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Pardo, R. Scott Peden and David M. Martin + + + + + + + + + + + + Life Partners Holdings, Inc., Brian D. Pardo, R. Scott Peden and David M. Martin + + + + + + + + + + + + + + + + + + + + + Litigation Release No. 22219 / January 4, 2012 + + Accounting and Auditing Enforcement Release No. 3351 / January 4, 2012 + + SEC v. Life Partners Holdings, Inc., Brian D. Pardo, R. Scott Peden and David M. Martin, Case No. 6:12-cv-00002 in the United States District Court for the Western District of Texas + + The Securities and Exchange Commission today charged Texas-based financial services firm Life Partners Holdings, Inc. and three of its senior executives for their involvement in a fraudulent disclosure and accounting scheme involving life settlements. + + Life Partners is a Nasdaq-traded company that generates virtually all of its revenues from brokering life settlements. Life settlements involve the purchase and sale of fractional interests of life insurance policies in the secondary market. In life settlement transactions, life insurance policy owners sell their policies to investors in exchange for a lump-sum payment. The dollar amount offered by the investor takes into account the insured's life expectancy and the terms and conditions of the insurance policy. + + The SEC alleges that Life Partners chairman and CEO Brian Pardo, president and general counsel Scott Peden, and chief financial officer David Martin misled shareholders by failing to disclose a significant risk to Life Partners' business: the company was systematically and materially underestimating the life expectancy estimates it used to price transactions. Life expectancy estimates are a critical factor impacting the company's revenues and profit margins as well as the company's ability to generate profits for its shareholders. + + The SEC further alleges that Life Partners and the three executives were involved in disclosure violations and improper accounting that Life Partners used to overvalue assets held on the company's books and create the appearance of a steady stream of earnings from brokering life settlement transactions. The SEC further charged Pardo and Peden with insider trading in their shares of Life Partners stock while in possession of material, non-public information indicating that the company had systematically and materially underestimated life expectancy estimates. + + According to the SEC's complaint filed in federal district court in Waco, Texas, Life Partners misrepresented and failed to disclose in public filings with the Commission that the company's systematic use of materially underestimated life expectancy estimates constituted a material risk to the company's revenues. Beginning in 1999, the company used life expectancy estimates provided by Dr. Donald T. Cassidy, a Reno, Nev.-based doctor with no actuarial training or prior experience rendering life expectancy estimates. The SEC alleges that Life Partners and Pardo failed to conduct any meaningful due diligence on Cassidy's qualification to act as a life expectancy underwriter and instructed the doctor to use a life expectancy methodology that was created by the company's former underwriter, a part-owner of Life Partners. The SEC also alleges that Pardo, Peden and Martin were aware that the Cassidy-rendered life expectancy estimates were systematically and materially short. + + The SEC alleges that Life Partners materially misstated net income from fiscal year 2007 through the third quarter of fiscal year 2011 by prematurely recognizing revenues and understating impairment expense related to its investments in life settlements. The SEC alleges that Life Partners improperly accelerated revenue recognition from the closing date to the date it obtained a non-binding agreement with the policy owner to sell a life settlement. Life Partners' use of Cassidy's life expectancy estimates as part of its impairment calculations caused the company to understate millions of dollars in impairment expense. + + The SEC further alleges that during this time, Pardo and Peden sold approximately $11.5 million and $300,000 respectively of Life Partners stock at inflated prices while in possession of material non-public information about the company's dependency on short life expectancy estimates to generate revenues. + + The SEC has alleged Life Partners, Pardo, Peden and Martin committed direct violations or aided and abetted violations of Sections 10(b), 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder. The SEC has also alleged that Life Partners, Pardo and Peden violated Section 17(a) of the Securities Act; that Life Partners, Pardo and Martin committed direct violations or aided and abetted violations of Section 13(b)(2)(B) of the Exchange Act; that Pardo, Peden and Martin violated Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2(a) thereunder; that Pardo violated Rule 13b2-2(b) of the Exchange Act; and that Pardo and Martin violated Rule 13a-14 of the Exchange Act. The SEC's complaint seeks repayment to the company of stock sales profits and bonuses received by Pardo and Martin pursuant to Section 304 of the Sarbanes Oxley Act of 2002. + + The SEC's investigation is continuing. + +   + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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JBI, Inc., John Bordynuik and Ronald Baldwin, Jr., Civil Action No. 1:12-cv-10012, United States District Court, District of Massachusetts + + SEC CHARGES COMPANY AND ITS OFFICERS WITH ACCOUNTING FRAUD + + The Securities and Exchange Commission announced today that it filed an action in federal court in Massachusetts against JBI, Inc., a publicly-traded company formerly located in Massachusetts and now headquartered in Ontario, Canada. The Commission also charged JBI's current CEO, John Bordynuik, a resident of Ontario, Canada, and its former CFO, Ronald Baldwin, Jr, a resident of Palm Harbor, Florida. The action alleges that the defendants engaged in a scheme to commit securities and accounting fraud by reporting materially false and inaccurate financial information on the financial statements of JBI, Inc. for two reporting periods during 2009. + + According to the Commission's complaint, JBI is purportedly a technology company focused on data restoration and recovery and environmentally engineered product development. The company is headquartered in Canada, but purportedly has operations in New York, Florida, Ohio, and Pennsylvania. The complaint alleges that JBI is purportedly also involved in the research and development of a process designed to convert plastic waste into oil, known as "Plastic2Oil" or "P2O". The Commission alleges that during the third quarter of 2009 and the year end 2009, JBI materially overstated certain assets in an effort to bolster its balance sheet and success in two private capital raising efforts (Private Investment in Public Equity or PIPES) geared toward raising the capital necessary to begin commercial operation and production of P2O. The Complaint alleges that JBI raised over $8.4 million for the company in these PIPES just before the company issued a public statement indicating its financial statements could no longer be relied upon, in part, due to the erroneous valuation of certain assets, known as media credits, on the balance sheet. + + The Commission alleges that in contravention of Generally Accepted Accounting Principles ("GAAP"), the company erroneously booked the media credits at a value of $9.997 million, thereby becoming the single largest asset on the company's balance sheet, when they should have been initially booked at a value of $1,000,000 when acquired in August 2009, and subsequently, the media credits should have been remeasured at their current value and written down to zero as of the end of the company's third fiscal quarter on September 30, 2009. According to the complaint, Bordynuik was aware of, or was reckless in not being aware of, GAAP concerns surrounding the reported value of the media credits in advance of the company's third quarter 2009 Form 10-Q filing with the Commission on November 16, 2009 and the year end 2009 Form 10-K filing with the Commission on March 31, 2010 yet falsely certified that the company's financial statements for those reporting periods were filed in conformity with GAAP. The Commission complaint further alleges that Baldwin was aware of, or was reckless in not being aware of, GAAP concerns surrounding the reported value of the media credits in advance of the company's year-end 2009 10-K filing on March 31, 2010, yet falsely certified that the company's financial statements for that period were filed in conformity with GAAP. + + The Commission's complaint charges JBI, Inc. with violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) 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 alleges that Bordynuik violated Sections 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5, and Section 13(b)(5) of the Exchange Act. In addition, the Commission's complaint alleges that Baldwin violated Sections 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5, and Section 13(b)(5). Finally, the complaint alleges that Bordynuik and Baldwin violated directly or aided and abetted JBI'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 (Bordynuik only), 13a-14, 13b2-1 and 13b2-2 (Bordynuik only). In its complaint, the Commission seeks permanent injunctions, disgorgement plus prejudgment interest, and civil penalties against all three defendants, and officer and director bars against Bordynuik and Baldwin. + + SEC Complaint +   + + + + + + + + + + + Resources + + + + + SEC Complaint + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Greene + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/511731","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Familant and Paul V. Greene + + + + + + + + + + + + Len A. Familant and Paul V. Greene + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 22237 / January 25, 2012 + + Accounting and Auditing Release No. 3356 / January 25, 2012 + + SEC v. Len A Familant and Paul V. Greene, Defendants, Civil Action No. 1:12-CV-00119-JEB (U.S. District Court for the District of Columbia, January 25, 2012) + + SEC Brings Fraud Charges Against Former InPhonic Senior Vice President and President of Americas Premiere Corporation + + On January 25, 2012, the Securities and Exchange Commission ("Commission") filed a civil injunctive action against a former senior vice president and a vendor of InPhonic, Inc., a now-bankrupt online retailer of cellular phones that was headquartered in Washington, D.C. According to the Commission's complaint, from late 2005 through early 2007, Len A. Familant, then an InPhonic senior vice president, and Paul V. Greene, president of telephone supplier Americas Premiere Corporation ("APC"), engaged in a fraudulent scheme involving a series of "round-trip transactions" to artificially inflate InPhonic's financial results. + + The Commission's complaint, filed in federal court in the District of Columbia, alleges: + + After the end of the third quarter of 2005 and each quarter in 2006, but before InPhonic reported its financial results, Familant obtained a total of almost $10 million in sham credits from APC and Greene. Familant and Greene entered into an unwritten, undisclosed agreement that InPhonic would repay APC by purchasing cellular telephones and repair services from APC at inflated prices and by paying for fake repairs.   + + InPhonic improperly recorded the false credits from APC as a decrease in cost of goods sold. InPhonic subsequently made repayments to APC in the form of overpayments for cellular telephones, repair services and fake repairs.   + + The round-trip scheme agreed to and implemented by Familant and Greene resulted in material understatements of InPhonic's net loss (between 7% and 55%) in quarterly and annual filings with the Commission and material overstatements of InPhonic's adjusted EBITDA in earnings releases from 2005-2007.   + + Familant and Greene concealed the fraudulent round-trip scheme. For instance, together they identified particular telephone models APC could provide to InPhonic at inflated prices without raising suspicion.   + + Greene hid the round-trip scheme from InPhonic's independent auditors even after APC's accountant had informed Greene that APC's sham credit transactions with InPhonic were illegal.   + + Familant encouraged APC to hide its billing for phony services after Familant learned that APC's accountant had told Greene, "[w]e cannot do that. That is fraud. . . ."   + + In October 2007, as InPhonic's business was failing and after APC had been unable to fully recoup the credits, Greene sent an email to himself outlining a proposed lawsuit against InPhonic. Greene referred to "the fake credits that were negotiated with INPC that they were using to hit certain quarterly numbers." + + Greene is charged with violating, and aiding and abetting InPhonic's and Familant's violations, of the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rules 10b-5(a) and (c). Greene is also charged with violating the books and records provision of Exchange Act Rule 13b2-1, and with aiding and abetting InPhonic's violations of the reporting and books and records provisions of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 13a-11 and 13a-13. The SEC is seeking a permanent injunction, disgorgement, civil penalties and prejudgment interest against Greene. + + Familant has agreed to settle the Commission's charges without admitting or denying the allegations against him. Familant has consented to a final judgment enjoining him from violating the antifraud provisions of Section 10(b) of the Exchange Act and Exchange Act Rules 10b-5(a) and (c), and the books and records provision of Exchange Act Rule 13b2-1, and from aiding and abetting InPhonic's violations of the reporting and books and records provisions of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13. Familant also has agreed to pay a $50,000 civil penalty and to be barred from serving as an officer or director of a public company. The proposed settlement with Familant is subject to the approval of the District Court. + + SEC Complaint in this matter +   + + + +  + + + + + + + + + + + Resources + + + + + SEC Complaint + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2012/AAER-3357.txt b/raw/aaer/2012/AAER-3357.txt new file mode 100644 index 0000000000000000000000000000000000000000..fb917ef59c50908dbd165343295c1bf1ef9dced1 --- /dev/null +++ b/raw/aaer/2012/AAER-3357.txt @@ -0,0 +1,125 @@ +UNITED STATES OF AMERICA + +before the +SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Rel. No. 66260 / January 26, 2012 +ACCOUNTING AND AUDITING ENFORCEMENT +Rel. No. 3357 / January 26, 2012 +Admin. Proc. File No. 3-14629 +In the Matter of ORDER DENYING A +STAY OR POSTPONEMENT OF +PAUL FREE, CPA PROCEEDINGS +On November 16, 2011, we issued an order instituting proceedings ("OIP") against Paul +Free, a certified public accountant and former Controller and Chief Accounting Officer of Delphi +Corporation from 1998 through 2002, pursuant to Commission Rule of Practice 102(e)(3)(i), +1 +that temporarily suspended him from appearing or practicing before the Commission as an +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 + +accountant.2 The OIP finds that Free was enjoined on October 31, 2011 by the United States +District Court for the Eastern District of Michigan from violating and/or aiding and abetting +violations of Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 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. +3 +The underlying complaint alleged that Free, while Delphi's Controller and Chief Accounting +Officer, engaged in conduct that resulted in the Company materially misstating its financial +condition and operating results in filings with the Commission, in offering documents, and in +other statements to investors. The complaint alleged, for example, that Free, among others, was +responsible for Delphi having improperly accounted for and disclosed a payment that it made to +its former parent company, pursuant to a settlement agreement. +On December 15, 2011, following our issuance of the OIP, Free filed a document titled, +"Motion Pursuant to Rule 401 of the Commission's Rules of Practice for Stay of Rule 102(e) +Proceedings." In his motion, Free states that the time for him to appeal the district court's +judgment has not yet run. He asserts that he will be entitled to reinstatement to appear and +practice before the Commission upon appropriate application to the Commission under Rule +102(e)(5) if he is successful in an appeal of that judgment. Free believes that "[i]t would be an +inefficient use of both the Commission's and [his] resources for [him] to petition the Commission +now to lift or limit his suspension, and to do so again after the conclusion of an appeal." Free +therefore requests, pursuant to Rule 401, that "the 102(e) proceedings against him be stayed +pending the outcome of any appeal that he may file." +The Division of Enforcement opposes the motion. The Division asserts that "such a stay +would significantly delay the outcome of these proceedings," and Free "fails to show that denial +of his motion would substantially prejudice his case." The Division states that, should Free +appeal the district court judgment, a resolution may not occur for one to two years and that a +delay of the Rule 102(e) proceedings here would be significant and "would not serve the public +interest." +Rule 401(c) permits motions for stays by persons aggrieved by a Commission order "who +would be entitled to review in a federal court of appeals." +4 However, Rule 401(c) is inapplicable +2 Paul Free, CPA, Securities Exchange Act Rel. No. 65759 (Nov. 16, 2011), +http://www.sec.gov/litigation/admin/2011/34-65759.pdf. +3 Free, http://www.sec.gov/litigation/admin/2011/34-65759.pdf, at 2. +4 17 C.F.R. § 201.401(c). + + +3 + +here because the Commission has not yet entered a final order, reviewable by an appellate court, +that we could consider staying.5 +Although Rule 401 is inapplicable, we will consider Free's motion as a request for an +extension of time, postponement, or adjournment under Rule 161.6 That rule provides that "the +Commission, at any time, . . . may, for good cause shown . . . postpone or adjourn any hearing" +so long as any such postponement or adjournment meets certain requirements. +7 When deciding +whether to grant such a motion, we "adhere to a policy of strongly disfavoring such requests, +except in circumstances where the requesting party makes a strong showing that the denial of the +request or motion would substantially prejudice" his or her case. +8 We find that Free has not made +the requisite showing under Rule 161. +As we have previously stated, the pendency of an appeal generally is an insufficient basis +upon which to prolong a Commission proceeding.9 A postponement in these circumstances +could delay significantly the outcome of these proceedings. The inefficient use of resources that +Free cites in having to petition the Commission twice is a potential inconvenience that does not +override the strong public interest in the prompt enforcement of the federal securities laws. +10 +5 See Eric S. Butler, Order Denying a Stay or Postponement of Administrative +Proceedings, Admin. Proc. File No. 3-13986 (Mar. 31, 2011), at 3 & n.7 (citing Michael J. +Markowski, Order Denying Request for a Stay and Granting Extension of Time for Filing Briefs, +Exchange Act Rel. No. 4748 (Dec. 4, 1998), 68 SEC Docket 2156, 2159 ("Neither the initial +decision of the law judge nor our order scheduling briefing in this proceeding is a Commission +order entitling [respondent] to appellate review.")). +6 17 C.F.R. § 201.161. In determining whether to postpone a proceeding under +Rule 161, we consider such factors as the length of the proceeding to date, the number of +postponements previously granted, the stage of the proceeding at the time of the request for a +postponement, the efficient and timely administration of justice, and any other matters justice +requires. 17 C.F.R. § 201.161(b)(1). +7 Id. +8 Id. +9 See James E. Franklin, Exchange Act Rel. No. 56649 (Oct. 12, 2007), 91 SEC +Docket 2708, 2714 n.15 (stating that "it is well established that a pending appeal does not affect +the injunction's status as a basis for this administrative proceeding") (citing cases). +10 See Butler, at 4 n.12 (citing Jon Edelman, 52 S.E.C. 789, 790 (1996)). + +4 +Under Rule 102(e)(3)(ii), Free could have appealed his temporary suspension within +thirty days of being served with the OIP. It does not appear that Free has filed such an appeal. +The suspension therefore has become permanent pursuant to Rule 102(e)(3)(ii).11 +Accordingly, IT IS ORDERED that Paul Free's request for a stay or postponement of this +proceeding be, and hereby is, denied; and +IT IS FURTHER ORDERED that the temporary suspension imposed upon Paul Free has +become permanent pursuant to Rule 102(e)(3)(ii). +By the Commission. +Elizabeth M. Murphy +Secretary +11 17 C.F.R. § 201.102(e)(3)(ii). As Free notes, he may apply to the Commission for +reinstatement pursuant to Rule 102(e)(5)(i). See 17 C.F.R. § 201.102(e)(5)(i) (stating that an +"application for reinstatement of a person permanently suspended or disqualified under paragraph +(e)(1) or (e)(3) of this rule may be made at any time"). \ No newline at end of file diff --git a/raw/aaer/2012/AAER-3360.txt b/raw/aaer/2012/AAER-3360.txt new file mode 100644 index 0000000000000000000000000000000000000000..ab4318e7299876e2295c751c291da40dd377b52e --- /dev/null +++ b/raw/aaer/2012/AAER-3360.txt @@ -0,0 +1,1392 @@ + + + + + + + + + + + + + + + + SEC.gov | Robert Chiu (a/k/a Chi Hung Chiu); 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 + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/511761","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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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 + + + + + + + + + + + + Robert Chiu (a/k/a Chi Hung Chiu); 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 + + + + + + + + + + + + + + + + + + + + + Litigation Release No. 22243 / January 30, 2012 + + Accounting and Auditing Enforcement Release No. 3360 / January 30, 2012 + + SECURITIES AND EXCHANGE COMMISSION v. ROBERT CHIU (A/K/A CHI HUNG CHIU), Civil Action No. CV-12-00200-PHX-JWS (JWS) (D. Ariz.) (Filed Jan. 30, 2012) + + 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) + + RELATIONSHIP PARTNER AT ACCOUNTING FIRM CHARGED WITH FRAUD AND BARRED FOR FIVE YEARS; FORMER SYNTAX-BRILLIAN CORP. EXECUTIVE ORDERED TO PAY MORE THAN $48 MILLION FOR INSIDER TRADING AND FINANCIAL FRAUD + + On January 30, 2012, the Securities and Exchange Commission filed settled charges against Robert Chiu for aiding and abetting the fraudulent revenue recognition scheme at Syntax-Brillian Corporation ("Syntax"), a developer of high-definition LCD televisions. In addition, on January 12, 2012, Judge Susan R. Bolton of the United States District Court for the District of Arizona entered a default judgment against Thomas Chow, formerly the Chief Procurement Officer and a Director of Syntax. The Court permanently enjoined Chow from future violations of the antifraud, reporting, books and records, internal controls, and misrepresentation to auditor provisions of the federal securities laws, and ordered him to pay disgorgement of $10,370,317.16, prejudgment interest of $2,567,483.64, an insider trading penalty of $30,849,951.48, and a civil penalty of $4,680,000.00 for his role in the financial fraud scheme. Chow was also permanently barred from serving as an officer or director of a publicly traded company. + + As alleged in the SEC's Complaint against Chow, from at least June 2006 through April 2008, Chow and other members of Syntax's senior management engaged in a complex scheme to overstate Syntax's revenues and earnings and artificially inflate its stock price. As a result, Syntax reported false and misleading financial statements beginning in the fiscal year ended June 30, 2006, through the fiscal first quarter ended September 30, 2007. The scheme included the creation of fictitious sales and shipping documents and coordinating the circular transfer of funds among and between Syntax, its primary manufacturer in Taiwan, and its purported distributor in Hong Kong. + + In its Complaint against Chiu, the SEC alleged that he served as an audit and relationship partner for Syntax's outside auditor. Specifically, the SEC alleged that Chiu instructed Syntax executives on how to create a backdated distribution agreement to assist them in improperly recognizing revenue in Syntax's fourth quarter ended June 30, 2006. Additionally, the SEC alleged that after his firm was replaced as Syntax's auditor, Chiu participated in an engagement for Syntax's purported distributor, where he learned that it was treating the Syntax sales as agency sales. This treatment was in contrast to Syntax's treatment of the same sales. Despite his knowledge, Chiu failed to object to his accounting firm's issuance of multiple consents to the reissuance of its audit opinion to Syntax's Form 10-K for fiscal year 2007. + + Without admitting or denying the allegations in the SEC's complaint, Chiu 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 Rules 10b-5, 13b2-1, and 13b2-2 thereunder. Chiu 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, with the right to reapply after five years. + + The settlement with Chiu takes into account his substantial cooperation with the Commission's investigation. + + The Commission has previously obtained permanent injunctions against defendants James Li, Roger Kao, Christopher Liu, and Wayne Pratt, and collected total disgorgement of $88,000, prejudgment interest of $17,000, and civil penalties of $290,000. In addition, the Commission obtained officer and director bars against Li, Liu, and Pratt, as well as the entry of an administrative order suspending Pratt from appearing or practicing before the Commission as an accountant with the right to reapply after five years. + + For more information about this case, please see Litigation Release No. 22075 (August 31, 2011). + + SEC Complaint +   + + + + + + + + + + + Resources + + + + + SEC Complaint + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2012/AAER-3364.pdf b/raw/aaer/2012/AAER-3364.pdf new file mode 100644 index 0000000000000000000000000000000000000000..2511d9cf944d7b4a3e43bbc9a3f2301fd81245fb Binary files /dev/null and b/raw/aaer/2012/AAER-3364.pdf differ diff --git a/raw/aaer/2012/AAER-3365.pdf b/raw/aaer/2012/AAER-3365.pdf new file mode 100644 index 0000000000000000000000000000000000000000..307210d665798a8aff508a980aea93e1f4a638e0 Binary files /dev/null and b/raw/aaer/2012/AAER-3365.pdf differ diff --git a/raw/aaer/2012/AAER-3366.txt b/raw/aaer/2012/AAER-3366.txt new file mode 100644 index 0000000000000000000000000000000000000000..77e704f942d212d280f0f11c20f61f214fa35893 --- /dev/null +++ b/raw/aaer/2012/AAER-3366.txt @@ -0,0 +1,160 @@ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + UNITED STATES OF AMERICA + before the + SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 66353 / February 7, 2012 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3366 / February 7, 2012 +ADMINISTRATIVE PROCEEDING +File No. 3-14754 +: +: +: +In the Matter of : ORDER INSTITUTING ADMINISTRATIVE +: PROCEEDINGS PURSUANT TO RULE +SHAUN P. WHITELEY, : 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 Shaun +Whiteley (“Respondent” or “Whiteley”) pursuant to Rule 102(e)(3)(i) of the Commission’s Rules +of Practice.1 +II. +In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the +1 Rule 102(e)(3)(i) provides, in relevant part, that: +The Commission, with due regard to the public interest and without preliminary hearing, may, by order, . . . +suspend from appearing or practicing before it any . . . accountant . . . who has been by name . . . permanently +enjoined by any court of competent jurisdiction, by reason of his or her misconduct in an action brought by the +Commission, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of +the rules and regulations thereunder. + + + + + + + + + + + + + + + + + + + +purpose of these proceedings and any other proceedings brought by or on behalf of the +Commission, or to which the Commission is a party, and without admitting or denying the findings +herein, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Section III.3 below, which are admitted, Respondent +consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) +of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions +(“Order”), as set forth below. +III. +On the basis of this Order and Respondent’s Offer, the Commission finds that: +1. Symmetry Medical, Inc. (“Symmetry”), is a Delaware corporation +headquartered in Warsaw, Indiana. A manufacturer of medical implants and instruments as well +as aerospace industry products, Symmetry’s subsidiaries include Symmetry Medical Sheffield +LTD, f/k/a Thornton Precision Components, Limited (“TPC”). Since 2003, TPC’s financial data +has been consolidated into Symmetry’s financial statements filed with the Commission. Since +December 2004, Symmetry’s common stock has been registered with the Commission pursuant to +Section 12(b) of the Exchange act and listed on the New York Stock Exchange. +2. Whiteley, age 45 and a citizen of the United Kingdom, was employed as a +management accountant at TPC from 1997 to October 2006. Whiteley returned to TPC to assist +with TPC’s quarterly inventories in December 2006, March 2007 and June 2007. +3. On February 1, 2012, a final judgment was entered by consent against +Whiteley, 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 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, in the civil action styled, Securities and Exchange +Commission v. Shaun Whiteley, et al. (“SEC v. Whiteley”) (Civil Action No. 3:12cv60), in the +United States District Court for the Northern District of Indiana. +4. The Commission’s complaint in SEC v. Whiteley alleged, among other +things, that as a management accountant at TPC, Whiteley was responsible for TPC’s stock +valuations and oversaw TPC’s physical inventories; that, between at least 2003 and June 2007, +Whiteley knowingly participated in TPC’s manipulation of its financial accounts; that these +manipulations included pre-booking sales revenues, booking fictitious sales revenues, +understating cost of revenues, and creating fictitious work-in-process inventories; that Whiteley +knew (i) that the foregoing manipulations did not conform to US Generally Accepted +Accounting Principles, (i) that the foregoing manipulations materially impacted TPC’s financial +statements, (iii) that TPC’s financial statements were consolidated into Symmetry’s financial +statements and (iv) that Symmetry was a US publicly traded company; and that Whiteley took +significant steps to deceive Symmetry’s internal and external auditors concerning the foregoing +manipulations, including (i) falsification of TPC’s inventory listing to provide apparent support +2 + + + + + + + + + + + + + + + + + +for TPC’s manipulated inventory counts and (ii) falsely stating that certain documents were not +available. +IV. +In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent Whiteley’s Offer. +Accordingly, it is hereby ORDERED, effective immediately, that Whiteley 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 + \ No newline at end of file diff --git a/raw/aaer/2012/AAER-3372.txt b/raw/aaer/2012/AAER-3372.txt new file mode 100644 index 0000000000000000000000000000000000000000..b61c67b584cd293ae02d1239df987003983b1394 --- /dev/null +++ b/raw/aaer/2012/AAER-3372.txt @@ -0,0 +1,1392 @@ + + + + + + + + + + + + + + + + SEC.gov | Ming Zhao and Liping Zhu + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/511866","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Ming Zhao and Liping Zhu + + + + + + + + + + + + Ming Zhao and Liping Zhu + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 22264 / February 22, 2012 + + Accounting and Auditing Enforcement No. 3372 / February 22, 2012 + + SEC v. Ming Zhao and Liping Zhu , Civ. No. 12-CV-1316 + + SEC Charges Chairman and Ex-CEO of Puda Coal With Fraud + + On February 22, 2012, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Southern District of New York charging the Chairman of Puda Coal, Inc. ("Puda") and the former CEO of Puda with securities fraud for the undisclosed theft of the primary asset of the U.S. public company they controlled. The Commission's complaint alleges as follows: + + Defendants Ming Zhao, the Chairman of Puda, and Liping Zhu, Puda's former CEO, perpetrated a massive fraud on Puda's public shareholders by effectively stealing and selling Puda's operating subsidiary. Before the defendants' fraud, Puda held an indirect 90% ownership stake in Shanxi Puda Coal Group Co., Ltd ("Shanxi Coal"), a coal mining company located in the Shanxi Province of the People's Republic of China ("PRC"). In September 2009, just weeks before Puda announced that Shanxi Coal had received a highly lucrative mandate from the provincial government authorities to become a consolidator of smaller coal mining companies, Zhao, with Zhu's knowledge and complicity, transferred Puda's 90% stake in Shanxi Coal to himself. In July 2010, Zhao transferred a 49% equity interest in Shanxi Coal to CITIC Trust Co. Ltd. ("CITIC Trust"), a Chinese private equity fund controlled by CITIC Group, which is reported to be the largest state-owned investment firm in the PRC. CITIC Trust placed its 49% stake in Shanxi Coal in a trust and then sold interests in the trust to Chinese investors. In addition, Zhao caused Shanxi Coal to pledge 51% of its assets to CITIC Trust as collateral for a loan of RMB 3.5 billion ($516 million) from the trust to Shanxi Coal. In exchange, CITIC Trust gave Zhao 1.212 billion preferred shares in the trust. None of these asset transfers were approved by Puda's board or its shareholders or disclosed in Puda's various SEC filings, which Zhao and Zhu signed knowing that those documents were materially false and misleading. Puda also conducted two public offerings in 2010 in the U.S. without disclosing that it no longer had any ownership stake in the coal company, Puda's sole source of revenue. Thus, at the same time that CITIC Trust was effectively selling interests in the coal company to Chinese investors, Zhao and Zhu were still telling U.S. investors that Puda owned a 90% stake in that company. + + In addition, Zhao and Zhu continued their fraudulent scheme to deceive public investors even after the Commission began its investigation. As part of the fraud, Zhu forged a letter purporting to be from CITIC Trust which falsely stated that no funds had actually been loaned to Shanxi Coal and disclaimed any interest in Puda's or Shanxi Coal's assets. Zhao's counsel then provided the forged letter to the Commission's investigative staff and to Puda's audit committee in an effort to create the false impression that Puda and its public shareholders had not been harmed by the asset transfers. After Puda disclosed the letter to the public in an SEC filing, further misleading shareholders about the ownership of Puda's assets, the letter was exposed as a forgery. Zhu admitted forging the letter and resigned as CEO, but Zhao remains Chairman. As a result of the defendants' fraud, Puda is now little more than a shell company, with no ongoing business operations. + + Both Zhao and Zhu are charged in the Commission's complaint with violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(b)(5), and 14(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13b2-1, 13b2-2, 14a-3, and 14a-9a thereunder. Both men are also alleged to be liable pursuant to Section 20(a) of the Exchange Act as control persons of Puda for Puda's violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder, and that they are also liable pursuant to Section 20(e) of the Exchange Act for aiding and abetting those violations. Zhu is also charged with violating Exchange Act Rule 13a-14. Finally, the Commission alleges, in the alternative, that Zhao and Zhu are liable pursuant to Section 20(a) of the Exchange Act as control persons of Puda for Puda's violations of Sections 10(b) and 14(a) of the Exchange Act and Rules 10b-5(a), 10b-5(b), and 10b-5(c), 14a-3 and 14a-9, and that they are also liable pursuant to Section 20(e) of the Exchange Act for aiding and abetting those violations. + + The complaint seeks a final judgment permanently enjoining the defendants from committing future violations of these provisions, ordering them to disgorge their ill-gotten gains plus prejudgment interest, imposing financial penalties and barring them from acting as officers or directors of a public company. + + SEC Complaint in this matter +   + + + +  + + + + + + + + + + + Resources + + + + + SEC Complaint + + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Share sensitive information only on official, secure websites. + + + + + + + + + + + + + + + + + SEC homepage + + + + + + + Menu + + + + + + + + + + + + + + Close + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + Search Filings + + + + + + + + + Search Filings + + + + + + + + + Full Text Search + + + + + + Latest Filings + + + + + + Mutual Fund Search + + + + + + Variable Insurance Products Search + + + + + + SIC Codes + + + + + + CIK Lookup + + + + + + Public Dissemination Service (PDS) + + + + + + Search Assistance + + + + + + + + + + + + + Submit Filings + + + + + + + + + Submit Filings + + + + + + + + + EDGAR Filer Management Portal + + + + + + EDGAR Filing Portal + + + + + + Online Forms Management Portal + + + + + + EDGAR Next + + + + + + Forms Index + + + + + + Filer Support & Resources + + + + + + + + + + + + + Data & Research + + + + + + + + + Data & Research + + + + + + + + + Data Library + + + + + + Statistics & Data Visualizations + + + + + + Structured Data + + + + + + Investment Management Data + + + + + + Open Data at the SEC + + + + + + + + + + + + + Rules, Enforcement, & Compliance + + + + + + + + + + + + + + + + + + + + Rules & Regulations + + + + + + + + + Rulemaking Activity + + + + + + Submit Public Comments + + + + + + Staff Guidance + + + + + + No-Action, Interpretive, and Exemptive Letters + + + + + + Self-Regulatory Organization Rulemaking + + + + + + Public Petitions for Rulemaking + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + + + Litigation Releases + + + + + + Administrative Proceedings + + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + + Trading Suspensions + + + + + + Distributions to Harmed Investors + + + + + + Receiverships + + + + + + + + + + + + + + + + + Compliance + + + + + + + + + Examination Priorities + + + + + + Risk Alerts + + + + + + Compliance Outreach Program + + + + + + + + + + + + + + + + + + + + + + + Proposed Rules + + + + + + What's New + + + + + + Whistleblower Program + + + + + + + + + + + + + + + + + + + Featured Topics + + + + + + + + + Featured Topics + + + + + + + + + Crypto Task Force + + + + + + Cybersecurity + + + + + + Market Structure Analytics + + + + + + Saving and Investing for Military Personnel + + + + + + Saving and Investing for Teachers + + + + + + SEC-CFTC Harmonization Initiative + + + + + + Treasury Clearing Implementation + + + + + + + + + + + + + About + + + + + + + + + About + + + + + + + + + Mission + + + + + + Commissioners + + + + + + Divisions & Offices + + + + + + Division & Office Directors + + + + + + Advisory Committees + + + + + + Budget & Performance + + + + + + Reports & Publications + + + + + + Commission Votes + + + + + + Contact the SEC + + + + + + Careers + + + + + + + + + + + + + Submit a Tip or Complaint + + + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + More in this Section + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Biomet, Inc. + + + + + + + + + + + + Biomet, Inc. + + + + + + + + + + + + + + + + + + + U.S. Securities and Exchange Commission + + Litigation Release No. 22306 / March 26, 2012 + + Accounting and Auditing Enforcement Release No. 3374 / March 26, 2012 + + Securities and Exchange Commission v. Biomet, Inc., Civil Action No. 1: 12-CV-00454 (D.D.C.)(RMC) (March 26, 2012) + + SEC CHARGES MEDICAL DEVICE COMPANY BIOMET WITH FOREIGN BRIBERY + + Washington, D.C., March 26, 2012 â€" The Securities and Exchange Commission today charged Warsaw, Ind.-based medical device company Biomet Inc. with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries and agents bribed public doctors in Argentina, Brazil, and China for nearly a decade to win business. + + Biomet, which primarily sells products used by orthopedic surgeons, agreed to pay more than $22 million to settle the SEC's charges as well as parallel criminal charges announced by the U.S. Department of Justice today. The charges arise from the SEC and DOJ's ongoing proactive global investigation into medical device companies bribing publicly-employed physicians. + + The SEC alleges that Biomet and its four subsidiaries paid bribes from 2000 to August 2008, and employees and managers of all levels of the parent company and the subsidiaries were involved along with the distributors who sold Biomet's products. Biomet's compliance and internal audit functions failed to stop the payments to doctors even after learning about the illegal practices. + + According to the SEC's complaint filed in federal court in Washington D.C., employees of Biomet Argentina SA paid kickbacks as high as 15 to 20 percent of each sale to publicly-employed doctors in Argentina. Phony invoices were used to justify the payments, and the bribes were falsely recorded as "consulting fees" or "commissions" in Biomet's books and records. Executives and internal auditors at Biomet's Indiana headquarters were aware of the payments as early as 2000, but failed to stop it. + + The SEC alleges that Biomet's U.S. subsidiary Biomet International used a distributor to bribe publicly-employed doctors in Brazil by paying them as much as 10 to 20 percent of the value of their medical device purchases. Payments were openly discussed in communications between the distributor, Biomet International employees, and Biomet's executives and internal auditors in the U.S. For example, a February 2002 internal Biomet memorandum about a limited audit of the distributor's books stated: + + "Brazilian Distributor makes payments to surgeons that may be considered as a kickback. These payments are made in cash that allows the surgeon to receive income tax free. …The accounting entry is to increase a prepaid expense account. In the consolidated financials sent to Biomet, these payments were reclassified to expense in the income statement." + + According to the SEC's complaint, two additional subsidiaries â€" Biomet China and Scandimed AB â€" sold medical devices through a distributor in China who provided publicly-employed doctors with money and travel in exchange for their purchases of Biomet products. Beginning as early as 2001, the distributor exchanged e-mails with Biomet employees that explicitly described the bribes he was arranging on the company's behalf. For example, one e-mail stated: + + "[Doctor] is the department head of [public hospital]. [Doctor] uses about 10 hips and knees a month and it's on an uptrend, as he told us over dinner a week ago. …Many key surgeons in Shanghai are buddies of his. A kind word on Biomet from him goes a long way for us. Dinner has been set for the evening of the 24th. It will be nice. But dinner aside, I've got to send him to Switzerland to visit his daughter." + + The SEC alleges that some e-mails described the way that vendors would deliver cash to surgeons upon completion of surgery, and others discussed the amount of payments. The distributor explained in one e-mail that 25 percent in cash would be delivered to a surgeon upon completion of surgery. Biomet sponsored travel for 20 Chinese surgeons in 2007 to Spain, where a substantial part of the trip was devoted to sightseeing and other entertainment. + + Biomet consented to the entry of a court order requiring payment of $4,432,998 in disgorgement and $1,142,733 in prejudgment interest. Biomet also is ordered to retain an independent compliance consultant for 18 months to review its FCPA compliance program, and is permanently enjoined from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934. Biomet agreed to pay a $17.28 million fine to settle the criminal charges. + + The SEC's investigation was conducted by Brent S. Mitchell with Tracy L. Price of the Enforcement Division's FCPA Unit and Reid A. Muoio. The SEC acknowledges the assistance of the U.S. Department of Justice's Fraud Section and the Federal Bureau of Investigation. The investigation into bribery in the medical device industry is continuing. + + SEC Complaint in this matter +   + + + +  + + + + + + + + + + + Resources + + + + + SEC Complaint + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2012/AAER-3376.txt b/raw/aaer/2012/AAER-3376.txt new file mode 100644 index 0000000000000000000000000000000000000000..315df5692575e769c2f58d9413c31fc7d9498b99 --- /dev/null +++ b/raw/aaer/2012/AAER-3376.txt @@ -0,0 +1,81 @@ + + + + + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 66735 / April 4, 2012 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3376 / April 4, 2012 + +ADMINISTRATIVE PROCEEDING +File No. 3-14834 +______________________________ +: +In the Matter of : + : ORDER OF SUSPENSION PURSUANT +BRYAN N. POLOZOLA, 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 Bryan N. Polozola (“Polozola”) pursuant to Rule 102(e)(2) of the +Commission’s Rules of Practice [17 C.F.R. § 201.102(e)(2)]. +1 + + + II. + +The Commission finds that: + +1. Polozola is a certified public accountant licensed in Texas and New York. + +2. On March 26, 2012, a judgment of conviction was entered against Polozola in +United States v. Bryan N. Polozola, 1:11-cr-00374-RLW, in the United States District Court for +the District of Columbia, finding him guilty of one count of making false statements to +Commission staff during investigative testimony in violation of 18 U.S.C. § 1001. + + +1 Rule 102(e)(2) provides in pertinent part: “Any . . . person who has been convicted of a felony or a +misdemeanor involving moral turpitude shall be forthwith suspended from appearing or practicing before the +Commission.” + + + + +2 + +3. As a result of his conviction, Polozola was sentenced to a 24 month term of +probation and ordered to serve 200 hours of community service and to pay an assessment in the +amount of $100. + +III. + +In view of the foregoing, the Commission finds that Polozola 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 Bryan N. Polozola 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/2012/AAER-3377.pdf b/raw/aaer/2012/AAER-3377.pdf new file mode 100644 index 0000000000000000000000000000000000000000..9a43779da21b32766add6ec967fe68546926a0e3 Binary files /dev/null and b/raw/aaer/2012/AAER-3377.pdf differ diff --git a/raw/aaer/2012/AAER-3378.txt b/raw/aaer/2012/AAER-3378.txt new file mode 100644 index 0000000000000000000000000000000000000000..6f7ff5210d0fb721188f4e9c0d54cdc2d12f5ec4 --- /dev/null +++ b/raw/aaer/2012/AAER-3378.txt @@ -0,0 +1,1386 @@ + + + + + + + + + + + + + + + + SEC.gov | Anthony J. Nocella and J. Russell McCann + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/512146","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Nocella and J. Russell McCann + + + + + + + + + + + + Anthony J. Nocella and J. Russell McCann + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 22321 / April 6, 2012 + + Accounting and Auditing Enforcement Release No. 3378 / April 6, 2012 + + SEC v. Anthony J. Nocella and J. Russell McCann , Case No. 4:12-cv-1051 in the United States District Court for the Southern District of Texas. + + The Securities and Exchange Commission today charged Anthony J. Nocella and J. Russell McCann for their involvement in a financial fraud at Franklin Bank Corp., a Houston-based bank holding company. The SEC's complaint alleges that Franklin CEO Nocella and CFO McCann implemented increasingly aggressive loan modification programs during the 3 rd and 4 th quarters of 2007 to hide from investors the true amount of Franklin's non-performing assets and to artificially inflate Franklin's net income and earnings. + + According to the SEC's complaint filed in U.S District Court for the Southern District of Texas, Nocella and McCann knew that the delinquencies and non-performing loans in Franklin's single family and residential construction loan portfolios increased significantly during the summer of 2007. The SEC alleges that Nocella and McCann implemented three loan modification schemes that caused Franklin to account for delinquent and non-performing loans as performing, thereby concealing that the quality of the Bank's loan portfolio was deteriorating. By the end of September 2007, Nocella and McCann had allegedly used the loan modification programs to conceal from shareholders over $11 million in non-performing single family residential loans and $13.5 million in non-performing residential construction loans. + + The SEC's complaint further alleges that, as a result of the loan modification scheme, Nocella and McCann understated Franklin's non-performing assets by 44%, and overstated Franklin's net income by 317% for the quarter ended September 30, 2007. The complaint also alleges that Nocella and McCann overstated Franklin's earnings by 77% for the 3 rd quarter of 2007. Specifically, Nocella and McCann represented that Franklin earned $0.30 per share, which improperly included $0.23 per share directly attributable to the loan modification scheme. + + The SEC has alleged that Nocella and McCann committed direct violations or aided and abetted violations of Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-11, 13a-13, 13a-14, 13b2-1, and 13b2-2 thereunder. The SEC's complaint seeks permanent injunctions, disgorgement with prejudgment interest, civil penalties, officer-and-director bars, and repayment of bonuses pursuant to Section 304 of the Sarbanes Oxley Act of 2002. + + SEC Complaint in this matter +   + + + +  + + + + + + + + + + + Resources + + + + + SEC Complaint + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2012/AAER-3380.txt b/raw/aaer/2012/AAER-3380.txt new file mode 100644 index 0000000000000000000000000000000000000000..ed2edbbbf485b68a3d27114d60a552bdbc3245ed --- /dev/null +++ b/raw/aaer/2012/AAER-3380.txt @@ -0,0 +1,117 @@ + + + +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 66796 / April 12, 2012 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3380 / April 12, 2012 + +ADMINISTRATIVE PROCEEDING +File No. 3-14846 + + : +In the Matter of : ORDER INSTITUTING ADMINISTRATIVE + : PROCEEDINGS PURSUANT TO RULE +JORGE L. CASTILLO, 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 Jorge L. +Castillo (“Castillo” or “Respondent”) pursuant to Rule 102(e)(3)(i) of the Commission’s Rules of +Practice.1 + + +II. + + In anticipation of the institution of these proceedings, Respondent has submitted an Offer +of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the +purpose of these proceedings and any other proceedings brought by or on behalf of the +Commission, or to which the Commission is a party, and without admitting or denying the findings + +1 Rule 102(e)(3)(i) provides, in relevant part, that: + + The Commission, with due regard to the public interest and without preliminary hearing, +may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has +been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his +or her misconduct in an action brought by the Commission, from violating or aiding and abetting +the violation of any provision of the Federal securities laws or of the rules and regulations +thereunder. + + 2 +herein, except as to the Commission’s jurisdiction over him and the subject matter of these +proceedings, and the findings contained in Section III. 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. Castillo, age 56, is and has been a certified public accountant licensed to +practice in the State of New Jersey. From at least 2003 through 2010, Castillo served, and publicly +presented himself, as the independent, outside auditor for Provident Capital Indemnity Ltd. (“PCI”), +a purported insurance and reinsurance company based in Costa Rica. + + 2. On April 6, 2012, a final judgment was entered against Castillo by consent, +permanently enjoining him 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, in the civil +action entitled SEC v. Provident Capital Indemnity, Ltd., Minor Vargas Calvo, and Jorge L. +Castillo, Civil Action No. 3:11-CV-045 (REP), in the United States District Court for the Eastern +District of Virginia. + + 3. The Commission’s Complaint alleged, among other things, that Castillo +falsely represented that he had audited PCI’s financial statements from at least 2003 through +2009, when, in fact, he never conducted an audit of PCI’s financial statements for those years; +rather than conduct proper audits, he instead issued clean audit opinions at the bidding of PCI’s +president, which falsely stated that PCI’s financial statements for those years “present fairly, in +all material respects, the financial position of [PCI] in conformity with generally accepted +accounting principles.” The Complaint alleged that Castillo’s actions, in turn, supported the +illusion that PCI had materially larger assets – including a Long-Term Asset that purportedly +comprised 70% to 80% of PCI’s total assets – and a greater financial wherewithal to support its +obligation on financial guarantee bonds issued in connection with life settlement investments. +Castillo allegedly knew or was reckless in not knowing that the Long-Term Asset did not exist +and assisted PCI’s president in manufacturing false backup for the Long-Term Asset. The +Complaint also alleged that Castillo knew, or was reckless in not knowing that PCI was +providing his false audit reports to a rating agency that, in partial reliance on those reports, gave +PCI a high rating. The Complaint also alleged that, on occasion, Castillo assisted PCI’s +president in formulating responses to the rating agency’s questions. The Complaint also alleged +that PCI’s president asked Castillo to issue certificates to life settlement issuers that falsely stated +PCI had made payments to purchase reinsurance, which Castillo did; such actions supported the +illusion that PCI’s obligations on financial guarantee bonds were backed by reinsurance. + +4. The Commission’s Complaint further alleged that in 2010, after learning of +a regulatory inquiry into his conduct, Castillo asked the president of PCI to manufacture backup + + 3 +material to support Castillo’s purported audit procedures and told the PCI president that he had +destroyed or was in the process of destroying all of his e-mails. Castillo also urged PCI’s +president to destroy documents. + + +IV. + + In view of the foregoing, the Commission deems it appropriate and in the public interest to +impose the sanction agreed to in Respondent Castillo’s Offer. + + Accordingly, it is hereby ORDERED, effective immediately, that: + + Castillo 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/2012/AAER-3383.txt b/raw/aaer/2012/AAER-3383.txt new file mode 100644 index 0000000000000000000000000000000000000000..25362faa6b1a4c2ff8f7bfad2fc5236460e285a3 --- /dev/null +++ b/raw/aaer/2012/AAER-3383.txt @@ -0,0 +1,1368 @@ + + + + + + + + + + + + + + + + SEC.gov | SinoTech Energy Limited, Qingzeng Liu, Guoqiang Xin, and Boxun Zhang + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/512246","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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SinoTech Energy Limited, Qingzeng Liu, Guoqiang Xin, and Boxun Zhang, Civ. Action No. 2:12-cv-00960 (United States District Court for the Western District of Louisiana, Lake Charles Division). + + SEC Sues Chairman of SinoTech Energy for Misappropriating $40 Million of Company Cash, and SinoTech for Falsifying Asset Values + + On April 23, 2012, the Commission filed suit in U.S. District Court in Lake Charles, Louisiana against China-based SinoTech Energy Limited, its Chairman and controlling shareholder, Qingzeng Liu, its CEO, Guoqiang Xin, and its former CFO, Boxun Zhang, charging the defendants with securities fraud and other violations. + + The Commission alleges that Liu misappropriated more than $40 million from SinoTech's primary bank account during July and August 2011. According to the Commission, he then stood silently by in August 2011 as SinoTech attempted to counter public accusations of fraud by claiming the company held $93 million in its bank accounts ¢€" a statement Liu and SinoTech knew was false. + + The Commission further alleges that, since its November 2010 IPO, SinoTech has intentionally misled investors about its use of IPO proceeds and the value of its assets, specifically the lateral hydraulic drilling ("LHD") units that are central to its business. According to the Commission, SinoTech's IPO filings represented that the company would use the IPO proceeds to acquire up to 20 LHD units at an average price of $7.5 million each. Subsequent public filings made it appear that SinoTech had followed through on these representations and acquired units valued on its balance sheet at $94 million. The SEC alleges, however, SinoTech had in fact only purchased 11 units with a total value of less than $17 million. As a result, the value of LHD units shown on SinoTech's balance sheet was materially overstated. + + The complaint alleges that SinoTech, Xin, and Zhang violated or aided and abetted violations of Section 17(a)(2) of the Securities Act of 1933 and 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 complaint further charges Liu, Xin and Zhang with violations of Exchange Act Section 13(b)(5) and Rule 13b2-1, and that Xin and Zhang also violated Exchange Act Rules 13a-14 and 13b2-2. Finally, the complaint alleges Liu, Xin and Zhang were "control persons," liable under Section 20(a) of the Exchange Act. The Commission seeks permanent injunctive relief and civil penalties against all defendants, as well as disgorgement of ill-gotten gains against SinoTech and Liu. The SEC also requests bars against the individual defendants from serving as officers or directors of U.S. public companies. + +   + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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Peterson + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/512271","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Peterson + + + + + + + + + + + + Garth R. Peterson + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 22346 / April 25, 2012 + + Accounting and Auditing Enforcement Release No. 3384 / April 25, 2012 + + Securities and Exchange Commission v. Garth R. Peterson , Case No. CV 12-2033 (E.D.N.Y)(JBW) (filed April 25, 2012) + + SEC CHARGES FORMER MORGAN STANLEY EXECUTIVE WITH FCPA VIOLATIONS AND INVESTMENT ADVISER FRAUD + + The Securities and Exchange Commission today charged a former executive at Morgan Stanley with violating the Foreign Corrupt Practices Act (FCPA) as well as securities laws for investment advisers by secretly acquiring millions of dollars worth of real estate investments for himself and an influential Chinese official who in turn steered business to Morgan Stanley's funds. + + The SEC alleges that Garth R. Peterson, who was a managing director in Morgan Stanley's real estate investment and fund advisory business, had a personal friendship and secret business relationship with the former Chairman of Yongye Enterprise (Group) Co. â€" a Chinese state-owned entity with influence over the success of Morgan Stanley's real estate business in Shanghai. Peterson secretly arranged to have at least $1.8 million paid to himself and the Chinese official that he disguised as finder's fees that Morgan Stanley's funds owed to third parties. Peterson also secretly arranged for him, the Chinese official, and an attorney to acquire a valuable Shanghai real estate interest from a Morgan Stanley fund. Peterson was acquiring an interest from the fund but negotiated both sides of the transaction. In exchange for offers and payments from Peterson, the Chinese official helped Peterson and Morgan Stanley obtain business while personally benefitting from some of these same investments. Peterson's deception, self-dealing, and misappropriation breached the fiduciary duties he owed to Morgan Stanley's funds as their representative. + + Peterson agreed to a settlement of the SEC's charges in which he will be permanently barred from the securities industry, pay more than $250,000 in disgorgement, and relinquish his interest in the valuable Shanghai real estate (currently valued at approximately $3.4 million) that he secretly acquired through his misconduct. The U.S. Department of Justice has filed a related criminal case against Peterson. + + According to the SEC's complaint filed in U.S. District Court for the Eastern District of New York, Peterson's violations occurred from at least 2004 to 2007. His principal responsibility at Morgan Stanley was to evaluate, negotiate, acquire, manage and sell real estate investments on behalf of Morgan Stanley's advisers and funds. He was terminated in 2008 due to his FCPA misconduct. + + The SEC alleges that Peterson led Morgan Stanley's effort to build a Chinese real estate investment portfolio for its real estate funds by cultivating a relationship with the Chinese official and taking advantage of his ability to steer opportunities to Morgan Stanley and his influence in helping with needed governmental approvals. Morgan Stanley thus partnered with Yongye on a number of significant Chinese real estate investments. At the same time, Peterson and the Chinese official expanded their personal business dealings both in a real estate interest secretly acquired from Morgan Stanley as well as by investing together in Chinese franchises of well-known U.S. fast food restaurants. Peterson failed to disclose these investments in annual disclosures that Morgan Stanley required him to make as part of his employment. + + According to the SEC's complaint, Peterson openly credited the Chinese official with helping obtain approvals required from other Chinese government entities for a deal to close. He wrote to several Morgan Stanley employees in response to an e-mail discussing the terms of one of Yongye's purported investments, "Everyone pls keep in mind the big picture here. YY gave us this deal. ... So we owe them a favor relating to this deal. ... This should be very easy and friendly." In another e-mail a week later, Peterson described "YYI" as "our friends who are coming in because WE OWE THEM A FAVOR." + + The SEC alleges that a Morgan Stanley compliance officer specifically informed Peterson in 2004 that employees of Yongye, a Chinese state-owned entity, were government officials for purposes of the FCPA. Peterson also received at least 35 FCPA compliance reminders from Morgan Stanley, but nonetheless committed the FCPA violations. + + The SEC's complaint charges Peterson with violations of the anti-bribery, books and records and internal control provisions of the FCPA, and with aiding and abetting violations of the anti-fraud provisions of the Investment Advisers Act of 1940. + + Peterson has consented to a court order (i) permanently enjoining him from violating Sections 30A and 13(b)(5) of the Securities Exchange Act of 1934 and Sections 206(1) and (2) of the Investment Advisers Act, (ii) requiring him to disgorge $254,589, and (iii) requiring him to relinquish to a court-appointed receiver the interest he secretly acquired from Morgan Stanley's fund in the Jin Lin Tiandi Serviced Apartments, which has a current estimated value of approximately $3.4 million. The proposed settlement is subject to court approval. Peterson has also consented to permanent industry bars based on the anticipated entry of the injunction against him and his criminal conviction. + + The SEC acknowledges the assistance of the Fraud Section of DOJ's Criminal Division, the U.S. Attorney's Office for the Eastern District of New York, and the Federal Bureau of Investigation. Morgan Stanley, which is not charged in the matter, cooperated with the SEC's inquiry and conducted a thorough internal investigation to determine the scope of the improper payments and other misconduct involved. + + SEC Complaint in this matter +   + + + +  + + + + + + + + + + + Resources + + + + + SEC Complaint + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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China Natural Gas, Inc. and Qinan Ji, United States District Court for the Southern District of New York (Civil Action No. 12-cv-3824 (PGG)) + + SEC CHARGES CHINA NATURAL GAS AND ITS CHAIRMAN FOR CONCEALING LOANS TO BENEFIT HIS FAMILY + + The Securities and Exchange Commission today filed suit in U.S. District Court for the Southern District of New York against China-based China Natural Gas, Inc. and its chairman and former CEO Qinan Ji for defrauding investors by secretly loaning company funds to benefit Ji's son and nephew while failing to disclose the true nature of the loans. + + The SEC alleges that Ji coordinated two short-term loans totaling more than $14 million in January 2010. One loan went to a real estate firm co-owned by Ji's son and nephew through a sham borrower. The other loan went to a business partner of the real estate firm. Ji signed the company's SEC filings that falsely stated the loans were made to third parties. Ji then lied about the true borrower to China Natural Gas's board, investors, and auditors as well as during the company's internal investigation. + + According to the SEC's complaint, Ji's nephew approached China Natural Gas in late 2009 to obtain a loan for a large real estate development project being run by Demaoxing Real Estate Co., a firm that was 90 percent owned by Ji's son and 10 percent owned by Ji's nephew. Ji recognized it was inappropriate for China Natural Gas to loan money directly to his nephew, so he asked his niece's husband, who was the company's internal audit chief, to use a sham borrower. The internal audit chief located an individual named Taoxiang Wang, and fabricated notes of a meeting with her to discuss loan terms. Wang signed a loan agreement for $9.9 million, and the money was wired directly into a Demaoxing bank account with a note stating that the amount was for "raw material expenses." + + The SEC alleges that around the same time, China Natural Gas made a $4.4 million loan to Shaanxi Juntai Housing Purchase Co., a business partner on Demaoxing's real estate development project. Shaanxi Juntai's then-general manager was Ji's friend. The internal audit chief talked with Ji's nephew about the project when arranging the loan, which directly benefitted Demaoxing. + + According to the SEC's complaint, Ji was the company CEO until he resigned in October 2011. He approved both loans without obtaining prior authorization from the board or informing the CFO. Ji repeatedly lied to conceal the related party nature of both loans. When questioned about the loans by the China Natural Gas board, Ji falsely stated that the loans involved senior Chinese government officers who were in charge of the company's liquid natural gas project. During a May 10, 2010 conference call about quarterly earnings, Ji responded to a question about the loans by again stating that they were made to obtain approvals from government officials. He later told the board that he made the loans to earn quick and lucrative interest, and lied about the true nature of the loans during the company's internal investigation. Ji also lied to the company's auditors by signing a letter stating that the two loans were for business purposes and the borrowers were not related parties. + + The SEC also alleges that in the fourth quarter of 2008, China Natural Gas paid $19.6 million to acquire a natural gas company but did not timely and properly report the transaction in its SEC filings. As with the loans, Ji approved the acquisition without obtaining prior authorization from the board. + + The complaint alleges that China Natural Gas and Ji violated or aided and abetted violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, and 14a-9. The complaint further alleges that Ji violated Exchange Act Section 13(b)(5) and Rules 13a-14, 13b2-1 and 13b2-2. Ji also is charged with violating provisions of the Sarbanes-Oxley Act that require him to repay China Natural Gas the bonuses and stock sale profits he received after the company filed false reports with the SEC. The SEC's complaint seeks a final judgment that imposes financial penalties, bars Ji from acting as an officer or director of a public company, and permanently enjoins Ji and China Natural Gas from future violations of these provisions. + + SEC Complaint in this matter +   + + + +  + + + + + + + + + + + Resources + + + + + SEC Complaint + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2012/AAER-3386.pdf b/raw/aaer/2012/AAER-3386.pdf new file mode 100644 index 0000000000000000000000000000000000000000..37ca61ed93e6356240b5037121ed41b12b658585 Binary files /dev/null and b/raw/aaer/2012/AAER-3386.pdf differ diff --git a/raw/aaer/2012/AAER-3388.pdf b/raw/aaer/2012/AAER-3388.pdf new file mode 100644 index 0000000000000000000000000000000000000000..b86bae01cc45a411671da816cd8be8989791c40b Binary files /dev/null and b/raw/aaer/2012/AAER-3388.pdf differ diff --git a/raw/aaer/2012/AAER-3388.txt b/raw/aaer/2012/AAER-3388.txt new file mode 100644 index 0000000000000000000000000000000000000000..1b1c138d2f1d104f8814658ab6eff9f9c0c22362 --- /dev/null +++ b/raw/aaer/2012/AAER-3388.txt @@ -0,0 +1,125 @@ + + + + + + + + + + +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION +SECURITIES EXCHANGE ACT OF 1934 +Release No. 67164 / June 8, 2012 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3388 / June 8, 2012 +ADMINISTRATIVE PROCEEDING +File No. 3-13007 +: ORDER GRANTING APPLICATION FOR +In the Matter of : +: +REINSTATEMENT TO APPEAR AND PRACTICE +BEFORE THE COMMISSION AS AN ACCOUNTANT +Kenneth M. Avery, CPA : +: +RESPONSIBLE FOR THE PREPARATION OR +REVIEW OF FINANCIAL STATEMENTS REQUIRED +: TO BE FILED WITH THE COMMISSION +On April 14, 2008, Kenneth M. Avery, CPA (“Avery”) 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 Avery pursuant to Rule +102(e)(3)(i) of the Commission's Rules of Practice. +1 This order is issued in response to Avery’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 Avery, an audit partner with the public accounting firm +Arthur Andersen LLP (“Andersen”), engaged in improper professional conduct in connection +with the audit of the financial statements of WorldCom, Inc. (“WorldCom”) for its fiscal year +ended December 31, 2001. During 2001, WorldCom improperly removed approximately $3 +billion in line cost expenses from its income statement by improperly and fraudulently +characterizing these expenses as “assets” on its balance sheet. Avery failed to comply with +Generally Accepted Auditing Standards (“GAAS”) by unreasonably: (i) failing to exercise due +professional care in the planning and performance of the audit; (ii) failing to exercise an attitude +of professional skepticism throughout the audit; (iii) failing to obtain sufficient evidential matter +to afford a reasonable basis for Andersen’s opinion regarding WorldCom’s financial statements; +(iv) failing to consider expanding the extent of the audit procedures applied, applying procedures +closer to or as of year end, particularly in critical audit areas, or modifying the nature of +1 See Accounting and Auditing Enforcement Release No. 2809 dated April 14, 2008. Avery was permitted, pursuant +to the order, to apply for reinstatement after three years upon making certain showings. + + + + + + + + + + + + + + + + + + + + +procedures to obtain more persuasive evidence, in light of the significant risks of material +misstatement that existed at WorldCom; (v) failing to plan and perform the audit to obtain +reasonable assurance about whether the financial statements were free of material misstatement, +whether caused by error or fraud; and (vi) issuing an audit report that falsely stated that the audit +was conducted in accordance with GAAS and that WorldCom’s financial statements were +presented in conformity with Generally Accepted Accounting Principles. +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, Avery +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. Avery 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, Avery’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 Avery, it appears that he has complied with the terms of the April 14, 2008 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 +Avery, by undertaking to have his work reviewed by the independent audit committee of any +company for which he works, or in some other manner acceptable to the Commission, in his +practice before the Commission as a preparer or reviewer of financial statements required to be +filed with the Commission, has shown good cause for reinstatement. Therefore, it is accordingly, +2 Rule 102(e)(5)(i) provides: +“An application for reinstatement of a person permanently suspended or disqualified under paragraph (e)(1) or (e)(3) +of this section may be made at any time, and the applicant may, in the Commission’s discretion, be afforded a +hearing; however, the suspension or disqualification shall continue unless and until the applicant has been reinstated +by the Commission for good cause shown.” 17 C.F.R. § 201.102(e)(5)(i). +2 + + + + + + +ORDERED pursuant to Rule 102(e)(5)(i) of the Commission’s Rules of Practice that +Kenneth M. Avery, 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 +3 + \ No newline at end of file diff --git a/raw/aaer/2012/AAER-3389.txt b/raw/aaer/2012/AAER-3389.txt new file mode 100644 index 0000000000000000000000000000000000000000..ddd0f8da3ba568c8e847b8134af018284bad6ed3 --- /dev/null +++ b/raw/aaer/2012/AAER-3389.txt @@ -0,0 +1,80 @@ + + + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 67218 / June 19, 2012 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3389 / June 19, 2012 + +ADMINISTRATIVE PROCEEDING +File No. 3-14921 +______________________________ +: +In the Matter of : + : ORDER OF SUSPENSION PURSUANT +LAURENCE M. BROWN, 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 Laurence M. Brown (“Brown”) pursuant to Rule 102(e)(2) of the +Commission’s Rules of Practice, 17 C.F.R. § 201.102(e)(2).1 + + + II. + +The Commission finds that: + +1. Brown, age 64, is and has been a certified public accountant licensed to practice in +the State of New York. From at least January 1, 2008 until June 30, 2010, Brown was a principal, +and managing and general partner of Marshall Granger & Company LLP, an accounting firm +located in Armonk, New York. + +2. On January 25, 2012, a judgment of conviction was entered against Brown in +United States v. Brown, No. 10-Cr. 991 (MGC), in the United States District Court for the +Southern District of New York, finding him guilty of one count of securities fraud in violation of +15 U.S.C. § 78j(b), two counts of wire fraud in violation of 18 U.S.C. § 1342, and one count of + +1 Rule 102(e)(2) provides in pertinent part: AAny ... 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 + +money laundering in violation of 18 U.S.C. § 1957. + +3. As a result of this conviction, Brown was sentenced to 60 months imprisonment +in a federal penitentiary and ordered to pay restitution in the amount of $2,096,394. + +III. + +In view of the foregoing, the Commission finds that Brown 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 Laurence M. Brown 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/2012/AAER-3391.txt b/raw/aaer/2012/AAER-3391.txt new file mode 100644 index 0000000000000000000000000000000000000000..44ae9b2be1a5180362feb265b12b5a0ee700ce90 --- /dev/null +++ b/raw/aaer/2012/AAER-3391.txt @@ -0,0 +1,96 @@ + + + + + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 67282 / June 27, 2012 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3391 / June 27, 2012 + +ADMINISTRATIVE PROCEEDING +File No. 3-14931 +______________________________ +: +In the Matter of : + : ORDER OF SUSPENSION PURSUANT +H. CLAYTON PETERSON, 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 H. Clayton Peterson (“Clayton Peterson”) 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. Clayton Peterson, age 66, resides in Denver, Colorado, Phoenix, Arizona +and Cabo San Lucas, Mexico. Now retired, he was a certified public accountant at Arthur +Andersen for thirty years. He was licensed as a CPA by the state of Colorado; his license +expired in 2003. From 2006 through 2010, he was a member of the board of directors of Mariner +Energy Inc. (“Mariner Energy”) and served as the chairman of the board’s audit committee. He + +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 + +has also served on the boards of directors of the real estate company, RE/Max International, Inc., +and the oil and gas company, Lone Pine Resources, Inc. + +2. On August 5, 2011, the Commission filed a civil action against Clayton +Peterson in SEC v. H. Clayton Peterson et al., Civil Action No. 11-CV-5448 (S.D.N.Y.). On +June 1, 2012, the Court entered an order permanently enjoining Clayton Peterson, by consent, +from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 +thereunder. + + 3. The Commission’s complaint alleges that in April 2010 C layton Peterson +engaged in insider trading by tipping his son regarding the impending acquisition of Mariner +Energy Inc. and instructing his son to purchase Mariner Energy securities for Clayton Peterson’s +daughter. + + 4. On August 5, 2011, Clayton Peterson pled guilty to one count of securities +fraud and one count of conspiracy to commit securities fraud in violation of 15 U.S.C. §§ 78j(b) +and 78ff and 18 U.S.C. § 371 before the United States District Court for the Southern District of +New York, in United States v. H. Clayton Peterson +, 11-CR-00665 (RPP). + + +III. + +In view of the foregoing, the Commission finds that Clayton Peterson 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 Clayton Peterson 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/2012/AAER-3394.pdf b/raw/aaer/2012/AAER-3394.pdf new file mode 100644 index 0000000000000000000000000000000000000000..6b3a626807638e561b5170fd6f74ba6e447564e1 --- /dev/null +++ b/raw/aaer/2012/AAER-3394.pdf @@ -0,0 +1,3 @@ +version https://git-lfs.github.com/spec/v1 +oid sha256:54bd4221dfa09934a7565b02ca4d97a663fdc71333b51f201d05ffef606ae030 +size 125445 diff --git a/raw/aaer/2012/AAER-3394.txt b/raw/aaer/2012/AAER-3394.txt new file mode 100644 index 0000000000000000000000000000000000000000..045f7429f7436253d580655fb7d8a682eabd99c2 --- /dev/null +++ b/raw/aaer/2012/AAER-3394.txt @@ -0,0 +1,868 @@ + + + + + + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 67472 / July 19, 2012 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3394 / July 19, 2012 + +ADMINISTRATIVE PROCEEDING +File No. 3-14958 + + +In the Matter of + +HURON CONSULTING +GROUP INC., GARY L. +BURGE, CPA, AND +WAYNE E. LIPSKI, CPA, + +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 AND REMEDIAL +SANCTIONS + +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 Huron Consulting Group Inc., Gary L. Burge, +and Wayne E. Lipski (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 + + + +2 +Findings, and Imposing a Cease-and-Desist Order and Remedial Sanctions (“Order”), as set forth +below. + +III. + + On the basis of this Order and Respondents' Offers, the Commission finds that: + +SUMMARY + +1. Huron Consulting Group Inc. (“Huron” or the “Company”), a provider of financial +and operational consulting services, Gary L. Burge (“Burge”), Huron’s former Chief Financial +Officer (“CFO”) and Treasurer, and Wayne E. Lipski (“Lipski”), Huron’s former Controller and +Chief Accounting Officer (“CAO”), failed to properly record compensation expense for +redistributions of sales proceeds by the selling shareholders of four companies that Huron acquired. +Due to the improper accounting, Huron’s financial statements for 2006 through 2008 and the first +quarter of 2009 were materially misstated. Huron also failed to maintain effective internal controls +to ensure the appropriate recording and reporting of those redistributions. Accordingly, Huron +violated the reporting, books and records, and internal controls provisions of the Exchange Act, +and Burge and Lipski were a cause of Huron’s violations. + +2. From May 2005 through July 2008, Huron acquired ten consulting firms, including: +Speltz & Weis, LLC (“S&W”); MSGalt & Company, LLC (“Galt”); Wellspring Partners LTD +(“WP”); and Callaway Partners, LLC (“Callaway”). The selling shareholders (“SSHs”) of S&W, +Galt, WP and Callaway received acquisition sales proceeds from Huron and subsequently +redistributed a portion of them to other Huron employees and among themselves +(“Redistributions”). Contrary to Generally Accepted Accounting Principles (“GAAP”), Huron did +not record compensation expense for these payments. For each of these Redistributions, Huron +should have recorded compensation expense because the Redistributions were (1) contingent on +the employees’ continued employment with Huron, (2) based on the achievement of personal +performance measures, or (3) were not “clearly for a purpose other than compensation.” +1 + + +3. In January 2008, Huron’s independent accountant (“Auditor”) discussed SEC Staff +Accounting Bulletin (“SAB”) Topic 5T, which referenced accounting principles applicable to the +Redistributions, with Huron, Burge and Lipski. Thereafter, Huron, Burge and Lipski did not +determine the full impact of the accounting principles referenced in SAB Topic 5T on the +Company’s financials. More specifically, although Burge and Lipski analyzed certain +Redistributions, their analysis was inadequate. Also, although they knew about other +Redistributions, and other previously contemplated Redistributions, they did not revisit them. +Finally, they did not adequately consider or determine whether there were any additional prior +Redistributions or contemplated Redistributions that needed to be analyzed. + +4. Because Huron failed to properly account for the Redistributions, Huron filed +periodic reports with the Commission that overstated its pre-tax income by 3.70% for 2005, 6.09% + +1 Statement of Financial Accounting Standards No. 123R, Share-Based Payment, paragraph 11. + + + +3 +for 2006, 30.45% for 2007, 68.59% for 2008, and 25.29% for the first quarter of 2009. In August +2009, Huron restated its financial statements for fiscal years 2006, 2007 and 2008 and the first +quarter of 2009, reducing its net income by approximately $56 million. +2 + + +RESPONDENTS + +5. Huron Consulting Group Inc. is a Delaware corporation with its principal place +of business in Chicago, Illinois. It provides financial and operational consulting services to clients +in diverse industries, including healthcare, business, and legal. At all relevant times, Huron’s +common stock was registered with the Commission pursuant to Section 12(b) of the Exchange Act, +and traded on the NASDAQ Global Select Market system under the symbol “HURN.” + +6. Gary L. Burge, CPA, age 58, of Wheaton, Illinois, joined Huron in November +2002 as CFO and thereafter also became CAO and Treasurer. He resigned from Huron on +December 31, 2009. Burge has been a registered Certified Public Accountant (“CPA”) in Illinois +since 2010. + +7. Wayne E. Lipski, CPA, 55, of Naperville, Illinois, joined Huron in October 2003 +as Controller, and became its CAO in May 2009. He resigned from Huron on July 31, 2009. +Lipski has been a registered CPA in Illinois since 2006. + +FACTS + +Huron’s Restatement + +8. On July 31, 2009, Huron announced that it intended to restate its financial +statements to properly account for redistributions of acquisition sales proceeds by the SSHs to +other Huron employees and among themselves in amounts that were not consistent with their +ownership percentages. Huron also announced the departure of its Chief Executive Officer +(“CEO”) and Lipski, and that Burge had stepped down as CFO. On August 3, 2009, the first +trading day after the Company’s announcement, Huron stock closed at $13.69, a 69.13% decrease +from the previous trading day’s closing price of $44.35. On August 17, 2009, the Company filed a +Form 10-K/A with restated financial statements for fiscal years 2006, 2007 and 2008 and the first +quarter of 2009, which reduced Huron’s net income for the restated periods by approximately $56 +million. + +9. In determining to restate its financial statements, Huron relied on SAB Topic 5T, +Accounting for Expenses or Liabilities Paid by Principal Stockholder(s). SAB Topic 5T provides +guidance by Commission staff on how to account for the Redistributions, through the principle that +expenses incurred by economic interest holders on behalf of an issuer should be recorded as + +2 Huron’s restated 2006 financial statements reflect $1,143,333 of non-cash compensation expense that should have +been recognized in 2005. + + + +4 +expenses by the issuer.3 + + While SAB Topic 5T has been updated periodically to reflect changes in +the underlying referenced accounting standards, including the issuance of Statement of Financial +Accounting Standards (“SFAS”) No. 123R, Share-Based Payment, in 2004, the underlying +accounting principle has remained unchanged. In SAB Topic 5T, the staff references paragraph 11 +of SFAS No. 123R, which considers the accounting for share-based payments made to issuer +employees by related parties or holders of an economic interest. Specifically, SFAS No. 123R +states that “share-based payments awarded to an employee of the reporting entity by a related party +or holder of an economic interest in the entity as compensation for services provided to the entity +are share-based payment transactions to be accounted for under this Statement unless the transfer is +clearly for a purpose other than compensation for services to the reporting entity.” The staff notes +in SAB Topic 5T that the problem of separating the benefit to the economic interest holder from +the benefit to the issuer, as addressed in SFAS No. 123R, is “not limited to transactions involving +stock compensation.” +10. Huron analogized the Redistributions to the transaction involving a primary +shareholder as discussed in SAB Topic 5T. The Company concluded that the Redistributions that +were subject to continuing employment requirements were considered compensation payments +made for the benefit of Huron. Huron concluded that the Redistributions that related to the +individual’s performance within Huron subsequent to the acquisition, or that were not “clearly for +a purpose other than compensation for services” to Huron, were considered compensation +payments made for services provided to Huron. SFAS No. 123R, paragraph 11. As such, Huron +should have recognized additional compensation expense for all of these Redistributions. + +In 2005, Huron, Burge and Lipski Knew that the S&W SSHs Contemplated Sharing Sales +Proceeds with Non-SSHs + +11. On or about May 9, 2005, Huron acquired S&W. The purchase consideration +included cash paid at closing and notes payable paid in annual installments. Among the S&W +consultants that joined Huron after the acquisition were the two SSHs and six key managing +directors (“S&W Key MDs”). + +12. During the S&W acquisition negotiations, Burge, Lipski, and others at Huron +learned that the S&W SSHs contemplated sharing their acquisition sales proceeds with non-SSHs. +In March 2005, Burge and others at Huron received a draft acquisition term sheet that detailed an +S&W “Special Bonus” plan, under which S&W would use sales proceeds to pay bonuses to S&W +Key MDs and non-MDs at the time of the acquisition’s closing. In April 2005, Burge and Lipski +corresponded amongst themselves and with another Huron employee about a proposed provision in +the S&W purchase agreement providing for Huron to make the payments (i.e., for Huron to serve +as “paymaster”). At Burge’s request, Lipski also opined on the accounting implications for such +payments. + + +3 SAB Topic 5T was originally issued in September 1988 through Staff Accounting Bulletin No. 79. SAB Topic 5T +was amended in part by Staff Accounting Bulletin No. 107 to update references made to other accounting literature. + + + +5 +13. One week before the acquisition closed, on May 2, Burge, Lipski, and others at +Huron, were forwarded an email from S&W’s attorney stating that some of the payments would be +“conditioned on [S&W’s] performance (tied to the earn-out and sales attribution),” and that all +payments would be “conditioned on continued employment with Huron.” + +14. The executed S&W purchase agreement did not include a provision that Huron +would distribute sales proceeds to S&W employees. + +15. On the day that the S&W acquisition closed, S&W established a Deferred Bonus +Plan under which the S&W Key MDs were entitled to receive a portion of the S&W sales proceeds +if they remained Huron employees. Under this Plan, the S&W SSHs gave the S&W Key MDs a +portion of the S&W Notes: $1,016,667 for fiscal year 2006 and $774,723 for fiscal year 2007. For +fiscal year 2006, S&W also gave $100,000 of its sales proceeds to twelve non-MD employees who +joined Huron in connection with the acquisition. Because all of these payments were contingent +on employment, Huron should have recognized non-cash compensation expense for them: +$1,116,667 for 2006; and $774,723 for 2007. + +In 2007, Huron, Burge and Lipski Knew that the Galt SSHs Paid Some of the Galt Employees’ +2006 Bonuses + +16. On or about March 31, 2006, Huron acquired Galt. The purchase consideration +included cash paid at closing, a holdback to be paid if certain target revenues were met, and the +ability for the SSHs to receive annual earn-out payments contingent on Galt meeting certain +financial targets (“Earn-Outs”). + +17. In December 2006, Burge, Lipski, and others at Huron learned that the Huron and +Galt SSHs’ 2006 bonus plans were at odds. Huron wanted the Galt practice to meet a 55% gross +margin target, which allowed for a 2006 Galt employee bonus pool of $380,000. Galt told Huron +that its bonus pool estimate was $1.544 million. + +18. Burge and Lipski were involved in discussions regarding Huron awarding +employees with full bonuses while still achieving the Galt gross margin target. Initially, Huron +proposed to the Galt SSHs that they reduce a guaranteed bonus that was contractually owed to +them. Shortly thereafter, Huron proposed requiring the Galt SSHs to pay a portion of the total +bonus amount that the Galt SSHs wanted to pay, instead. In the end, the Galt SSHs paid bonuses +to employees employed by Galt at the time of the acquisition, and Huron paid bonuses to +employees who were hired by the Galt practice after the acquisition. + +19. On January 25, 2007, Huron’s Managing Director of Financial Planning & Analysis +(“MD of FP&A”) sent Burge and Lipski a spreadsheet outlining the final structure. It stated that of +the Galt employee bonus pool, the Galt SSHs would pay $1.119 million and Huron would pay +$199,000. A note next to the line with Huron’s amount stated: “Reduce Consultant Bonus Pool +for ’06 to deliver 55% Gross Margin.” The spreadsheet showed that if Huron were to pay the +entire proposed Galt bonus amount, then the Galt practice’s gross margin would be 45.2%. + + + +6 + +20. The Galt SSHs used $1,184,847 of their personal funds to pay 2006 bonuses to Galt +non-SSHs. At the time of the Restatement, Huron concluded that the Galt SSHs’ payment was not +“clearly for a purpose other than compensation” and therefore, under SAB Topic 5T, it should +have recorded this payment as additional non-cash compensation expense in 2006. + +In 2007, Huron, Burge and Lipski Generally Knew that the WP SSHs Formed a Trust to Receive +and Distribute the WP Earn-Outs + +21. On or about January 2, 2007, Huron acquired WP. The purchase consideration +included cash paid at closing and the ability for the SSHs to receive Earn-Outs. Huron paid Earn- +Outs to WP for fiscal years 2007 and 2008. + +22. On April 16, 2007, the WP SSHs entered into the WP Partners Trust Agreement +(“WP Trust Agreement”), which provided that a specific percentage of the total WP Earn-Outs for +a given year would be distributed to the SSHs based on their ownership interest and that the +remainder would be distributed to the SSHs and any other managing directors designated by the +trustees (three of the WP SSHs) based on their performance. The WP Trust Agreement provided +that “[o]nly Managing Directors employed by [Huron] on the last date of the relevant Calculation +Period may receive distributions of Performance Earn-Out Payments.” + +23. Burge, Lipski, and others at Huron generally knew that WP had formed a trust that +would receive and distribute the WP Earn-Outs. + +In 2007, Huron and Burge Knew that the Callaway SSHs Contemplated Sharing Earn-Outs with +Non-SSHs + +24. On or about July 28, 2007, Huron acquired Callaway. The purchase consideration +included cash paid at closing and the ability for the SSHs to receive Earn-Outs. + +25. During the Callaway acquisition negotiations, Burge learned that the Callaway +SSHs contemplated sharing their Earn-Outs with non-SSHs. In April 2007, Callaway’s investment +banker told Burge that “[Callaway’s investment banker has] assumed in other Huron transactions +that the ownership of the earnout has roughly mirrored the ownership of the selling shareholders, +which would not be the case here.” They then discussed whether this might raise accounting issues +for Huron. Ultimately, Huron never paid the Callaway SSHs any Earn-Outs. As discussed below, +in 2008, Huron and the Callaway SSHs entered into an Amendment to Callaway’s Asset Purchase +Agreement that relieved Huron of its continuing obligation to pay the Callaway SSHs any Earn- +Outs. + + + + +7 +In 2007, Huron, Burge and Lipski Knew that the Callaway SSHs Paid Bonuses to Non-SSHs + +26. During the Callaway acquisition negotiations, Burge, Lipski, and others at Huron +learned from an acquisition due diligence report that the Callaway SSHs had a written plan that +awarded acquisition sales proceeds to non-SSHs (“Callaway Awards”). + +27. Immediately before the closing of the Callaway acquisition, Callaway entered into +agreements entitled Bonus, Termination of Grant and Release Agreements with eleven Callaway +non-SSHs and two SSHs (“Callaway Agreements”). These agreements rescinded the Callaway +Awards, granted bonuses to the thirteen individuals, and stated that Callaway would use sales +proceeds to pay the bonuses. The Callaway Agreements had a clawback provision requiring the +recipients to repay a portion of their bonuses if they voluntarily terminated their employment with +Huron before two years after the acquisition. + +28. With the closing of the acquisition, pursuant to the Callaway Agreements, the +Callaway SSHs redistributed $8,120,000 of their up-front cash payment to non-SSHs. Huron +should have recorded non-cash compensation expense for the portion of the redistributed amounts +that were subject to a clawback provision: $1,353,333 for 2007; $3,248,000 for 2008; and +$812,000 for the first quarter of 2009. + +29. Around October 2007, Auditor conducted an audit of Callaway’s financial +statements for 2006 and reviewed Callaway’s financial statements for the six-month period ended +June 30, 2007. Huron’s Director of External Reporting (“External Reporting Director”) was the +coordinator between Auditor and the Callaway accounting department. + +30. During the audit and review of Callaway, External Reporting Director told Lipski +that Callaway was rescinding the Callaway Awards and was using the acquisition’s initial cash +payment to pay bonuses instead. Lipski and External Reporting Director then had a conversation +with Auditor and Callaway representatives about this fact. Lipski told Burge about this +conversation. + +31. Neither Burge nor Lipski asked for, or saw, any agreements underlying the bonuses +and were therefore unaware of the clawback provision. + +32. Huron and Burge also knew that the Callaway SSHs used sales proceeds to pay +bonuses to project managers. Shortly after the acquisition closed, a Callaway SSH sent an email to +Burge and others at Huron stating: “FYI, we extended $300k of special recognition bonuses +(coming from our proceeds) to our Delivery folks (PM’s). Half paid this week, half in a month.” +Thirty days after the Callaway acquisition closed, the Callaway SSHs distributed $150,000 of its +up-front cash payment to twelve Callaway project managers who became Huron employees. +Lipski was unaware of these bonuses. Auditor received a spreadsheet listing these bonuses, +including their distribution dates. At the time of the Restatement, Huron concluded that these +bonuses were contingent on the non-SSHs’ employment with Huron and therefore, that it should +have recorded non-cash compensation expense of $150,000 for them in 2007. + + + +8 + +During Huron’s Year-End 2007 Closing Process, Burge and Lipski Discussed the Applicability of +SAB Topic 5T with Auditor + +33. In early December 2007, Burge, Lipski, and others at Huron learned that the WP +and Galt SSHs were planning to share their 2007 Earn-Outs with three non-SSHs who were hired +by the acquired companies after the acquisitions closed (“Three Non-SSHs”). They discussed +these payments and initially concluded that, based primarily on EITF 95-8, Huron would need to +recognize the payments as compensation expense. + +34. On December 20, after additional internal discussions between Burge, Lipski, and +others, External Reporting Director called Auditor’s engagement manager (“Engagement +Manager”) and asked for accounting guidance on redistributing Earn-Outs. Although she did not +initially ask about the specific redistributions to the Three Non-SSHs, within a week the focus +shifted to them. + +35. On January 4, 2008, Engagement Manager emailed SAB Topic 5T to Lipski and +External Reporting Director, and stated that he believed that under it, SSHs would be “holders of +an economic interest” in Huron and that the Earn-Out redistributions to the Three Non-SSHs +would need to be expensed because “the payment[s] [are] caused by a relationship that is not +completely unrelated to Huron and . . . benefits Huron.” + +36. The next day, Lipski emailed Burge, MD of FP&A, and External Reporting +Director, and shared Engagement Manager’s guidance. Lipski stated that under SAB Topic 5T, +“[w]hen a party with an economic interest in an entity…pays for items on the behalf of the entity +where the payment has some sort of any benefit to the entity…those payments…must be +expense[d] by the company in their income statement.” + +37. On January 14, Engagement Manager emailed Lipski and External Reporting +Director, providing another overview of SAB Topic 5T and applying it to the Earn-Out +redistributions to the Three Non-SSHs. He stated: “[E]xpense accounting ‘is required in this and +other transactions where a principal stockholder (also defined as holders of an economic interest) +pays an expense for the company, unless the stockholder’s action is caused by a relationship or +obligation completely unrelated to his position as a stockholder or such action clearly does not +benefit the company.’” + +38. Burge, Lipski, and External Reporting Director later spoke with Engagement +Manager and Auditor’s engagement partner and concluded that Huron would need to expense the +Earn-Out redistributions to the Three Non-SSHs. + +39. After Burge, Lipski, CEO, and External Reporting Director discussed having the +Company, not the Galt and WP SSHs, make the payments to the Three Non-SSHs, Huron directly +paid “Galt Non-SSH 1” and “WP Non-SSH 1,” and recorded the payments as compensation + + + +9 +expense. The last of the Three Non-SSHs – “WP Non-SSH 2” - was not immediately due a +payment. + +Burge and Lipski Did Not Adequately Analyze Certain Redistributions They Knew About + +40. After Burge and Lipski discussed SAB Topic 5T with Auditor, they did not +adequately analyze certain Redistributions. As discussed below, although they learned facts +indicating that the Galt SSHs were planning to pay Galt Non-SSH 1 a 2007 bonus, they failed to +adequately verify whether the Galt SSHs ultimately made an additional payment to him. They also +failed to consider whether Huron properly accounted for tax gross-ups that the Company paid the +Galt SSHs. In addition, they concluded that payments to two WP Non-SSHs did not have +accounting ramifications without adequately performing the necessary factual analysis. Finally, +although in the spring of 2008 they were told that the Callaway SSHs were planning to share Earn- +Out settlement proceeds with non-SSHs, they failed to determine whether there was an +employment contingency attached to these payments. + +The Galt SSHs Directly Paid Galt Non-SSH 1 a 2007 Bonus + +41. Almost immediately after Huron decided to expense the bonus payment to Galt +Non-SSH 1, Lipski emailed a Galt SSH (“Galt SSH 1”), copying Burge, asking for an estimate of +Non-SSH 1’s bonus so that Huron could accrue an expense for it. Because Galt SSH 1 did not +provide an estimate, Lipski proposed that Huron accrue an estimated bonus amount of $800,000 +based on Non-SSH 1’s past compensation and payments made to similarly situated Galt +employees, with the plan of making an adjustment at the same time the “Huron company bonus +pool calculation” was finalized. Burge concurred with this approach. + +42. After Lipski once again asked for, and did not receive, a bonus estimate, he emailed +Galt SSH 1, copying Burge, and told him that Huron accrued $800,000 for the bonus. Lipski also +asked Galt SSH 1 to “agree to let Huron pay the $800,000 accrued bonus (assuming he gets at least +$800,000) directly to [Galt Non-SSH 1]…” + +43. In a February 15, 2008 email, Galt SSH 1 confirmed with CEO that Huron would +pay the accrued bonus of $800,000 to Galt Non-SSH 1. He also detailed an adjustment to the +Earn-Out calculation that would eliminate any tax implications resulting from the payment. CEO +forwarded this email to Burge, Lipski, and MD of FP&A. + +44. By March 22, Lipski learned that the Galt SSHs were going to directly pay Galt +Non-SSH 1 an additional 2007 bonus (incremental to the amount accrued by Huron). On March +13, Galt Non-SSH 1 called Huron’s Director of Tax (“Dir. of Tax”) and told her that the Galt SSHs +awarded him an additional bonus, and that he expected Huron to gross him up for any taxes +associated with it. Dir. of Tax emailed Lipski communicating the substance of this call. She then +emailed Galt Non-SSH 1 asking for the date and amount of the bonus payment. Galt Non-SSH 1 +responded within minutes that he had not yet received the payment and would send another email + + + +10 +once he did. Galt Non-SSH 1 did not tell Dir. of Tax the actual bonus amount. On March 22, Dir. +of Tax forwarded Lipski her email string with Galt Non-SSH 1. + +45. Burge and Lipski failed to adequately verify whether the Galt SSHs directly paid +Non-SSH 1 an additional 2007 bonus. On March 28, Lipski emailed Galt SSH 1, copying Burge +and CEO, and stated: “I need to know/confirm if any additional amounts were paid (or to be paid) +or any future commitment (short or long-term) was or will be made to [Galt Non-SSH 1] in regards +to the $6 million (or future) Galt Earn-out payments…[S]hould you have any additional +plans/thoughts for potential current or future earn-out distributions for [Galt Non-SSH 1] (or any +other non-original Galt owner) it would be appreciated if you communicate those thoughts now.” +Galt SSH 1 responded that same day to Lipski in one sentence: “There are no commitments for +payments to [Galt Non-SSH 1].” Lipski forwarded the response to Burge and others at Huron; +Burge then forwarded the response to others at Huron. Burge and Lipski did not seek any +additional information. + +46. For Galt Non-SSH 1’s 2007 performance, he received a $2,562,421 bonus: Huron +paid him $800,000 and the Galt SSHs used their Earn-Outs to pay him an additional $1,762,421. +For fiscal year 2008, Huron paid Galt Non-SSH 1 $800,000. At the time of the Restatement, +Huron concluded that the Galt SSHs payment to Galt Non-SSH 1 for 2007 was not “clearly for a +purpose other than compensation” and therefore, under SAB Topic 5T, it should have recorded +this payment as additional non-cash compensation expense that year. + +Huron Paid the Galt SSHs a Gross-Up for Adverse Tax Consequences + +47. Huron paid the Galt SSHs a gross-up for the adverse tax consequences resulting +from the Company paying Galt Non-SSH 1 a 2007 and 2008 bonus of $800,000 each year. These +payments were not made pursuant to the Galt asset purchase agreement. At the time of the +Restatement, Huron concluded that the payments were not “clearly for a purpose other than +compensation” and therefore, under SAB Topic 5T, it should have recorded additional +compensation expense for them: $38,190 for 2007 and $44,082 for 2008. + +48. Burge and Lipski were aware of the adjustments. CEO forwarded them the +February 15, 2008 email from Galt SSH 1 detailing the tax adjustment. Then, on February 28, MD +of FP&A forwarded Lipski an email from another Galt SSH referencing the bonus adjustment and +attaching spreadsheets detailing the adjustment. + +The WP SSHs Shared their Earn-Outs with WP Non-SSH 3 and WP Non-SSH 4 + +49. On December 26, 2007, a WP SSH responded to a request by CEO and told him +that WP planned to share five years of its Earn-Out with WP Non-SSH 3 and WP Non-SSH 4, who +were “employees of Wellspring but were not shareholders.” On January 8, 2008, CEO forwarded +this email to Burge, who forwarded it to Lipski the same day. + + + + +11 +50. Lipski concluded, and Burge concurred, that Huron did not have to recognize +compensation expense for these contemplated redistributions because WP Non-SSHs 3 and 4 were +“Junior Partners.” Lipski believed that purchase price accounting remained intact if the SSHs +shared Earn-Outs with employees on track to becoming partners as long as the number of junior +partners was limited (the “Junior Partner Theory”). He recognized that the facts and circumstances +of the particular situation governed whether someone was considered a Junior Partner. Burge +agreed that whether a person was a Junior Partner depended on the specific facts, such as the +person’s status within the firm, how long they had been there, how much revenue they generated, +and the duration of their employment. + +51. Lipski concluded that WP Non-SSHs 3 and 4 were Junior Partners based on his +prior knowledge of their roles, without performing an additional factual analysis or having or +requesting any documents to determine why the payments were made. He did not know or ask +whether there was a contingency on the Redistributions. + +52. In concurring with Lipski’s conclusion, Burge did not confirm that Lipski or +External Reporting Director performed the necessary factual analysis. + +53. Pursuant to the WP Trust Agreement, WP Non-SSHs 3 and 4 received a portion of +the WP Earn-Outs: WP Non-SSH 3 received $400,000 for fiscal year 2007, and WP Non-SSH 4 +received $1,048,215 for fiscal year 2007 and $1,161,994 for fiscal year 2008. Since these +payments were based on their performance, Huron should have recognized non-cash compensation +expense for them: $1,448,215 for 2007; and $1,161,994 for 2008. + +The Callaway SSHs’ Redistribution of Earn-Out Settlement Proceeds to Class B SHs + +54. Shortly after the closing of the Callaway acquisition in July 2007, the Callaway +SSHs created a Class B membership structure and issued Class B units to fourteen non-SSHs +(“Class B SHs”). The written grants stated that the units had no current value and would only gain +value if Huron paid Earn-Outs. They further stated that the units were fully vested upon grant, but +were subject to repurchase at $1 per unit if the Class B SH ceased to be a Huron employee. + +55. In January 2008, Huron and the Callaway SSHs began negotiating an Amendment +to Callaway’s Asset Purchase Agreement to relieve Huron of its obligation to pay Earn-Outs in +exchange for a promissory note payable no later than August 31, 2008 (the “Amendment”). + +56. On March 21, External Reporting Director, who was reviewing the accounting +aspects of the Amendment, emailed a draft Amendment to Engagement Manager, copying Lipski, +stating that Huron planned to record the settlement proceeds as additional purchase price. +Engagement Manager told External Reporting Director that, to maintain purchase price accounting +under EITF 95-8 and SAB Topic 5T, Huron should insert language into the Amendment requiring +that Callaway distribute the settlement amount in proportion to the SSHs’ ownership interests at +the time of the acquisition. External Reporting Director told Lipski about this guidance. + + + + +12 +57. When External Reporting Director told the Callaway SSHs’ attorney about the +required language, the attorney told her it was unacceptable because the Callaway ownership +structure had changed a few days after the acquisition’s closing with the creation of the Class B +membership. He told her that the Class B SHs had rights to the Callaway Earn-Outs proceeds, and +thus, the settlement proceeds. + +58. On April 3, External Reporting Director emailed the Callaway SSHs’ attorney, +copying Burge, Lipski, and others at Huron, with suggested language for the Amendment that +addressed Engagement Manager’s guidance. + +59. On April 4, after the Callaway SSHs’ attorney revised the suggested language to +include a Class A and Class B distinction, Huron and CP4 Warbird Holdings (i.e. the Callaway +SSHs) entered into the Amendment. The Amendment specified that the settlement proceeds would +only go to Class A and Class B SHs. + +60. Huron and Auditor concluded that the portion of the settlement proceeds that would +be paid to the Class B SHs would properly be accounted for as additional purchase price under the +Junior Partner Theory. Huron and Auditor were not aware of the employment contingency relating +to the Class B units. Neither Burge nor Lipski asked whether there was one, or asked for, or saw, +the underlying reorganization documents that would have exposed the employment contingencies. +Although External Reporting Director asked the Callaway SSHs’ attorney for the reorganization +documents, she did not receive them. + +61. On August 15, pursuant to the Amendment, Huron paid $23,512,158 to CP4 +Warbird Holdings. On August 22, CP4 Warbird Holdings distributed a portion of the proceeds to +Class B SHs. Because the payments had an employment contingency, Huron should have +recognized additional non-cash compensation expense for them: $692,130 for 2007; and +$8,305,590 for 2008. + +Burge and Lipski Did Not Adequately Analyze Other Redistributions and Redistribution Plans + +62. Although Burge and Lipski knew that the Galt SSHs previously paid some of the +Galt employees’ 2006 bonuses, that the Callaway SSHs had previously redistributed initial cash +sales proceeds to non-SSHs, and that the S&W SSHs contemplated redistributing initial sales +proceeds, they did not revisit these Redistributions or consider whether SAB Topic 5T applied to +them. + +63. Burge and Lipski also did not adequately consider or determine whether there were +any additional prior Redistributions or contemplated Redistributions. Therefore, they were +unaware of, and Huron did not record compensation expense for, several other Redistributions, +discussed below – Galt’s payments under its Employee Award Program, Galt’s 2006 bonus +payment to Galt Non-SSH 1, WP’s payments to WP Non-SSHs 5 and 6, and the redistributions of +sales proceeds among the Galt and WP SSHs. + + + + +13 +Galt’s Employee Award Program + +64. Prior to the Galt acquisition, Galt granted to its employees share units representing +a small percentage interest in the firm. The units entitled the employees to a proportional share of +proceeds received by Galt from a sale, merger or other liquidity event. To carry out the grants, on +March 31, 2006, Galt created an Employee Award Plan “to provide incentive compensation to +certain employees . . . who become and remain employed within the Galt group by Huron.” Under +the plan, the employees’ awards vested in 25% increments over a 4-year period (May 2007, 2008, +2009 and 2010), provided the employees remained employed at Huron. + +65. Although structured differently, Galt also included another employee, Galt Non- +SSH 2, in the award program. Instead of providing a vesting schedule, Galt Non-SSH 2 received a +lump award in 2006, but then signed a promissory note promising to repay the same amount as a +loan. The note provided that 25% of the loan would be forgiven annually over a 4-year period as +long as Galt Non-SSH 2 and at least two of the Galt SSHs remained at Huron. + +66. Since the payments had an employment contingency, Huron should have +recognized non-cash compensation expense for them: $144,712 for 2006; $399,553 for 2007; +$325,522 for 2008; and $78,123 for the first quarter of 2009. + +The Galt SSHs’ 2006 Bonus to Galt Non-SSH 1 + +67. In addition to the Galt SSHs payment of 2006 bonuses to employees employed by +Galt at the time of the acquisition, the Galt SSHs paid a 2006 bonus of $155,290 to Galt Non-SSH +1, who was hired after the acquisition. At the time of the Restatement, Huron concluded that the +bonus was not “clearly for a purpose other than compensation” and therefore, under SAB Topic +5T, it should have recorded this payment as additional non-cash compensation expense in 2006. +4 + + +The WP SSHs’ Redistributions in 2007 and 2008 to WP Non-SSH 5 and WP Non-SSH 6 + +68. In 2007 and 2008, WP shared portions of its Earn-Out with WP Non-SSH 5 and +WP Non-SSH 6. Since WP Non-SSH 5 received $250,000 for both 2007 and 2008 based on her +performance as a Huron employee, these payments should have been recognized as non-cash +compensation expense. WP Non-SSH 6 received $500,000 of the 2008 Earn-Out for administering +the WP trust. At the time of the Restatement, Huron concluded that this payment was not “clearly +for a purpose other than compensation” and therefore, under SAB Topic 5T, it should have +recognized non-cash compensation expense for it. + + +4 As part of its restatement, Huron also accrued an additional $3.1 million of compensation expense for a bonus that +the Galt SSHs may pay Galt Non-SSH 1 for his 2008 performance. Whether the Galt SSHs are obligated to pay the +bonus is the subject of pending litigation. + + + +14 +Redistributions of Earn-Outs Among SSHs + +69. For 2006, 2007 and 2008, the Galt SSHs redistributed Earn-Outs among +themselves. Because the redistributions were based upon the SSHs’ performance and individual +contribution to the Galt practice, Huron should have recognized additional non-cash compensation +expense for the amounts subject to redistribution: $85,012 for 2006; $407,117 for 2007; $579,898 +for 2008; and $237,600 for the first quarter of 2009. + +70. For 2007 and 2008, the WP SSHs redistributed Earn-Outs among themselves. +Because the redistributions were based on performance, Huron should have recognized additional +non-cash compensation expense for the amounts subject to redistribution: $10,344,897 for 2007; +$13,054,731 for 2008; and $2,634,016 for the first quarter of 2009. + +Huron’s Internal Controls Weaknesses + +71. Huron’s deficient internal controls contributed to the restatement of its financial +statements. As Huron disclosed in its amended Form 10-K for 2008, it did not “maintain effective +controls to ensure the appropriate recording and reporting” of certain acquisition sales proceeds. +Huron stated that its controls were “not designed to ensure that the redistribution of certain +[acquisition sales proceeds] among the selling shareholders and to certain of our employees was +correctly recorded in accordance with GAAP, including guidance promulgated by the SEC.” + +72. After February 2008, Huron did not implement sufficient internal controls to +monitor whether the SSHs were sharing Earn-Out proceeds with non-SSHs. Although Huron +discussed the issue with SSHs who received Earn-Outs for 2007, no formal process was +established for educating SSHs about the accounting implications resulting from sharing Earn-Outs +or for obtaining information from SSHs about the distribution of Earn-Outs. Although Huron +included language limiting redistributions in the purchase agreements for the two acquisitions that +occurred between February 2008 and the restatement, it did not seek to negotiate amendments to +the purchase agreements of prior acquisitions. + +73. Huron did not take any steps to determine or prevent the sharing of sales proceeds +other than Earn-Outs. + +74. Burge, as Huron’s CFO, and Lipski, as Huron’s Controller, were two of the persons +responsible for ensuring Huron’s books, records and accounts accurately reflected its +compensation expense, and for devising and maintaining Huron’s internal controls. + +Impact of the Redistributions on Huron’s Financial Statements + +75. As a result of the conduct described above, Huron’s financial statements in its +annual report on Form 10-K for 2006 through 2008, and in its quarterly report on Form 10-Q for the +first quarter of 2009, were materially misstated. On August 17, 2009, Huron filed a Form 10-K/A +with restated financial statements. + + + +15 + +76. The following table summarizes the additional compensation expense for the +Redistributions that were the subject of Huron’s restatement, as they impacted direct costs (the +income statement line item where compensation expense is recorded) and pre-tax income: + + 20065 2007 2008 1Q 2009 +Direct Costs +As Reported $ 163,569,000 $ 293,387,000 $ 360,404,000 $ 99,131,000 +Additional +Compensation +Expense $ 3,829,861 $ 17,620,579 $ 30,569,817 $ 3,761,739 +As Adjusted $ 167,398,861 $ 311,007,579 $ 390,973,817 $ 102,892,739 +Percentage +Understatement + + 2.29% 5.67% 7.82% 3.66% + +Pre-Tax Income +As Reported $ 46,822,000 $ 75,497,000 $ 75,140,000 $ 18,638,000 +Additional +Compensation +Expense $ (3,829,861) $ (17,620,579) $ (30,569,817) $ (3,761,739) +As Adjusted $ 42,992,139 $ 57,876,421 $ 44,570,183 $ 14,876,261 +Percentage +Overstatement + + 8.91% 30.45% 68.59% 25.29% + +Burge’s and Lipski’s Incentive-Based Compensation + +77. For his work in 2006, Burge received incentive-based compensation including a +cash bonus, a portion of which was based on Huron’s performance. On July 7, 2009, pursuant to a +10b5-1 plan, Burge sold shares of Huron stock. + +78. For his work in 2006, Lipski received incentive-based compensation including a +cash bonus, a portion of which was based on Huron’s performance. + +VIOLATIONS + +79. Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder +require that 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. + +80. Section 13(b)(2)(A) of the Exchange Act and Rule 13b2-1 thereunder require +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 prohibit any + +5 Huron’s restated 2006 financial statements reflect $1,143,333 of non-cash compensation expense that should have +been recognized in 2005. + + + +16 +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. + +81. Section 13(b)(2)(B) of the Exchange Act 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 GAAP. + +82. As a result of the conduct described above, Huron violated Section 13(a) of the +Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder because it failed to record +compensation expense for the Redistributions, and thus filed inaccurate periodic reports with the +Commission that materially understated direct costs and overstated pre-tax income. + +83. As a result of the conduct described above, Huron violated Section 13(b)(2)(A) of +the Exchange Act because it did not keep books, records or accounts that accurately reflected its +compensation expense relating to certain redistributions of acquired companies’ sales proceeds to +non-SSHs and among the SSHs. + +84. As a result of the conduct described above, Huron violated Section 13(b)(2)(B) of +the Exchange Act because it failed to devise and maintain a system of internal accounting controls +sufficient to provide reasonable assurances that Redistributions were recorded as necessary to +permit the preparation of financial statements in conformity with GAAP. + +85. As a result of the conduct described above, Burge and Lipski violated Rule 13b2-1 +under the Exchange Act and were a cause of Huron’s violations of Sections 13(a), 13(b)(2)(A), and +13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. + +HURON’S REMEDIAL EFFORTS + +86. In determining to accept Huron’s Offer, the Commission considered remedial acts +promptly undertaken by Huron and cooperation afforded by Huron to the Commission staff. +Among other things, Huron self-investigated and self-reported the accounting errors, selected new +management and implemented various additional controls designed to prevent similar errors going +forward. + +IV. + + In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offers. + + + + +17 + Accordingly, it is hereby ORDERED that: + +A. Pursuant to Section 21C of the Exchange Act, Huron 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, Burge and Lipski 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-13, and 13b2-1 thereunder. + + C. Respondent Huron shall, within 10 days of the entry of this Order, pay a civil +money penalty in the amount of $1,000,000.00 to the Securities and Exchange Commission. If +timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. 3717. Payment +must be made in one of the following ways: (A) Respondent may transmit payment electronically +to the Commission, which will provide detailed ACH transfer/Fedwire instructions upon request; +(B) Respondent may make direct payment from a bank account via Pay.gov through the SEC +website at +http://www.sec.gov/about/offices/ofm.htm; or (C) Respondent may pay by certified +check, bank cashier’s check, or United States postal money order, made payable to the Securities +and Exchange Commission and hand-delivered or mailed to Enterprise Services Center, Accounts +Receivable Branch, HQ Bldg., Room 181, AMZ-341, 6500 South MacArthur Boulevard, +Oklahoma City, OK 73169. Payments by check or money order must be accompanied by a cover +letter identifying Huron Consulting Group Inc. as a Respondent in these proceedings, and the file +number of these proceedings; a copy of the cover letter and check or money order must be sent to +Paul A. Montoya, Assistant Regional Director, U.S. Securities and Exchange Commission, +Chicago Regional Office, 175 West Jackson Boulevard, Suite 900, Chicago, Illinois 60604. + +D. Respondent Burge shall, within 10 days of the entry of this Order, pay a civil +money penalty in the amount of $50,000.00, disgorgement of $147,763.12 and prejudgment +interest of $30,338.46 to the Securities and Exchange Commission. If timely payment is not made, +additional interest shall accrue pursuant to Rule 600 of the Commission’s Rules of Practice, 17 +C.F.R. § 201.600, and 31 U.S.C. 3717. Payment must be made in one of the following ways: (A) +Respondent may transmit payment electronically to the Commission, which will provide detailed +ACH transfer/Fedwire instructions upon request; (B) Respondent may make direct payment from a +bank account via Pay.gov through the SEC website at +http://www.sec.gov/about/offices/ofm.htm; +or (C) Respondent may pay by certified check, bank cashier’s check, or United States postal +money order, made payable to the Securities and Exchange Commission and hand-delivered or +mailed to Enterprise Services Center, Accounts Receivable Branch, HQ Bldg., Room 181, AMZ- +341, 6500 South MacArthur Boulevard, Oklahoma City, OK 73169; and (D) submitted under +cover letter that identifies Gary L. Burge 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 Paul A. +Montoya, Assistant Regional Director, U.S. Securities and Exchange Commission, Chicago +Regional Office, 175 West Jackson Boulevard, Suite 900, Chicago, Illinois 60604. + + + + +18 +E. Respondent Lipski shall, within 10 days of the entry of this Order, pay a civil +money penalty in the amount of $50,000.00 and disgorgement of $12,750.00 and prejudgment +interest of $3,584.94 to the Securities and Exchange Commission. If timely payment is not made, +additional interest shall accrue pursuant to Rule 600 of the Commission’s Rules of Practice, 17 +C.F.R. § 201.600, and 31 U.S.C. 3717. Payment must be made in one of the following ways: (A) +Respondent may transmit payment electronically to the Commission, which will provide detailed +ACH transfer/Fedwire instructions upon request; (B) Respondent may make direct payment from a +bank account via Pay.gov through the SEC website at +http://www.sec.gov/about/offices/ofm.htm; +or (C) Respondent may pay by certified check, bank cashier’s check, or United States postal +money order, made payable to the Securities and Exchange Commission and hand-delivered or +mailed to Enterprise Services Center, Accounts Receivable Branch, HQ Bldg., Room 181, AMZ- +341, 6500 South MacArthur Boulevard, Oklahoma City, OK 73169; and (D) submitted under +cover letter that identifies Wayne E. Lipski 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 Paul +A. Montoya, Assistant Regional Director, U.S. Securities and Exchange Commission, Chicago +Regional Office, 175 West Jackson Boulevard, Suite 900, Chicago, Illinois 60604. + + F. Such disgorgement, interest and civil money penalties may be distributed pursuant +to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, and Section 929B of the Dodd- +Frank Wall Street Reform and Consumer Protection Act. Regardless of whether any such +distribution is made, 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 Respondents’ 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 they 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 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. + + By the Commission. + + + + Elizabeth M. Murphy + Secretary \ No newline at end of file diff --git a/raw/aaer/2012/AAER-3395.pdf b/raw/aaer/2012/AAER-3395.pdf new file mode 100644 index 0000000000000000000000000000000000000000..dd85231a670a168179c378cbc8ec8af8aa0192f6 Binary files /dev/null and b/raw/aaer/2012/AAER-3395.pdf differ diff --git a/raw/aaer/2012/AAER-3395.txt b/raw/aaer/2012/AAER-3395.txt new file mode 100644 index 0000000000000000000000000000000000000000..a3822283dd77f700d832d52495b5bd9fcee3f306 --- /dev/null +++ b/raw/aaer/2012/AAER-3395.txt @@ -0,0 +1,125 @@ + + + + UNITED STATES OF AMERICA + before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 67542 / July 30, 2012 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3395 / July 30, 2012 + +ADMINISTRATIVE PROCEEDING +File No. 3-14968 + + +In the Matter of + + NANCY SHAO WEN CHU + + 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 against Nancy +Shao Wen Chu (“Chu”) 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. + +The Commission finds that: + +A. RESPONDENT + +1. Nancy Shao Wen Chu, age 54, is a resident of Claremont, California. Chu +served as CFO of publicly traded Soyo Group, Inc. (“Soyo”) between 2002 and 2009 and she was +also effectively the chief executive officer as she ran the day-to-day operations of the company. +Chu has never held a Certified Public Accountant license. + +B. COURT FINDINGS & INJUNCTION + +2. On May 25, 2012, the U.S. District Court for the Central District of +California in SEC v. Chu, et al., Case No. CV 11-09859 R(FMOx) (C.D. Cal.) issued a Final Order +of Judgment By Default, permanently enjoining Chu from violating, directly or indirectly, Section +10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder [15 U.S.C. § 78j(b) and +17 C.F.R. § 240.10b-5] and Section 17(a) of the Securities Act of 1933 [15 U.S.C. § 77q(a)]. + +3. The Final Order of Judgment by Default was entered after Chu failed to +respond to the Commission’s complaint, which was properly served on her. That complaint, the +allegations of which are deemed true as to Chu by her default, alleged that between January 2007 +and November 2008, Soyo, through the actions of Chu and others, 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 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 alleged 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. + + +III. + +Based upon the foregoing, the Commission finds that a court of competent jurisdiction has +permanently enjoined Chu from violating the Federal securities laws within the meaning of rule +102(e)(3)(i)(A) of the Commission’s Rules of Practice for conduct that occurred while acting as an +accountant. In view of these findings, the Commission deems it appropriate and in the public +interest that Chu be temporarily suspended from appearing or practicing before the Commission. + + IT IS HEREBY ORDERED that Chu be, and hereby is, temporarily suspended from + + 3 +appearing or practicing before the Commission. This Order will be effective upon service on the +Respondent. + + IT IS FURTHER ORDERED that Chu may, within thirty days after service of this Order, +file a petition with the Commission to lift the temporary suspension. If the Commission receives +no petition within thirty days after service of the Order, the suspension will become permanent +pursuant to Rule 102(e)(3)(ii). + + If a petition is received within thirty days after service of this Order, the Commission will, +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 Chu personally or by certified mail at h er last known +address or as otherwise authorized by the Commission’s Rules of Practice. + + By the Commission. + + + + + Elizabeth M. Murphy + Secretary + + \ No newline at end of file diff --git a/raw/aaer/2012/AAER-3399.txt b/raw/aaer/2012/AAER-3399.txt new file mode 100644 index 0000000000000000000000000000000000000000..2852a8c03682d372ab72627458958948a4b40345 --- /dev/null +++ b/raw/aaer/2012/AAER-3399.txt @@ -0,0 +1,1378 @@ + + + + + + + + + + + + + + + + SEC.gov | Pfizer Inc. / Wyeth LLC + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/512731","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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(filed Aug. 7, 2012) + + U.S. Securities and Exchange Commission vs. Wyeth LLC, Civil Action No. 1:12-cv-01304 (D.D.C.) (filed Aug. 7, 2012) + + SEC FILES SETTLED FCPA CHARGES AGAINST PFIZER INC. AND WYETH LLC + + The Securities and Exchange Commission today filed a settled enforcement action in the U.S. District Court for the District of Columbia against Pfizer Inc. for violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries bribed doctors and other health care professionals employed by foreign governments in order to win business. + + The SEC alleges that employees and agents of Pfizer's subsidiaries in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia made improper payments to foreign officials to obtain regulatory and formulary approvals, sales, and increased prescriptions for the company's pharmaceutical products. They tried to conceal the bribery by improperly recording the transactions in accounting records as legitimate expenses for promotional activities, marketing, training, travel and entertainment, clinical trials, freight, conferences, and advertising. + + The SEC filed a separate settled enforcement action in the U.S. District Court for the District of Columbia against another pharmaceutical company that Pfizer acquired a few years ago ¢€" Wyeth LLC ¢€" for its own FCPA violations. Pfizer and Wyeth agreed to separate settlements in which they will pay approximately $45 million combined in disgorgement and prejudgment interest to the SEC to settle their respective charges. In a related action, Pfizer H.C.P. Corporation, an indirect wholly owned subsidiary of Pfizer, will pay a $15 million penalty to settle FCPA charges brought against it today by the U.S. Department of Justice (DOJ) under a deferred prosecution agreement. + + The SEC's complaint against Pfizer alleges that Pfizer's misconduct dates back as far as 2001. According to the SEC's complaint, employees of Pfizer's subsidiaries authorized and made cash payments and provided other incentives to bribe government doctors to utilize Pfizer products. In China, for example, the SEC's complaint alleges that Pfizer employees invited "high-prescribing doctors" in the Chinese government to club-like meetings that included extensive recreational and entertainment activities to reward doctors' past product sales or prescriptions. In addition, according to the SEC's complaint, Pfizer employees in Croatia created a "bonus program" for Croatian doctors who were employed in senior positions in Croatian government health care institutions. According to the SEC's complaint, once a doctor agreed to use Pfizer products, a percentage of the value purchased by a doctor's institution would be funneled back to the doctor in the form of cash, international travel, or free products. + + According to the SEC's complaint, Pfizer made an initial voluntary disclosure of misconduct by its subsidiaries to the SEC and Department of Justice in October 2004, and fully cooperated with SEC investigators. The complaint alleges that Pfizer took such extensive remedial actions as undertaking a comprehensive worldwide review of its compliance program. + + The SEC further alleges that Wyeth subsidiaries engaged in FCPA violations, primarily before, but also after, the company's acquisition by Pfizer in late 2009. For example, according to the SEC's complaint, starting at least in 2005, subsidiaries marketing Wyeth nutritional products in China, Indonesia, and Pakistan bribed government doctors to recommend their products to patients by making cash payments or in some cases providing BlackBerrys and cell phones or travel incentives. The complaint alleges that Wyeth's employees often used fictitious invoices to conceal the true nature of the payments. + + According to the SEC's complaint, following Pfizer's acquisition of Wyeth, Pfizer undertook a risk-based FCPA due diligence review of Wyeth's global operations and voluntarily reported the findings to the SEC staff. The complaint alleges that Pfizer diligently and promptly integrated Wyeth's legacy operations into its compliance program and cooperated fully with SEC investigators. + + In settling the SEC's charges, Wyeth neither admitted nor denied the allegations. Pfizer consented to the entry of a final judgment ordering it to pay disgorgement of $16,032,676 in net profits and prejudgment interest of $10,307,268 for a total of $26,339,944. Pfizer also is required to report to the SEC on the status of its remediation and implementation of compliance measures over a two-year period, and is permanently enjoined from further violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. Wyeth consented to the entry of a final judgment ordering it to pay disgorgement of $17,217,831 in net profits and prejudgment interest of $1,658,793, for a total of $18,876,624. As a Pfizer subsidiary, the status of Wyeth's remediation and implementation of compliance measures will be subsumed in Pfizer's two-year self-reporting period. Wyeth also is permanently enjoined from further violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. The settlements are subject to court approval. + +   + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2012/AAER-3400.txt b/raw/aaer/2012/AAER-3400.txt new file mode 100644 index 0000000000000000000000000000000000000000..93e99e439da086866984b88682fc854436af982d --- /dev/null +++ b/raw/aaer/2012/AAER-3400.txt @@ -0,0 +1,349 @@ + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 67640 / August 10, 2012 + +INVESTMENT ADVISERS ACT OF 1940 +Release No. 3443 / August 10, 2012 + +INVESTMENT COMPANY ACT OF 1940 +Release No. 30165 / August 10, 2012 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3400 / August 10, 2012 + +ADMINISTRATIVE PROCEEDING +File No. 3-14979 + + +In the Matter of + +PEAK WEALTH +OPPORTUNITIES, LLC and +DAVID W. DUBE, CPA, + +Respondents. + +ORDER INSTITUTING ADMINISTRATIVE +AND CEASE-AND-DESIST PROCEEDINGS, +PURSUANT TO SECTION 15(b)(6) OF THE +SECURITIES EXCHANGE ACT OF 1934, +SECTIONS 203(e), 203(f) AND 203(k) OF THE +INVESTMENT ADVISERS ACT OF 1940, +SECTIONS 9(b) AND 9(f) OF THE +INVESTMENT COMPANY 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 pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 (“Exchange Act”), +Sections 203(e), 203(f), and 203(k) of the Investment Advisers Act of 1940 (“Advisers Act”), +Sections 9(b) and 9(f) of the Investment Company Act of 1940 (“Investment Company Act”), and +Rule 102(e) of the Commission’s Rules of Practice +1 + +1 Rule 102(e)(1)(iii) provides, in pertinent part, that: + against Peak Wealth Opportunities LLC +(“Peak Wealth”) and David W. Dube (collectively “Respondents”). +2 +II. + +After an investigation, the Division of Enforcement alleges that: + +A. RESPONDENTS + + 1. Peak Wealth, a Florida limited liability company located in Largo, Florida, +has been registered with the Commission as an investment adviser since October 2007. From +April 2008 to June 2010, Peak Wealth was the investment adviser to the StockCar Stocks Index +Fund (the “Fund”), the sole series of the StockCar Stocks Mutual Fund, Inc. (the “Company”), +formerly a registered investment company. Peak Wealth’s basis for its registration with the +Commission was its status as an investment adviser to an investment company registered under the +Investment Company Act. Peak Wealth is a wholly owned subsidiary of Peak Capital Corporation +(“Peak Capital”), which also owns Peak Securities Corporation, a former broker-dealer (which +withdrew its broker-dealer registration in March 2010), and a publishing and debt collection +business. + + 2. Dube, age 55, owns Peak Capital and its subsidiary businesses. He is the +president and sole managing member of Peak Wealth. He was also the acting chief compliance +officer of the Fund from October 2009 until June 2010. Dube is a certified public accountant +licensed in Florida and New Hampshire. Dube registered with the Public Company Accounting +Oversight Board in January 2010, indicating that he may conduct or play a substantial role in an +audit in the future. A recent public company filing in September 2011 indicates that Dube has +been engaged to prepare the company’s audited financial statements. Other public filings from +2001 and 2002 indicate that Dube has also served on at least two public company audit +committees. Dube has a disciplinary history with the Financial Industry Regulatory Authority in +connection with his formerly registered broker dealer. + +B. RELEVANT ENTITY + + The Company, now defunct, was a Maryland corporation that operated as an open- +end diversified management investment company. The Company’s sole series was the Fund. The +Company was registered with the Commission from September 1998 until March 2011, when it +formally deregistered. + +C. BACKGROUND + + 1. The Fund was an open-end management company that invested in +companies of the StockCar Stocks Index (the “Index”), the Fund’s proprietary index consisting of + +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. +3 +approximately 40 companies that support NASCAR racing events. The Fund reported net assets of +approximately $3.9 million in its most recently filed annual report for the fiscal year ended +September 30, 2009. + + 2. Peak Wealth became the investment adviser to the Fund in April 2008, +pursuant to a vote by the majority of the Company’s shareholders approving Peak Wealth’s written +advisory agreement. The advisory agreement was for an initial term of two years and was subject +to the Fund board’s annual review and approval thereafter. Peak Wealth also served as the Fund’s +administrator pursuant to a separate administration agreement. The Fund was Peak Wealth’s only +client. + + 3. For its advisory services, Peak Wealth charged an annual fee of 0.65% of +the Fund’s average daily net assets. Peak Wealth contractually agreed to waive fees and/or +reimburse the Fund for all expenses it incurred to the extent necessary to maintain the Fund’s total +operating expenses at 1.5% of the Fund’s average daily net assets for a two-year period ending +April 15, 2010. Throughout the period of the reimbursement agreement, the expenses paid by the +Fund, exclusive of advisory fees, exceeded the 1.5% cap. Thus, due to the waiver agreement, Peak +Wealth did not collect advisory fees while it served as adviser to the Fund. + +D. THE FUND BOARD’S TERMINATION OF PEAK WEALTH’S +ADVISORY CONTRACT + + 1. In late 2008, the Fund’s board began to raise concerns about Peak Wealth’s +ability to meet its expense reimbursement obligation to the Fund. Peak Wealth had failed to +reimburse the Fund for expenses it owed under the advisory agreement, which resulted in the Fund +delaying the filing of its annual report for the fiscal year ended September 30, 2008. + + 2. By September 2009, the Fund had accumulated another receivable for +expenses owed from Peak Wealth of approximately $50,000. Dube repeatedly promised the board +that he would repay the Fund, but he never did. The Fund’s auditor refused to release its audit +opinion without repayment of the outstanding obligation, resulting in the Fund delaying the filing +of its 2009 annual report. Ultimately, the board liquidated Dube’s personal holdings in the Fund in +order to satisfy the outstanding receivable. + + 3. The Fund’s portfolio manager, who worked for Peak Wealth and handled +the trading activity and index rebalancing for the Fund, also encountered problems with Peak +Wealth and Dube. Dube failed to respond to multiple letters and emails from the portfolio +manager throughout 2008 and 2009 regarding the Fund’s compliance obligations, the portfolio +manager’s concerns about the regularity and substance of his communications with Peak Wealth +and Dube, and his compensation. The portfolio manager ultimately raised his concerns about the +lack of communication with the Fund’s board in late 2009. + + 4. In March 2010, prior to the conclusion of Peak Wealth’s initial two year +investment advisory agreement with the Fund, the Fund’s board requested documents from Peak +Wealth and Dube in connection with its first annual review of Peak Wealth’s investment advisory +4 +contract under Section 15(c) of the Investment Company Act. The board sent a second request in +May 2010. Peak Wealth requested an extension of time to respond to the board’s requests but +failed to provide the board with any of the requested documents. + + 5. In June 2010, the board terminated Peak Wealth’s advisory agreement, and +voted to liquidate the Fund’s assets (approximately $4 million) and to deregister the Company. + + 6. The Fund has distributed to investors all remaining assets net of liquidation +expenses. On March 23, 2011, the Division of Investment Management, pursuant to delegated +authority, issued an order terminating the Company’s registration under the Investment Company +Act. + +E. SEC EXAMINATION OF PEAK WEALTH + 1. In April 2010, SEC examination staff from the Miami Regional Office +initiated an examination of Peak Wealth and the Fund. The examination staff faxed its initial +document request list to Peak Wealth and the Fund on April 7, 2010, one week before it +commenced its examination. When the staff arrived on April 14, Dube did not have any +documents for Peak Wealth or the Fund. Dube repeatedly assured examiners that responsive +documents would be forthcoming. + 2. T he examination staff provided Peak Wealth with seven additional requests +for documents. These included requests for financial records relating to Peak Wealth’s advisory +business including: Peak Wealth’s balance sheet, trial balance, income statement, cash flow +statements, and cash receipts and disbursements journals. + 3. Dube and Peak Wealth did not produce these financial records because they +did not exist. Instead, Dube told examiners that he would create the requested financial records +relating to Peak Wealth. + 4. The examination staff also provided a document request to Dube (in his +capacity as a representative of Peak Wealth and the Fund’s acting chief compliance officer) for +documents relating to the maintenance of the Index, including the list of eligible issuers and proof +of their eligibility, and records of daily value computations, the weighting of positions, the annual +rebalancing process, and the correlation between the performance of the Fund and the Index. + 5. At the conclusion of the field work, the majority of the requests for Peak +Wealth’s financial records remained outstanding, as well as requests relating to the maintenance of +the Index. Examination staff referred the matter to the Division of Enforcement for further review. + + 6. The Company, the Fund (through its board), and the former portfolio +manager subsequently produced documents in response to a subpoena from the enforcement staff. +However, Peak Wealth and Dube never responded to the staff’s document subpoenas, and Dube +failed to appear for investigative testimony pursuant to a subpoena. + +5 +F. PEAK WEALTH’S FILINGS + + Although the Fund terminated Peak Wealth’s advisory agreement in June 2010, +Peak Wealth continues to be registered with the Commission. Peak Wealth has not filed a Form +ADV since September 2008. Peak Wealth’s September 2008 Form ADV states that its basis for +registration with the Commission is its status as an investment adviser to a registered investment +company. Peak Wealth has not filed a Form ADV-W or annually amended Forms ADV for its +fiscal years ended September 30, 2009, 2010, and 2011. + +G. VIOLATIONS + + 1. As a result of the conduct described above, Peak Wealth willfully violated +Section 15(c) of the Investment Company Act which requires, among other things, that the terms +of any contract or agreement, whereby a person undertakes regularly to serve or act as investment +adviser of a registered investment company, and any renewal thereof, be approved by a vote of the +majority of a fund’s disinterested directors or trustees at a meeting called for the purpose of voting +on such approval. Section 15(c) makes it the duty of an investment adviser of a registered +investment company to furnish such information as may reasonably be necessary for fund directors +to evaluate the terms of any contract whereby a person undertakes regularly to serve or act as +investment adviser of such company.2 + + Peak Wealth failed to provide the Fund’s board with +information necessary for the board to evaluate the nature, quality, and cost of its services in +connection with the board’s first annual renewal of Peak Wealth’s advisory agreement. Dube +willfully aided and abetted and caused Peak Wealth’s violations of Section 15(c) of the Investment +Company Act. + 2. As a result of the conduct described above, Peak Wealth willfully violated +Section 204 of the Advisers Act and Rules 204-1(a)(1) and 204-2(a)(1), (2), (4), (5), and (6) +thereunder. Section 204 of the Advisers Act requires investment advisers to make and keep certain +records and furnish copies thereof, and to make and disseminate such reports as the Commission, +by rule, may prescribe as necessary or appropriate in the public interest or for the protection of +investors. Section 204 specifies that all records of investment advisers are subject to examination +by representatives of the Commission. Rule 204-2 provides that investment advisers registered or +required to be registered shall make and keep true, accurate and current copies of various specific +categories of books and records, including: +• A journal or journals, including cash receipts and disbursements, records, and any other +records of original entry forming the basis of entries in any ledger; + +2 See In the Matter of Morgan Stanley Investment Management, Inc., Advisers Act Release +No. 3315 (Nov. 16, 2011)(charging adviser with 15(c) violations for failing to provide board with +information relating to sub-advisory services); In the Matter of New York Life Investment +Management, LLC, Advisers Act Release No. 2883 (May 27, 2009)(charging adviser with 15(c) +violations for failing to provide board with information reasonably necessary to evaluate fund’s +profitability) . + +6 +• General and auxiliary ledgers (or other comparable records) reflecting asset, liability, +reserve, capital, income and expense accounts; +• All check books, bank statements, cancelled checks and cash reconciliations of the +investment adviser; +• All bills or statements (or copies thereof), paid or unpaid, relating to the business of the +investment adviser as such; and +• All trial balances, financial statements, and internal audit working papers relating to the +business of such investment adviser. + +Rule 204-1(a)(1) requires registered investment advisers to file with the Commission annual +amended Forms ADV within 90 days of their fiscal year end. Peak Wealth failed to make, keep, +and furnish true, accurate and current books and records. Peak Wealth failed to make and keep +financial statements, bank records, cash receipts or disbursement records, general or auxiliary +ledgers, trial balances, or income and expense statements for its advisory business. Peak Wealth +offered to create certain financial statements for the examination staff, but only after the fact, and +never actually produced them. Peak Wealth also failed to furnish certain records to the +examination and enforcement staff relating to the maintenance of the Index. The enforcement staff +was compelled to subpoena these documents directly from a portfolio manager who worked for +Peak Wealth. Further, Peak Wealth failed to file annual amended Forms ADV for its fiscal years +2009, 2010, and 2011. Dube willfully aided and abetted and caused Peak Wealth’s violations of +Section 204 of the Advisers Act and Rules 204-1(a)(1) and 204-2(a)(1), (2), (4), (5), and (6) +thereunder. + + 3. As a result of the conduct described above, Peak Wealth willfully violated +Section 203A of the Advisers Act and Rule 203A-1(b)(2) thereunder. Section 203A of the +Advisers Act generally prohibits investment advisers with assets under management of less than +$25 million from registering with the Commission, unless the adviser is an investment adviser to a +registered investment company, or comes within one of the specified exemptions. +3 + + Advisers Act +Rule 203A-1(b)(2) requires a registered investment adviser who becomes ineligible for SEC +registration to file Form ADV-W to withdraw its SEC registration within 180 days of its fiscal year +end. Peak Wealth failed to timely file a Form ADV-W after it became ineligible for SEC +registration because the Fund terminated its advisory agreement on June 1, 2010. Peak Wealth +should have filed its Form ADV-W within 180 days of September 30, 2010, its 2010 fiscal year +end. Dube willfully aided and abetted and caused Peak Wealth’s violations of Section 203A of the +Advisers Act and Rule 203A-1(b)(2) thereunder. + +3 Effective July 21, 2011, Section 203A generally prohibits an adviser that has assets under +management between $25 million and $100 million from registering with the Commission, +unless it is an investment adviser to a registered investment company, or it comes within one of +the specified exemptions. See Advisers Act Section 203A(a)(2) (amended by the Dodd-Frank +Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010)); +Final Rule: Rules Implementing Amendments to the Investment Advisers Act of 1940, Investment +Advisers Act Release No. 3221 (June 22, 2011). +7 +III. + + In view of the allegations made by the Division of Enforcement, the Commission +deems it necessary and appropriate 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 +Respondents pursuant to Sections 203(e) and 203(f) of the Advisers Act including, but not limited +to, civil penalties pursuant to Section 203 of the Advisers Act; + +D. What, if any, remedial action is appropriate in the public interest against +Respondents pursuant to Section 9(b) of the Investment Company Act including, but not limited to, +civil penalties pursuant to Section 9 of the Investment Company Act; + +E. What, if any, remedial action is appropriate in the public interest against +Respondents pursuant to Section 15(b)(6) of the Exchange Act; + +F. What, if any, remedial action is appropriate in the public interest against Dube +pursuant to Rule 102(e)(1)(iii) of the Commission’s Rules of Practice; and + +G. Whether, pursuant to Section 203(k) of the Advisers Act, and Section 9(f) of the +Investment Company Act, Respondents should be ordered to cease and desist from committing or +causing violations of and any future violations of Sections 203A and 204 of the Advisers Act and +Rules 203A-1(b)(2), 204-1(a)(1), 204-2(a)(1), (2), (4), (5) and (6) thereunder, and Section 15(c) of +the Investment Company Act, and whether Respondents should be ordered to pay civil penalties +pursuant to Section 203(i) of the Advisers Act, and Section 9(d) of the Investment Company Act. + +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. + +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 fails to file the directed answer, or fails 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 +8 +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/2012/AAER-3402.pdf b/raw/aaer/2012/AAER-3402.pdf new file mode 100644 index 0000000000000000000000000000000000000000..24cada47661dabe11393ebb224c5d1d3cb11588f --- /dev/null +++ b/raw/aaer/2012/AAER-3402.pdf @@ -0,0 +1,3 @@ +version https://git-lfs.github.com/spec/v1 +oid sha256:16edf0abd1f06fc9d9665b2fe00fd1971e392e831a44f6d3c12b4bbff899cc46 +size 152448 diff --git a/raw/aaer/2012/AAER-3402.txt b/raw/aaer/2012/AAER-3402.txt new file mode 100644 index 0000000000000000000000000000000000000000..0a663b7d2604f77a84cd7477e2fb6686329b90f8 --- /dev/null +++ b/raw/aaer/2012/AAER-3402.txt @@ -0,0 +1,104 @@ + + UNITED STATES OF AMERICA + before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 67708 / August 22, 2012 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3402 / August 22, 2012 + +ADMINISTRATIVE PROCEEDING +File No. 3-14992 + + : + : + : +In the Matter of : ORDER INSTITUTING ADMINISTRATIVE + : PROCEEDINGS PURSUANT TO RULE + Todd C. Crow, : 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 Todd C. +Crow (“Respondent” or “Crow”) 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. Crow, age 64, was the chief financial officer of NutraCea, Inc. (“NutraCea”) +from October 2005 to May 2008 and July 2008 to November 2008. + + 2. NutraCea is a California corporation with its principal executive offices +located in Scottsdale, 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 Crow in +SEC v. NutraCea, et al. (Civil Action No. CV 11-0092-PHX-SRB), in the United States District +Court for the District of Arizona. On July 23, 2012, the court entered a final judgment +permanently enjoining Crow, 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, 13a-14, 13b2-1, +and 13b2-2 thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and +13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder. The final +judgment also prohibits Crow from serving as an officer or director of a public company and +orders him to pay a $50,000 civil money penalty. + + 4. The Commission’s complaint alleged, among other things, that NutraCea, +through the misconduct of Crow and others, overstated its sales revenues for its fiscal year 2007 +by engaging in improper revenue recognition practices. The complaint alleged that Crow +violated the antifraud, books and records, and internal controls provisions of the federal +securities laws because he knew or was reckless in not knowing 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 Crow 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 Crow’s Offer. + + Accordingly, it is hereby ORDERED, effective immediately, that Crow 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/2012/AAER-3403.pdf b/raw/aaer/2012/AAER-3403.pdf new file mode 100644 index 0000000000000000000000000000000000000000..67c90ae536a7cbf92da3661dec07c7b8e77f260d --- /dev/null +++ b/raw/aaer/2012/AAER-3403.pdf @@ -0,0 +1,3 @@ +version https://git-lfs.github.com/spec/v1 +oid sha256:5d77b0a71c57f99b23ebc387f501789d9b983d443dfc419b7a59e099bc45ea86 +size 293536 diff --git a/raw/aaer/2012/AAER-3404.txt b/raw/aaer/2012/AAER-3404.txt new file mode 100644 index 0000000000000000000000000000000000000000..1aaf355810a253cee8e1c055b26253926e6ed79c --- /dev/null +++ b/raw/aaer/2012/AAER-3404.txt @@ -0,0 +1,1391 @@ + + + + + + + + + + + + + + + + SEC.gov | China Sky One Medical, Inc. and Yan-qing Liu + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/512891","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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China Sky One Medical, Inc. and Yan-qing Liu , United States District Court for the Central District of California (Civil Action No. CV12-7543 MWF (MANx) + + SEC Charges China Sky One Medical and Top Executive with Inflating Financial Results through Phony Sales + + The Securities and Exchange Commission today filed suit in U.S. District Court for the Central District of California, charging China-based China Sky One Medical, Inc. (CSKI) and its CEO and chairman Yan-qing Liu with fraud for recording fake sales of a weight loss product to inflate revenues in the company's financial statements by millions of dollars. + + The SEC alleges CSKI falsely stated in 2007 annual and quarterly reports that it had entered into a strategic distribution agreement with a Malaysian company that would become the "exclusive" distributor of CSKI's "slim patch" in Malaysia and generate $1 million per month in sales.  However, the company never actually entered into any such agreement.  CSKI instead created approximately $19.8 million in phony export sales to Malaysia that were recorded as revenue in its financial results for 2007 and 2008.  CEO Yan-qing Liu certified the overstated financial results, which appear in CSKI's financial statements through 2010 and continue to impact the company's retained earnings on its balance sheet.  + + According to the SEC's complaint, CSKI is based Harbin, China.  In addition to weight loss patches, the company produces and sells sprays, ointments, and other Chinese traditional pain relief and health and beauty products.  CSKI became a public company trading on the U.S. markets through a reverse merger in May 2006. + + The SEC alleges that after CSKI devised the purported strategic distribution agreement with Takasima Industries ¢€" which is a Malaysian fitness equipment manufacturer and retailer ¢€" CSKI went on to falsely report export sales to Malaysia of more than $12.2 million for 2007, which constituted 25 percent of its total revenues.  CSKI then falsely recorded $7.5 million (8.2 percent of total revenues) in such sales for 2008.  Virtually all of CSKI's reported sales to Malaysia via Takasima were bogus.  Takasima only purchased $167,542 in slim patches from CSKI in 2007, and none in 2008.  And it never entered into any distribution agreement with CSKI and never undertook ¢€" much less satisfied ¢€" any minimum purchase commitment. + + According to the SEC's complaint, CSKI also falsely claimed in its public filings that its top two customers for 2007 were sales agents for Takasima.  CSKI identified those customers as Ningbo Yuehua International Trading Company and Guangzhou Xinghe International Trading Company, which collectively accounted for the phony 25 percent of CSKI's total revenues for 2007.  CSKI claimed that all of these purported sales to Ningbo Yuehua and Guangzhou Xinghe went through Takasima, while in fact Takasima never had any relationship with these two entities. + + The complaint alleges that CSKI and/or Liu violated, aided and abetted, or is liable as a control person for, violations of Section 17(a)(2) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, 13a-11, and 13a-13.  The complaint further alleges that Liu violated Exchange Act Section 13(b)(5) and Rules 13a-14, 13b2-1 and 13b2-2.  The SEC's complaint seeks financial penalties against CSKI and Liu as well as disgorgement of ill-gotten gains by Liu, who personally benefited from the overstated financial statements through the company's 2008 private placement of securities.  The SEC seeks to have Liu reimburse CSKI for certain incentive-based compensation he received during the period affected by the fraud pursuant to Section 304 of the Sarbanes-Oxley Act, and to have Liu barred from acting as an officer or director of a public company.  The SEC also seeks to have CSKI and Liu permanently enjoined from future violations of these provisions of the federal securities laws. + + In addition to the court action, the Commission issued an Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934 to determine whether to revoke or suspend registration of CSKI's securities due to the company's failure to file its annual report for 2011 or any quarterly reports for 2012. + + SEC Complaint + +   + + + + + + + + + + + Resources + + + + + SEC Complaint + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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MOSKOWITZ, : 102(e) OF THE COMMISSION’S RULES OF + : P RACTICE, 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 +Moskowitz (“Moskowitz” or “Respondent”) pursuant to Rule 102(e)(3)(i) of the Commission’s +Rules of Practice.1 + +II. + + In anticipation of the institution of these proceedings, 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) + +1 Rule 102(e)(3)(i) provides, in relevant part, that: + + The Commission, with due regard to the public in terest 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 - +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 Respon dent’s Offer, the Commission finds that: + + 1. Moskowitz, age 47, resides in Flushing, New York. From 2002 until 2010, +Moskowitz served as the Chief Financial Officer (“CFO”), Chief Operating Officer, Chief +Accounting Officer, and Secretary of Spongetech Delivery Systems, Inc. (“Spongetech”). +Moskowitz has never been a certified public accountant. As Spongetech’s CFO, he oversaw +Spongetech’s day-to-day financial operations, the preparation of its financial statements, and its +filing of annual and quarterly reports with the Commission, which Moskowitz signed and certified +to be accurate. + + 2. Spongetech was, at all relevant times, a Delaware corporation with its +principal place of business in New York, New York, that sold soap-filled sponges. In April 2006, +Spongetech registered the resale of shares of its common stock with the Commission by filing a +Form SB-2 with the Commission. Spongetech later filed periodic reports with the Commission +under Section 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”). On September 28, +2009, Spongetech filed a registration statement for its common stock with the Commission under +Section 12(g) of the Exchange Act, which became effective on the same date. From 2006 until +October 5, 2009, Spongetech’s common stock was quoted on the Over-the-Counter Bulletin Board +as “SPNG” and then as “SPNGE.” On October 5, 2009, the Commission issued an order +temporarily suspending the trading of Spongetech common stock. Since the expiration of the +trading suspension, Spongetech’s common stock has continued to trade on an unsolicited basis in +the grey market. + + 3. On June 12, 2012, a judgment was entered against Moskowitz, by consent, +in the civil action entitled SEC v. Spongetech Delivery Systems, Inc., et al., Civil Action No. 10- +2031, in the United States District Court for the Eastern District of New York. The judgment +permanently enjoined Moskowitz from violations of Sections 5 and 17(a) of the Securities Act of +1933 (“Securities Act”), Sections 10(b) and 13(b)(5) of the Exchange Act, and Exchange Act +Rules 10b-5, 13b2-1, 13b2-2, and 15d-14, and from aiding and abetting violations of Sections +13(a), 13(b)(2)(A), 13(b)(2)(B), and 15(d) of the Exchange Act and Exchange Act Rules 12b-20, +13a-13, 15d-1, and 15d-13. The judgment also, among other things, barred Moskowitz from +serving as an officer or director of a public company, and engaging in any offering of penny stock +pursuant to Securities Act Section 20(g) and Exchange Act Section 21(d)(6). + +4. + The Commission’s complaint alleged that from at least April 2007, +Moskowitz and others engaged in a scheme to increase demand illegally for, and profit from, the +unregistered sale of publicly-traded stock in Spongetech by, among other things, “pumping” up +demand for Spongetech stock through false public statements about non-existent Spongetech +customers, fictitious sales orders, and phony revenue. They also repeatedly and fraudulently +understated the number of Spongetech’s outstanding shares in press releases and public filings. +The purpose of flooding the market with false public information was to fraudulently inflate the + + - 3 - +price for Spongetech shares so Moskowitz and others could then “dump” the shares by illegally +selling them to the public through affiliated entities in unregistered transactions. Among other +things, the complaint further alleged that Spongetech, at the direction of Moskowitz and a co- +defendant, filed periodic reports with the Commission that contained materially false and +misleading statements and materially overstated revenues, created materially false purchase orders, +invoices, and other documents, and failed to ensure that Spongetech maintained accurate books and +records or implemented effective 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 Moskowitz’s Offer. + + Accordingly, it is hereby ORDERED, effective immediately, that Steven Y. Moskowitz 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 \ No newline at end of file diff --git a/raw/aaer/2012/AAER-3407.pdf b/raw/aaer/2012/AAER-3407.pdf new file mode 100644 index 0000000000000000000000000000000000000000..2fbdec66991561f8270872e7dda17423deb44e38 --- /dev/null +++ b/raw/aaer/2012/AAER-3407.pdf @@ -0,0 +1,3 @@ +version https://git-lfs.github.com/spec/v1 +oid sha256:273d8e063f716fa188f1f08268c1f192bffa0e7e269ee6ba855741f83101ff6b +size 341123 diff --git a/raw/aaer/2012/AAER-3412.pdf b/raw/aaer/2012/AAER-3412.pdf new file mode 100644 index 0000000000000000000000000000000000000000..7e61d85725c2a5a6cab3fcee4f4137d9ea9d4e7e Binary files /dev/null and b/raw/aaer/2012/AAER-3412.pdf differ diff --git a/raw/aaer/2012/AAER-3412.txt b/raw/aaer/2012/AAER-3412.txt new file mode 100644 index 0000000000000000000000000000000000000000..689ab243f89d1901eb8644c33e772f459265db44 --- /dev/null +++ b/raw/aaer/2012/AAER-3412.txt @@ -0,0 +1,112 @@ + + +UNITED STATES OF AMERICA +Before the +SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 67988 / October 4, 2012 +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3412 / October 4, 2012 +ADMINISTRATIVE PROCEEDING +File No. 3-12126 + +In the Matter of +Gilbert Bergsman, CPA + +: +: +: +: +: +: +ORDER GRANTING APPLICATION FOR +REINSTATEMENT TO APPEAR AND PRACTICE +BEFORE THE COMMISSION AS AN ACCOUNTANT + +On December 15, 2005, Gilbert Bergsman, CPA (“Bergsman”) 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 Bergsman pursuant to Rule +102(e) of the Commission's Rules of Practice. +1 Bergsman consented to the entry of the +December 15, 2005 order without admitting or denying the findings therein. This order is issued +in response to Bergsman’s application for reinstatement to appear and practice before the +Commission as an accountant. + +Bergsman was found to have engaged in improper professional conduct with respect to +the audit of the financial statements of eSafetyworld, Inc. (“eSafety”) for its fiscal year ended +June 30, 2001 and the reviews of the financial statements for the quarters ended September 30, +2000, December 31, 2000, and March 31, 2001 by Eichler Bergsman & Co., LLP. Bergsman +served as the engagement partner on the eSafety engagement. During this time, Bergsman +engaged in improper professional conduct by repeatedly engaging in unreasonable conduct, +resulting in a violation of applicable professional standards that indicated a lack of competence +to practice before the Commission. Specifically, Bergsman (i) failed to make adequate inquiries +into eSafety’s new revenue stream and the valuation thereof during the first three quarters of +2001; (ii) allowed the reports on eSafety’s quarterly financial statements to remain outstanding +despite eSafety’s failure to reverse certain consulting revenues recognized during the first three +quarters of 2001; (iii) did not confirm accounts receivable from eSafety’s consulting clients, and + +1 See Accounting and Auditing Enforcement Release No. 2354 dated December 15, 2005. Bergsman was permitted, +pursuant to the order, to apply for reinstatement after one year upon making certain showings. + +did not note or require disclosure of eSafety’s related party relationships with eSafety’s +consulting clients; (iv) did not appropriately audit or require correction of eSafety’s deferral of +certain administrative costs; and (v) did not obtain sufficient competent evidence to conclude +that certain cash advances were loans or investments, which eSafety improperly recorded as +assets rather than expenses. + +Bergsman has met all of the conditions set forth in the December 15, 2005 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, Bergsman 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 Bergsman, it appears that he has complied with the terms of the December 15, 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 Bergsman, 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 Bergsman, 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, + + + + + +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 +Gilbert Bergsman, 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/2012/AAER-3413.txt b/raw/aaer/2012/AAER-3413.txt new file mode 100644 index 0000000000000000000000000000000000000000..2de7abd2773e3a588a13cabd81029afc0cdbf0e3 --- /dev/null +++ b/raw/aaer/2012/AAER-3413.txt @@ -0,0 +1,1390 @@ + + + + + + + + + + + + + + + + SEC.gov | Freedom Environmental Services, Inc., et al. + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/512951","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Freedom Environmental Services, Inc., et al. + + + + + + + + + + + + Freedom Environmental Services, Inc., et al. + + + + + + + + + + + + + + + + + + + U.S. Securities and Exchange Commission + + Litigation Release No. 22482 / September 17, 2012 + + Accounting and Auditing Enforcement Release No. 3413 / September 17, 2012 + + SEC v. Freedom Environmental Services, Inc., et al. , Civil No.: 6:12-CV-1415-ORL-28-DAB (USDC M.D. Fla., Filed September 17, 2012). + + SEC OBTAINS ASSET FREEZE AND OTHER RELIEF IN MICROCAP FRAUD + + On September 17, 2012, the Securities and Exchange Commission obtained a temporary restraining order against future violations of the antifraud, issuer reporting, books and records, internal controls and officer certification provisions of the federal securities laws. It is alleged these violations occurred in furtherance of a scheme orchestrated by Michael Borish and Michael Ciarlone, through Freedom Environmental Services, Inc. (Freedom) which also involved misappropriation of corporate assets by Borish and Ciarlone. The court also appointed a receiver to preserve and marshal assets, froze Borish's assets, prohibited the destruction of documents and records, and ordered expedited discovery. + + The Commission's complaint, filed in the U.S. District Court for the Middle District of Florida (Orlando Division), alleges Borish, Freedom's former chief executive officer, orchestrated a scheme to remain in control of the company after being removed by the board of directors. Despite the board's action, Borish continued to act as the company's de facto CEO and to control its operations. From at least July 2010 â€" both before and after his ostensible removal â€" Borish caused Freedom to file numerous false and misleading annual, quarterly, and periodic reports with the Commission. Freedom also issued a false press release regarding the acquisition of another company, failed to file Forms 8-K regarding material events, such as Freedom's recent bankruptcy filing, insider litigation settlements, and repeatedly misrepresented the composition of the board of directors and identities of Freedom's officers in Freedom's filings. It is further alleged that Borish and Ciarlone, from July 2011 through at least May 2012, stole corporate funds to pay personal expenses. + + The complaint alleges that through this conduct Freedom, Borish and Ciarlone violated Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(b)(2)(A) and (B), Section 13(b)(5) and 14(c) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 13a-14, 13b-1 and 14c-6 thereunder. + + A hearing has been set for October 1, 2012, on the Commission's motion for a preliminary injunction. Separately, the Commission issued an order suspending trading in the securities of Freedom from September 17, 2012 through September 28, 2012. + + Paul N. Feindt and Scott R. Frost conducted the Commission's investigation; Thomas M. Melton and Daniel J. 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Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2012/AAER-3415.pdf b/raw/aaer/2012/AAER-3415.pdf new file mode 100644 index 0000000000000000000000000000000000000000..4b718238b87bc73c39c9d4c8ac34d71067123cfa --- /dev/null +++ b/raw/aaer/2012/AAER-3415.pdf @@ -0,0 +1,3 @@ +version https://git-lfs.github.com/spec/v1 +oid sha256:bc794b1f1f85aae838587c684e0c6f5997065f7b8279f5a574d5d67a3cea3bcb +size 267295 diff --git a/raw/aaer/2012/AAER-3415.txt b/raw/aaer/2012/AAER-3415.txt new file mode 100644 index 0000000000000000000000000000000000000000..7730cc3f6199db92d44ea6b099fd50a758e2e433 --- /dev/null +++ b/raw/aaer/2012/AAER-3415.txt @@ -0,0 +1,444 @@ + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 67793 / September 6, 2012 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3415 / September 6, 2012 + +ADMINISTRATIVE PROCEEDING +File No. 3-15012 CORRECTED + + +In the Matter of + +S. W. Hatfield, CPA and +Scott W. Hatfield, CPA + +Respondents. + +ORDER INSTITUTING PUBLIC +ADMINISTRATIVE AND CEASE- +AND-DESIST PROCEEDINGS +PURSUANT TO SECTIONS 4C AND +21C OF THE SECURITIES EXCHANGE +ACT OF 1934 AND RULE 102(e) OF +THE COMMISSION’S RULES OF +PRACTICE + + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate +that public administrative and cease-and-desist proceedings be, and hereby are, instituted +against S. W. Hatfield, CPA and Scott W. Hatfield, CPA (“Respondents”) pursuant to +Sections 4C1 and 21C of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule +102(e)(1)(i) and (iii) of the Commission’s Rules of Practice. + +II. + +After an investigation, the Division of Enforcement alleges that: + + A. RESPONDENTS + + +1 Section 4C provides, in relevant part, that: + +The Commission may censure any person, or deny, temporarily or permanently, to any person the +privilege of appearing or practicing before the Commission in any way, if that person is found . . . (1) not to +possess the requisite qualifications to represent others . . . (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 rule s and regulations +thereunder. + + 2 +1. S. W. Hatfield, CPA (“SWH”) is a public accounting firm based in +Dallas, Texas. SWH is registered with the Public Company Accounting Oversight Board +(“PCAOB”). Between January 31, 2010 and May 19, 2011, SWH’s license to practice +public accounting in Texas was expired. During this period, SWH issued 38 audit reports +that 21 issuers included in periodic reports and registration statements filed with the +Commission. +2. Scott W. Hatfield, CPA (“Scott Hatfield”), age 57, resides in Dallas, +Texas and is the sole proprietor of SWH. He served as the engagement partner on each of +SWH’s issuer audits and knowingly signed the firm’s name to each audit report SWH +issued during the period SWH’s license was expired. Scott Hatfield has been licensed in +Texas as a certified public accountant since 1985. + + B. FACTS + +1. In 1994, Scott Hatfield obtained SWH’s initial license to practice as a public +accounting firm from the Texas State Board of Public Accountancy (“TSBPA”). He +annually renewed SWH’s license through January 2009. + +2. Under Texas’ Public Accountancy Act,2 a firm, including a sole +proprietorship such as SWH, may not provide attest services3 unless it holds a validly- +issued firm license,4 and only a license holder may issue a report on a financial statement.5 +Accordingly, an individual license holder may not issue audit reports unless his firm also +holds a validly-issued firm license. + +3. In addition, each firm licensed by the TSBPA that performs attest services +must enroll and participate in a peer review program. A firm that performs attest services +only for issuer clients can meet this requirement through the PCAOB inspection process. +On the other hand, a firm that performs attest services for any non-issuer clients must also +enroll in a peer review program for review of its non-public company attest work. + +4. In October 2009, the TSBPA notified Scott Hatfield that SWH’s license had +not yet been renewed for the upcoming year and would expire on January 31, 2010. It also +informed Scott Hatfield that SWH had failed to report the results of a 2006 peer review or +the results of any other peer review in the subsequent three years. In or before March 2010, + +2 See Tex. Occ. Code Ch. 901 (the “Public Accountancy Act”). + +3 The Texas Administrative Code, Rule 501.52(4), defines “Attest service” to include, among other +things: “an audit or other engagement required by the [TSBPA] to be performed in accordance with the +auditing standards adopted by the AICPA, PCAOB, or another national or international accountancy +organization recognized by the [TSBPA].” + +4 See Tex. Occ. Code § 901.351 (requiring firm licenses). + +5 See id. § 901.456. + 3 +the TSBPA told Scott Hatfield that he could be sanctioned if he issued audit reports without +a valid firm license. + +5. SWH’s license expired on January 31, 2010 and was not renewed until May +19, 2011. Scott Hatfield knew that SWH’s license had expired. + +6. Scott Hatfield successfully renewed SWH’s firm license on May 19, 2011. + +7. Between January 31, 2010 and May 19, 2011, while SWH’s public +accounting license was expired, SWH issued 38 audit reports that 21 issuers included in +periodic reports and registration statements filed with the Commission (see Appendix). +Scott Hatfield, as SWH’s sole proprietor, consented to the inclusion of SWH’s audit reports +in these filings. Issuers relied on SWH’s audit reports to, among other things, issue +securities. Scott Hatfield and SWH billed issuers $199,722 in connection with audits +conducted or completed while SWH’s license was expired. + +8. SWH’s audit reports were included in public filings by five issuers quoted +on the OTCBB during the period from January 31, 2010 and May 19, 2011. The following +chart summarizes the number of days traded, the average trading volume and the low, high, +and average close price per these five issuers during this period: + + +Issuer +No. Days +Traded +Avg. +Daily +Volume +Close Price +Low High Average +8888 Acquisition Corp. (EGHA); +(Registration withdrawn Aug. 17, 2011) 13 261 $ 0.07 $ 3.00 $ 1.11 +Eight Dragons Co. (EDRG) 26 213 $ 0.07 $ 1.70 $ 0.57 +HPC Acquisitions, Inc. (HPCQ) 23 8,665 $ 0.01 $ 0.75 $ 0.15 +Truewest Corp. (TRWS) 7 200 $ 0.10 $ 3.00 $ 1.39 +X-Change Corp. (XCHC) 128 9,268 $ 0.20 $ 1.58 $ 0.47 + + + +9. Scott Hatfield authorized seven issuers to include SWH audit reports in +registration statements filed with the Commission while SWH’s license was expired. Six +issuers filed registration statements on Form 10-12G; however only one, SMSA Kerrville +Acquisition Corp. (“SMSA Kerrville”), issued securities during the period that SWH’s +license was expired. Specifically, on December 15, 2010, SMSA Kerrville issued 9.5 +million shares of restricted, unregistered common stock in exchange for 100% of the +outstanding common stock of another company. In August 2010, the sixth issuer, Asia + 4 +Green Agriculture Corp., f/k/a SMSA Palestine Acquisition Corp., (“SMSA Palestine”), +issued 11,685,617 shares for 100% of the outstanding common stock of Sino Oriental +Agriculture Group Limited, a BVI corporation. SMSA Palestine later filed a Form S-1 on +September 20, 2010 and subsequent amendments before going effective on July 15, 2011.6 + +10. Three other issuers7 disclosed issuances of unregistered, restricted +common stock for acquisitions and for services while SWH’s firm license was expired. +Their Commission filings indicate that they relied on Section 4(2) of the Securities Act of +1933, as amended, for an exemption from registration and that no underwriter was used in +related transactions. A fourth issuer, X-Change Corp., issued securities during the period +in which SWH’s license was expired to convert or retire outstanding debt and to obtain +certain intellectual property rights. +11. Under Rule 1-02(a) of Regulation S-X, audit reports must be +prepared by “an independent public or certified public accountant.” Rule 2-01(a) of +Regulation S-X, however, provides that the Commission will not recognize any person +(including an unincorporated organization like SWH) as either a public accountant or +certified public accountant who is not in good standing as such under the laws of the place +of his residence or principal office. Between January 31, 2010 and May 19, 2011, SWH +was not duly registered and in good standing under the laws of the state of Texas, where +Scott Hatfield resided and SWH maintained its principal office. Accordingly, SWH was +not recognized as an accountant by the Commission during this period. +C. VIOLATIONS + + 1. As a result of the conduct described above, Respondents willfully +violated Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, which prohibit +fraudulent conduct in connection with the purchase or sale of securities. + + 2. As a result of the conduct described above, Respondents do not +possess the requisite qualifications to represent others, pursuant to Section 4C(a)(1) and Rule +102(e)(1)(i) of the Commission’s Rules of Practice. + +3. As a result of the conduct described above, Respondents willfully +violated 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. + + +6 SMSA Palestine included SWH’s audit report in amendments to the registration statement on form +S-1 filed November 5, 2010 and December 10, 2010. Neither the initial registration statement on Form S -1 +filed on September 20, 2010 nor amendments filed subsequent to 2010 include SWH’s audit report. + +7 Signet International Holdings, Inc, SMSA Crane Acquisition Corp., and SMSA Gainesville +Acquisition Corp. + 5 +III. + +In view of the allegations made by the Division of Enforcement, the Commission +deems it necessary 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. 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 Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder; +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; + +D. Whether, pursuant to Section 21B of the Exchange Act, civil penalties should +be levied against either Respondent; and + +E. Whether, pursuant to Section 21C(e) of the Exchange Act, Respondents should +be subject to disgorgement with prejudgment interest. + + +IV. + +IT IS ORDERED that a public hearing for the purpose of taking evidence on t he +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. + +IT IS FURTHER ORDERED that Respondent 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 Respondent fails to file the directed answer, or fails to appear at a hearing after +being duly notified, the Respondent may be deemed in default and the proceedings may be +determined against 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 Respondent personally or by certified +mail. + + 6 +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 + + + 7 +Appendix +Filings Including Audit Reports Issued by S. W. Hatfield, CPA while License Expired +January 31, 2010 to May 19, 2011 + + + +Issuer +CIK +Code Ticker +Filing +Type Filing Date +Period +Ended No. +Report +Date +Consent +Date Disclosed +SWH Fees +1 8888 Acquisition +Corp. (SWH +dismissed +10/19/2010; Form +15 Filed 8/17/11) +1376866 EGHA 10-K 10/15/2010 8/31/2010 1 10/7/2010 N/A $ 6,100 +2 Alliance Health, +Inc. (Form 15 +Filed 6/8/11) +822434 ALNH 10-K 11/26/2010 9/30/2010 2 11/2/2010 N/A $ 5,750 +3 Asia Green +Agriculture +Corp. f/k/a SMSA +Palestine +Acquisition Corp. +(SWH dismissed +8/20/10) +1440476 AGAC +10-K 3/30/2010 12/31/2009 3 3/15/2010 N/A $ 7,200 + S-1/A1 11/5/2010 12/31/2009 3/15/2010 11/4/2010 + 8-K/A 11/5/2010 8/20/2010 3/15/2010 11/4/2010 + S-1/A2 12/10/2010 12/31/2009 3/15/2010 12/10/2010 + 8-K/A 1/18/2011 8/20/2010 3/15/2010 N/A + 8-K/A 2/22/2011 8/20/2010 3/15/2010 N/A + 8-K/A 3/22/2011 8/20/2010 3/15/2010 N/A + 8-K/A 4/19/2011 8/20/2010 3/15/2010 N/A + 8-K/A 5/9/2011 8/20/2010 3/15/2010 N/A +4 BTHC X, Inc. +(SWH resigned +3/29/2010) 1375685 BTXI +10-K 3/30/2010 3/31/2009 4 3/23/2010 N/A $ 4,100 + +10-K 3/29/2011 12/31/2010 3/23/2010 N/A $ 8,100 +5 BTHC XIV, Inc. +1405646 BXII +10-K 3/10/2010 12/31/2009 5 3/4/2010 N/A $ 4,300 + +10-K 1/18/2011 12/31/2010 6 1/11/2011 N/A $ 5,200 +6 BTHC XV, Inc. +(SWH dismissed +10/18/2010) 1412090 BTXV +10-K 3/10/2010 12/31/2009 7 3/5/2010 N/A $ 4,300 + +10-K 4/15/2011 12/31/2010 N/A N/A $ 7,375 +7 Chile Mining +Technologies, Inc. +f/k/a Latin +America +Ventures, Inc. +(SWH dismissed +5/12/2010) +1427714 LVEN 10-K 2/9/2010 12/31/2009 8 2/3/2010 N/A $ 6,450 + 8 + +Issuer +CIK +Code Ticker +Filing +Type Filing Date +Period +Ended No. +Report +Date +Consent +Date Disclosed +SWH Fees +8 Eight Dragons +Co. +1100778 EDRG +10-K 3/9/2010 12/31/2009 9 2/23/2010 N/A $ 6,950 + +10-K 1/28/2011 12/31/2010 10 1/26/2011 N/A $ 5,713 +9 HPC +Acquisitions, Inc. +1435224 HPCQ +10-K 3/17/2010 12/31/2009 11 2/11/2010 N/A $ 6,725 + +10-K 3/1/2011 12/31/2010 12 1/6/2011 N/A $ 5,750 +10 Marketing +Acquisition Corp. 1363343 MAQC 10-K 3/28/2011 12/31/2009 13 3/2/2010 N/A $ 2,250 + (SWH resigned +5/4/2010) 10-K 3/5/2010 12/31/2009 3/2/2010 N/A $ 4,500 + Renewable +Energy +Acquisition Corp. 1418302 +10G 3/3/2010 12/31/2009 14 2/12/2010 N/A +11 +10-K 3/9/2011 12/31/2010 15 2/25/2011 N/A $ 4,918 +12 Signet +International +Holdings, Inc. +1317833 SIGN 10-K 4/12/2010 12/31/2009 16 4/7/2010 N/A $ 18,365 (SWH resigned +4/9/2010) +13 SMSA Crane +Acquisition Corp. 1473287 SSCR 10-12G/A 2/22/2010 12/31/2009 17 2/17/2010 N/A + 10-K 3/7/2011 12/31/2010 18 2/7/2011 N/A $ 4,300 +14 SMSA +Gainesville +Acquisition Corp. 1474266 SACQ +10-K 3/16/2010 12/31/2009 19 3/11/2010 N/A $ 3,000 + +10-K 3/8/2011 12/31/2010 20 2/8/2011 N/A $ 4,975 +15 SMSA Humble +Acquisition Corp. +1495900 SMHQ + 10-12G 8/27/2010 6/30/2010 21 8/25/2010 N/A + 10-12G 10/29/2010 9/30/2010 22 10/26/2010 N/A + 10-12G/A 12/10/2010 9/30/2010 23 12/8/2010 N/A + 10-K 3/14/2011 12/31/2010 24 2/10/2011 N/A $ 4,225 +16 SMSA Katy +Acquisition Corp. +1495899 SCQO +10-12G 8/25/2010 6/30/2010 25 8/24/2010 N/A + 10-12G 10/27/2010 9/30/2010 26 10/25/2010 N/A + 10-12G/A 11/30/2010 9/30/2010 10/25/2010 N/A + 10-12G/A 12/20/2010 9/30/2010 27 12/17/2010 N/A + + 10-K 3/14/2011 + +12/31/2010 + +28 2/9/2011 N/A $ 4,225 +17 SMSA Kerrville +Acquisition Corp. 1512693 +10-12G 2/15/2011 12/31/2010 29 1/28/2011 N/A $ - + 10-12G/A 3/23/2011 12/31/2010 1/28/2011 N/A + 10-12G/A 4/5/2011 12/31/2010 1/28/2011 N/A + 9 + +Issuer +CIK +Code Ticker +Filing +Type Filing Date +Period +Ended No. +Report +Date +Consent +Date Disclosed +SWH Fees +18 SMSA +Shreveport +Acquisition Corp. +1501643 +10-12G 11/1/2010 9/20/2010 30 10/27/2010 N/A $ - + (Form 15 Filed +8/8/11) 10-12G 1/27/2011 12/31/2010 31 1/25/2011 N/A + 10-12G/A 3/7/2011 12/31/2010 1/25/2011 N/A +19 SMSA Treemont +Acquisition Corp. +(SWH dismissed +5/13/2011) 1495898 SAQU +10-12G 8/27/2010 6/30/2010 32 8/25/2010 N/A + 10-12G 10/29/2010 9/30/2010 33 10/26/2010 + 10-12G/A 12/10/2010 9/30/2010 34 12/8/2010 + 10-K 3/14/2011 12/31/2010 35 2/10/2011 $ 4,225 +20 Truewest Corp. +895650 TRWS 10-K 11/15/2010 9/30/2010 36 11/9/2010 N/A $ 6,138 +21 X-Change Corp. +54424 XCHC +10-K 4/21/2010 12/31/2009 37 3/31/2010 N/A $ 27,500 + +10-K 1/18/2011 12/31/2010 38 1/14/2011 N/A $ 27,138 + +Total disclosed SWH audit fees $ 199,772 + \ No newline at end of file diff --git a/raw/aaer/2012/AAER-3416.txt b/raw/aaer/2012/AAER-3416.txt new file mode 100644 index 0000000000000000000000000000000000000000..223d1c5f2443298953319fbf5a7553570264ba62 --- /dev/null +++ b/raw/aaer/2012/AAER-3416.txt @@ -0,0 +1,1406 @@ + + + + + + + + + + + + + + + + SEC.gov | Gilbert Fiorentino + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); 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S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 22481 / September 17, 2012 + + Auditing and Accounting Enforcement Release No. 3416 / September 17, 2012 + + SEC v. Gilbert Fiorentino , Civil Case No. 12-cv-23388, (S.D. FL.) (September 17, 2012) + + SEC CHARGES FORMER SYSTEMAX DIRECTOR IN COMPENSATION SCHEME + + On September 17, 2012, the Securities and Exchange Commission ("Commission") filed a civil action for fraud and other violations against, and proposed settlement with, Gilbert Fiorentino, a former director of Systemax Inc. ("Systemax"), a Port Washington, N.Y.-based consumer electronics retailer. + + The Commission's Complaint, filed in the U.S. District Court for the Southern District of Florida, alleges that Gilbert Fiorentino, who in addition to serving on the board was the former chief executive of Systemax's Technology Products Group in Miami, obtained over $400,000 in extra compensation directly from firms that conducted business with Systemax. Fiorentino also stole several hundred thousand dollars worth of company merchandise that was used to market Systemax's products online and in mail order catalogs. Because Fiorentino was one of Systemax's highest-paid executives, the federal securities laws required the company to disclose all compensation he received each fiscal year as well as his perks and other personal benefits. Since Fiorentino failed to disclose his extra compensation and perks to Systemax or its auditors, the amounts were not reported to shareholders correctly. + + Systemax placed Fiorentino on administrative leave in April 2011. After the SEC began investigating the conduct, Fiorentino agreed to resign from all of his positions with Systemax, surrender stock and stock options valued at approximately $9.1 million, and repay his 2010 annual bonus of $480,000. + + According to the SEC's complaint, the misconduct occurred from January 2006 to December 2010. Systemax sells personal computers and other consumer electronics through its websites, retail stores, and direct mail catalogs. Fiorentino arranged the extra compensation as he dealt directly with external service providers, manufacturer representatives, and other entities that conducted business with Systemax. For example, he demanded and received $5,000 to $10,000 monthly from an entity that supplied materials to Systemax's subsidiaries for use in retail and mail order operations. + + The SEC further alleges that through his executive position at Systemax, Fiorentino had access to company merchandise used to market Systemax products in mail order catalogs and online. Fiorentino routinely misappropriated some of this merchandise and failed to disclose it to Systemax and its auditors. + + According to the SEC's complaint, as a result of Fiorentino's actions, the information that Systemax filed with the SEC and provided to investors materially understated his compensation and omitted his personal financial interest in certain related-party transactions. Fiorentino reviewed and signed each Systemax Form 10-K from fiscal year 2006 to 2010 while knowing that it failed to make the required disclosures. Fiorentino also routinely signed management representation letters to Systemax's independent auditors stating that he did not know of any fraud or suspected fraud involving Systemax's management. + + The SEC's complaint alleges that Fiorentino violated Sections 10(b), 13(b)(5), and 14(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rules 10b-5, 13b2-1, 13b2-2, 14a-3, and 14a-9. In addition, the SEC's complaint alleges that Fiorentino aided and abetted Systemax's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-1. + + Fiorentino has consented to the entry of an injunctive order without admitting or denying the allegations in the Commission's complaint. The proposed order would: + + Enjoin Fiorentino from violating the anti-fraud, proxy, lying to accountants, and record-keeping provisions of the securities laws (Sections 10(b), 13(b)(5), and 14(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1, 13b2-2, 14a-3, and 14a-9).   + + Enjoin Fiorentino from aiding and abetting violations of the reporting, record-keeping, and internal control provisions of the securities laws (Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 12b-20 and 13a-1).   + + Order Fiorentino to pay a $65,000 civil penalty; and   + + Permanently bar Fiorentino from serving as an officer or director of a public company. + + This settlement is subject to the approval of the U.S. District Court of Florida. + + SEC Complaint in this matter +   + + + +  + + + + + + + + + + + Resources + + + + + SEC Complaint + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2012/AAER-3418.txt b/raw/aaer/2012/AAER-3418.txt new file mode 100644 index 0000000000000000000000000000000000000000..a25aa1ba0f794a6b4c0c98fe02925dc551fbe806 --- /dev/null +++ b/raw/aaer/2012/AAER-3418.txt @@ -0,0 +1,1391 @@ + + + + + + + + + + + + + + + + SEC.gov | Joseph Pacifico + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/513126","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. The link you have selected is located on another server. Please click on the OK button below to proceed to the selected site. 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Share sensitive information only on official, secure websites. + + + + + + + + + + + + + + + + + SEC homepage + + + + + + + Menu + + + + + + + + + + + + + + Close + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + Search Filings + + + + + + + + + Search Filings + + + + + + + + + Full Text Search + + + + + + Latest Filings + + + + + + Mutual Fund Search + + + + + + Variable Insurance Products Search + + + + + + SIC Codes + + + + + + CIK Lookup + + + + + + Public Dissemination Service (PDS) + + + + + + Search Assistance + + + + + + + + + + + + + Submit Filings + + + + + + + + + Submit Filings + + + + + + + + + EDGAR Filer Management Portal + + + + + + EDGAR Filing Portal + + + + + + Online Forms Management Portal + + + + + + EDGAR Next + + + + + + Forms Index + + + + + + Filer Support & Resources + + + + + + + + + + + + + Data & Research + + + + + + + + + Data & Research + + + + + + + + + Data Library + + + + + + Statistics & Data Visualizations + + + + + + Structured Data + + + + + + Investment Management Data + + + + + + Open Data at the SEC + + + + + + + + + + + + + Rules, Enforcement, & Compliance + + + + + + + + + + + + + + + + + + + + Rules & Regulations + + + + + + + + + Rulemaking Activity + + + + + + Submit Public Comments + + + + + + Staff Guidance + + + + + + No-Action, Interpretive, and Exemptive Letters + + + + + + Self-Regulatory Organization Rulemaking + + + + + + Public Petitions for Rulemaking + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + + + Litigation Releases + + + + + + Administrative Proceedings + + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + + Trading Suspensions + + + + + + Distributions to Harmed Investors + + + + + + Receiverships + + + + + + + + + + + + + + + + + Compliance + + + + + + + + + Examination Priorities + + + + + + Risk Alerts + + + + + + Compliance Outreach Program + + + + + + + + + + + + + + + + + + + + + + + Proposed Rules + + + + + + What's New + + + + + + Whistleblower Program + + + + + + + + + + + + + + + + + + + Featured Topics + + + + + + + + + Featured Topics + + + + + + + + + Crypto Task Force + + + + + + Cybersecurity + + + + + + Market Structure Analytics + + + + + + Saving and Investing for Military Personnel + + + + + + Saving and Investing for Teachers + + + + + + SEC-CFTC Harmonization Initiative + + + + + + Treasury Clearing Implementation + + + + + + + + + + + + + About + + + + + + + + + About + + + + + + + + + Mission + + + + + + Commissioners + + + + + + Divisions & Offices + + + + + + Division & Office Directors + + + + + + Advisory Committees + + + + + + Budget & Performance + + + + + + Reports & Publications + + + + + + Commission Votes + + + + + + Contact the SEC + + + + + + Careers + + + + + + + + + + + + + Submit a Tip or Complaint + + + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + Newsroom + + + | + + + Investors + + + Small Businesses + + + Whistleblowers + + + + + + + + + + + + + + + + + Search SEC.gov & EDGAR + + + + + + Search + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + More in this Section + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + Enforcement & Litigation + + + + + + + Litigation Releases + + + + + Administrative Proceedings + + + + + Administrative Law Judge Orders and Initial Decisions + + + + + Trading Suspensions + + + + + Distributions to Harmed Investors + + + + + Receiverships + + + + + Electronic Filings in Administrative Proceedings (eFAP) + + + + + Rules of Practice + + + + + Applications for Reentry + + + + + Reports of Investigations + + + + + Whistleblower Program + + + + + Public Alert: Unregistered Soliciting Entities (PAUSE) + + + + + SEC Action Lookup - Individuals (SALI) + + + + + Enforcement Data Delivery Standards + + + + + Small Businesses + + + + + Appellate Briefs + + + + + Amicus / Friend of the Court Briefs + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Home + + + Enforcement and Litigation + + + Litigation Releases + + + Joseph Pacifico + + + + + + + + + + + + Joseph Pacifico + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + + Litigation Release No. 22517 / October 19, 2012 + + Accounting and Auditing Enforcement Release No. 3418 / October 19, 2012 + + SEC v. Joseph Pacifico , Civil Action No. 1:12-CV-03636 (U.S. District Court for the Northern District of Georgia) + + On October 18, 2012, the Securities and Exchange Commission charged Joseph Pacifico, a former President of Carter's, Inc., the Atlanta-based marketer of children's clothing, for engaging in financial fraud at Carter's. The SEC alleges that Pacifico's misconduct caused Carter's to materially misstate its net income and expenses in several financial reporting periods between 2004 and 2009. + + The SEC's complaint, filed in the United States District Court for the Northern District of Georgia, alleges that between 2004 and 2009, Carter's Executive Vice President of Sales, Joseph Elles, who reported to Pacifico, fraudulently manipulated the amount of discounts that Carter's granted to its largest wholesale customer in order to induce that customerâ€"itself a large national department storeâ€"to purchase greater quantities of Carter's clothing for resale. Elles then concealed his conduct by persuading the customer to defer subtracting the discounts from payments until later periods and creating and signing false documents misrepresenting the timing and amount of those discounts to Carter's accounting personnel. + + After Pacifico discovered Elles's scheme, the complaint alleges that Pacifico signed a false certification to Carter's accounting personnel that understated the amount discounts that Carter's owed to the customer. The complained also alleges that Pacifico signed false internal forms that also misstated that discounts to be paid to the customer related to sales in 2009 when, in fact, the discounts related to prior financial periods. After conducting its own internal investigation, Carter's was required to issue restated financial results for the affected periods. + + The SEC's complaint alleges that Pacifico violated Section 17(a)(2) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5(b) and 13b2-1 thereunder, and aided and abetted Carter's violations of Sections 10(b), 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 10b-5(b),12b-20, 13a-1, 13a-11 and 13a-13 thereunder. The SEC is seeking permanent injunctive relief, financial penalties, and an officer and director bar against Pacifico. + + This is the second case that the SEC has filed in connection with the financial fraud at Carter's. The Commission previously charged Joseph Elles in connection with this scheme. See SEC v. Joseph Elles, Litigation Release No. 21784 / December 20, 2010. + + The SEC acknowledges the assistance of the U.S. Attorney's Office for the Northern District of Georgia and the Federal Bureau of Investigation in this matter. The SEC's investigation is continuing. + + + SEC Complaint +   + + + +  + + + + + + + + + + + Resources + + + + + SEC Complaint + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2012/AAER-3419.pdf b/raw/aaer/2012/AAER-3419.pdf new file mode 100644 index 0000000000000000000000000000000000000000..35505c127df69b411fcbe74c365d0c2e0639c8ca Binary files /dev/null and b/raw/aaer/2012/AAER-3419.pdf differ diff --git a/raw/aaer/2012/AAER-3420.txt b/raw/aaer/2012/AAER-3420.txt new file mode 100644 index 0000000000000000000000000000000000000000..cdc137be09d046e87434be4930e8e6ab15cb3b78 --- /dev/null +++ b/raw/aaer/2012/AAER-3420.txt @@ -0,0 +1,135 @@ + + + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 68098 / October 24, 2012 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3420 / October 24, 2012 + +ADMINISTRATIVE PROCEEDING +File No. 3-15078 + + +In the Matter of + +RAJNISH K. DAS, + + 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 Rajnish K. Das (“Respondent” or +“Das”). + + +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. + +The Commission finds that: + +A. RESPONDENT + +1. Rajnish K. Das, age 42, is a resident of New York, New York. From +approximately September 2003 through January 2006, Das was employed as chief financial officer +(“CFO”) of infoUSA, Inc. (“Info”), a database marketing company. As CFO, Das signed and +certified Info’s Forms 10-K which incorporated information from the company’s proxy statements. +Das was terminated from Info in approximately July 2006. Das has not passed the certified public +accountant (“CPA”) exam and has not been a licensed CPA. + +2. Prior to working at Info, Das was employed with various investment banking +firms. Following his employment at Info, Das has owned and operated POM Partners, LLC, which +offers investment banking advisory services. Das has held Series 7 and 63 securities licenses. + + B. CIVIL INJUNCTION AND FINDING OF LIABILITY FOR VIOLATIONS + +3. On May 29, 2012, the U.S. District Court for the District of Nebraska +entered a final judgment against Das, permanently enjoining him from future violations, direct or +indirect, of Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5), and 14(a) of the Securities +Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-13, 13a-14, 13b2-1, 13b2-2, 14a-3, +and 14a-9 thereunder. Securities and Exchange Commission v. Rajnish K. Das, et al., Civil Action +Number 8:10-cv-00102-LSC-FG3. In the final judgment, the court declared that Das “acted in bad +faith toward shareholders of [Info], when committing the acts and omissions that led to this +proceeding, and knew his actions were contrary to the interests of [Info] and its shareholders.” + +4. Previously, on March 2, 2012, after a trial, a jury for the U.S. District Court +for the District of Nebraska, issued a verdict finding Das liable for violations of Sections 10(b), +13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5), 14(a) of the Exchange Act and Rules 10b-5, 12b-20, 13a- +1, 13a-13, 13a-14, 13b2-1, 13b2-2, 14a-3, and 14a-9 thereunder. Securities and Exchange +Commission v. Rajnish K. Das, et al., Civil Action Number 8:10-cv-00102-LSC-FG3. + +5. The Commission’s complaint alleged that Das signed and certified Info’s +false Forms 10-K and proxy statements that materially understated and failed to properly disclose +the perquisite compensation of Vinod Gupta, Info’s former chief executive officer and Chairman +of the Board of Directors, and failed to properly disclose related party transactions involving +Gupta. The complaint alleged that for the years 2003 through 2007, Gupta used Info to pay for his +personal expenses associated with private jet flights, a yacht, homes, automobiles, credit card +expenses, country club memberships, and life insurance policies. As CFO, Das approved Info’s +payment of Gupta’s personal expenses and signed and certified Info’s false Forms 10-K for 2003 +and 2004 which incorporated information from Info’s proxy statements. The complaint also +alleged that Das aided and abetted the filing of Info’s false Form 10-K for 2005 which incorporated +information from Info’s proxy statements. + 3 + +III. + +Based upon the foregoing, the Commission finds that a court of competent jurisdiction has +found Respondent to have violated the Federal securities laws and permanently enjoined him from +violations of the Federal securities laws within the meaning of Rule 102(e)(3)(i)(A) and (B) 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 Rajnish K. Das be, and hereby is, temporarily suspended +from appearing or practicing before the Commission. This Order shall be effective upon service +on the Respondent. + + I T 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. + + + + Elizabeth M. Murphy + Secretary + + + + \ No newline at end of file diff --git a/raw/aaer/2012/AAER-3422.txt b/raw/aaer/2012/AAER-3422.txt new file mode 100644 index 0000000000000000000000000000000000000000..c0e2796a4f254c0f3b41bd763899f05616ca7c6d --- /dev/null +++ b/raw/aaer/2012/AAER-3422.txt @@ -0,0 +1,1375 @@ + + + + + + + + + + + + + + + + SEC.gov | MedLink International, Inc., Aurelio Vuono and James Rose + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/513146","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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MedLink International, Inc., Aurelio Vuono and James Rose , Civil Action No. 12 Civ. 5325 (E.D.N.Y.) + + SEC Charges Medlink International and Two Executives with Fraudulent Filing + + + + The Securities and Exchange Commission today announced that it filed a civil injunctive action against MedLink International, Inc., its CEO, Aurelio Vuono, and its CFO, James Rose, accusing them of filing an annual report falsely stating that its audit had been completed and defrauding a MedLink investor. MedLink's principal office is in Hauppauge, New York, and it purports to be a healthcare information technology company. Vuono, age 46 and a recidivist securities law violator, resides in Huntington Station, New York. Rose, age 33, resides in Hauppauge, New York. + + The Commission's complaint, filed October 24, 2012 in U.S. District Court in Brooklyn, New York, alleges that on April 25, 2011, MedLink filed with the Commission an annual report on Form 10-K for the year ended December 31, 2010. Included in the filing was an audit report with the electronic signature of MedLink's auditor, which stated that the auditor had conducted an audit of MedLink's financial statements for the years ended December 31, 2009 and 2010. The complaint alleges that the Form 10-K was false and misleading because the audit had not been completed, and the auditor had not authorized MedLink to include the audit report or to use its electronic signature. The complaint also alleges that the Form 10-K was false and misleading because it contained the electronic signature of MedLink's founder and director, even though the director had not reviewed it nor authorized use of his electronic signature. + + The complaint further alleges that in approximately April 2011, a MedLink investor agreed to purchase 210,526 shares of MedLink stock for $149,473.50. Vuono promised the investor that MedLink would delay this purchase and not cash the investor's check until the investor had sufficient funds in his checking account. Shortly thereafter, the investor informed Vuono and Rose that MedLink was not authorized to cash the check and instructed MedLink to return it. Instead of returning the check, Rose deposited it in MedLink's bank account. Despite repeated requests, MedLink did not return the investor's money or issue any MedLink stock to the investor. + + The Commission's complaint charges: MedLink, Vuono and Rose with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5; MedLink with violations of Section 15(d) of the Exchange Act and Rules 12b-20 and 15d-1; Vuono and Rose with violations of Exchange Act Rule 15d-14; and Vuono and Rose with aiding and abetting MedLink's violations of Section 17(a) of the Securities Act, Sections 10(b) and 15(d) of the Exchange Act and Rules10b-5, 12b-20 and 15d-1. The Commission is seeking against MedLink, Vuono and Rose permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest to be paid jointly and severally, and civil monetary penalties. The Commission is also seeking against Vuono and Rose officer and director and penny stock bars. + + + + + SEC Complaint + +   + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. Sign up for email updates. + + + + + + Your email address + + Sign Up + + + + + + + + + + + + X + + + + + + + + Facebook + + + + + + + + Instagram + + + + + + + + RSS + + + + + + + + YouTube + + + + + + + + Email Updates + + + + + + + + + + + + + + + + + + + diff --git a/raw/aaer/2012/AAER-3424.pdf b/raw/aaer/2012/AAER-3424.pdf new file mode 100644 index 0000000000000000000000000000000000000000..acb5fa312c551b29b0ba5e7a99df5b78d7ef3e37 --- /dev/null +++ b/raw/aaer/2012/AAER-3424.pdf @@ -0,0 +1,3 @@ +version https://git-lfs.github.com/spec/v1 +oid sha256:ba415f985fe7e4c07e250e94b2b253c330a5f686ce35d5e99f14f1474308f207 +size 304582 diff --git a/raw/aaer/2012/AAER-3425.pdf b/raw/aaer/2012/AAER-3425.pdf new file mode 100644 index 0000000000000000000000000000000000000000..c663b1958b6b2c158bfb4f7eb13f5cb8f4fe1cfe --- /dev/null +++ b/raw/aaer/2012/AAER-3425.pdf @@ -0,0 +1,3 @@ +version https://git-lfs.github.com/spec/v1 +oid sha256:c81b49ceff66c62aae03473862f66a4c791a7036907c761f22cff183e8c83037 +size 153131 diff --git a/raw/aaer/2012/AAER-3425.txt b/raw/aaer/2012/AAER-3425.txt new file mode 100644 index 0000000000000000000000000000000000000000..0f2150324865d085d62e1c62ae2dafd14597bc06 --- /dev/null +++ b/raw/aaer/2012/AAER-3425.txt @@ -0,0 +1,518 @@ + + + + + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 68307 / November 28, 2012 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3425 / November 28, 2012 + +ADMINISTRATIVE PROCEEDING +File No. 3-15109 + + +In the Matter of + +KCAP FINANCIAL, INC., +DAYL W. PEARSON, +MICHAEL I. WIRTH, CPA +AND R. JONATHAN +CORLESS, + +Respondents. + + +ORDER INSTITUTING CEASE-AND-DESIST +PROCEEDINGS PURSUANT TO SECTION +21C OF THE SECURITIES EXCHANGE ACT +OF 1934, MAKING FINDINGS, AND +IMPOSING CIVIL PENALTIES 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 KCAP Financial, Inc., Dayl W. Pearson, Michael +I. Wirth, CPA, and R. Jonathan Corless (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 them and the subject matter of these + 2 +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 Civil Penalties and a Cease-and-Desist Order (“Order”), as set forth below. + +III. + + On the basis of this Order and Respondents’ Offers, the Commission finds1 that: + +Summary + + From the end of 2008 through the middle of 2009, KCAP Financial, Inc. (“KCAP”), a +business development company (“BDC”), materially overstated the value of its asset portfolio in its +reported financial statements. During the relevant period, KCAP held two primary classes of assets +in its portfolio: corporate debt consisting of senior secured term loans, junior term loans, mezzanine +debt, and bonds issued primarily by privately-held middle market companies (“debt securities”); +and investments in collateralized loan obligation funds (“CLOs”). +2 During the 2008-09 financial +crisis, KCAP did not account for certain market-based activity in determining the fair value of its +debt securities. KCAP also did not account for certain market-based activity for its two largest CLO +investments by fair valuing those investments at KCAP’s cost. Moreover, KCAP’s public filings +were materially misleading because they stated that these two CLOs were valued using a discounted +cash flow method that incorporated market data, when the CLOs were valued at KCAP’s cost. + + By not accounting for certain market-based activity, KCAP did not record and report the fair +values of its assets in conformity with the Financial Accounting Standards Board Statement of +Financial Accounting Standards 157 – Fair Value Measurements (“FAS 157”) and Generally +Accepted Accounting Principles (“GAAP”). In particular, FAS 157 calls for expanded disclosures +about fair value measurements and requires that assets be fair valued based on an “exit price,” +which reflects the price that would be received to sell an asset in an orderly transaction between +market participants at the measurement date. + + In May 2010, KCAP disclosed that it needed to restate the fair values for certain of its debt +securities and CLOs and that it had overstated its Net Asset Value by approximately 27% as of the +December 31, 2008 valuation date. Also, KCAP’s internal controls over financial reporting were +not properly designed to value its illiquid assets because the company’s valuation procedures did +not adequately take into account certain market inputs. KCAP’s asset overvaluation and internal +controls failures violated the reporting, books and records, and internal controls provisions of the +federal securities laws, namely 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 promulgated thereunder. + +1 The findings herein are made pursuant to Respondents’ Offers and are not binding on any other +person or entity in this or any other proceeding. +2 A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic +and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans. + 3 + + Dayl W. Pearson, KCAP’s President and Chief Executive Officer, and R. Jonathan Corless, +KCAP’s Chief Investment Officer, had primary responsibility for calculating the fair value of +KCAP’s debt securities, while Michael I. Wirth, KCAP’s Chief Financial Officer, had primary +responsibility for calculating the fair value of KCAP’s CLOs. Wirth was also responsible for +KCAP’s financial statements, and he prepared KCAP’s disclosures concerning its valuation +methodologies in KCAP’s public filings. Pearson reviewed those valuation disclosures before they +were filed. + + Thus, Pearson, Wirth, and Corless each caused KCAP’s reporting, books and records, and +internal controls violations. Each also directly violated Exchange Act Rule 13b2-1 by causing +KCAP’s internal books and records to reflect the materially overstated fair values of certain of its +debt securities and CLOs. Pearson and Wirth also violated Exchange Act Rule 13a-14 by signing +various KCAP public filings with certifications that KCAP had designed sufficient internal controls +over financial reporting. + +Respondents + +1. KCAP Financial, Inc., f/k/a Kohlberg Capital Corporation (“KCAP”), is an +internally managed, non-diversified closed-end investment company that elected to be regulated as a +BDC under the Investment Company Act of 1940 (“Investment Company Act”). KCAP also has a +wholly-owned portfolio company, Katonah Debt Advisors, which manages its CLO funds. KCAP +is incorporated in the State of Delaware and is headquartered in New York City. KCAP’s common +stock is registered with the Commission pursuant to Section 12(b) of the Exchange Act and trades +on the NASDAQ Global Select Market. KCAP is required to file reports with the Commission +pursuant to Section 13 of the Exchange Act. +2. Dayl W. Pearson, age 57, is a resident of Locust Valley, NY. Since December +2006, Pearson has been KCAP’s President and Chief Executive Officer. +3. Michael I. Wirth, CPA, age 54, is a resident of Scarsdale, NY. Wirth is currently +licensed as a CPA in New York. From December 2006 through June 2012, Wirth served as +KCAP’s Chief Financial Officer. +4. R. Jonathan Corless, age 60, is a resident of Pound Ridge, NY. Since December +2006, Corless has served as KCAP’s Chief Investment Officer. +Background + +5. During fiscal years 2008 and 2009, KCAP invested in debt securities issued by +privately-held middle market companies. The middle market, as defined by KCAP, consisted of +companies with Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) of +$10 million to $50 million and/or total debt of $25 million to $150 million. As of December 31, +2008, KCAP’s investments in debt securities totaled approximately $384 million and constituted +75% of the $514 million in KCAP’s investment portfolio. + 4 +6. KCAP also invested in the equity tranches of CLOs, primarily those managed by +KCAP’s wholly-owned investment adviser Katonah Debt Advisors. At December 31, 2008, +KCAP’s CLO investments totaled approximately $57 million and constituted 11% of KCAP’s +investment portfolio. +7. KCAP is regulated as a BDC under the Investment Company Act. A BDC is a type +of closed-end investment company established by Congress to make capital more readily available +to small, developing, and financially troubled companies that do not have ready access to the +public capital markets or other forms of conventional financing. BDCs function like private equity +or venture capital funds. As a BDC, KCAP is subject to the relevant requirements of the Investment +Company Act to the same extent as a registered closed-end fund, including Section 2(a)(41)(B)(ii), +which requires a registered fund’s Board of Directors to determine, in good faith, the fair value of its +portfolio assets when market quotations are not readily available. +8. In September 2006, the Financial Accounting Standards Board(“FASB”) issued +FAS 157. +3 FAS 157 became effective for financial reporting fiscal periods beginning after +November 2007. Thus, beginning with its financial statements for the first quarter of fiscal 2008, +KCAP had to prepare its financial statements in conformity with FAS 157. +9. FAS 157 defines “fair value,” establishes a framework for measuring fair value in +accordance with GAAP and calls for expanded disclosures about fair value measurements. FAS +157 defines fair value as an exit price, which reflects the price that would be received to sell an asset +in an orderly transaction between market participants at the measurement date. FAS 157 +emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and +should be determined based on the assumptions market participants would use in pricing the asset. +10. FAS 157 outlines three broad approaches to measure fair value – the market +approach, income approach, and/or cost approach and states that valuation techniques consistent +with these three approaches shall be used to measure fair value. Under the market approach, prices +and other relevant information generated by market transactions involving identical or comparable +assets or liabilities are used to measure fair value. The income approach utilizes valuation +techniques to convert future amounts to a single discounted present value amount. Lastly, the cost +approach is based on the amount that currently would be required to replace the assets in service +(i.e. current replacement cost). +11. FAS 157 establishes a fair value hierarchy that prioritizes the inputs to valuation +techniques used to measure fair value into three broad levels. The highest priority is given to +quoted prices in active markets for identical assets or liabilities (Level One assets). The next +highest priority is given to instances where quoted prices in active markets do not exist for the +identical asset, but the asset’s fair value can be calculated directly or indirectly based on observable + +3 Upon the codification of GAAP, which became effective for periods ending after September 15, 2009, FAS +157 became known as ASC 820 - Fair Value Measurements and Disclosures. + 5 +market inputs (Level Two assets).4 The lowest priority is given to instances where observable +market inputs are not available, and, therefore, the fair value of those assets is calculated through +the use of management estimates of the assumptions that market participants would use in pricing +the asset (Level Three assets). +12. In October 2008, FASB issued Statement FAS 157-3, which provided guidance on +fair valuing assets in situations in which there is little, if any, market activity. Statement FAS 157-3 +noted, among other things, that “[e]ven in times of market dislocation, it is not appropriate to +conclude that all market activity represents forced liquidations or distressed sales.”5 +13. KCAP’s fair value calculations for its debt securities were primarily performed by +two senior KCAP officials – Pearson and Corless – with the assistance of a team of four internal +credit analysts. Each quarter, the analysts prepared valuation summaries for each debt security. The +analysts sent these summaries to Corless for review and approval. After reviewing the valuation +packages and making adjustments to the values, Corless forwarded them to Pearson for review, +additional adjustments, and approval. The valuation summaries were then sent to KCAP’s +Valuation Committee6 for review and approval. +14. KCAP’s fair value calculations for its CLOs were primarily performed by Wirth +with the assistance of an analyst. Pearson reviewed the CLO valuations before Wirth sent them to +the Valuation Committee for review and approval. +Materially Misstated Valuation of Debt Securities +15. KCAP was required to apply valuation methodologies consistent with FAS 157 +beginning with the first quarter of 2008. For the first three quarters of 2008, KCAP classified +some of its debt securities as liquid, and therefore determined their fair value based on third-party +pricing services. +16. KCAP used an enterprise value (“EV”) methodology to determine fair value for +those debt securities that it determined were illiquid. The EV methodology calculated whether, in +the event of a default or liquidation of the issuer, KCAP would receive full repayment of its loan. +To apply the methodology, KCAP calculated an issuer’s EV based on EBITDA valuation +multiples of comparable companies. KCAP typically considered three EBITDA multiples: (1) the + +4 An example of a Level Two asset is an interest-rate swap where the components of the swap are observable +data points like the quoted price of a 10-year Treasury bond. The quoted price of a 10-year Treasury bond can be +used, either in whole or in part, as a proxy for the fair value of the interest-rate swap. +5 Statement FAS 157-3 further noted that “it is not appropriate to automatically conclude that any transaction +price is determinative of fair value. Determining fair value in a dislocated market depends on the facts and +circumstances and may require the use of significant judgment about whether individual transactions are forced +liquidations or distressed sales.” + +6 KCAP’s Board of Directors delegated their statutory obligation under the Investment Company Act to +report investments at fair value to the Valuation Committee. + 6 +average comparable public companies based on size and industry; (2) the average of recent +comparable private merger and acquisition transactions; and (3) an actual or implied multiple at the +time of the issuer’s most recent acquisition or restructuring. +17. If the issuer’s EV was greater than the issuer’s total outstanding debt that was +senior to or the same seniority as the debt security held by KCAP, KCAP used the cost of the debt +security as fair value. Conversely, if the issuer’s EV was calculated to be less than the issuer’s +outstanding debt that was senior to or the same seniority as the debt held by KCAP, KCAP would +adjust its fair value to be less than its cost. +18. The EV methodology did not, however, calculate or inform KCAP – or the public – +what the exit price was for that security. Instead, the EV methodology provided KCAP an +assessment of whether the entire principal balance owed to it was likely to be repaid by the debt +issuer. +19. During the fourth quarter of 2008, Pearson and Corless classified all of KCAP’s +debt securities as illiquid, Level Three assets. Therefore, KCAP determined the fair value for all +its debt securities solely using the EV methodology.7 Pearson and Corless assumed that, due to +market conditions in the fourth quarter of 2008, price quotes from third-party pricing services did +not represent fair value. To the extent any of KCAP’s debt securities traded during the fourth +quarter of 2008, Pearson and Corless concluded that all such trades reflected distressed +transactions. +20. Pearson’s and Corless’ decision not to use trade data from market transactions +during the fourth quarter of 2008 – and to fair value all of KCAP’s debt securities based on the EV +methodology – caused KCAP to overstate the fair values for most of its debt securities. Upon +restatement, 13 of KCAP’s debt securities were fair valued using prices reported by third-party +pricing services in the fourth quarter of 2008, which resulted in values significantly lower than +KCAP’s originally reported values at December 31, 2008. +21. Pearson and Corless were aware of and did not take into account numerous quotes +or actual trades in the fourth quarter of 2008 involving several of KCAP’s debt securities. For +example, KCAP held a debt instrument issued by Ford Motor Credit Co. (“Ford”). On or about +December 31, 2008, the Ford debt instrument held by KCAP was trading between 41-45% of par +value. In early March 2009, before KCAP filed its Form 10-K, Ford made a tender offer to +repurchase $500 million of the same Ford debt instrument held by KCAP at 38-47% of par value. +Ford’s offer was oversubscribed, and Ford subsequently repurchased an additional $700 million of +its debt instrument at the same price (38-47% of par value). +22. Notwithstanding this market activity, when KCAP filed its Form 10-K for the +period ending December 31, 2008, it valued the Ford debt instrument at 70% of par. When KCAP + +7 For the fourth quarter of 2008, KCAP began incorporating into the EV methodology a discounted cash flow +analysis based on the issuer’s projected cash flow. This approach, however, did not include a discounted cash flow +analysis based on the principal and/or interest payments flowing from the debt security actually held by KCAP. + 7 +restated in May 2010, and took into account evidence of market-based activity, it re-valued the +Ford debt significantly lower – at approximately 41% of par. +23. Similarly, KCAP also held two bonds – Freescale Semiconductor and Cooper- +Standard Automotive – that had actual trading activity in December 2008 reported by the Trade +Reporting and Compliance Engine (“TRACE”), a source for reports on secondary bond market +trades in the United States. KCAP did not take into account the trading activity reported on +TRACE for these bonds, which showed dramatically lower values than the fair values KCAP +assigned to these bonds in its original 2008 financial statements. Compared to the restatement, +KCAP’s original valuations for Freescale Semiconductor and Cooper-Standard Automotive were +overstated by 75% and 300%, respectively. +24. KCAP did not use an EV methodology to determine the fair value of its debt +securities in its restatement. Rather, KCAP largely used an income-based approach, which involved +projecting the cash flows of the principal and interest payments from the debt securities it held, and +then discounting those payments to present value. Using the income approach, the vast majority of +KCAP’s debt securities were restated. Based on application of the EV methodology at December +31, 2008, KCAP fair valued 64 of its 135 debt securities (almost 50%) at par. Upon restatement, +however, KCAP fair valued 10 of its 135 debt securities (less than 10%) at par. +Materially Misstated Valuation of CLOs +25. At year-end 2008, KCAP used different valuation methodologies depending upon +the “seasoning,” i.e., the number of contractual, quarterly cash payments made from the CLOs, to +fair value the nine CLOs in its portfolio. Wirth was responsible for determining the appropriate +valuation methodology to fair value KCAP’s CLOs, and was primarily responsible for calculating +the fair value of those assets. +26. For seven CLOs that had four or more contractual payments, KCAP used valuation +models to fair value those CLOs. These valuation models took into account current market +conditions. Those current market conditions were reflected in various inputs that were considered +in KCAP’s valuation models, such as discount, prepayment, and default rates. +8 These seven CLOs +represented approximately 28% of KCAP’s overall CLO portfolio. KCAP’s two remaining CLOs +– Katonah X and Katonah 2007-1 – represented a substantial portion (approximately 72%) of +KCAP’s overall CLO portfolio. +27. In 2007, KCAP purchased Katonah X in two tranches. As of December 31, 2008, +Katonah X had generated four quarterly payments. Applying the valuation model KCAP used to +fair value those CLOs that had four quarterly payments, Wirth calculated a fair value of $10.98 + +8 A discount rate is applied to convert projected cash flows out of the CLO to their present value. A prepayment +rate measures the percentage of loans in the CLO for which the principal will be repaid before the call date of the loan. +A default rate measures the percentage of loans that are expected to default before the loan call date. + 8 +million for Katonah X.9 Wirth, however, decided to use Katonah X’s cost – $11.9 million – as its +fair value. +28. By deciding to fair value Katonah X at cost, Wirth did not take into account the +significant changes in market conditions, as reflected in changes to market discount, default, and +prepayment rates, between KCAP’s 2007 purchases and the December 2008 valuation date. +29. In early 2008, KCAP purchased the Katonah 2007-1 CLO for $28.9 million. +Because this CLO had not yet generated four quarterly payments as of December 31, 2008, Wirth +calculated the fair value of this CLO to be its cost. In so doing, Wirth did not take into account the +market conditions of the fourth quarter of 2008, as those conditions were reflected in critical +market-based inputs. +30. KCAP did not disclose that it valued the Katonah X and 2007-1 CLOs at cost. +Rather, KCAP disclosed that, for more recently acquired CLOs (like Katonah X and Katonah +2007-1), it used a “discounted cash flow model for more recent CLO funds that utilizes +prepayment and loss assumptions based on historical experience and projected performance, +economic factors, the characteristics of the underlying cash flow and comparable yields for similar +bonds or preferred shares.” Wirth prepared this disclosure, which was contained in KCAP’s public +filings. +31. KCAP and Wirth did not incorporate market-based inputs, such as “prepayment and +loss assumptions,” into the valuation of Katonah X and Katonah 2007-1. Rather, KCAP valued +those two CLOs at the cost it paid for them. Thus, KCAP’s disclosures with respect to Katonah X +and Katonah 2007-1 were materially misleading. +32. Upon restatement, KCAP fair valued Katonah X and Katonah 2007-1 based on a +discounted cash flow method, and determined that their fair values at December 31, 2008 were +overstated by 128%, or $6.7 million, and 35%, or $7.5 million, respectively. +The Restatement +33. On May 28, 2010, KCAP restated its financial statements for all four quarters of +fiscal 2008 and for the first two quarters of fiscal 2009. For certain reporting periods, the +restatement resulted in a significant decrease in the Net Asset Value of KCAP’s assets. For +example, as a result of the restatement, KCAP reported that its CLO investments were valued at +$34.7 million, and had been overstated by 64%, or $21.9 million, in fiscal year 2008. KCAP’s debt +securities were valued at $353.9 million as a result of the restatement, and had been overstated by +9%, or $30.6 million, in fiscal year 2008. For the fiscal year ended December 31, 2008, KCAP +overstated its Net Asset Value by 27%. + +9 Based on KCAP’s valuation model that was applicable only to KCAP’s more “seasoned” CLOs, i.e . those +CLOs with numerous, contractual cash payments, Wirth calculated two additional fair values for Katonah X of +$11.8 million and $14.3 million. + 9 +34. In the restatement, KCAP acknowledged that it had identified errors in its fair value +measurements of its illiquid investments and it identified those errors through the use and weighting +of additional valuation techniques and a broader consideration of secondary market inputs. +35. Moreover, KCAP stated that it had material weaknesses with respect to its internal +controls for valuing its asset portfolio. KCAP acknowledged in the restatement that its “internal +control over financial reporting was not properly designed to implement an appropriate valuation +methodology and procedures to value the Company’s illiquid investments consistent with the +requirements of Fair Value Measurements and Disclosures as required by GAAP because the +Company’s prior valuation procedures did not adequately take into account certain market inputs +and other data.” +10 +Material Misstatements in KCAP’s Public Filings +36. KCAP disseminated materially misstated valuations to the market in its Form 10-K +for fiscal year 2008, its Forms 10-Q for the first two quarters of 2009, and in earnings releases filed +on Forms 8-K from March through August 2009. +37. Pearson and Wirth each signed the Forms 10-Q for 2008, Form 10-K for 2008, and +Forms 10-Q for the first two quarters of 2009 certifying that they had “[d]esigned such internal +control over financial reporting, or caused such internal control over financial reporting to be +designed under [their] supervision, to provide reasonable assurance regarding the reliability of +financial reporting and the preparation of financial statements for external purposes in accordance +with generally accepted accounting principles….” In light of the errors resulting in the restatement +and KCAP’s internal controls failures, these certifications were false. +Violations +38. Under Section 21C 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 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. +39. Section 13(a) of the Exchange Act requires issuers that have securities registered +pursuant to Section 12 of the Exchange Act to file such periodic and other reports as the +Commission may prescribe and in conformity with such rules as the Commission may promulgate. +Exchange Act Rules 13a-1, 13a-11, and 13a-13 require the filing of annual, current, and quarterly + +10 For example, as noted earlier, KCAP analysts prepared valuation summaries for each debt security which +contained a calculated fair value. These summaries were sent to Pearson and Corless for review, and were then sent +to KCAP’s Valuation Committee, which consisted of three KCAP Board members. The Valuation Committee +reviewed and approved the calculated values, and these calculated values were then reviewed and approved by the +entire KCAP Board. These valuation summaries contained the relevant information needed to apply the EV +methodology to calculate a fair value. In most instances, however, the valuation summaries did not contain a +description of current market transactions or activity in the debt security at issue. + 10 +reports, respectively. In addition to the information expressly required to be included in such +reports, Rule 12b-20 under the Exchange Act requires issuers to add such further material +information, if any, as may be necessary to make the required statements, in the light of the +circumstances under which they are made, not misleading. “The reporting provisions of the +Exchange Act are clear and unequivocal, and they are satisfied only by the filing of complete, +accurate, and timely reports.” SEC v. Savoy Industries, 587 F.2d 1149, 1165 (D.C. Cir. 1978) +(citing SEC v. IMC Int’l, Inc., 384 F. Supp. 889, 893 (N.D. Tex. 1974)). A violation of the reporting +provisions is established if a report is shown to contain materially false or misleading information. +SEC v. Kalvex, Inc., 425 F. Supp. 310, 316 (S.D.N.Y. 1975). +40. Section 13(b)(2)(A) of the Exchange Act requires issuers to “make and keep books, +records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and +dispositions of the assets of the issuer.” Section 13(b)(2)(B) of the Exchange Act requires issuers to +devise and maintain a system of internal accounting controls sufficient to provide reasonable +assurances that, among other things, transactions are recorded to permit the preparation of financial +statements in conformity with generally accepted accounting principles. +41. Exchange Act 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. + +42. Exchange Act Rule 13a-14, among other things, requires each principal executive, +and principal financial officer to certify in each quarterly and annual report filed under Section 13(a) +of the Exchange Act that such officer has reviewed the report and that such officer and the issuer’s +other certifying officer have designed internal control over financial reporting, or caused such +internal control over financial reporting to be designed under their supervision, to provide +reasonable assurance regarding the reliability of financial reporting and the preparation of financial +statements for external purposes in accordance with GAAP. + +43. By engaging in the conduct described above, KCAP violated Sections 13(a), +13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 +thereunder. +44. By engaging in the conduct described above, Pearson, Wirth, and Corless caused +KCAP’s violations and each violated Exchange Act Rule 13b2-1, and Pearson and Wirth each +violated Exchange Act Rule 13a-14. +IV. + + In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondents’ Offers. + + Accordingly, pursuant to Section 21C of the Exchange Act, it is hereby ORDERED that: + + 11 +A. Respondent KCAP 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 promulgated thereunder. +B. Respondent Pearson 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, 13a-13, 13a-14, and 13b2-1 promulgated thereunder. +C. Respondent Pearson shall, within 30 days of the entry of this Order, pay a civil +money penalty in the amount of $50,000 to the United States Treasury. If timely payment is not +made, interest shall accrue pursuant to 31 U.S.C. § 3717. Payment must be made in one of the +following ways: +(1) Respondent may transmit payment electronically to the Commission, which will +provide detailed ACH transfer/Fedwire instructions upon request; +(2) Respondent may make direct payment from a bank account via Pay.gov through the +SEC website at http://www.sec.gov/about/offices/ofm.htm; or +(3) Respondent may pay by certified check, bank cashier’s check, or United States postal +money order, made payable to the Securities and Exchange Commission and hand- +delivered or mailed to: + +Enterprise Services Center +Accounts Receivable Branch +HQ Bldg., Room 181, AMZ-341 +6500 South MacArthur Boulevard +Oklahoma City, OK 73169 +Payments made by check or money order must be accompanied by a letter identifying Dayl +W. Pearson as a Respondent in these proceedings, and the file number of these proceedings; a copy +of the cover letter and money order or check shall be sent to Antonia Chion, Associate Director +Division of Enforcement, U.S. Securities and Exchange Commission, 100 F Street, N.E., Mail +Stop 5720-B, Washington, DC 20549-5720-B. +D. Respondent Wirth 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, 13a-13, 13a-14, and 13b2-1 promulgated thereunder. +E. Respondent Wirth shall pay a civil money penalty in the amount of $50,000 + to the +United States Treasury. Payment shall be made in the following installments: (i) $8,333 within 30 +days of entry of this Order, (ii) $8,333 within 60 days of entry of this Order, (iii) $8,333 within 90 +days of entry of this Order, (iv) $8,333 within 120 days of entry of this Order, (v) $8,333 within +150 days of entry of this Order, and (vi) $8,335 within 180 days of entry 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 interest accrued pursuant to 31 U.S.C. § 3717, shall be due and +payable immediately, without further application. Payment must be made in one of the following +ways: + 12 +(1) Respondent may transmit payment electronically to the Commission, which will +provide detailed ACH transfer/Fedwire instructions upon request; +(2) Respondent may make direct payment from a bank account via Pay.gov through the +SEC website at http://www.sec.gov/about/offices/ofm.htm; or +(3) Respondent may pay by certified check, bank cashier’s check, or United States postal +money order, made payable to the Securities and Exchange Commission and hand- +delivered or mailed to: + +Enterprise Services Center +Accounts Receivable Branch +HQ Bldg., Room 181, AMZ-341 +6500 South MacArthur Boulevard +Oklahoma City, OK 73169 +Payments by check or money order must be accompanied by a letter identifying Michael I. +Wirth as a Respondent in these proceedings, and the file number of the proceedings; a copy of the +cover letter and money order or check shall be sent to Antonia Chion, Associate Director Division +of Enforcement, U.S. Securities and Exchange Commission, 100 F Street, N.E., Mail Stop 5720-B, +Washington, DC 20549-5720-B. +F. Respondent Corless 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, 13a-13, and 13b2-1 promulgated thereunder. +G. Respondent Corless shall, within 30 days of the entry of this Order, pay a civil +money penalty in the amount of $25,000 + to the United States Treasury. If timely payment is not +made, interest shall accrue pursuant to 31 U.S.C. § 3717. Payment must be made in one of the +following ways: + +(1) Respondent may transmit payment electronically to the Commission, which will +provide detailed ACH transfer/Fedwire instructions upon request; +(2) Respondent may make direct payment from a bank account via Pay.gov through the +SEC website at http://www.sec.gov/about/offices/ofm.htm; or +(3) Respondent may pay by certified check, bank cashier’s check, or United States postal +money order, made payable to the Securities and Exchange Commission and hand- +delivered or mailed to: + +Enterprise Services Center +Accounts Receivable Branch +HQ Bldg., Room 181, AMZ-341 +6500 South MacArthur Boulevard +Oklahoma City, OK 73169 + Payments by check or money order must be accompanied by a letter identifying R. +Jonathan Corless as a Respondent in these proceedings, and the file number of these proceedings; a +copy of the cover letter and money order or check shall be sent to Antonia Chion, Associate + 13 +Director Division of Enforcement, U.S. Securities and Exchange Commission, 100 F Street, N.E., +Mail Stop 5720-B, Washington, DC 20549-5720-B. + + + + + By the Commission. + + + + Elizabeth M. Murphy + Secretary + \ No newline at end of file diff --git a/raw/aaer/2012/AAER-3426.txt b/raw/aaer/2012/AAER-3426.txt new file mode 100644 index 0000000000000000000000000000000000000000..50cc589f2c44794cd46384ea780735a6ca217fbf --- /dev/null +++ b/raw/aaer/2012/AAER-3426.txt @@ -0,0 +1,295 @@ +1 + + + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 68335 / December 3, 2012 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3426 / December 3, 2012 + +ADMINISTRATIVE PROCEEDING +File No. 3-15116 + + +In the Matter of + +BDO China Dahua CPA Co., Ltd.; +Ernst & Young Hua Ming LLP; +KPMG Huazhen (Special General +Partnership); +Deloitte Touche Tohmatsu Certified +Public Accountants Ltd.; +PricewaterhouseCoopers Zhong Tian +CPAs Limited + +Respondents. + + + + +ORDER INSTITUTING +ADMINISTRATIVE PROCEEDINGS +PURSUANT TO RULE 102(e)(1)(iii) OF +THE COMMISSION’S RULES OF +PRACTICE AND NOTICE OF +HEARING + + + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative proceedings be, and hereby are, instituted pursuant to Rule 102(e)(1)(iii) of the +Commission’s Rules of Practice against BDO China Dahua CPA Co., Ltd.; Ernst & Young Hua +Ming LLP; KPMG Huazhen (Special General Partnership); Deloitte Touche Tohmatsu Certified +Public Accountants Ltd.; and PricewaterhouseCoopers Zhong Tian CPAs Limited (collectively +“Respondents”). +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. + +The Division of Enforcement alleges that: + +A. RESPONDENTS + +1. BDO China Dahua CPA Co., Ltd. (“BDO China”) is located in Beijing, China, +and is a PCAOB-registered member firm of BDO International Limited, a UK +company limited by guarantee. BDO China audited the financial statements of an +issuer client (“Client A”) for the fiscal years ended December 31, 2010 and 2011. + +2. Ernst & Young Hua Ming LLP (formerly known as Ernst & Young Hua Ming +Certified Public Accountants) (“E&Y Beijing”) is located in Beijing, China, and is +a PCAOB-registered member firm of Ernst & Young Global Limited, a UK private +company limited by guarantee. E&Y Beijing was engaged to audit the financial +statements of an issuer client (“Client B”) for the fiscal year ended December 31, +2010 and another issuer client (“Client C”) for the fiscal years ended September 30, +2010 and 2011. + +3. KPMG Huazhen (Special General Partnership) (formerly known as KPMG +Huazhen) (“KPMG Beijing”) is located in Beijing, China, and is a PCAOB- +registered member firm of KPMG International Cooperative (“KPMG”), a Swiss +entity. KPMG Beijing substantially assisted a KPMG affiliate in auditing the +financial statements of an issuer client (“Client D”) for the fiscal year ended +December 31, 2010, another issuer client (“Client E”) for the fiscal year ended +December 31, 2010, and another issuer client (“Client F”) for the fiscal years ended +December 31, 2008, 2009 and 2010. + +4. Deloitte Touche Tohmatsu Certified Public Accountants Ltd. (“DTTC”) is +located in Shanghai, China, and is a PCAOB-registered member firm of Deloitte +Touche Tohmatsu Limited, a UK private company limited by guarantee. DTTC +was engaged to audit the financial statements of an issuer client (“Client G”) for the +fiscal year ended June 30, 2010. + +5. PricewaterhouseCoopers Zhong Tian CPAs Limited (“PwC Shanghai”) is +located in Shanghai, China, and is a PCAOB-registered member firm of +PricewaterhouseCoopers International Limited, a UK private company limited by +guarantee. PwC Shanghai was engaged to audit the financial statements of an +issuer client (“Client H”) for the fiscal year ended December 31, 2010 and another +issuer client (“Client I”) for the fiscal year ended December 31, 2010. + +3 + +B. FACTS + +Summary + +6. The Division of Enforcement has ongoing fraud investigations concerning Clients +A, B, C, D, E, F, G, H, and I, each of which is a U.S. issuer whose securities were registered with +the Commission and whose principal operations were based in the People’s Republic of China. + +7. This action stems from Respondents’ willful refusal, in response to +Commission requests, to provide the Commission with audit workpapers and other materials +prepared in connection with audit work or interim reviews performed for Clients A, B, C, D, E, F, +G, H, and I, in contravention of their legal obligations as foreign public accounting firms. + +Commission’s Section 106 Requests + +8. On February 1, 2012, pursuant to Section 106 of the Sarbanes-Oxley Act of 2002 +(“Sarbanes-Oxley”), as amended by Section 929J of the Dodd-Frank Wall Street Reform and +Consumer Protection Act (“Section 106”), the Commission served BDO China, through its +designated U.S. agent for service of Section 106 requests, with a request for “[a]ll audit work papers +and all other documents related to any audit work or interim reviews performed for [Client A]” for +the fiscal years ended December 31, 2010. + +9. On April 26, 2012, pursuant to Section 106, the Commission served E&Y Beijing, +through its designated U.S. agent for service of Section 106 requests, with a request for “[a]ll audit +work papers and all other documents related to any audit work or interim reviews performed for +[Client B]” for the fiscal year ended December 31, 2010. + +10. On February 2, 2012, pursuant to Section 106, the Commission served E&Y +Beijing, through its designated U.S. agent for service of Section 106 requests, with a request for +“[a]ll audit work papers and all other documents related to any audit work or interim reviews +performed for [Client C]” for the fiscal years ended September 30, 2010 and 2011. + +11. On February 6, 2012, pursuant to Section 106, the Commission served KPMG +Beijing, through its designated U.S. agent for service of Section 106 requests, with a request for +“[a]ll audit work papers and all other documents related to any audit work or interim reviews +performed for [Client D]” for the fiscal year ended December 31, 2010. + +12. On February 9, 2012, pursuant to Section 106, the Commission served KPMG +Beijing, through its designated U.S. agent for service of Section 106 requests, with a request for +“[a]ll audit work papers and all other documents related to any audit work or interim reviews +performed for [Client E]” for the fiscal year ended December 31, 2010. + +13. On February 3, 2012 pursuant to Section 106, the Commission served KPMG +Beijing, through its designated U.S. agent for service of Section 106 requests, with a request for +“[a]ll audit work papers and all other documents related to any audit reports issued, audit work +4 + +performed, or interim reviews conducted for [Client F]” for the fiscal years ended December 31, +2008, 2009, and 2010. + +14. On February 14, 2012, pursuant to Section 106, the Commission served DTTC, +through its designated U.S. agent for service of Section 106 requests, with a request for “[a]ll audit +work papers and all other documents related to any audit work or interim reviews performed for +[Client G]” for the fiscal year ended June 30, 2010. + +15. On February 8, 2012 pursuant to Section 106, the Commission served PwC +Shanghai, through its designated U.S. agent for service of Section 106 requests, with a request for +“[a]ll audit work papers and all other documents related to any audit work or interim reviews +performed for [Client H]” for the fiscal year ended December 31, 2010. + +16. On February 16, 2012, pursuant to Section 106, the Commission served PwC +Shanghai, through its designated U.S. agent for service of Section 106 requests, with a request for +“[a]ll audit work papers and all other documents related to any audit work performed for [Client I]” +for the fiscal year ended December 31, 2010. + +17. Each of the Respondents has informed the Commission that it will not produce the +documents to the Commission as requested in the Section 106 requests because, among other +things, Respondents interpret the law of the People’s Republic of China as prohibiting Respondents +from doing so. + +18. As of the date of this Order, the Commission does not have possession of the audit +workpapers and other relevant documents sought in any of the Section 106 requests. + +C. VIOLATIONS + +19. Section 106(b) of Sarbanes-Oxley directs a foreign public accounting firm that +“issues an audit report, performs audit work, or conducts interim reviews” to “produce the audit +workpapers of the foreign public accounting firm and all other documents of the firm related to any +such audit work or interim review” to the Commission upon request. + +20. A willful refusal to comply, in whole or in part, with a request by the Commission +under Section 106 is a violation of Sarbanes-Oxley. See Section 106(e). + +21. A violation of Sarbanes-Oxley constitutes a violation of the Securities Exchange +Act of 1934 (“Exchange Act”). See Sarbanes-Oxley Section 3(b)(1). + +22. BDO China has willfully refused to provide the Commission with its audit +workpapers and all other documents relating to BDO China’s audit or interim review work for +Client A. + +23. E&Y Beijing has willfully refused to provide the Commission with its audit +workpapers and all other documents relating to E&Y Beijing’s audit or interim review work for +Client B. +5 + + +24. E&Y Beijing has willfully refused to provide the Commission with its audit +workpapers and all other documents relating to E&Y Beijing’s audit or interim review work for +Client C. + +25. KPMG Beijing has willfully refused to provide the Commission with its audit +workpapers and all other documents relating to KPMG Beijing’s audit or interim review work for +Client D. + +26. KPMG Beijing has willfully refused to provide the Commission with its audit +workpapers and all other documents relating to KPMG Beijing’s audit or interim review work for +Client E. + +27. KPMG Beijing has willfully refused to provide the Commission with its audit +workpapers and all other documents relating to KPMG Beijing’s audit or interim review work for +Client F. + +28. DTTC has willfully refused to provide the Commission with its audit workpapers +and all other documents relating to DTTC’s audit or interim review work for Client G. + +29. PwC Shanghai has willfully refused to provide the Commission with its audit +workpapers and all other documents relating to PwC Shanghai’s audit or interim review work for +Client H. + +30. PwC Shanghai has willfully refused to provide the Commission with its audit +workpapers and all other documents relating to PwC Shanghai’s audit or interim review work for +Client I. + +31. As such, Respondents have each willfully violated Section 106 of Sarbanes-Oxley +and therefore also the Exchange Act. + +32. As a result of the conduct described above, it is appropriate that this proceeding be +brought pursuant to Rule 102(e)(1)(iii) of the Commission’s Rules of Practice to determine +whether Respondents should be censured or denied the privilege of appearing and practicing before +the Commission for having willfully violated Section 106 of Sarbanes-Oxley. + + +III. + +In view of the allegations made by the Division of Enforcement, the Commission deems it +appropriate and in the public interest that public administrative proceedings be instituted to +determine: + +A. Whether the allegations set forth above are true and, in connection therewith, to +afford Respondents an opportunity to establish any defenses to such allegations; + +6 + +B. What, if any, remedial action is appropriate against Respondents pursuant to Rule +102(e)(1)(iii) of Commission’s Rules of Practice. + +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 each Respondent 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, such Respondent may be deemed in default and the proceedings may be determined +against such Respondent 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. + +Under the authority conferred by Rule 141(a)(2) of the Commission’s Rules of Practice, +17 C.F.R. § 201.141(a)(2), this Order shall be served upon Respondents through the respective +domestic registered public accounting firms or other United States agents that Respondents have +designated for service under Section 106(d) of Sarbanes-Oxley, 15 U.S.C. § 7216(d), or by any +other method reasonably calculated to give notice to a Respondent, provided that the other method +of service used is not prohibited by the law of the foreign country in which the Respondent is +located. + +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/2012/AAER-3427.pdf b/raw/aaer/2012/AAER-3427.pdf new file mode 100644 index 0000000000000000000000000000000000000000..43e6fe7ab1de024513f231e9e719e2b8a689e677 --- /dev/null +++ b/raw/aaer/2012/AAER-3427.pdf @@ -0,0 +1,3 @@ +version https://git-lfs.github.com/spec/v1 +oid sha256:63d362550f0de37e66a18ba45b41dc887b6ac59b4defdeee9bc8271caae9c480 +size 2791629 diff --git a/raw/aaer/2012/AAER-3428.pdf b/raw/aaer/2012/AAER-3428.pdf new file mode 100644 index 0000000000000000000000000000000000000000..85d735da060659a5dd2af64caa620fa73b6d76e2 --- /dev/null +++ b/raw/aaer/2012/AAER-3428.pdf @@ -0,0 +1,3 @@ +version https://git-lfs.github.com/spec/v1 +oid sha256:d35b6d18e703b592d045c351ce81fadd284a6f30628380a08ad1088559cd2210 +size 169979 diff --git a/raw/aaer/2012/AAER-3429.pdf b/raw/aaer/2012/AAER-3429.pdf new file mode 100644 index 0000000000000000000000000000000000000000..a2b3dbe5d825c7dbf47d7335a09d9c54307c5390 --- /dev/null +++ b/raw/aaer/2012/AAER-3429.pdf @@ -0,0 +1,3 @@ +version https://git-lfs.github.com/spec/v1 +oid sha256:e99d032dfb111ae99a8238737457b3a3d02d3b3a64f3c51cccbd0356bdf6965d +size 220681 diff --git a/raw/aaer/2012/AAER-3430.pdf b/raw/aaer/2012/AAER-3430.pdf new file mode 100644 index 0000000000000000000000000000000000000000..536418720770b4e59701a0e0cf1da7a0f557431e --- /dev/null +++ b/raw/aaer/2012/AAER-3430.pdf @@ -0,0 +1,3 @@ +version https://git-lfs.github.com/spec/v1 +oid sha256:90a38a73a65e7ddc1432a980271c423ddf502a934639603f3386f2c044207a01 +size 170408 diff --git a/raw/aaer/2012/AAER-3431.txt b/raw/aaer/2012/AAER-3431.txt new file mode 100644 index 0000000000000000000000000000000000000000..4b20f5517142b9879febfc1b265c617c1c86fb4e --- /dev/null +++ b/raw/aaer/2012/AAER-3431.txt @@ -0,0 +1,389 @@ + + + + UNITED STATES OF AMERICA + Before the + SECURITIES AND EXCHANGE COMMISSION + +SECURITIES EXCHANGE ACT OF 1934 +Release No. 68449 / December 17, 2012 + +ACCOUNTING AND AUDITING ENFORCEMENT +Release No. 3431 / December 17, 2012 + +ADMINISTRATIVE PROCEEDING +File No. 3-15133 + + + +In the Matter of + +J. Brian Laib, CPA, + +Respondent. + + +ORDER INSTITUTING 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, +MAKING FINDINGS, AND IMPOSING +REMEDIAL SANCTIONS + + +I. + + The Securities and Exchange Commission (“Commission”) deems it appropriate that public +administrative proceedings be, and hereby are, instituted against J. Brian Laib, CPA (“Respondent” +or “Laib”) pursuant to Section 4C +1 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 profe ssional conduct. + + 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, which are admitted, Respondent consents to the entry of this Order Instituting 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, 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 +3 that: + +A. SUMMARY + +1. This matter involves improper professional conduct by J. Brian Laib in connection +with audits conducted by Murrell Hall, McIntosh & Co. PLLP and Eide Bailly LLP of the financial +statements of Life Partners Holdings, Inc. (“Life Partners” or the “Company”) for fiscal years +ended February 28, 2005 through 2009. Laib failed to conduct Murrell Hall’s fiscal year 2005 +through 2008 audits and Eide Bailly’s fiscal year 2009 audit in accordance with Public Company +Accounting Oversight Board (“PCAOB”) standards,4 and Life Partners’ fiscal year 2006 through +2009 financial statements did not present fairly, in all material respects, Life Partners’ financial +position, operating results, and cash flows in conformity with generally accepted accounting +principles (“GAAP”). +2. On January 3, 2012, the Commission filed a complaint against Life Partners and +three of its senior executives for their involvement in a fraudulent disclosure and accounting +scheme involving life settlements.5 The Commission alleges, in part, that Life Partners materially +misstated net income from fiscal year 2007 through the third quarter of fiscal year 2011 by +prematurely recognizing revenues and understating impairment expense related to its investments +in life insurance policies. The Commission also alleges that Life Partners backdated certain +transactional documents to hide the Company’s premature revenue recognition from its auditors +from 2004 through 2010. + +3 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any +other person or entity in this or any other proceeding. +4 Citations to PCAOB Standards and Rules refer to standards and rules in effect at the time of the conduct +discussed herein. +5 See Litigation Release No. 22219, January 4, 2012. + 3 +B. RESPONDENT + + J. Brian Laib, 48, is a certified public accountant licensed in the state of +Oklahoma. From January 2005 to August 1, 2008, Laib was a partner with Murrell Hall, McIntosh +& Co. PLLP, an accounting firm that was registered with the PCAOB. Laib became a partner with +Eide Bailly LLP, a PCAOB-registered accounting firm, on August 1, 2008, following Eide Bailly’s +acquisition of Murrell Hall’s assets. + +C. RELEVANT ENTITY +Life Partners Holdings, Inc. is a Texas corporation headquartered in Waco, Texas. Life +Partners’ common stock is registered with the Commission pursuant to Section 12(b) of the +Exchange Act, and the Company is subject to the reporting requirements of the Exchange Act. +Since 2000, Life Partners’ common stock has traded on the NASDAQ exchange under the ticker +symbol “LPHI.” + +D. FACTS + + Life Partners’ Revenue Recognition +1. Life Partners brokers the sale of life insurance policies by policy owners to +investors in the secondary market, in transactions referred to as “life settlements.” Life Partners +derives its revenues from the difference between the amounts investors pay to acquire an interest in +a life settlement and the amounts for which policy owners agree to sell their policies. +2. In a typical life settlement transaction brokered by the Company, a policy owner +interested in selling his or her policy executes a “Seller Agreement,” which grants Life Partners an +option to purchase the policy on behalf of investors at an agreed upon price. The Company’s +standard Seller Agreement defines the “Closing Date” as “the date upon which the consideration +for the transaction described herein is transferred from the Escrow Agent to the Seller.” Prior to +the Closing Date, neither the policy owner nor Life Partners are contractually obligated to proceed +with the sale, as each may rescind the agreement at any time and for any reason without incurring a +penalty. Additionally, during the 15-day period following the Closing Date (the “Rescission +Period”), the policy owner has the option to rescind his or her agreement to sell the policy for any +reason without penalty. Moreover, death of the insured covered by the policy prior to or during the +Rescission Period triggers an automatic rescission under the Seller Agreement (collectively, the +“Rescission Rights”). +3. Life Partners typically identifies potential investors in life settlements through its +network of independent buyers’ agents. Potential investors generally deposit funds with Life +Partners’ escrow agent and deliver signed, but undated, “Policy Funding Agreements” to the +Company in advance of identifying specific policies in which they intend to purchase an interest. +The Policy Funding Agreement specifies the policy to be purchased, the acquisition price, and the +escrow arrangements for receipt and disbursement of funds. + 4 +4. After receipt of the Policy Funding Agreement, the Seller Agreement, and the +accompanying assignment documents, Life Partners forwards to the escrow agent the documents +necessary for closing. A life settlement transaction closes when the seller gets paid – i.e., on the +Closing Date, as defined in the Seller Agreement. +5. Rather than wait until the Closing Date to recognize revenues, Life Partners +routinely recognized revenue as of the date listed on the Policy Funding Agreement. This date +purportedly represented the date the investor committed to purchase an interest in the policy; +however, Life Partners routinely backdated Policy Funding Agreements and other transaction +documents. Additionally, the Company did not wait until it had identified investors to purchase +100% of a policy to recognize revenue. Instead, Life Partners recognized a pro rata portion of the +total revenue it expected to earn when it completed the sale of 100% of the interests in that policy. +According to Life Partners’ policy, if the Company had received Policy Funding Agreements from +purchasers to acquire 2% of a policy and certain other transaction documents, the Company would +recognize 2% of the total revenue anticipated from that life settlement transaction. +Applicable Authoritative Accounting Literature +6. Under GAAP, revenue can be recognized only when it is both (i) realized or +realizable and (ii) earned. Revenue is “realized or realizable” when products or services (in this +case, life settlements) are exchanged or readily convertible to known amounts of cash or claims to +cash. Revenues are “earned” when “the entity has substantially accomplished what it must do to +be entitled to the benefits represented by the revenues” (See Financial Accounting Standards Board +(“FASB”) Accounting Standards Codification (“ASC”) 605-10-25, Revenue Recognition (also +contained in FASB Statement of Financial Accounting Concepts No. 5, Recognition and +Measurement in Financial Statements of Business Enterprises, paragraphs 83(a) and 83(b)) and +Accounting Research Bulletin No. 43, Restatement and Revision of Accounting Research Bulletins, +Chapter 1A, Paragraph 1. +Life Partners’ Improper Revenue Recognition +7. Life Partners’ revenue recognition policy is contrary to GAAP because the +Company recognized revenues prior to being (i) realized or realizable and (ii) earned, which +occurred, at the earliest on the Closing Date. Revenue is not realized or realizable before the +Closing Date because Life Partners receives no cash, and has no claim to cash, until a life +settlement is purchased by investors and the policy owner/seller is paid by the escrow agent, which +occurs on the Closing Date. Similarly, revenue is not earned before the Closing Date because the +policy owner is not obligated to sell the policy to Life Partners prior to the Closing Date. +Additionally, Life Partners’ revenues do not qualify as “earned” until such time as it fully brokers +the sale of 100% of a policy. Policy owners sell their policies in a single transaction under the +Seller Agreement, not on a prorated basis, as Life Partners identifies investors interested in +purchasing fractional interests in the policy. Consequently, after the Company identifies one or +more interested investors in a given policy, Life Partners has substantial continuing obligations to +identify additional investors sufficient to purchase any unsold interests in the policy before it +becomes entitled to any portion of the proceeds from the sale. Life Partners is not entitled to any + 5 +proceeds from the sale until investors purchase 100% of a policy, which does not happen until the +Closing Date, at the earliest. +Life Partners’ Restatement +8. In its Form 10-K filed on November 22, 2011for its fiscal year ended February 28, +2011, Life Partners restated its financial statements for fiscal years 2007 through 2010 and for the +first three quarters of 2011 to correct accounting errors related to revenue recognition, accounts +receivable, impairment of investments in Company-owned policies, accrued liabilities, and the +related tax impact. The Company’s restatement of revenues resulted from changing the date of +revenue recognition from the date that purchasers commit to buy policies to the date that policy +closings are funded, i.e., the Closing Date. +Audits of Life Partners Fiscal Year 2005 through 2009 Financial Statements +9. Laib served as the engagement partner and supervised and conducted Murrell Hall’s +fiscal year 2005 through 2008 audits and Eide Bailly’s fiscal year 2009 audit of Life Partners’ +financial statements. +10. An auditor is required 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 Auditing Standards, Responsibilities and Functions of the Independent +Auditor, AU § 110.02). “The auditor’s response to the assessment of the risks of material +misstatement due to fraud involves the application of professional skepticism in gathering and +evaluating audit evidence.” (See PCAOB Auditing Standards, Consideration of Fraud in a +Financial Statement Audit AU § 316.46). +6 “Professional skepticism is an attitude that includes a +questioning mind and a critical assessment of audit evidence” (See PCAOB Auditing Standards, +Consideration of Fraud in a Financial Statement Audit AU § 316.13). The auditor’s response +should be general, by, for example, considering management’s selection and application of +significant accounting principles and whether management’s accounting policies are being applied +in an inappropriate manner to create a material misstatement of the financial statements, and +specific, by impacting the nature, timing, and extent of auditing procedures to address identified +risks, including the risk of management override of controls (See AU § 316.48-67). +11. In connection with the 2005 audit, Laib identified risks of material misstatements +due to fraud but failed to maintain an attitude of professional skepticism in assessing such risks and +failed to respond appropriately to such risks related to revenue recognition. For example, in +planning the 2005 audit, Murrell Hall concluded that management was very aggressive in +recording revenue based, in part, on identified business and fraud risk factors. Yet, Murrell Hall’s +work papers do no document the auditor’s evaluation of whether management’s revenue +recognition policies comply with GAAP or any changes to planned procedures to address +identified fraud risks. Laib also became aware during planning the 2005 audit that a member of +management had alleged to Murrell Hall that the dates on Policy Funding Agreements had been +changed in order to process life settlement transactions in another period. Yet again, Murrell + +6 See also PCAOB Auditing Standards, Due Professional Care in the Performance of Work, AU §230.07. + 6 +Hall’s work papers document no procedures performed to address the identified risk of +management override of controls or any inquiries of other members of management or any +discussions with the audit committee. Instead, Murrell Hall’s work papers document only that it +was unable to verify the practice. Murrell Hall’s 2006 audit work papers contain identical +documentation. Despite management’s efforts to obstruct Laib by concealing improper revenue +recognition practices (i.e., backdating documents), had he appropriately planned and performed +Murrell Hall’s audits, Laib may have discovered that Life Partners prematurely recognized +revenue. +12. An auditor is to obtain sufficient competent evidential matter to afford a reasonable +basis for an opinion regarding the financial statements under audit (See PCAOB Auditing +Standards, Evidential Matter, AU § 326.01). Although evidential matter includes representations +from management, management’s representations are not a substitute for performing sufficient +auditing procedures to afford a reasonable basis for an opinion regarding the financial statements +under audit (See PCAOB Auditing Standards, Management Representations, AU § 333.02). The +nature, timing, and extent of the procedures to be applied, as well as the validity and sufficiency of +required evidence, depend on the circumstances and the auditor’s judgment (See PCAOB Auditing +Standards, AU § 326.13 and .21-22). With respect to such judgment, however, the procedures +adopted should be adequate to obtain evidential matter sufficient for the auditor to form +conclusions concerning the validity of the individual assertions embodied in the components of +financial statements (See PCAOB Auditing Standards, AU § 326.13). Furthermore, due +professional care requires the auditor to exercise professional skepticism, which requires the +auditor to conduct the engagement with a mindset that recognizes the possibility that a material +misstatement due to fraud could be present and an ongoing questioning of whether the information +and evidence obtained suggests that a material misstatement due to fraud has occurred (See +PCAOB Auditing Standards, AU § 316.13). In developing his or her opinion, the auditor should +consider relevant evidential matter regardless of whether it appears to corroborate or to contradict +the assertions in the financial statements (See PCAOB Auditing Standards, AU § 326.25). +13. Murrell Hall and Eide Bailly’s 2005 through 2009 audit work papers document +certain testing that was designed to confirm the existence, completeness, and accuracy of signed +transaction documents, including Sales Agreements, Policy Funding Agreements, and funding +status reports that purportedly reflected investor commitments to purchase policies prior to period- +end. Laib, nonetheless, failed to evaluate whether Life Partners’ revenue recognition policy was in +accordance with GAAP. Laib understood that Life Partners recognized revenues prior to the +Closing Date. When he initially became involved with the Life Partners’ engagement, Laib recalls +looking at example transactional files to get familiar with documents related to life settlement +transactions. Laib, however, did not read, and did not direct an assistant to read, the transactional +documents in sufficient detail to identify and document contractual provisions relevant to the +timing of revenue recognition under GAAP. Had Laib done so, he would have identified +contractual provisions that contradict management’s representations as to when revenue can be +recognized. In particular, he would have discovered the Seller Agreement was nonbinding on both +the seller and the Company and he would have identified the seller’s Rescission Rights. +Accordingly, Laib would have known a life settlement is not legally sold prior to the Closing Date +and that the Company’s revenue recognition policy was not consistent with GAAP. Additionally, +Laib also failed to notice or ignored indications in Murrell Hall’s and Eide Bailly’s work papers + 7 +that should have raised questions about Life Partners’ revenue recognition policies. Murrell Hall’s +and Eide Bailly’s work papers include schedules detailing, by month, each life settlement +transaction which Life Partners recognized revenue. The schedules include adjustments for +rescissions and other items to reconcile the total anticipated revenue for each transaction to the +revenue the Company actually recorded for each month, including adjustments related to +rescissions of life settlement for which Life Partners had recognized revenues in prior quarters. +There is no documentation that Laib questioned the circumstances of the rescissions or whether +rescissions contradicted management’s representation concerning the timing of revenue +recognition. +7 +14. Laib did not consider or respond to adequately the possibility of illegal acts in +connection with the 2005 through the 2009 audits (See PCAOB Auditing Standards, AU § 317, +Illegal Acts by Clients). Specifically, Laib reviewed Murrell Hall and Eide Bailly work papers +documenting the existence of loans to certain executive officers; however, he failed to consider +whether such loans violated Section 13(k) of the Securities Exchange Act of 1934, which prohibits +any issuer to make, directly or indirectly, “personal loans” to any executive officer. +15. PCAOB Auditing Standard No. 3, Audit Documentation, requires, in part, that +“documentation must contain sufficient information to enable an experienced auditor, having no +previous connection with the engagement: (a) to understand the nature, timing, extent, and results +of the procedures performed, evidence obtained, and conclusions reached, and (b) to determine +who performed the work and the date such work was completed as well as the person who +reviewed the work and the date of such review” (See PCAOB Auditing Standard No. 3, paragraph +6). Laib failed to adequately document the nature, timing, and extent of procedures performed, the +evidence obtained, and the underlying rationale for certain conclusions reached in connection with +the 2005 through 2009 audits. The 2005 through 2009 audit work papers fail to adequately +document consideration as to whether revenues were recognized in accordance with GAAP, +whether receivables from officers were prohibited transactions under Section 13(k) of the +Exchange Act of 1934, or whether receivables from officers should be disclosed as related party +transactions. +E. VIOLATIONS +Rule 102(e) of the Commission’s Rules of Practice and Section 4C of the Exchange +Act +16. 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 + +7 Murrell Hall and Eide Bailly’s work papers identify one to five rescissions per year of the approximately +200 life settlement transactions reported as being closed in each of fiscal years 2005 through 2009. As a result of +the rescissions, Life Partner’s quarterly revenues were misstated in 15 of the 20 quarters during this period, +including three quarters in which revenues, net of brokerage fees, were misstated in excess of 10%, as Life Partners +transitioned to policies with larger face amounts which generate larger net revenues per transaction. + 8 +in a violation of applicable professional standards, that indicate a lack of competence to practice +before the Commission.” +17. Laib’s conduct during Murrell Hall’s fiscal year 2005 through 2008 audit +engagements and Eide Bailly’s fiscal year 2009 audit engagement is unreasonable and fails to +conform to applicable professional standards. Laib failed to (i) obtain sufficient competent +evidential matter with respect to revenues and cost of revenues; (ii) ) comply with PCAOB +Auditing Standards, AU § 317, Illegal Acts by Clients, with respect to certain loans to executive +officers; and (iii) comply with PCAOB Auditing Standard No. 3, Audit Documentation. +F. FINDINGS + +18. Based on the foregoing, the Commission finds that Laib engaged in improper +professional conduct pursuant to Rule 102(e)(1)(ii) and 102(e)(1)(iv)(B)(2) of the Commission’s +Rules of Practice. +IV. + + In view of the foregoing, the Commission deems it appropriate to impose the sanctions +agreed to in Respondent’s Offer. + + Accordingly, it is hereby ORDERED, effective immediately, that: + + A. Laib is denied the privilege of 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 PCAOB in accordance with the Sarbanes-Oxley Act of 2002, +and such registration continues to be effective; + + 9 + (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 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 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. + +D. 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/2012/AAER-3433.pdf b/raw/aaer/2012/AAER-3433.pdf new file mode 100644 index 0000000000000000000000000000000000000000..f97f6f2cfd4311fc54c3400e8f26c76309197b55 Binary files /dev/null and b/raw/aaer/2012/AAER-3433.pdf differ diff --git a/raw/aaer/2012/AAER-3434.txt b/raw/aaer/2012/AAER-3434.txt new file mode 100644 index 0000000000000000000000000000000000000000..e98c8b7ec8a59917469690aa6e0a789a4eca7c52 --- /dev/null +++ b/raw/aaer/2012/AAER-3434.txt @@ -0,0 +1,1375 @@ + + + + + + + + + + + + + + + + SEC.gov | Rex T. Shelby, Scott Yeager, Kevin A. Howard and Michael W. Krautz; Schuyler M. Tilney and Thomas W. Davis + + + + + + + + !function(){var e=navigator.userAgent,a=document.documentElement,n=a.className;n=n.replace("no-js","js"),/iPad|iPhone|iPod/.test(e)&&!window.MSStream&&(n+=" ua-ios"),a.className=n}(); + {"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/513426","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"gtag":{"tagId":"","consentMode":false,"otherIds":[],"events":[],"additionalConfigInfo":[]},"ajaxPageState":{"libraries":"eJxdT0GOwzAI_JBdn_oei2DkeINNZLC22devlaZS2wtiBhhmcKNUTPo97jxyaXEH3GJpiZrFhQW38A4cMqgeYQGlV19JFTKpQ-kUmvQKXP7I0cO4tC2kPnbg2wVdFslM0SCHPMs3vsEPPD7J6hgOGdPCKJyoRxxqUuePHjLLAuzVjimenRJGSLW08NoBK9LUn6SHlrytVOlcpJShB63QLSpBx_WkOzHNePol4fRQo_qMPvQ36ZXsAmd99lMNr2t_GUR9n60EyX9a_wePd5ns","theme":"uswds_sec","theme_token":null},"ajaxTrustedUrl":[],"gtm":{"tagId":null,"settings":{"data_layer":"dataLayer","include_classes":false,"allowlist_classes":"","blocklist_classes":"","include_environment":false,"environment_id":"","environment_token":""},"tagIds":["GTM-TD3BKV"]},"data":{"extlink":{"extTarget":false,"extTargetAppendNewWindowDisplay":true,"extTargetAppendNewWindowLabel":"(opens in a new window)","extTargetNoOverride":false,"extNofollow":false,"extTitleNoOverride":false,"extNoreferrer":false,"extFollowNoOverride":false,"extClass":"0","extLabel":"(link is external)","extImgClass":false,"extSubdomains":true,"extExclude":".*\\.gov|http:\/\/www.xbrl.org\/utr\/2013-05-17\/utr.xml|http:\/\/www.xbrl.org\/dtr\/type\/numeric-2009-12-16.xsd|http:\/\/www.xbrl.org\/dtr\/type\/nonNumeric-2009-12-16.xsd|https:\/\/secir.secure.force.com\/ombudsman\/OMMSForm","extInclude":"","extCssExclude":".data-exempt","extCssInclude":"","extCssExplicit":"","extAlert":true,"extAlertText":"You are now leaving the SEC Website. 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Shelby, Scott Yeager, Kevin A. Howard and Michael W. Krautz; Schuyler M. Tilney and Thomas W. Davis + + + + + + + + + + + + Rex T. Shelby, Scott Yeager, Kevin A. Howard and Michael W. Krautz; Schuyler M. Tilney and Thomas W. Davis + + + + + + + + + + + + + + + + + + + U.S. SECURITIES AND EXCHANGE COMMISSION + Litigation Release No. 22577 / December 20, 2012 + Accounting and Auditing Enforcement Release No. 3434 / December 20, 2012 + Securities and Exchange Commission v. Rex T. Shelby, Scott Yeager, Kevin A. Howard and Michael W. Krautz, Civil Action No. H-03-0946 (S.D. Tex.) + Securities and Exchange Commission v. Schuyler M. Tilney and Thomas W. Davis, Civil Action No. H-03-0946 (S.D. Tex.) + SEC SETTLES PENDING CIVIL FRAUD CHARGES AGAINST THREE FORMER EXECUTIVES OF ENRON BROADBAND SERVICES + + + The Securities and Exchange Commission announced today that former Enron senior vice presidents Rex T. Shelby and Scott Yeager and the former chief financial officer of Enron Broadband Services (EBS) Kevin A. Howard have agreed to settle the SEC's pending civil actions against them.   + + The SEC charged Shelby and Yeager with securities fraud and insider trading on May 1, 2003, amending a complaint previously filed March 12, 2003, which charged Howard and Michael W. Krautz, a former senior director of accounting at EBS, with securities fraud.  The SEC's civil case was stayed by the U.S. District Court while criminal proceedings occurred against these defendants.  + + To settle the SEC's action against them, Shelby agreed to pay a civil penalty of $1 million, and Yeager and Howard agreed to pay civil penalties of $110,000 and $65,000, respectively.  In addition, they each consented to the entry of a final judgment enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and permanently barring them from serving as an officer or director of a public company.  Howard also agreed to be permanently enjoined from violating Section 17(a) of the Securities Act of 1933, Section 13(b)(5) of the Exchange Act and Exchange Act Rule 13b2-1, and aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) and (B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1 and 13a-13.  These settlement agreements are subject to court approval.  Separately, Howard also consented to the entry of an Administrative Order, pursuant to Rule 102(e) of the Commission's Rules of Practice, suspending him from appearing or practicing before the Commission as an accountant.  + + In the related criminal proceedings, the Department of Justice previously entered into plea agreements with Shelby and Howard on related charges.  Shelby and Howard agreed to respectively forfeit $2,568,750 and $25,000 that, along with the Commission's civil penalties announced today, will contribute $3,658,750 for the benefit of injured investors through the Commission's Enron Fair Fund.  Yeager was acquitted in a related criminal proceeding.    + + As alleged in the Commission's complaint, Shelby, Yeager and other EBS executives engaged in a fraudulent scheme to, among other things, make false or misleading statements about the technological prospects, performance, and financial condition of EBS.  These statements were made at Enron's annual analyst conference and in multiple press releases during 2000.  While aware of material non-public information concerning the true nature of EBS' technological and commercial condition, Shelby and Yeager sold a large amount of Enron stock at inflated prices.  In another part of the scheme, Howard engaged in a sham transaction, known as "Project Braveheart," in which Enron improperly recognized $53 million in earnings in the fourth quarter of 2000 and $58 million in earnings in the first quarter of 2001.      + + The Commission also announced today that it filed notices of voluntary dismissal of its case against Krautz, along with its case against Schuyler M. Tilney and Thomas W. Davis, two former Merrill Lynch executives who were charged on March 17, 2003 with aiding and abetting Enron's securities fraud.  Krautz was acquitted at trial in a related criminal proceeding.   + + For more information, see Litigation Release No. 18122 (May 1, 2003); Litigation Release No. 18038 (March 17, 2003). + + + + +   + + + + + + + + + + + + + + + + + + + + + + + + + Return to top + + + + + SEC homepage + + + + + + + + + + + + + + About the SEC + + + + + + Budget & Performance + + + Careers + + + Commission Votes + + + Contact + + + Contracts + + + + + + + + Transparency + + + + + + Accessibility & Disability + + + Super Intelligence + + + FOIA + + + Inspector General + + + No FEAR Act Data + + + Ombuds + + + SEC Excess Personal Property Guidance + + + + + + + + Websites + + + + + + Investor.gov + + + Related Sites + + + USA.gov + + + + + + + + Site Information + + + + + + Plain Writing + + + Privacy & Security + + + Site Map + + + + + + + + + + + + + + + + + + Stay connected. 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