any provision 
+of the Federal securities laws or of the rules and regulations thereunder; or . . . found by any court 
+of competent jurisdiction in an action brought by the Commission . . . to have violated . . . any 
+provision of the Federal securities laws or rules and regulations thereunder."
+9   Although Furman 
+is entitled to appeal the underlying case against him, the possibility of an appeal to the court of 
+appeals "does not alter the effect" of the jury's finding of securities law violations or the court's 
+imposition of an injunction here.
+10   Generally, a respondent in a "follow-on" proceeding is 
+8 Id. In the district court's June 23, 2011 orders in support of the final judgment and 
+making findings of fact and conclusions of law concerning the relief sought by the Commission, 
+the court found that the evidence presented at trial and on summary judgment demonstrated that 
+"'Furman played an essential and knowing role in the securities law violations at issue.'"  Id. 
+9 17 C.F.R. § 201.102(e)(3)(i). 
+10 Daniel S. Lezak, 57 S.E.C. 997, 1000 n.16 (2004); see also Michael T. Studer, 57 
+S.E.C. 890, 896 (2004) (noting that "the fact that Studer is still litigating that action [on appeal] 
+(continued...) 
+  
+4
+ 
+precluded from challenging the basis for, or findings in, the underlying injunctive action.11 At 
+this stage, it appears that the findings made in the injunctive proceeding and the injunction issued 
+against Furman justify continuing his suspension "until it can be determined what, if any, action 
+may be appropriate to protect the Commission's processes."
+12 
+Furman further asserts that he will suffer prejudice if the suspension remains in effect 
+pending his appeal of the underlying action.  Furman states that he currently is not employed by a 
+public company or by an accounting firm, that he is not a CPA because he allowed his license to 
+expire several years ago, and that he is not seeking to be an independent accountant.  He states 
+that any accounting-related work he might do for a public company as a consultant would be 
+subject to review by the company executive(s) responsible for review and approval of his work, 
+the company's audit committee, and such company's outside auditors. The Division counters that 
+"Furman's ongoing consulting services, including the 'CFO-type' consulting services he provides 
+to small companies that do not need a full time CFO, . . . support the need for a Rule 102(e) 
+suspension to protect the Commission's processes . . . ." 
+Under the circumstances, we find it appropriate that the suspension remain in effect 
+pending the holding of a public hearing and decision by an administrative law judge.  As 
+provided in Rule 102(e)(3)(iii), we will set the matter down for public hearing.  We express no 
+opinion as to the merits of Furman's claims. 
+Accordingly, IT IS ORDERED that this proceeding be set down for public hearing before 
+an administrative law judge in accordance with Rule of Practice 110.  As specified in Rule of 
+Practice 102(e)(3)(iii), the hearing in this matter shall be expedited in accordance with Rule of 
+Practice 500; it is further 
+10 (...continued) 
+does not affect our statutory authority to conduct this proceeding"), aff'd, 148 F. App'x 58 (2d 
+Cir. 2005). 
+11 See, e.g., Jose P. Zollino, Exchange Act Rel. No. 55107 (Jan. 16, 2007), 89 SEC 
+Docket 2598, 2604-05 n.20 (noting the appropriate forum for respondent's challenges to 
+underlying litigation is the appellate court). 
+12 Lezak, 57 S.E.C. at 1001. 
+ 
+5 
+ORDERED that the administrative law judge shall issue an initial decision no later than 
+210 days from the date of service of this order; and it is further 
+ORDERED that the temporary suspension of Ran H. Furman, entered on 
+September 6, 2011, remain in effect pending a hearing and decision in this matter. 
+By the Commission. 
+Elizabeth M. Murphy 
+Secretary 
\ No newline at end of file
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new file mode 100644
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+++ b/raw/aaer/2011/AAER-3336.txt
@@ -0,0 +1,170 @@
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65754 / November 16, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3336 / November 16, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14624 
+       
+      :  
+ :  
+ :   
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+      : PROCEEDINGS PURSUANT TO RULE 
+ STEVEN M. DES CHAMPS, 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 Steven 
+M. Des Champs (“Respondent” or “Des Champs”) 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 
+ 
+ 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 Commission finds that:  
+ 
+  1. Des Champs, age 46, of Las Vegas, Nevada, served as the Chief Accounting 
+Officer (“CAO”) of Bally Technologies, Inc. (“Bally” or “Bally Technologies”) from February 
+2000 to March 2005; as Bally’s Chief Financial Officer (“CFO”) from March 2005 to March 2006; 
+and as Bally’s Senior Vice President, Business Analysis, from March 2006 to November 2006.  Des 
+Champs was licensed to practice as a certified public accountant in the state of Nevada from 
+December 1990 until December 2008.  
+ 
+  2. Bally Technologies is a Nevada corporation headquartered in Las Vegas, 
+Nevada whose common stock during the relevant period was registered with the Commission under 
+Section 12(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and traded on the New 
+York Stock Exchange.  Bally’s primary business is the design, manufacture, and sale of gaming 
+machines and related casino monitoring systems.  
+ 
+ 3. On October 21, 2011, a final judgment of permanent injunction was entered 
+by consent against Des Champs, permanently enjoining him from future violations of Sections 
+17(a)(2) and (a)(3) of the Securities Act of 1933 (“Securities Act”) and Rule 13a-14 of the 
+Exchange Act, 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 the 
+civil action entitled Securities and Exchange Commission v. Steven M. Des Champs et al., Civil 
+Action Number 2:08-CV-1279-KJD-GWF in the United States District Court for the District of 
+Nevada.  Des Champs was ordered to pay disgorgement in the amount of $138,865, prejudgment 
+interest in the amount of $47,655, and a civil penalty in the amount of $130,000.   
+ 
+                                                                                                                                                             
+the violation of any provision of the Federal securities laws or of the rules and regulations 
+thereunder. 
+ 
+ 3 
+   4.  The Commission’s complaint alleged, among other things, that Bally 
+materially misstated its revenue in its Form 10-K for the fiscal year ended June 30, 2003; its 
+Forms 10-Q for the quarters ended June 30, 2003, September 30, 2003, December 31, 2003, 
+December 31, 2004 and March 31, 2005; in Form S-8 registration statements filed May 7, 2004 
+and January 14, 2005; and in Forms 8-K filed August 5, 2003, October 15, 2003, January 15, 
+2004, February 1, 2005 and April 29, 2005.  The complaint alleged that in his positions as CAO 
+and CFO of Bally, Des Champs aided and abetted Bally’s violation of Section 13(a) of the 
+Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder, by providing substantial 
+assistance to an issuer that files false and misleading annual, quarterly, and current reports with 
+the Commission.  The complaint further alleged that Des Champs aided and abetted Bally’s 
+violation of Exchange Act Section 13(b)(2)(A) by providing substantial assistance to an issuer 
+that fails to make or keep books, records, and accounts, which, in reasonable detail, accurately 
+and fairly reflect the company’s transactions and dispositions of its assets.  The complaint also 
+alleged that Des Champs violated Sections 17(a)(2) and (a)(3) of the Securities Act; and certified 
+Bally’s Form 10-K for the year ended June 30, 2005, and its Form 10-Q for the period ended 
+March 31, 2005, in violation of Exchange Act Rule 13a-14.  
+ 
+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. Des Champs 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 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; 
+ 
+ 4 
+ 
+   (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 
+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. 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+ 
\ No newline at end of file
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+ 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65755 / November 16, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3337 / November 16, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14625
+       
+      :  
+ :  
+ :   
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+  : PROCEEDINGS PURSUANT TO RULE 
+ MARTHA W. VLCEK, 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 Martha 
+W. Vlcek, CPA (“Respondent” or “Vlcek”) 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 . . . 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 
+ 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 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. Vlcek, age 51, of Henderson, Nevada, served as the Director of Finance at Bally 
+Gaming, Inc. (“Bally Gaming”) from August 2002 to April 2003 and as Bally Gaming’s Vice 
+President of Finance from April 2003 to February 2005.  Vlcek has been a certified public 
+accountant licensed by the California Board of Accountancy since 1992 and currently holds an 
+active license to engage in the practice of public accounting.  
+ 
+ 2. Bally Gaming is a wholly-owned subsidiary of Bally Technologies, Inc. (“Bally”), a 
+Nevada corporation headquartered in Las Vegas, Nevada.  During the relevant time period, Bally’s 
+common stock was registered with the Commission under Section 12(b) of the Securities Exchange 
+Act of 1934 (“Exchange Act”) and traded on the New York Stock Exchange.  Bally’s primary 
+business was the design, manufacture, and sale of gaming machines and related casino monitoring 
+systems, with Bally Gaming as its primary earnings center.  
+ 
+3. On October 21, 2011, a final judgment of permanent injunction was entered by 
+consent against Vlcek, permanently enjoining her from future violations of Sections 17(a)(2) and 
+(a)(3) of the Securities Act of 1933 (“Securities Act”) 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 the civil action entitled Securities and Exchange Commission v. 
+Steven M. Des Champs and Martha W. Vlcek, Civil Action Number 2:08-CV-1279-KJD-GWF, in 
+the United States District Court for the District of Nevada.  Vlcek paid disgorgement in the amount 
+of $10,849 together with $3,509 in prejudgment interest and a civil penalty in the amount of 
+$30,000. 
+ 
+  4.  The Commission’s complaint alleged, among other things, that Bally materially 
+misstated its revenue in its Form 10-K for the fiscal year ended June 30, 2003 and in its Forms 
+10-Q for the quarters ended June 30, 2003, September 30, 2003, December 31, 2003, and 
+December 31, 2004.  The complaint alleged that in her position as Vice President of Finance of 
+Bally Gaming, Vlcek aided and abetted Bally’s violation of Section 13(a) of the Exchange Act 
+and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder, by providing substantial assistance to 
+an issuer that files false and misleading annual, quarterly, and current reports with the 
+ 
+ 3 
+Commission.  The complaint further alleged that Vlcek aided and abetted Bally’s violation of 
+Exchange Act Section 13(b)(2)(A) by providing substantial assistance to an issuer that fails to 
+make or keep books, records, and accounts, which, in reasonable detail, accurately and fairly 
+reflect the company’s transactions and dispositions of its assets.  The complaint also alleged that 
+Vlcek violated Sections 17(a)(2) and (a)(3) of the Securities Act. .  
+ 
+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. Vlcek 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 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 whi ch 
+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 
+ 
+ 4 
+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 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. 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+ 
+ 
+  
+ 
+   
+ 
\ No newline at end of file
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+ 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65882 / December 5, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3339 / December 5, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14651 
+       
+      :  
+ :  
+ :   
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+      : PROCEEDINGS PURSUANT TO RULE 
+ MARK A. KONYNDYK, 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 Mark A. 
+Konyndyk (“Respondent” or “Konyndyk”) 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.2 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. Konyndyk, age 33, was at all relevant times a certified public accountant.  
+Although his CPA licenses are now inactive, he was licensed to practice in the State of North 
+Carolina from February 21, 2005 until his licensed lapsed on June 30, 2011.  He also was licensed 
+in the State of Georgia from June 20, 2007 until December 31, 2009.  He worked in the 
+Transactions Advisory Services group (last serving as a Manager) at Ernst & Young LLP (“E&Y”) 
+from 2003 until his resignation on November 2, 2007.   
+ 
+ 2. On November 21, 2011, a final judgment was entered by consent against 
+Konyndyk, permanently enjoining him from future violations of Section 14(e) of the Exchange Act 
+and Rule 14e-3 thereunder, in the civil action entitled Securities and Exchange Commission v. 
+Mark A. Konyndyk, (“SEC v. Konyndyk”) (Civil Action Number 11-CV-02055-GK), in the 
+United States District Court for the District of Columbia.  Konyndyk also was ordered to pay 
+$9,725.00 in disgorgement of ill-gotten gains from his sales of stock while participating in the 
+fraud, and $1,789.28 in prejudgment interest, and a $9,725.00 civil money penalty. 
+ 
+ 3. The Commission’s complaint in SEC v. Konyndyk alleged, among other 
+things, that Konyndyk traded in Activision Inc. call options during the last week before the public 
+announcement that Vivendi S.A. had agreed to acquire Activision by tender offer; and that he did 
+so despite having performed buy-side due-diligence work on the underlying acquisition talks for 
+E&Y’s client, Vivendi, while employed at E&Y.  The complaint further alleged that Konyndyk 
+knew or had reason to know the information he possessed about the Activision acquisition talks 
+was material and nonpublic.  The complaint also alleged that at the time of Konyndyk’s Activision 
+options trading, substantial steps had been taken in furtherance of the tender offer.  
+ 
+ 
+ 
+ 
+ 
+ 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 Konyndyk’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately, that: 
+ 
+ A. Konyndyk is suspended from appearing or practicing before the Commission as an 
+accountant.   
+ 
+ B. After two years (or 24 months) 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.   
+      
+ 
+ 4 
+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. 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3340.txt b/raw/aaer/2011/AAER-3340.txt
new file mode 100644
index 0000000000000000000000000000000000000000..107140429e5f268357acf53f44d5b0db6085a66c
--- /dev/null
+++ b/raw/aaer/2011/AAER-3340.txt
@@ -0,0 +1,1383 @@
+
+
+ 
+ 
+   
+     
+ 
+ 
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+     
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+     SEC.gov | J.T. Battenberg, III and Paul Free 
+     
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+              J.T. Battenberg, III and Paul Free
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+        J.T. Battenberg, III and Paul Free
+       
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+
+ Litigation Release No. 22156 / November 16, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3340 / November 16, 2011 
+
+  Securities and Exchange Commission v. J.T. Battenberg, III and Paul Free , 06-cv-14891-AC-SDP (E.D. Mich.) (filed October 30, 2006) 
+
+ COURT ENTERS FINAL JUDGMENTS AGAINST DELPHI'S FORMER CHIEF EXECUTIVE OFFICER AND CHIEF ACCOUNTING OFFICER FOLLOWING JURY VERDICT. 
+
+ The Securities and Exchange Commission today announced that the Honorable Avern Cohn, U.S. District Judge for the Eastern District of Michigan, entered final judgments as to Paul Free, the former Chief Accounting Officer and Controller of Delphi Corporation, and J.T. Battenberg, III, the former Chief Executive Officer of Delphi, and ordered them to pay disgorgement and penalties for federal securities law violations found by a jury. The Court also entered a permanent injunction for fraud and other securities law violations against Free. Delphi is an auto parts manufacturer with headquarters in Troy, Michigan. 
+
+ On January 13, 2011, a jury returned a verdict in favor of the SEC and against Free and Battenberg for violating the federal securities laws. Specifically, the jury found that Battenberg violated the books and records and misrepresentations to accountants provisions of the federal securities laws for his role in the improper accounting for Delphi's portrayal of $202 million of Delphi's $237 million warranty settlement with General Motors Corporation ("GM") in September 2000 as related to pension and other post-employment benefits. As a result, Delphi filed materially false and misleading financial statements in the company's third quarter 2000 quarterly report on Form 10-Q and its fiscal year 2000 annual report on Form 10-K. In addition, the jury found Free liable on fraud and other charges brought by the Commission for his role in Delphi's false and misleading accounting for two financing transactions at year-end 2000 -- one involving nearly Delphi's entire inventory of precious metals necessary to the manufacture of catalytic converters, and one involving Delphi's inventory of generator cores and batteries ¢€" which Delphi falsely claimed as inventory sales; as well as Delphi's false and misleading accounting for a $20 million payment that it received from Electronic Data Systems ("EDS") in December 2001 as a rebate (income) rather than as a loan. The jury further found that Free violated the books and records and misrepresentations to accountants provisions of the federal securities laws for his role in the GM warranty transaction. On March 8, 2011, the Court entered partial judgment on liability in accord with the jury's findings. 
+
+ Thereafter, on October 31, 2011, at the conclusion of the remedies phase of the case, and based upon the jury verdicts, the Court entered final judgments as to Free and Battenberg. The Court enjoined Free from future violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), Rules 10b-5, 13b2-1 and 13b2-2 promulgated thereunder, and Section 20(e) of the Exchange Act for aiding and abetting Delphi'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 promulgated thereunder. The Court further ordered Free to disgorge $38,000 in profits and to pay a penalty of $80,500. In addition, the Court found Battenberg liable for violations of Section 13(b)(5) of the Exchange Act, and Rules 13b2-1 and 13b2-2 promulgated thereunder. The Court ordered Battenberg to disgorge $198,500 in profits and to pay a penalty of $16,500. 
+
+ During the trial, the Commission settled with two individual defendants ¢€" Catherine Rozanski, Delphi's former Director of Financial Accounting and Reporting, and Milan Belans, Delphi's former Director of Capital Planning, Structured Finance and Pension Analysis. Rozanski consented to the entry of an injunction from future violations of Section 17(a) of the Securities Act of 1933 (Securities Act) 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 and13a-1 thereunder. Rozanski also consented to pay a $40,000 civil money penalty. In settling the Commission's claims, Rozanski neither admitted nor denied the Commission's allegations. In addition, separately, without admitting or denying the Commission's findings, Rozanski consented to the institution of administrative proceedings pursuant to Rule 102(e)(3) of the Commission's Rules of Practice, suspending her from appearing or practicing before the Commission as an accountant, with a right to apply for reinstatement after three years, based on the entry of the injunction. The Commission's Complaint against Rozanski alleged that as a result of her participation in the EDS $20 million payment transaction, described above, Delphi filed materially false and misleading financial statements in the company's 2001 Form 10-K. 
+
+ Moreover, during the trial, Belans consented to the entry of an injunction from future violations of Section 17(a) of the Securities Act 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) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. Belans also consented to pay disgorgement of $17,835, together with prejudgment interest thereon in the amount of $13,865, and a $55,800 civil money penalty. In settling the Commission's claims, Belans neither admitted nor denied the Commission's allegations. In addition, separately, without admitting or denying the Commission's findings, Belans consented to the institution of settled administrative proceedings pursuant to Rule 102(e)(3) 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, based on the entry of the injunction. The Commission's Complaint against Belans alleged that Belans engaged in the GM warranty settlement transaction and the inventory transactions described above, which resulted in Delphi filing materially false and misleading financial statements in the company's quarterly report on Form 10-Q for third quarter 2000, and on the company's annual report on Form 10-K for the fiscal year ended December 31, 2000. 
+
+ The Commission originally filed suit against Delphi and 13 individual defendants on October 30, 2006. Delphi and six individual defendants settled with the Commission at that time. The Commission entered into settlements with two individual defendants and voluntarily dismissed another prior to trial. 
+
+ Finally, based upon the Court's permanent injunction of Free, the Commission entered an order instituting public administrative proceedings and imposing remedial sanctions pursuant to Rule 102(e) of the Commission's Rules of Practice. The Commission temporarily suspended Free from appearing or practicing before the Commission. The suspension may become permanent if Free does not file a petition with the Commission within thirty days. 
+
+ This concludes the Commission's federal district court litigation. 
+
+ Additional materials: Litigation Release Nos. 19891 (October 30, 2006), 20975 (March 27, 2009), 21660 (September 22, 2010). 
+
+ Securities Exchange Act of 1934 Release Nos. 63356 (November 22, 2010), 63578 (December 20, 2010). 
+
+ Accounting and Auditing Release Nos. 2500 (October 30, 2006), 2501 (October 30, 2006), 2502 (October 30, 2006), 2503 (October 30, 2006), 2791 (February 26, 2008), 2792 (February 26, 2008), 2955 (March 27, 2009), 3188 (September 22, 2010), 3214 (November 22, 2010), 3220 (December 20, 2010). 
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diff --git a/raw/aaer/2011/AAER-3341.txt b/raw/aaer/2011/AAER-3341.txt
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+ Litigation Release No. 22174 / December 2, 2011 
+
+ Accounting and Auditing Enforcement Release No. 3341 / November 16, 2011 
+
+  SEC v. Nancy S.W. Chu et al. , Civil Action No. CV11-09859 (C.D. Cal., filed November 29, 2011) 
+
+ SEC Charges Soyo Group, Inc.'s Former CFO and Two Members of Her Accounting Staff for Their Role in Financial Fraud 
+
+ The Securities and Exchange Commission ("Commission") announced today that it filed charges against three individuals who participated in a securities fraud scheme at Soyo Group, Inc. ("Soyo"), a now defunct California-based consumer electronics and computer parts company.  
+
+ The Commission's civil injunctive complaint, filed in the U.S. District Court for the Central District of California on November 29, 2011, alleges that between January 2007 and November 2008, Soyo, through the actions of its chief financial officer, Nancy Shao Wen Chu, and members of her accounting staff, Elizabeth Tsang and Eric Jon Strasser, misled Soyo's investors, primary lending bank, and auditor by materially overstating Soyo's net revenues and understating its liabilities. According to the complaint, Chu and Tsang caused Soyo to book over $47 million in fraudulent sales revenues arising from at least 120 fictitious transactions with 21 customers, resulting in Soyo materially overstating its net revenues in its periodic filings by amounts ranging from 14.4 to 76.8 percent. The complaint also alleges that in order to obtain additional bank financing for Soyo and keep its existing line of credit from defaulting, Chu misled Soyo's investors, primary lending bank, and auditor regarding a $6 million debt-for-equity transaction with a Soyo vendor that was never completed. The complaint further alleges that Strasser, a consultant who prepared Soyo's filings with the Commission, was alerted to the falsity of the debt-for-equity transaction disclosures, but he failed to correct the misstatements or inform Soyo's auditor prior to the next quarter's filing. 
+
+ The Commission's complaint alleges that, as a result of their conduct, Chu and Tsang violated, and unless enjoined, will continue to violate, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and that Strasser aided and abetted an antifraud violation. The complaint also alleges that Chu violated, and unless enjoined, will continue to violate Section 17(a) of the Securities Act of 1933, and is liable as a control person for Soyo's antifraud violations. As part of this action, the Commission seeks against each of the defendants an injunction against future violations of the provisions set forth above, disgorgement, pre-judgment interest, third tier civil money penalties and, as to Chu, an officer and director bar.  
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diff --git a/raw/aaer/2011/AAER-3342.txt b/raw/aaer/2011/AAER-3342.txt
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+                  U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22190 / December 13, 2011 
+
+ Accounting and Auditing Enforcement No. 3342 / December 13, 2011 
+
+  Securities and Exchange Commission v. Uriel Sharef, Ulrich Bock, Carlos Sergi, Stephan Signer, Herbert Steffen, Andres Truppel and Bernd Regendantz , Civil Action No. 11 civ 9073 (Judge Scheidlin/Pitman) (S.D.N.Y.)  
+
+ SEC Charges Seven Former Siemens Executives with Bribing Leaders in Argentina 
+
+ 
+
+ The Securities and Exchange Commission filed a Civil Action on December 13, 2011, in the U.S. District Court for the Southern District of New York, charging seven former senior executives of Siemens AG ("Siemens") and its regional company in Argentina with violations of the anti-bribery, books and records, and internal controls provisions of the Foreign Corrupt Practices Act in connection with a decade-long scheme to bribe senior government officials in Argentina, including two Presidents and Cabinet Ministers in two Presidential administrations.  One of the executives charged was also a payment intermediary for Siemens. According to the SEC complaint, the seven individuals charged today, all foreign nationals, paid scores of millions of dollars in bribes for Siemens to obtain and retain a $1 billion contract to produce national identity cards for Argentine citizens. 
+
+ The SEC alleges that over  $100 million in bribes were paid  in connection with Siemens' efforts to secure the contract and obtain the profits from that contract.  The defendants charged in the scheme are Uriel Sharef, Ulrich Bock, Carlos Sergi, Stephan Signer, Herbert Steffen, Andres Truppel, and Bernd Regendantz.  The most senior of these, Uriel Sharef, is a former Siemens Managing Board member.  The SEC alleges that in furtherance of the scheme, the defendants falsified documents, including invoices and sham consulting contracts, participated in meetings in the United States to negotiate the terms of bribe payments, and made use of U.S. bank accounts to pay bribes.  According to the SEC's complaint, the bribery scheme lasted for more than a decade, from approximately 1996 until early 2007.   
+
+ The SEC previously charged Siemens in December 2008 with FCPA violations in Argentina and numerous other countries around the world.  Siemens paid over $1.6 billion to resolve the charges with the Commission, the U.S. Department of Justice, and the Office of the Prosecutor General in Munich, Germany.   
+
+ The SEC's complaint alleges that:  
+
+ From approximately 1996 until early 2007, senior executives at Siemens and its regional company in Argentina, Siemens S.A. ("Siemens Argentina"), paid bribes to senior Argentine government officials â€" including two Presidents, and  Cabinet Ministers in two Presidential administrations.  The bribes were initially paid to secure a $1 billion government contract (the "DNI Contract") to produce national identity cards, or Documentos Nacionales de Identidad, for every Argentine citizen.  Later, after a change in Argentine political administrations resulted in the DNI Contract being suspended and then canceled, Siemens paid additional bribes in a failed effort to bring the DNI Contract back into force.  Still later, after the company instituted an arbitration proceeding to recover its costs and expected profits from the canceled DNI Contract, Siemens paid additional bribes to suppress evidence that the DNI Contract had originally been obtained through corruption. 
+
+ Over the course of the bribery scheme, over $100 million in bribes were paid, approximately $31.3 million of which were made after March 12, 2001, when Siemens became a U.S. issuer subject to U.S. securities laws.  As a result of the bribe payments it made, Siemens received an arbitration award in 2007 against the government of Argentina of over $217 million plus interest for the DNI Contract.  In August 2009, after settling bribery charges with the U.S. and Germany, Siemens waived the arbitration award. 
+
+ During the relevant 2001 to 2007 time period, defendants Uriel Sharef, Ulrich Bock, Carlos Sergi, Stephan Signer, Herbert Steffen, Andres Truppel, and Bernd Regendantz each had a role in authorizing, negotiating, facilitating, or concealing bribe payments in connection with the DNI Contract.  Siemens employed a group of consultants, designated the Project Group and led by defendant Sergi, to serve as payment intermediaries between the company and the Argentine government officials.   
+
+ Each of the defendants violated Section 30A of the Securities Exchange Act of 1934 (the "Exchange Act") by engaging in the bribery of government officials in Argentina.  Each defendant also aided and abetted Siemens' violations of Section 30A.  The defendants also violated Exchange Act Section 13(b)(5) and Rule 13b2-1 thereunder by authorizing or directing others to falsify documents, including invoices and sham consulting contracts, in furtherance of the bribery scheme.  Defendant Regendantz violated Rule 13b2-2 by signing false internal certifications pursuant to the Sarbanes Oxley Act ("SOX").  All defendants aided and abetted Siemens' violations of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B) by substantially assisting in Siemens' failure to maintain internal controls to detect and prevent bribery of government officials in Argentina, and by substantially assisting in the improper recording of the bribe payments in Siemens' accounting books and records.  The SEC's complaint seeks permanent injunctive relief, disgorgement and civil penalties from the defendants.   
+  
+ Without admitting or denying the SEC's allegations, defendant Bernd Regendantz has consented to the entry of a final judgment that permanently enjoins him from future violations of Sections 30A and 13(b)(5) of the Exchange Act, and Rules 13b2-1 and 13b2-2 thereunder, and from aiding and abetting violations of Exchange Act Sections 30A, 13(b)(2)(A), and 13(b)(2)(B); and orders him to pay a civil penalty of $40,000, deemed satisfied by Regendantz' payment of a €30,000 administrative fine ordered by the Public Prosecutor General in Munich, Germany.  
+
+ The SEC appreciates the assistance of the U.S. Department of Justice's Fraud Section, the U.S. Attorney's Office for the Southern District of New York, the Federal Bureau of Investigation, and the Office of the Prosecutor General in Munich, Germany 
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diff --git a/raw/aaer/2011/AAER-3343.txt b/raw/aaer/2011/AAER-3343.txt
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+                   U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22192 / December 13, 2011  
+
+ Accounting and Auditing Enforcement Release No. 3343 / December 13, 2011  
+
+  Securities and Exchange Commission v. Michael Resnick et al.,  Civil Action No. 1:05-cv-01254-CCB (D. Md.)  
+
+ SEC ANNOUNCES FINANCIAL FRAUD SETTLEMENT WITH FORMER U.S. FOODSERVICE EXECUTIVE MARK KAISER 
+
+ The U.S. Securities and Exchange Commission (Commission) announced today that on December 12, 2011, the U.S. District Court for the District of Maryland entered a final judgment against defendant Mark P. Kaiser in a Commission injunctive action,  Securities and Exchange Commission v.   Michael Resnick et al.,  Civil Action No. 1:05-cv-01254-CCB (D. Md.).  Kaiser is the former Executive Vice President of Purchasing and Chief Marketing Officer of U.S. Foodservice, Inc. (USF).  The Commission's original complaint was filed on July 27, 2004 in the U.S. District Court for the Southern District of New York.  The Commission's second amended complaint was filed on February 16, 2005, and alleges that Kaiser and three other USF executives engaged in a scheme to overstate the operating income of USF, and therefore of its then-parent corporation, Royal Ahold (Koninklijke Ahold N.V.) (Ahold), by more than $700 million for Ahold's fiscal years 2001 and 2002.  The Commission also alleged that the executives induced numerous suppliers to submit false confirmations to the company's auditors in order to conceal their fraud.  Kaiser's three co-defendants settled previously. 
+
+ Without admitting or denying the allegations in the second amended complaint, Kaiser consented to the entry of the final judgment permanently enjoining him from violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (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 and 13a-1; prohibiting him from acting as an officer or director of a public company; and ordering him to pay $352,329 in disgorgement, but deeming payment satisfied by entry of a forfeiture order in the parallel federal criminal proceeding.   
+
+ In that parallel proceeding,  United States v. Mark P. Kaiser,  (S1) 04 Cr. 733 (SDNY) (TPG), Kaiser was sentenced on December 7, 2011, in the U.S. District Court for the Southern District of New York to a term of incarceration of forty-six months and ordered to forfeit the amount of $352,329.   
+
+ 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 further information,  see  Litigation Release Nos.  20592  (May 21, 2008),  19031  (January 11, 2005), and  18797  (July 27, 2004). 
+
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+  SEC Complaint in this matter  
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diff --git a/raw/aaer/2011/AAER-3344.pdf b/raw/aaer/2011/AAER-3344.pdf
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@@ -0,0 +1,519 @@
+UNITED STATES OF AMERICA 
+Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65950 / December 14, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3344 / December 14, 2011      
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14339 
+ 
+ 
+ 
+ 
+In the Matter of 
+ 
+            Kempisty & Company, Certified 
+Public Accountants, P.C., Philip 
+C. Kempisty, CPA, and John 
+Anthony Rubino, 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)(1)(ii) AND (iii) 
+OF THE COMMISSION’S RULES OF 
+PRACTICE 
+ 
+ 
+ 
+ 
+I. 
+ 
+ On April 8, 2011, the Securities and Exchange Commission (“Commission”) issued 
+an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities 
+Exchange Act of 1934 and Public Administrative Proceedings pursuant to Section 4C1 of 
+the Securities Exchange Act of 1934 and Rule 102(e) 2
+                                                 
+1  Section 4C provides, in relevant part, that: 
+ of the Commission’s Rules of 
+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 . . . (2) to be 
+lacking in character or integrity, or to have engaged in unethical or improper professional conduct; 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  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.  
+ 
+ Rule 102(e)(1)(iii) provides, in pertinent part, that: 
+ 2 
+Practice, and Notice of Hearing against Kempisty and Company, Certified Public 
+Accountants, P.C. (“Kempisty & Company”), Philip C. Kempisty, CPA (“Kempisty”) and 
+John Anthony Rubino, CPA (“Rubino”) (collectively, “Respondents”).    
+ 
+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)(1)(ii) and (iii) 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
+3
+ 
+ that: 
+A. SUMMARY 
+ 
+ These proceedings arise out of quarterly reviews and an audit performed by 
+Kempisty & Company of the financial statements of its client, Kentucky Energy, Inc. 
+(“Kentucky Energy”),
+4 for the year ended December 31, 2005.  In these financial 
+statements, Kentucky Energy improperly accounted for warrants and convertible notes it 
+had issued to third parties.  Kempisty & Company rendered an unqualified report stating 
+that, in the firm’s opinion, the financial statements presented fairly the financial position 
+of the company in conformity with
+5 generally accepted accounting principles (“GAAP”).  
+In fact, the financial statements were not presented in conformity with GAAP and the 
+resulting errors were material.  Moreover, the firm failed to comply with Public Company 
+Accounting Oversight Board (the “Board”) auditing standards (“AU”)6
+                                                                                                                                                 
+ The Commission may  . . . deny, temporarily or permanently, the privilege of appearing or 
+practicing before it … 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.  
+ in carrying out the 
+relevant audits and reviews.   
+3  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. 
+4  The company was named Quest Minerals and Mining Corp. during the relevant time.   
+5  The Kempisty & Company report did contain an explanatory paragraph describing substantial 
+doubt about the entity’s ability to continue as a going concern and an emphasis of matter paragraph 
+describing that potential adverse rulings in ongoing litigation could result in a loss of the company’s 
+operating assets. 
+6  “AU” refers to the specific sections of the codification of the American Institute of Certified 
+Public Accountants (“AICPA”) professional standards, known as the Statements on Auditing Standards, as 
+issued by the Auditing Standards Board of the AICPA.  These standards have been adopted by the Board  
+following passage of the Sarbanes-Oxley Act of 2002.  References in this order are to the standards in 
+effect at the time of the relevant conduct. 
+ 3 
+ 
+ 
+B. RESPONDENTS 
+ 
+1. Kempisty & Company, Certified Public Accountants, P.C. is an audit 
+firm with offices in New York City.  It is a public accounting firm registered with the 
+Board.  Kempisty & Company was the independent auditor for Kentucky Energy at all 
+relevant times from 2003 until the company dismissed it on February 13, 2009.   
+ 
+2. Philip C. Kempisty, CPA, 62, is the founding partner and majority 
+shareholder of Kempisty & Company, an audit firm with offices in New York 
+City.  He has been licensed as a CPA in the state of New York since 1974.  
+Kempisty & Company was the independent auditor for Kentucky Energy at all 
+relevant times from 2003 until the company dismissed it on February 13, 2009.  
+During the relevant period its partners were Kempisty and John Anthony Rubino, 
+CPA (“Rubino”).  Kempisty’s current accounting practice involves tax 
+preparation, accounting services and other private company and individual audit 
+services.   
+ 
+3. John Anthony Rubino, CPA, 68, had been employed with Kempisty & 
+Company since 1989.  He has an undergraduate degree from Pace University in New 
+York City and is licensed as a CPA in the states of New York and Nevada.  Rubino 
+continues to practice public accounting through a professional corporation, John Anthony 
+Rubino & Co., CPA, P.C. but no longer has clients that are registered with or reporting to 
+the Commission. Rubino has no disciplinary history related to his accounting work.  On 
+the Kentucky Energy audit and reviews discussed in this memorandum, Rubino acted as 
+engagement partner. 
+C. FACTS 
+ 
+Issuance of convertible notes and warrants by Kentucky Energy 
+ 
+1. Kentucky Energy’s 2005 financial statements, like those for the preceding 
+year, were prepared by a consultant to the company.  This consultant’s father was the 
+Vice President, Secretary and a director of Kentucky Energy.  Kempisty and Rubino had 
+no specific knowledge of the consultant’s education or experience in accounting.  
+ 
+2. Beginning in 2004 and continuing into 2005, Kentucky Energy obtained a 
+series of loans from third parties evidenced by notes convertible into common stock.
+7
+                                                 
+7  One series of notes issued during 2005 was not convertible and one note did not have warrants 
+attached, however. 
+  As 
+an additional incentive to the lenders, Kentucky Energy issued warrants along with each 
+note.  Kentucky Energy’s consultant needed to account for warrants for the first time in 
+preparing the company’s financial statements for inclusion in its Form 10-KSB for the 
+year ended December 31, 2004.   Rubino had never previously dealt with the issue of 
+ 4 
+how to account for warrants or a beneficial conversion feature of a convertible note, both 
+of which are derivatives.   
+ 
+Improper accounting for warrants and beneficial conversion feature 
+ 
+3. Rubino told the consultant that he would need to value the warrants using 
+the  Black-Scholes option pricing model.  Accordingly, the consultant found a Black-
+Scholes calculator on the internet.  This calculator called for him to fill in variables for 
+the warrants’ “equity price,” “strike price,” “volatility,” “riskless interest rate,” and “time 
+to maturity,” and would then generate a Black-Scholes valuation.  For “volatility” and 
+“interest rate,” however, the consultant simply inserted the generic numbers provided as 
+an example by the website, rather than calculate the actual volatility of Kentucky Energy 
+stock and determine the real riskless interest rate.  In fact, Kentucky Energy’s stock price 
+was far more volatile than that listed in the website example.   
+ 
+4. Using this method, the consultant arrived at a value for the warrants issued 
+during the last quarter of 2004.  He recorded that value as an expense on the company’s 
+statement of operations and sent his draft financial statements to Kempisty & Company.   
+ 
+5. Rubino, however, contacted the consultant and told him that he should 
+have recorded the warrant valuation as an asset on the company’s balance sheet, rather 
+than as an expense on its statement of operations, and that he should then have amortized 
+that amount over the life of the underlying convertible notes.  Not only was this 
+accounting treatment incorrect, but both Rubino and the consultant ignored the necessity 
+to provide for the beneficial conversion feature of the notes. 
+ 
+6. In fact, accounting for the warrants in accordance with GAAP required 
+that the proper inputs be used in the Black-Scholes option pricing model.  Kentucky 
+Energy should have allocated the loan proceeds first to the notes and the warrants; and 
+then, from the portion allocated to the notes, reallocated that to the notes and the 
+beneficial conversion feature of the notes.  The amount of proceeds allocable to the 
+warrants and the beneficial conversion feature would be accounted for as paid-in-capital 
+and as a discount to the face amount of the note.  The note should have been recorded net 
+of this discount on the balance sheet and the discount should have been amortized to 
+interest expense in the statement of operations over the life of the notes. 
+ 
+7. Rubino testified that he did not know what the consultant’s accounting 
+background was, or whether he was familiar with GAAP.  Even after he decided that the 
+consultant’s first set of financial statements was incorrectly prepared, Rubino took no 
+further steps to verify the consultant’s competence.   
+ 
+GAAP failures  
+ 
+8. For the first quarter of 2005, using the same methodology established in 
+2004, the consultant arrived at a value of $15,694,422 for the warrants, and that amount 
+less amortization of $1,881,139, or $13,813,283 was recorded as an asset on the 
+ 5 
+company’s balance sheet.  In the subsequent quarters of 2005, the consultant continued to 
+calculate the warrant valuation improperly and to record it as an asset which, for each of 
+the first two quarters, amounted to over 60% of Kentucky Energy’s total assets.  On the 
+company’s statements of operations, the warrant amortization expense increased 
+correspondingly, and on its 2005 year-end statement of operations amounted to 70% of 
+Kentucky Energy’s net loss.  Throughout this period, the consultant continued to fail to 
+consider the effect of the beneficial conversion feature of the promissory notes.  The 
+combined valuation of the warrants and the beneficial conversion features should not 
+have exceeded the proceeds the company had received from the notes, which amounted 
+to $1,875,000 at the end of the first quarter and $3,105,000 at the end of 2005, and they 
+should not have been recorded as an asset. 
+ 
+9. For its year ended December 31, 2005, as a result of its improper 
+accounting for the warrants and convertible notes, Kentucky Energy recorded the warrant 
+asset in the amount of $3,097,903 on its balance sheet, reflecting the ensuing quarters’ 
+amortization as an expense on its statements of operations.  In so doing, the company 
+overstated total assets by 43% and overstated its net loss by 197%.  It also materially 
+overstated paid-in capital, retained deficit, shareholders’ equity and expenses.  This 
+improper accounting was material to balance sheets and statements of operations 
+contained in its quarterly filings for 2005 as well.  For example, its assets were overstated 
+by approximately $13.8 million, or 213%, in the financial statements contained in its 
+Form 10-Q for the first quarter of 2005 and its net loss was overstated by approximately 
+174% for the second quarter of 2005.  
+   
+Audit and Reviews  
+ 
+10. Kempisty & Company conducted quarterly reviews and a year-end audit 
+of Kentucky Energy’s financial statements for the 2005 year.  In the report filed with the 
+Form 10-KSB filed by the company on May 9, 2006, Kempisty & Company stated that 
+the financial statement presented fairly the financial position of the company at 
+December 31, 2005.  On these engagements, Rubino was the engagement partner and 
+Kempisty was the concurring review partner.  They were the only auditors who worked 
+on this engagement, and in fact were the only partners and auditors in the firm at the 
+time. 
+ 
+The Board’s auditing standards failures by Rubino as the engagement partner 
+ 
+ Lack of training and proficiency 
+ 
+ 11. Rubino lacked the necessary training and proficiency as an auditor to 
+properly interpret the professional guidance under GAAP having to do with accounting 
+for warrants and convertible notes.  The workpapers reflect no analysis to support treating 
+the warrants as assets on Kentucky Energy’s balance sheet.  Nevertheless, he sought no 
+outside advice on these issues.  In fact, Rubino did not realize that in accounting for the 
+warrants he was dealing with derivative instruments requiring a careful analysis for 
+proper accounting.   
+ 6 
+ 
+12. The Board’s auditing standards require that the audit be performed by "a 
+person or persons having adequate technical training and proficiency as an auditor."  AU 
+§ 210.01.  The Board’s Auditing Standards further require that “[t]he auditor with final 
+responsibility for the engagement should know, at a minimum, the relevant professional 
+accounting and auditing standards . . . .”  AU § 230.06.   
+ 
+Failure to exercise due professional care and skepticism 
+and to obtain sufficient competent evidential matter 
+ 
+13. Rubino also failed to obtain and sufficiently examine, read and understand 
+all of the underlying documents evidencing the note/warrant transactions.  The 
+workpapers did not contain copies of all the relevant agreements underlying the 
+convertible note financings.  There is no evidence that Rubino evaluated this 
+documentation to understand how the transactions should be accounted for under GAAP.   
+ 
+14. Rubino knew that Kentucky Energy’s consultant had limited knowledge of 
+accounting and GAAP, yet he failed to review in sufficient detail the Black-Scholes 
+assumptions and analysis the consultant had used, therefore failing to discover that he had 
+merely used the generic volatility and interest rate numbers off the website rather than 
+obtain the correct numbers for Kentucky Energy.   
+ 
+15. The Board’s auditing standards require that "[d]ue professional care is to 
+be exercised in the planning and performance of the audit and the preparation of the 
+report."  AU § 230.01.  Among other things, due professional care requires that an auditor 
+exercise professional skepticism, defined as "an attitude that includes a questioning mind 
+and a critical assessment of audit evidence."  AU § 230.07.  Gathering and objectively 
+evaluating audit evidence requires the auditor to consider the competency and sufficiency 
+of the evidence.  AU § 230.08.  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.   
+  
+16. The Board’s auditing standards also require that "[s]ufficient competent 
+evidential matter is to be obtained through inspection, observation, inquiries, and 
+confirmations to afford a reasonable basis for an opinion regarding the financial 
+statements under audit."  AU § 326.01.  To be competent, evidence, regardless of its 
+form, must be both valid and relevant.  AU § 326.21.  In addition, the auditor should 
+"recognize the possibility that the financial statements may not be fairly presented in 
+conformity with generally accepted accounting principles ..." and should "consider 
+relevant evidential matter regardless of whether it appears to corroborate or contradict the 
+assertions in the financial statements."  AU § 326.25.  Management representations "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 § 333.02.  
+ 
+ 7 
+Failure to comply with relevant auditing standards  
+regarding auditing of derivatives 
+ 
+17. In fact, the Board’s auditing standards provide specific guidance to 
+auditors in planning and performing auditing procedures for assertions about derivative 
+instruments that are made in an entity’s financial statements.  AU§ 332.  This guidance 
+states that the auditor may need special skills or knowledge to plan and perform auditing 
+procedures for certain assertions about derivatives and securities.  AU§ 332.05.  
+ 
+18. Rubino failed to, among other things: 
+ 
+• Understand the application of generally accepted accounting 
+principles for assertions about derivatives (AU§ 332.05) 
+• Understand the determination of fair value of derivatives, 
+including the reasonableness of key assumptions (AU§ 332.05 and AU§ 332.40) 
+• Alter its risk assessment and audit procedures based on the entity’s 
+inexperience with a derivative (AU§ 332.08) 
+• Obtain evidence supporting management’s assertion about fair 
+value of the derivative (AU§ 332.35) and  
+• Evaluate whether the presentation and disclosure of derivatives are 
+in conformity with generally accepted accounting principles (AU§ 332.49). 
+ 
+Thus, Rubino failed to fulfill  his responsibilities under the Board’s auditing 
+standards for auditing those instruments.   
+   
+The Board’s auditing standards review failures by Rubino as the engagement partner 
+ 
+19. In addition to the audit failures, Rubino failed to comply with the specific 
+standards applicable to interim reviews of Kentucky Energy’s 2005 quarterly financial 
+statements.  These standards, set forth in AU § 722, provide guidance on the nature, 
+timing and extent of the procedures to be performed by an independent accountant when 
+conducting a review of interim financial information.   
+ 
+20.  The objective of a review of interim financial information is to provide 
+the accountant with a basis for communicating whether he or she is aware of any material 
+modifications that should be made to the interim financial information for it to conform 
+with GAAP.  AU § 722.07.  The standards specifically require the accountant to perform 
+certain procedures when conducting a review of interim financial information, including, 
+but not limited to inquiring of management about unusual or complex situations that may 
+have an effect on the interim financial information, and matters about which questions 
+have arisen in the course of applying the review procedures and significant journal entries 
+and other adjustments.  AU § 722.18.   
+ 
+21. The unusual or complex situations, referred to in the above paragraph, 
+specifically include the use of derivative instruments and unique terms for debt that could 
+affect classification.  AU § 722.55 (Appendix B).  Rubino, however, did not give 
+ 8 
+adequate consideration to the analysis and classification of the derivative instruments 
+recorded in the financial statements. 
+ 
+22. Finally, the same standards relating to adequate technical training and 
+proficiency, due professional care and professional skepticism apply to reviews as well as 
+audits.  AU § 722.01.   Therefore, Rubino’s audit failures for Kentucky Energy’s year 
+ended December 31, 2005 apply equally to the quarterly reviews.    
+ 
+The Board’s auditing standards failures by Kempisty as the concurring review partner 
+ 
+23. Kempisty, as the concurring review partner, was responsible for 
+performing an objective review of significant auditing, accounting, and financial 
+reporting matters that came to his attention, and was an integral part of the resolution of 
+matters prior to the issuance of the firm's audit report.  SEC Practice Section (“SECPS”) 
+§1000.39 (Appendix E).
+8
+ 
+  On the basis of that review, Kempisty was required to 
+conclude that no matters came to his attention that caused him to believe that the 
+financial statements of Kentucky Energy were not in conformity with GAAP in all 
+material respects, and that the firm's audit was performed in accordance with the 
+standards of the Board.   
+24. Kempisty was required, among other things, to review documentation of 
+the resolution of significant accounting, auditing and financial reporting matters.  His 
+review of the financial statements and management documentation should have alerted 
+him to the mistakes in valuing and classifying the warrants.  
+ 
+25. Kempisty had additional specific responsibilities with respect to the 
+concurring review of Kentucky Energy’s interim financial statements.  For a review 
+conducted on interim financial information on financial statements in an SEC client’s 
+quarterly Form 10-Q or 10-QSB filing, a member firm's policies and procedures should 
+require discussion with the concurring partner reviewer, prior to the completion of the 
+review, about any matters identified in the review that involve a significant risk of 
+material misstatement of the financial statements.  Any such involvement should be 
+documented.  SECPS §1000.39 (Appendix E).   
+ 
+26. Although testimony indicates that Kempisty did discuss the 
+warrant/convertible note accounting issue with Rubino, the workpapers for the interim 
+reviews do not contain any documentation of such discussions nor of matters identified in 
+the review that involve a significant risk of material misstatement of the financial 
+statements.   
+ 
+27. Finally, as a general matter, Kempisty as concurring reviewer was 
+required to have “sufficient relevant technical expertise and experience” to perform his 
+                                                 
+8  This references concurring partner review standards set by the AICPA which were adopted by the 
+Board following passage of the Sarbanes-Oxley Act of 2002.  Kempisty & Company was a member of the 
+SEC Practice Section of the AICPA from 1991until the formation of the Board , making it subject to these 
+standards.  
+ 9 
+duties.  SECPS §1000.39 (Appendix E).  In this matter he was therefore required to have 
+technical expertise and experience in the area of accounting for derivatives, including 
+warrants and convertible notes.  The standards also require that a concurring reviewer 
+seek assistance from other individuals to supplement his knowledge when necessary.   
+ 
+28. As concurring reviewer for both the interim reviews and year-end audit, 
+Kempisty lacked the expertise and experience necessary to understand that the 
+instruments involved in the transactions were derivatives.  He also failed to seek outside 
+professional assistance to understand how to properly account for such items.  
+ 
+Misstatement in Audit Report 
+ 
+29. In this matter, Kempisty & Company’s audit report falsely states that they 
+conducted the audit in accordance with the standards of the Board, and that in its opinion 
+the financial statements of Kentucky Energy were presented fairly, in all material 
+respects, in conformity with accounting principles generally accepted in the United States 
+of America.  In fact, they were not. 
+  
+D. VIOLATIONS 
+ 
+ 30. Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 
+thereunder require issuers with securities registered under Section 12 of the Exchange 
+Act to file quarterly and annual 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), 
+cert. denied, 440 U.S. 913 (1979). 
+ 
+ 31. As discussed above, for the year ended December 31, 2005, Kempisty & 
+Company, Kempisty and Rubino caused Kentucky Energy to file false and misleading 
+quarterly and annual reports with the Commission that misrepresented the financial 
+results of Kentucky Energy, overstating total assets and net loss. By their conduct 
+described above, Kempisty & Company, Kempisty and Rubino willfully aided and 
+abetted and caused Kentucky Energy’s violations of Section 13(a) of the Exchange Act, 
+and Rules 12b-20, 13a-1, and 13a-13 thereunder. 
+ 
+E. FINDINGS 
+ 
+1. Based on the foregoing the Commission finds that Kempisty & Company, 
+Kempisty and Rubino willfully aided and abetted and caused Kentucky Energy’s 
+violations of Section 13(a) of the Exchange Act, and Rules 13a-1, 13a-13 and 12b-20 
+thereunder. 
+ 
+2. Based on the foregoing, the Commission finds that Kempisty & Company, 
+Kempisty and Rubino engaged in improper professional conduct pursuant to Section 
+4C(a)(2) of the Exchange Act and Rule 102(e)(1)(ii) of the Commission’s Rules of 
+Practice, and willfully aided and abetted and caused Kentucky Energy’s violation of the 
+ 10 
+federal securities laws, pursuant to Section 4C(a)(3) of the Exchange Act and Rule 
+102(e)(1)(iii) 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 Respondents’ Offers. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately that: 
+ 
+ A. Respondents Kempisty & Company, Kempisty and Rubino shall cease and 
+desist from committing or causing any violations and any future violations of Section 13(a) 
+of the Exchange Act and Rules 12b-20, 13a-1 and13a-13 promulgated thereunder.   
+ 
+ B. Kempisty & Company, Kempisty and Rubino are denied the privilege of 
+appearing or practicing before the Commission as an accountant.   
+ 
+ C. After one year from the date of this Order, Kempisty may request that the 
+Commission consider his reinstatement.  After three years from the date of this Order, 
+Rubino may request that the Commission consider his reinstatement.   
+ 
+D. Respondents Kempisty and Rubino may separately request that the 
+Commission consider their 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 Kempisty’s or 
+Rubino’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. Kempisty or Rubino, or the public accounting firm with 
+which he is associated, is registered with the Board in accordance with the Sarbanes-
+Oxley Act of 2002, and such registration continues to be effective; 
+ 
+   b. Kempisty or Rubino, 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; 
+  
+ 11 
+   c. Kempisty and/or Rubino 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. Kempisty and/or Rubino acknowledges his responsibility, 
+as long as that 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.   
+      
+E. The Commission will consider an application by Kempisty or Rubino 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. 
+ 
+  
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+ 
\ No newline at end of file
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@@ -0,0 +1,72 @@
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65985 / December 15, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3345 / December 15, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14670 
+  
+__________________________________  
+       :  
+In the Matter of          : ORDER OF FORTHWITH  
+            :    SUSPENSION PURSUANT 
+JUAN CARLOS GUILLÉN ZERPA     : TO RULE 102(e)(2) OF THE 
+             : COMMISSION’S RULES OF                
+Respondent.          :    PRACTICE    
+_________________________________ : 
+ I. 
+ 
+The Securities and Exchange Commission deems it appropriate to issue an order 
+of forthwith suspension of Juan Carlos Guillén Zerpa (“Guillén”) 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. Since 1989, Guillén has been licensed as a certified public accountant in the 
+Bolivarian Republic of Venezuela. 
+ 
+2. On December 14, 2011, a judgment was entered convicting Guillén of one count 
+of conspiracy to obstruct an official proceeding in violation of Title 18 United States 
+Code, Section 1512(k), before the United States District Court for the District of 
+Connecticut, in United States v. Juan Carlos Guillén Zerpa
+, 3:11-cr-76 (SRU).      
+ 
+                         
+1 Rule 102(e)(2) provides, in pertinent part, “[A]ny 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 his conviction, Guillén  was sentenced to 14 months incarceration, 
+two years supervised release and was ordered to pay a $10,000 fine.  He was also ordered 
+to forfeit $315,000.      
+ 
+III. 
+ 
+In view of the foregoing, the Commission finds that Guillén 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 Juan Carlos Guillén Zerpa 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. 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+  
+ 
\ No newline at end of file
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@@ -0,0 +1,1372 @@
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+       
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+                  U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 22199 / December 16 , 2011 
+
+ Accounting and Enforcement Release No. 3346 / December 16, 2011 
+
+  Securities and Exchange Commission v. Stuart W. Fuhlendorf , Civil Action No. C-09-1292 (MJP) (W.D. Wash.) 
+
+ SEC SETTLES CHARGES AGAINST FORMER CFO OF SEATTLE-AREA TECHNOLOGY COMPANY 
+
+ The United States Securities and Exchange Commission ("Commission") announced that on November 23, 2011, the Honorable Marsha J. Pechman, United States District Court Judge for the Western District of Washington, entered a judgment of permanent injunction against Stuart W. Fuhlendorf pursuant to a negotiated settlement of the Commission's claims against him. 
+
+  Under the terms of the settlement, Fuhlendorf consented to the entry of final judgment.  The final judgment enjoins Fuhlendorf from violating Sections 17(a)(2) and (3) 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, 13b2-2, and 13a-14 thereunder. Additionally, the final judgment bars Fuhlendorf from serving as an officer or director of a public company for three years pursuant to Section 21(d)(2) of the Exchange Act. The judgment does not impose a penalty or other monetary relief based upon Fuhlendorf's sworn financial statements. Under the terms of the settlement, Fuhlendorf neither admits nor denies the Commission's allegations. 
+
+ On September 14, 2009, the Commission filed its complaint against Fuhlendorf, who lives in Golden, Colorado. The Commission's complaint alleged that Fuhlendorf, the former Chief Financial Officer of Isilon Systems, Inc. ("Isilon"), caused Isilon to improperly recognize revenue for multiple sales, including transactions with side agreements between Isilon and its customers precluding revenue recognition under GAAP. The complaint further alleged that Fuhlendorf misled Isilon's audit committee and auditors. Isilon ultimately restated $4.8 million in improper revenue for these transactions.   
+
+ Fuhlendorf also consented to the entry of an administrative order, without admitting or denying the findings, suspending him, pursuant to Rule 102(e) of the Commission's Rules of Practice, from appearing or practicing as an accountant before the Commission, with the right to apply for reinstatement after three years. 
+
+ For more information on earlier actions in this case, see  LR-21210  (September 14, 2009). 
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diff --git a/raw/aaer/2011/AAER-3347.txt b/raw/aaer/2011/AAER-3347.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f12084d7ae9f371e34e63a34a9b207b578560569
--- /dev/null
+++ b/raw/aaer/2011/AAER-3347.txt
@@ -0,0 +1,130 @@
+  UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 65996 / December 16, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3347 / December 16, 2011  
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14671 
+ 
+ 
+ 
+In the Matter of 
+ 
+Stuart W. Fuhlendorf, 
+ 
+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 Stuart 
+W. Fuhlendorf (“Respondent” or “Fuhlendorf”) 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 Commission finds that: 
+ 
+ 1. Fuhlendorf, age 49, is the former Chief Financial Officer of Isilon Systems, 
+Inc. (“Isilon”), having served in that capacity from approximately May 2004 to October 2007.  
+Fuhlendorf is a resident of Golden, Colorado. 
+ 
+ 2. Isilon was, at all relevant times, a Delaware corporation headquartered in 
+Seattle, Washington, which sold clustered storage systems and software for digital content.  From 
+December 2006 through November 2010, Isilon’s common stock was registered under Section 
+12(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and was quoted on the Nasdaq. 
+ 
+ 3. On November 23, 2011, a final judgment was entered against Fuhlendorf, 
+permanently enjoining him from future violations of Sections 17(a)(2) and (3) of the Securities Act 
+of 1933 (“Securities Act”), Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 
+13b2-1, 13b2-2, and 13a-14 thereunder, in the civil action entitled Securities and Exchange 
+Commission v. Stuart W. Fuhlendorf, Civil Action Number 2:09-CV-01292-MJP, in the United 
+States District Court for the Western District of Washington.  The final judgment also prohibits 
+Fuhlendorf from acting as an officer or director of a public company for a period of three years. 
+ 
+ 4. The Commission’s complaint alleged, among other things, that Fuhlendorf 
+engaged in a financial reporting fraud which caused Isilon to materially overstate revenue in 
+periodic reports filed with the Commission during a three-quarter period in 2006 and 2007.  The 
+Complaint alleged that Fuhlendorf participated in recording revenue from sales transactions with 
+improper terms that materially increased Isilon’s quarterly revenue in a departure from Generally 
+Accepted Accounting Principles (“GAAP”).  
+ 
+  
+ 
+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 Fuhlendorf’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately, that: 
+ 
+ A. Fuhlendorf 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 an accountant. 
+ 
+   
+ 
+ By the Commission. 
+ 
+ 
+ 
+       Elizabeth M. Murphy 
+       Secretary 
+ 
+ 
+ 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3349.pdf b/raw/aaer/2011/AAER-3349.pdf
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diff --git a/raw/aaer/2011/AAER-3349.txt b/raw/aaer/2011/AAER-3349.txt
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+UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 66024 / December 21, 2011 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3349 / December 21, 2011 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-14674 
+______________________________ 
+:  
+In the Matter of   : 
+     : ORDER OF SUSPENSION PURSUANT 
+ERIC JON STRASSER, : 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 Eric Jon Strasser (“Strasser”) 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. Strasser, age 47, is a resident of Las Vegas, Nevada.  Between approximately 
+2005 and 2009, Strasser was a consultant to Soyo Group, Inc. (“Soyo”) who acted as its de facto 
+controller in that he prepared Soyo’s periodic filings with the Commission and was a liaison 
+between Soyo and its auditor.  In the mid-1980s, Strasser worked as an auditor and passed the 
+examination to become a certified public accountant, but he never obtained a license.   
+ 
+2. On April 22, 2011, an amended judgment of conviction was entered against 
+Strasser in United States v. Strasser, No. 2:10-cr-00266-LDG-LRL-1, in the United States  
+ 
+                         
+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 
+ 
+District Court for the District of Nevada, finding him guilty of one count of misprision of a 
+felony under 18 U.S.C. §4.   
+ 
+3. As a result of this conviction, Strasser was sentenced to 5 years of probation and 
+ordered to pay restitution in the amount of $190,000.
+2
+ 
+ 
+III. 
+ 
+In view of the foregoing, the Commission finds that Strasser 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 Eric Jon Strasser 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. 
+ 
+ 
+ 
+Elizabeth M. Murphy 
+Secretary 
+ 
+ 
+ 
+ 
+ 
+ 
+                         
+2  On June 25, 1992, a judgment of conviction was entered against Strasser for one count of computer fraud 
+under 18 U.S.C. §1030(a)(4) in United States v. Strasser, No. 1:91-cr-00836-DNE-1, in the United States District 
+Court for the Southern District of New York.  As a result of this conviction, Strasser was sentenced to 16 months of 
+imprisonment. 
+ 
\ No newline at end of file
diff --git a/raw/aaer/2011/AAER-3350.pdf b/raw/aaer/2011/AAER-3350.pdf
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--- /dev/null
+++ b/raw/aaer/2011/AAER-3350.txt
@@ -0,0 +1,195 @@
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+   
+ 
+ 
+ 
+ 
+ 
+ 
+                                                
+ 
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 66051 / December 23 2011 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 3350/ December 23, 2011 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-14675 
+In the Matter of ORDER INSTITUTING ADMINISTRATIVE 
+PROCEEDINGS PURSUANT TO RULE 102(e) 
+CRAIG ON (CPA), 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 Craig 
+On (“Respondent” or “On”) 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 him and the subject matter of these 
+proceedings, and the findings contained in Section III.3 below, which are admitted, Respondent 
+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 pr acticing before it any … accountant … who has 
+been by name … permanently enjoined by any co urt 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. 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+  
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+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. Craig On, age 59, is and has been a certified public accountant licensed to 
+practice in the State of California.  He served as Interim Chief Financial Officer of UCBH Holdings, 
+Inc. (“UCBH”) from May 2008 until October 2008 and Chief Financial Officer from October 2008  
+until November 2009. 
+2. UCBH was, at all relevant times, a Delaware corporation with its principal 
+place of business in San Francisco, California.  UCBH was a holding company for subsidiary 
+United Commercial Bank, a California state-chartered bank.  At all relevant times, UCBH’s 
+common stock was registered with the Commission pursuant to Section 12(b) of the Securities 
+Exchange Act of 1934 (“Exchange Act”), and listed on the NASDAQ Global Select Market. 
+3. On December 14, 2011, a final judgment was entered against On, 
+permanently enjoining him from future violations of Sections 17(a)(2) and 17(a)(3) of the 
+Securities Act of 1933, Section 13(b)(5) of the Exchange Act and Rules 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-11 thereunder, in the civil action entitled 
+Securities and Exchange Commission v. Thomas S. Wu, et al., Civil Action No. 11-CV-4988-
+JSW, in the United States District Court for the Northern District of California.  On was also 
+ordered to pay a $150,000 civil money penalty. 
+4. The Commission’s Complaint alleged, among other things, that On failed to 
+ensure the accuracy of the financial statements in the UCBH annual report on Form 10-K for the 
+fiscal year ended December 31, 2008.  The Complaint alleged that UCBH’s 2008 Form 10-K 
+contained materially false and misleading financial statements because these financial statements 
+understated loan losses and reserves.  The Complaint alleged that On knew or should have known 
+of losses on certain loans and other assets, but failed to disclose full and accurate information about 
+these loans and assets to UCBH’s independent auditors.  In addition, the Complaint alleged On 
+certified false financial statements in the 2008 Form 10-K, failed to implement a system of internal 
+accounting controls, and falsified or caused to be falsified certain books, records, and accounts.  
+The Complaint also alleged On aided and abetted UCBH’s violations of provisions requiring 
+accurate annual reports and periodic filings, accurate books and records, and an adequate system of 
+internal controls. 
+IV. 
+In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanction agreed to in Respondent On’s Offer. 
+2 
+
+  
+ 
+ 
+ 
+   
+ 
+ 
+ 
+   
+ 
+  
+  
+ 
+  
+  
+  
+ 
+  
+ 
+ 
+  
+Accordingly, it is hereby ORDERED, effective immediately, that: 
+A. Respondent On 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 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 
+accountancy. However, if state licensure is dependent on reinstatement by the 
+Commission, the Commission will consider an application on its other merits.  The 
+3 
+
+ 
+ 
+ 
+ 
+ 
+   
+ 
+ 
+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.
+       E l i z a b e t h M . M u r p h y
+       S e c r e t a r y 
+4