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+ UNITED STATES OF AMERICA 
+ Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No.  57210 / January 28, 2008 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No.  2775 / January 28, 2008 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-12938 
+In the Matter of 
+MICHAEL LOWTHER, CPA,  
+Respondent. 
+I.
+ORDER INSTITUTING PUBLIC 
+ADMINISTRATIVE PROCEEDINGS 
+PURSUANT TO RULE 102(e) OF THE 
+COMMISSION’S RULES OF 
+PRACTICE, MAKING FINDINGS, 
+AND IMPOSING REMEDIAL 
+SANCTIONS 
+The Securities and Exchange Commission (“Commission”) deems it appropriate that public 
+administrative proceedings be, and hereby are, instituted against Michael Lowther, CPA  
+(“Lowther” or “Respondent”), pursuant to Rule 102(e)(1)(ii) of the Commission’s Rules of 
+Practice.1 
+II. 
+In anticipation of the institution of these proceedings, Lowther has submitted an Offer of 
+Settlement (“Offer”) which the Commission has determined to accept. Solely for the purpose of 
+these proceedings and any other proceedings brought by or on behalf of the Commission, or to 
+which the Commission is a party, and without admitting or denying the findings herein, except as 
+to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are 
+Rule 102(e)(1)(ii) provides that: 
+The Commission may . . . deny, temporarily or permanently, the privilege of appearing or practicing before 
+it in any way to any person who is found by the Commission . . . to have engaged in . . . improper professional 
+conduct. 
+1 
+admitted, Lowther consents to the entry of this Order Instituting Public Administrative Proceedings 
+Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing 
+Remedial Sanctions (“Order”), as set forth below.   
+III. 
+On the basis of this Order and Respondent’s Offer, the Commission finds2 that: 
+A. SUMMARY 
+Enron Corp.’s (“Enron”) senior executives engaged a wide-ranging scheme to defraud the 
+investing public by materially overstating the company’s earnings and cash flows, and concealing 
+debt in periodic reports filed with the Commission.3  The fraudulent scheme was carried out 
+through a variety of complex structured transactions, related party transactions, misleading 
+disclosures, and a widespread abuse of generally accepted accounting principles (“GAAP”).  
+Arthur Andersen LLP (“Andersen”) served as Enron’s auditor, and for each year during the 
+relevant time period, issued an auditor’s report falsely stating that Enron’s financial statements 
+were presented fairly, in all material respects, in conformity with GAAP, and that Andersen had 
+conducted its audit of those financial statements in accordance with generally accepted auditing 
+standards (“GAAS”).  Lowther served as the concurring review partner for the Enron audits.  As 
+specified in this Order, Lowther engaged in improper professional conduct by concurring with the 
+audit engagement team’s faulty conclusions regarding Enron’s accounting for certain transactions 
+and authorizing the issuance by Andersen of unqualified audit reports that were materially false 
+and misleading. 
+B. RESPONDENT 
+Michael Lowther, 51, served as the partner in charge of Andersen’s energy audit division 
+in Houston, Texas, and also served as the concurring review partner for the Enron audits during the 
+relevant time period.  As a concurring review partner, Lowther was required to provide additional 
+assurance that Enron’s financial statements were in conformity with GAAP and that Andersen’s 
+report thereon was in accordance with GAAS.  Lowther is currently and was a CPA licensed in the 
+state of Texas at all relevant times. 
+2 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any 
+other person or entity in this or any other proceeding.  
+3 In connection with this fraudulent scheme, several former Enron executives either pleaded guilty or were 
+convicted of felonies, including Enron’s former Chief Executive Officer, Chief Financial Officer, and Chief 
+Accounting Officer. 
+2
+
+C. OTHER PARTIES 
+Enron Corp. was an Oregon corporation with its principal place of business in Houston, 
+Texas.  During the relevant time period, Enron’s common stock was registered with the 
+Commission pursuant to Section 12(b) of the Exchange Act and traded on the New York Stock 
+Exchange.  Among other operations, Enron was the nation’s largest natural gas and electric 
+marketer, with reported annual revenue of more than $100 billion.  In 2000, Enron rose to number 
+seven on the Fortune 500 list of public companies.  By December 2, 2001, when it filed for 
+bankruptcy, Enron’s stock price had dropped over the course of a year from more than $80 per 
+share to less than $1. 
+Arthur Andersen LLP once was one of the so-called “Big Five” accounting firms in the 
+United States and had its headquarters in Chicago, Illinois.  Andersen personnel performed work 
+for Enron during the relevant time period in several cities, including Chicago, Houston and 
+London.4 
+D. FACTS 
+1. Andersen Identified Enron as a Maximum Risk Client 
+Lowther was aware that the risk of fraudulent financial reporting at Enron was high.  In 
+accordance with applicable professional standards, Andersen assessed the risk of fraud at Enron 
+(AU §316, Consideration of Fraud in a Financial Statement Audit), and Lowther should have 
+known that Enron possessed many of the risk factors that should be considered in making that 
+assessment. For example, Fraud Risk Assessment questionnaires prepared by the audit 
+engagement team documented that Enron placed an “undue emphasis on meeting earnings targets;” 
+used “highly aggressive accounting;” utilized “unusual” year-end transactions that posed difficult 
+“substance over form” questions; possessed a “philosophy of significantly managing (maximizing 
+or minimizing) earnings;” and had a “high dependence on debt, difficulty in meeting debt 
+payments or vulnerability to interest rate changes.”  In addition, an internal Andersen document 
+prepared each year by the engagement team consistently classified the Enron engagement as 
+involving “maximum risk” and noted that Enron’s use of complex “form over substance” and 
+“related party” transactions created an “extreme” or “very significant” financial reporting risk.  
+This document, called a “SMART,” was prepared each year to assist with the annual decision 
+whether to retain Enron as an audit client.  Lowther reviewed the SMART documents and also 
+attended annual client retention meetings during which the risks identified above were discussed. 
+David B. Duncan served as the global engagement partner for Andersen’s audits of Enron from 1997 until 
+December 2001.  Contemporaneously with the filing of this Order, the Commission filed a settled civil injunctive 
+action in the U.S. District Court for the Southern District of Texas, Houston Division, against Duncan, in which 
+Duncan consented to be permanently enjoined from violating Section 10(b) of the Securities Exchange Act of 1934 
+and Rule 10b-5 thereunder.  Upon entry of the injunction by the Court, Duncan has also offered to settle an 
+administrative proceeding by the Commission in which he agrees to be permanently barred from appearing or 
+practicing before the Commission as an accountant. 
+3
+4 
+2. Enron’s Prepay Transactions 
+Enron improperly reported structured financing proceeds as operating cash flows by means 
+of “prepay” transactions with various financial institutions.  Enron used prepay transactions to 
+improperly report the cash it received from prepay transactions as cash flow from operating 
+activities, rather than cash flow from financing activities. This allowed Enron to hide the true 
+extent of its borrowing from investors and the national credit rating agencies because sums 
+borrowed in prepay transactions appeared as “price risk management liabilities” rather than 
+additional debt on Enron’s balance sheet. 
+Enron’s prepay transactions were in substance financings because Enron used a three party 
+structure involving a bank and a bank sponsored SPE that were not independent of each other to 
+remove all commodity price risk from the transaction.  The circular nature of delivery and 
+payments with respect to the commodities and the lack of independence between the bank 
+counterparties had the effect of eliminating any material risk or any potential gain with respect to 
+changes in the price of the underlying commodity.  In effect, Enron’s prepay transactions involved 
+an investment bank making a large payment to Enron in exchange for Enron’s promise to pay the 
+bank sponsored entity an amount in excess of what Enron received in the initial prepayment.   
+Amounts borrowed by Enron using the prepay structure were finely tuned each quarter for 
+maximum reporting benefit.  Enron simply determined the amount of operating cash flows it 
+wanted to report, projected any “shortfall” as the end of a reporting period approached, and then 
+used prepay transactions to fill the gap.  From 1997 through September 30, 2001, Enron, using 
+prepay transactions, received over $5 billion in funds in this manner.  
+Enron never separately disclosed in its public filings that it was entering into prepay 
+transactions. Such disclosure was necessary because of the large dollar amounts and volume of 
+prepay transactions entered into by Enron and the significant future obligated cash commitments 
+associated with the transactions.  Rather, the prepay transactions were aggregated into Enron’s 
+“price risk management liabilities.”  Enron provided a generic and inadequate description of its 
+price risk management activities in the notes to the financial statements and in the management’s 
+discussion and analysis section of its annual reports on Form 10-K and its quarterly reports on 
+Form 10-Q.       
+GAAS provides that “the presentation of financial statements in conformity with [GAAP] 
+includes adequate disclosure of material matters.  These matters relate to the form, arrangement, 
+and content of the financial statements and their appended notes . . .”  (AU §431, Adequacy of 
+Disclosure in Financial Statements). GAAS also states that “[GAAP] recognize[s] the importance 
+of reporting transactions and events in accordance with their substance” and that the “auditor 
+should consider whether the substance of the transactions or events differs materially from their 
+form.”  (AU §411, The Meaning of Present Fairly in Conformity With Generally Accepted 
+Accounting Principles in the Independent Auditor’s Report). Enron’s financial statement 
+presentation and disclosure of the prepay transactions was not in conformity with GAAP because it 
+mischaracterized the nature of the cash flows associated with the transactions, obscured the true 
+4
+
+economic substance of these financing transactions, and did not address the material impact they 
+had on Enron’s financial statements. 
+Enron’s disclosures regarding prepay transactions were materially inadequate.  In 
+conjunction with both the 1999 and 2000 audits, the engagement team advised Enron of the need 
+for more robust disclosure of the prepay transactions.  David Duncan, the engagement partner for 
+the audits, even proposed to Enron’s senior management specific language used by another 
+Andersen audit client that would have disclosed the fact that Enron used “prepaid commodity 
+contracts” and also the dollar amount of liabilities associated with the prepay transactions.  
+Andersen’s recommendations to enhance the disclosure for prepay transactions were rejected by 
+Enron’s management.  Lowther consulted with Duncan and others regarding Enron’s prepay 
+transaction disclosures and they determined, improperly, that Enron’s disclosures complied with 
+GAAP without the proposed enhancements.   
+3. Enron’s Project Nahanni 
+After completing an $800 million prepay transaction in November 1999, Enron still was 
+approximately $500 million short of the funds flow target Enron had told the credit rating agencies 
+it intended to achieve for the year.  To make up for this shortfall, Enron entered into a transaction 
+code-named Project Nahanni that, in its entirety, had no material economic benefit to Enron.  This 
+transaction was in substance a year-end, one month, $500 million financing that Enron used to 
+manipulate its financial statements by:  (i) inflating reported cash flow from operating activities; 
+(ii) under-reporting cash flow from financing activities; and (iii) under-reporting debt -- in each 
+instance by $500 million. 
+Project Nahanni was structured as a minority interest transaction in which Citigroup, 
+through an SPE called Nahanni, provided capital in return for a minority interest in a consolidated 
+subsidiary of Enron called Marengo.  Marengo was a partnership between Enron and Nahanni 
+created specifically to effectuate the subject transaction.  As a result, cash flow associated with the 
+activities of Marengo appeared as cash flow from operating activities on Enron’s financial 
+statements, and Nahanni’s financial contribution to Marengo appeared as a minority interest on 
+Enron’s balance sheet, rather than debt.  
+On or about December 17, 1999, Citigroup funded Nahanni with $485 million in debt and 
+$15 million in outside equity.  Nahanni immediately purchased $500 million of short-term U.S. 
+Treasury bills (“T-bills”) and then contributed the T-bills to acquire a minority interest in Marengo.  
+On or about December 29, 1999, two days before Enron’s annual reporting period ended, Enron 
+directed Marengo to sell the $500 million in T-bills.  The sale of the T-bills appeared as cash flow 
+from operating activities on Enron’s consolidated statement of cash flow.  Enron then borrowed 
+from Marengo the cash proceeds from the sale of the T-bills to pay down its reported debt by $500 
+million just before year-end 1999.   Since Enron treated the transaction with Marengo as an inter-
+company loan, it did not increase Enron’s reported debt.  By replacing $500 million of debt with a 
+minority interest in a consolidated subsidiary, Enron improved its reported debt-to-equity ratio by 
+16 percent at year-end, December 31, 1999.  In addition, the $500 million in operating cash flow 
+from Project Nahanni accounted for 41 percent of Enron’s total cash flow reported for the year. 
+5
+
+On or about January 14, 2000, Enron repaid the $500 million loan from Marengo with 
+interest. Marengo then paid Nahanni approximately $487.1 million, representing $485 million in 
+principal, plus $2.1 million in interest.  While the initiation of the transaction was reported as an 
+increase in cash flow from operating activities, its wind-down just weeks later was reported 
+differently by Enron, as a reduction in cash flow from investing activities.  
+In order for the Nahanni transaction to achieve Enron’s goal of increasing its cash flow 
+from operating activities, it was necessary for Enron to take the position that holding Treasury 
+securities was part of its “merchant activities,” so that it could then claim that the sale of those 
+securities generated cash flow from operating activities.  Accordingly, Enron changed the 
+merchant activities footnote in its financial statements to include government securities in the 
+definition of merchant investments.  Such a change was materially misleading because T-bill 
+investing was not a part of Enron’s merchant business, and because, contrary to the definition of 
+merchant investment, Enron never had any intent to hold the securities for the purpose of making a 
+profit. 
+Enron’s overall disclosure of the Nahanni transaction in its Form 10-K for year 2000 was 
+materially misleading because Enron did not disclose:  (i) that the partnership was created in 
+December to fund a transaction that lasted just long enough to achieve a year-end financial 
+reporting objective; and (ii) that the Nahanni transaction was a one-time boost to cash flow, not a 
+continuous, sustainable cash flow from operations.  Thus, Enron’s disclosure created the false 
+impression that the transaction related to Enron’s regular-course-of-business investments in energy 
+and technology companies.   
+Lowther, in his concurring partner role, reviewed documentation for the Nahanni 
+transaction and missed various red flags indicating that Project Nahanni was purely a “window 
+dressing” transaction that had no material economic benefit to Enron.  Consequently, in his review 
+of the Nahanni transaction, Lowther failed to exercise due professional care and skepticism (AU 
+§230, Due Professional Care in the Performance of Work) and failed to ensure Enron’s balance 
+sheet and cash flow presentation were not materially misleading (AU §431, Adequacy of 
+Disclosure in Financial Statements and AU §411, The Meaning of Present Fairly in Conformity 
+With Generally Accepted Accounting Principles in the Independent Auditor’s Report). 
+4. Enr on’s Raptor Transactions 
+Beginning in the spring of 2000, Enron and LJM2, a partnership formed and managed by 
+Enron’s then-Chief Financial Officer Andrew Fastow, engaged in a series of complex financial 
+transactions with four SPE structures called Raptor I, Raptor II, Raptor III and Raptor IV 
+(collectively “Raptors”).  Enron’s senior management used the Raptors, in part, to manipulate 
+Enron’s financial statements.   
+By 1999, a large percentage of Enron’s quarterly earnings were attributed to unrealized 
+gains in its merchant energy portfolio and in various technology investments.  Many of these assets 
+were extremely volatile. The Raptors were used by Enron to “hedge” the value of those 
+6
+
+ 
+investments with a purported independent third party SPE, so that Enron could offset declines in 
+the value of these assets with the Raptor hedges.  Enron capitalized Raptors I, II and IV with Enron 
+stock. Raptor III was capitalized with warrants of an Enron spin-off company. Enron received an 
+economic interest in the Raptors and $1.2 billion in notes receivable from the Raptors in return for 
+the Enron shares and warrants.  Because of the related party nature and complexity of the 
+transaction, the engagement team reviewed the features of the Raptors structures with Lowther and 
+Andersen’s regional practice director before Enron entered into the transactions and consulted with 
+them both on various Raptors related issues throughout 2000 and 2001. 
+LJM2 contributed $30 million of equity to each Raptor.  However, through undisclosed 
+side agreements between Fastow and others, the structures were designed so that amounts equal to 
+LJM2’s equity was returned to LJM2 for each Raptor prior to any hedges being put in place.  As a 
+result of the side agreements and related effective return of capital, LJM2 had no equity at risk and 
+Enron should have consolidated the Raptors into its financial statements.  LJM2's equity was 
+effectively returned to it through three separate $41 million put options in Enron stock in Raptors I, 
+II and IV, and through a distribution in Raptor III.  These put options provided a return equal to 
+LJM2's initial $30 million capital contribution in each Raptor, along with an agreed upon rate of 
+return on such capital, before the Raptor SPEs entered into the hedging transactions.  Effectively, 
+Enron was entering into hedging contracts with entities backed solely with its own stock.  
+Since the Enron engagement was classified as maximum risk, and related party transactions 
+created an “extreme” or “very significant” financial reporting risk, the existence of the put options 
+in the Raptor structures should have triggered increased professional skepticism.  The puts were 
+priced at a premium that matched exactly LJM2's targeted return, and were included as part of 
+aggressive and complex related party transactions that had a material effect on Enron’s reported 
+earnings. Additionally, LJM2 received its $41 million payout in each Raptor shortly after signing 
+the contracts - resulting in a short-term return on investment in excess of 130% in each case.  
+Moreover, the payout occurred in each Raptor after Enron settled the put option early and before 
+any hedges were put in place. The timing of settlement by Enron of these out-of-the-money put 
+options should have been an additional red flag that prompted Lowther and others to increase their 
+professional skepticism and question why Enron would repeatedly make such economically 
+irrational payments.  These payments actually eliminated the supposed protection from a drop in its 
+stock price that the company purportedly had purchased at a premium.  Despite the need for 
+greater scrutiny, Lowther did not exercise due professional care or professional skepticism with 
+regard to this aspect of the Raptor transactions (AU §230, Due Professional Care in the 
+Performance of Work). In addition, Lowther and members of the engagement team allowed Enron 
+to avoid recording significant Raptor-related impairment charges at year-end 2000 and for the first 
+quarter of 2001 by improperly allowing Enron to offset losses in Raptors I and III against the 
+excess credit capacity in Raptors II and IV.    
+Enron’s footnote disclosure in its Form 10-K for year 2000 contains a paragraph describing 
+some aspects of the Raptor transactions.  However, the disclosure was not in accordance with 
+GAAP (FAS 57, Related Party Disclosures) since it did not include an adequate description of the 
+Raptor transactions and information necessary to understand the effects these transactions had on 
+Enron’s financial statements.  Furthermore, in the footnote, Enron asserted, without any reasonable 
+7
+
+basis or substantiation, that “the terms of the transactions with the Related Party were reasonable 
+compared to those which could have been negotiated with unrelated third parties.”  FAS 57 states 
+that financial statement representations “shall not imply that the related party transactions were 
+consummated on terms equivalent to those that prevail in arm’s-length transactions unless such 
+representations can be substantiated.”  Lowther reviewed Enron’s related party disclosure and 
+should have known that the disclosure did not comply with GAAP, that the terms of the Raptor 
+transactions were not equivalent to an arm’s-length transaction, and that the disclosure was 
+materially misleading. 
+5. Violations 
+Rule 102(e)(1)(ii) of the Commission’s Rules of Practice provides, in part, that the 
+Commission may censure or deny, temporarily or permanently, the privilege of appearing or 
+practicing before the Commission in any way to any person who is found by the Commission to 
+have engaged in improper professional conduct.  Rule 102(e)(1)(iv) defines improper professional 
+conduct with respect to persons licensed to practice as accountants. 
+As applicable here, improper professional conduct means a violation of applicable 
+standards that resulted from “repeated instances of unreasonable conduct, each resulting in a 
+violation of applicable professional standards, that indicate a lack of competence to practice before 
+the Commission.”  (Rule 102(e)(1)(iv)(B)(2)).  As a result of the conduct described above, 
+Lowther repeatedly acted unreasonably by concurring with the Enron audit engagement team’s 
+faulty conclusions regarding Enron’s accounting for certain transactions and allowing the issuance 
+by Andersen of unqualified audit reports that were materially false and misleading.   
+6. Findings 
+Based on the foregoing, the Commission finds that Lowther engaged in improper 
+professional conduct pursuant to Rule 102(e)(1)(ii) of the Commission’s Rules of Practice. 
+IV. 
+In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent’s Offer. 
+Accordingly, it is hereby ORDERED, effective immediately, that: 
+A. Lowther is denied the privilege of appearing or practicing before the Commission 
+as an accountant. 
+B. After two years from the date of this order, Lowther 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: 
+8
+
+1. a preparer or reviewer, or a person responsible for the preparation or 
+review, of any public company’s financial statements that are filed with the Commission.  Such 
+an application must satisfy the Commission that Respondent’s work in his practice before the 
+Commission will be reviewed either by the independent audit committee of the public company 
+for which he works or in some other acceptable manner, as long as he practices before the 
+Commission in this capacity; and/or 
+2. an independent accountant.  Such an application must satisfy the 
+Commission that: 
+(a) Respondent, or the public accounting firm with which he is 
+associated, is registered with the Public Company Accounting Oversight Board (“Board”) in 
+accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; 
+(b) Respondent, or the registered public accounting firm with which he 
+is associated, has been inspected by the Board and that inspection did not identify any criticisms 
+of or potential defects in the Respondent’s or the firm’s quality control system that would 
+indicate that the Respondent will not receive appropriate supervision;
+ (c) Respondent has resolved all disciplinary issues with the Board, and 
+has complied with all terms and conditions of any sanctions imposed by the Board (other than 
+reinstatement by the Commission); and 
+(d) Respondent acknowledges his responsibility, as long as 
+Respondent appears or practices before the Commission as an independent accountant, to 
+comply with all requirements of the Commission and the Board, including, but not limited to, all 
+requirements relating to registration, inspections, concurring partner reviews and quality control 
+standards. 
+C. The Commission will consider an application by Respondent to resume 
+appearing or practicing before the Commission provided that his state CPA license is 
+current and he has resolved all other disciplinary issues with the applicable state boards of 
+accountancy. However, if state licensure is dependent on reinstatement by the 
+Commission, the Commission will consider an application on its other merits.  The 
+Commission’s review may include consideration of, in addition to the matters referenced 
+above, any other matters relating to Respondent’s character, integrity, professional conduct, 
+or qualifications to appear or practice before the Commission. 
+ By the Commission. 
+       N ancy M. Morris
+       S ecretary 
+9

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+______________________________ 
+UNITED STATES OF AMERICA 
+BEFORE THE 
+SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 57303 / February 11, 2008 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 2783 / February 11, 2008 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-12953 
+:
+ : 
+In the Matter of : ORDER INSTITUTING PUBLIC 
+: ADMINISTRATIVE PROCEEDINGS 
+: PURSUANT TO RULE 102(e) OF THE 
+Robert A. Fish, CPA, : COMMISSION’S RULES OF 
+: PRACTICE, MAKING FINDINGS, AND 
+: IMPOSING REMEDIAL SANCTIONS 
+Respondent. : 
+:
+ : 
+I. 
+The Securities and Exchange Commission (“Commission”) deems it appropriate 
+that public administrative proceedings be, and hereby are, instituted against Robert A. 
+Fish (“Respondent” or “Fish”) pursuant to Rule 102(e)(1)(ii) of the Commission’s Rules 
+of Practice.1 
+II. 
+In anticipation of the institution of these proceedings, Respondent has submitted 
+an Offer of Settlement (the “Offer”), which the Commission has determined to accept.  
+Solely for the purpose of these proceedings and any other proceedings brought by or on 
+behalf of the Commission, or to which the Commission is a party, and without admitting 
+or denying the findings herein, except as to the Commission’s jurisdiction over him and 
+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 . . . improper professional conduct. 
+1
+the subject matter of these proceedings, which are admitted, Respondent consents to the 
+entry of this Order Instituting Public Administrative Proceedings Pursuant to Rule 102(e) 
+of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial 
+Sanctions (“Order”), as set forth below. 
+III. 
+On the basis of this Order and Respondent’s Offer, the Commission finds2 that: 
+A. RESPONDENT 
+Fish, 60, resides in Rockville Centre, New York.  Fish, now retired, is a certified 
+public accountant licensed to practice in the states of New York, New Jersey and 
+Connecticut. As PricewaterhouseCoopers’ (“PwC”) engagement partner for the audits of 
+Take-Two Interactive Software, Inc.’s (“Take-Two”) financial statements from fiscal 
+year 1994 to 2001, Fish served as the engagement partner assigned to audit Take-Two’s 
+financial statements as of and for the fiscal year ended October 31, 2000 (“fiscal year 
+2000”). On December 13, 2000, Fish signed the PwC audit report containing an 
+unqualified audit opinion accompanying Take-Two’s fiscal year 2000 financial 
+statements included in Take-Two’s 2000 Form 10-K filed with the Commission on 
+January 29, 2001. 
+B. RELEVANT ENTITY 
+Take-Two is a Delaware corporation headquartered in New York, New York.  
+Take-Two develops, markets and publishes interactive entertainment software games for 
+video game consoles as well as the personal computer.  Prior to July 31, 2006, Take-
+Two’s common stock was registered with the Commission pursuant to Section 12(g) of 
+the Exchange Act and traded on the NASDAQ NMS under the symbol “TTWO.”  Since 
+July 31, 2006, Take-Two’s common stock has been registered with the Commission 
+pursuant to Section 12(b) of the Exchange Act and has traded on the NASDAQ Global 
+Market. During the relevant period, Take-Two’s fiscal year ended on October 31. 
+C. SUMMARY 
+Take-Two engaged in a fraudulent scheme to inflate its reported revenues during, 
+among other periods, fiscal year 2000.  Specifically, by engaging in transactions that 
+involved parking several hundred thousand video games with multiple distributors,3 
+2   The findings herein are made pursuant to Respondent’s Offer and are not binding on 
+any other person or entity in this or any other proceeding. 
+3   During these parking transactions, Take-Two shipped video games to different 
+distributors at or near the end of a fiscal quarter or fiscal year, recorded revenue from 
+these shipments as if they were sales, and then accepted returns of the shipments (some of 
+which were disguised as purchases of new inventory) in subsequent reporting periods. 
+2
+
+4
+Take-Two improperly recognized approximately $26 million in revenues during fiscal 
+year 2000 (including $11 million from sales recognized at interim periods, which were 
+subsequently returned and reversed before year end).  Take-Two inflated its after-tax 
+fiscal year 2000 earnings by at least $5 million, or 19%, as a result of inflating its 
+reported fiscal year 2000 revenues by $15.4 million.  In addition, during the same period, 
+Take-Two did not comply with Generally Accepted Accounting Principles (“GAAP”) 
+because it failed to establish proper reserves for video game returns.  As a result, Take-
+Two improperly inflated its reported assets and net income.4  Take-Two’s fiscal year 
+2000 financial statements were not fairly presented in all material respects in conformity 
+with GAAP. 
+Fish was PwC’s engagement partner assigned to audit Take-Two’s financial 
+statements for fiscal year 2000, and was the engagement partner on PwC’s audits of 
+Take-Two’s financial statements starting in fiscal year 1994.  Fish signed PwC’s audit 
+report accompanying Take-Two’s fiscal year 2000 financial statements included in Take-
+Two’s 2000 Form 10-K filed with the Commission.  In performing the Take-Two audit 
+for fiscal year end 2000, Fish departed from Generally Accepted Auditing Standards 
+(“GAAS”).  Fish did not exercise due professional care and professional skepticism, and 
+failed to obtain sufficient competent evidential matter in his audit testing of Take-Two’s 
+accounts receivable balance as of October 31, 2000.  A material portion of those 
+receivables were part of Take-Two's fraudulent parking transactions, meaning they were 
+receivables for which Take-Two would never be paid because the product had not 
+actually been sold. 
+Additionally, Fish failed to exercise due professional care and professional 
+skepticism in testing Take-Two’s reserve accounting for video game returns.  Of the five 
+transactions Fish examined to test for possible cutoff errors and to ensure items had not 
+been shipped at year end (and subsequently returned) in order to increase fiscal year 2000 
+sales, four had product return rates of at least 75% when Take-Two’s historical reserve 
+for returns was only 5%. Fish failed to investigate these transactions and did not compare 
+   On June 1, 2005, the Commission authorized and simultaneously settled civil actions 
+in federal court against Take-Two and several present and former members of senior 
+management, obtaining injunctions, disgorgement, civil penalties, and officer and 
+director bars. SEC v. Take-Two Interactive Software, Inc., et al., Civil Action No. 1:05-
+CV-5443 (DLC) (S.D.N.Y. June 9, 2005), Litigation Release No. 19260. The 
+Commission also authorized, and simultaneously settled, an administrative cease-and-
+desist proceeding against one officer and a Rule 102(e)(3) administrative proceeding 
+against the former Chief Financial Officer.  In the Matter of Robert M. Blau, Securities 
+Act of 1933 Release No. 8581, Securities Exchange Act of 1934 (“Exchange Act”) 
+Release No. 51809, Litigation Release No. 19260 (June 9, 2005).  In the Matter of James 
+H. David, Jr., CPA, Exchange Act Release No. 51895, Accounting and Auditing 
+Enforcement Release No. 2262 (June 21, 2005). 
+3
+
+the returns to the original sales invoices.  Had he done so, he would have discovered that 
+Take-Two had not set aside sufficient reserves to account for expected returns. 
+Fish reasonably should have known that Take Two’s fiscal year 2000 financial 
+statements had not been prepared in conformity with GAAP.  He nonetheless signed an 
+audit report on Take-Two’s fiscal year 2000 financial statements containing an 
+unqualified audit opinion that Take-Two’s financial statements were fairly presented in 
+all material respects in conformity with GAAP, based on PwC’s audit in accordance with 
+GAAS. Fish did not comply with GAAS in the conduct of the audit and engaged in 
+improper professional conduct under Rule 102(e)(1)(ii) of the Commission’s Rules of 
+Practice. 
+D. FACTS 
+1. Take-Two fraudulently inflated its revenues and after-tax earnings in its 
+fiscal year 2000 financial statements.  Take-Two arranged with several distributors to 
+ship several hundred thousand computer and video game units at or near the end of a 
+fiscal quarter or the fiscal year and have the distributors park the video games with no 
+intention to sell them.  Take-Two then improperly recorded these shipments as sales 
+revenue and accounts receivable with the understanding that all or substantially all of the 
+same games shipped would be returned in the next fiscal reporting period.  As part of the 
+fraudulent scheme, Take-Two shipped, and took back, games that were often outdated 
+and that typically would not have been purchased by distributors in the quantities shipped 
+in the normal course of business. 
+2. This fraudulent scheme enabled the Company to recognize approximately 
+$26 million in revenues during fiscal year 2000 from products it shipped but never 
+actually sold. The scheme also enabled the Company to report after-tax fiscal year 2000 
+earnings that were inflated by at least $5 million, or 19%.  
+3. Take-Two also failed to maintain adequate reserves for video game 
+returns.  This allowed Take-Two to artificially inflate its reported assets and net income. 
+4. Take-Two restated its financial statements for fiscal year 2000 in February 
+2002 and again in February 2004 to correct for, among other things, the fraudulent 
+revenue recognition associated with the Company’s numerous parking transactions.  The 
+February 2004 restatement also corrected for the Company’s improper reserve 
+accounting. 
+5. Fish, who first became PwC’s engagement partner for Take-Two’s audit 
+in 1994, served as the engagement partner on the audit of Take-Two’s financial 
+statements for fiscal year 2000.  On December 13, 2000, Fish signed the PwC audit report 
+containing an unqualified audit opinion accompanying Take-Two’s fiscal year 2000 
+financial statements included in Take-Two’s 2000 Form 10-K filed with the Commission.   
+4
+
+6. In planning for the audit of Take-Two’s fiscal year 2000 financial 
+statements, Fish appropriately identified risks presented by the audit and planned the 
+conduct of the audit to address them.  In fact, the plan referred specifically to revenue 
+recognition and accounts receivable reserves as “areas of higher risk which will be given 
+special attention.” However, Fish did not properly respond to those risks in his audit 
+testing as he failed to exercise due professional care and professional skepticism, and 
+failed to obtain sufficient competent evidential matter. As a result, Fish improperly 
+represented in the audit report that he had conducted the audit in accordance with GAAS 
+and opined that the Take-Two financial statements were fairly presented in all material 
+respects in conformity with GAAP. 
+7. In the course of the fiscal year 2000 audit, Fish failed to exercise due 
+professional care and failed to obtain sufficient competent evidential matter in his effort 
+to verify the existence of Take-Two’s accounts receivable balance, the Company’s single 
+most important asset, as of October 31, 2000. Take-Two reported total gross domestic 
+accounts receivable of $104 million as of October 31, 2000.  Attempting to verify the 
+existence of the accounts receivable, PwC, under Fish’s supervision, sent requests for 
+confirmation of October 31, 2000 accounts receivable balances to 15 of the Company’s 
+customers, who owed approximately 70% of the total domestic accounts receivable 
+balance as of October 31, 2000. In response to the 15 confirmation requests sent, PwC 
+received only one confirmation (which turned out to be false) representing $2 million – 
+less than 2% of the total domestic accounts receivable balance. 
+8. One of the 14 customers PwC did not receive a confirmation response 
+from was Capitol Distributing L.L.C. (“Capitol”), a new customer at the time, with a 
+balance of $5.4 million resulting from two sales on October 31, 2000.  The Capitol 
+“sales” were parking transactions Take-Two arranged that shipped on the last day of its 
+fiscal year,5 and were the largest of several such transactions entered into by Take-Two in 
+the fourth quarter of fiscal year 2000 in connection with a fraudulent revenue recognition 
+scheme.  Making no attempt to sell the games, Capitol returned all of them after the end 
+of Take-Two’s fiscal year 2000 using fraudulent “assorted product” invoices to disguise 
+the return as a purchase of new product from Capitol by Take-Two.6 
+5   Take-Two itself provided the cash for Capitol’s alleged “purchases.” 
+6   Capitol is a privately-owned video game distributor organized as a limited liability 
+company under the laws of the Commonwealth of Virginia.  On May 2, 2007, the 
+Commission issued an Order Instituting Cease-and-Desist Proceedings, Making Findings, 
+and Imposing a Cease-and-Desist Order Pursuant to Section 21C of the Securities 
+Exchange Act of 1934 in the matter of Terry M. Phillips (“Phillips”), owner/operator of 
+Capitol, and simultaneously filed a complaint for a civil penalty against Phillips and 
+injunction against Capitol. In the Matter of Terry M. Phillips, Exchange Act Release No. 
+55696. SEC v. Capitol Distributing, L.L.C. et al., Civil Action No. 1:07-CV-00798 
+(RMC) (D.D.C. May 2, 2007), Litigation Release No. 20100. 
+5
+
+9. Another confirmation response that was not received was from a Canadian 
+distributor with whom Take-Two had a parking arrangement.  Included in the October 
+31, 2000 accounts receivable balance was a $1.7 million parking transaction sale of 
+product that shipped on October 31, 2000, the last day of Take-Two’s fiscal year and the 
+same day that the $5.4 million of sales were improperly recorded from the Capitol 
+parking transactions. A third confirmation response that was not received was from a 
+Texas-based distributor with whom Take-Two also parked video games.  Included in the 
+October 31, 2000 balance was a $1 million parking transaction sale of product with this 
+distributor on the last day of the fiscal year. 
+10. In response to the lack of confirmation responses Fish, who had identified 
+accounts receivable as a higher risk audit area for Take-Two, reviewed the subsequent 
+cash receipts as an alternative audit procedure (in addition to examining sales invoices 
+and third party shipping documents) to verify the existence of accounts receivable.  
+However, Take-Two’s cash receipts journal showed only $16 million had been collected 
+as of December 8, 2000. Combined with the amount of the one confirmation response 
+received, Fish verified the existence of only $18 million, or 17% of the domestic accounts 
+receivable total of $104 million.  Fish’s alternative audit procedures were insufficient 
+under GAAS to verify the existence of Take-Two’s accounts receivable. 
+11. Fish knew, or should have known, that Take-Two’s records showed, in 
+numerous instances, only aggregate cash collected after October 31, 2000.  As a result, 
+Fish knew, or should have known, that he could not be certain whether the cash he 
+examined from November 1 through December 8, 2000 related to the accounts receivable 
+balances that existed as of October 31, 2000, or to sales that were recorded after that date.  
+For example, if the cash received related to sales recorded after October 31, 2000 only, 
+then the testing would only have verified fiscal year 2001 sales, and not fiscal year 2000, 
+which was the year under audit. Likewise, because Fish could not reliably match cash 
+received to specific invoices, he could not determine with any degree of certainty whether 
+any of the cash collected had been applied to accounts that were past due, including by as 
+much as 180 days or more, as of October 31, 2000.  Fish, therefore, could not determine 
+with any degree of certainty whether any of these past due accounts were collectible.  The 
+fact that Take-Two’s records often showed only aggregate cash collected was a red flag 
+to Fish that any subsequent cash receipts testing relying on this data would prove 
+ineffective. However, Fish nonetheless relied on insufficient information from Take-Two 
+and conducted a test that he knew, or should have known, could not verify the existence 
+of Take-Two’s accounts receivable or reduce the identified audit risk to an acceptably 
+low level as GAAS requires. Fish’s auditing methodology, therefore, was not in 
+accordance with GAAS. 
+12. Fish also failed to exercise due professional care and professional 
+skepticism in testing the adequacy of Take-Two’s estimated sales returns reserve at 
+October 31, 2000 as required by GAAS. Take-Two accounted for shipments as sales 
+even though its practice was to accept returns of certain games it had sold.  While 
+recording these sales was appropriate in certain circumstances, the Company was 
+6
+
+required under GAAP to estimate and record sufficient reserves to account for these 
+returns. 
+13. As of October 31, 2000, Take-Two reserved for returns at the rate of 
+approximately 5% for the year.  During Take-Two’s fiscal year end 2000 audit, Fish and 
+others at PwC at his direction performed certain analytical procedures on historical sales 
+returns and examined five specific returns made after year end to test for possible cutoff 
+errors and to ensure items had not been shipped at year end (and subsequently returned) 
+in order to increase fiscal year 2000 sales. Of the five specific returns tested, Fish did not 
+compare the returns with the original sales invoices.  Had he done so, he would have 
+discovered that in four of the five instances, more than 75% of the games purportedly 
+purchased had been returned, an amount much greater than the historical return rate, 
+when Take-Two only reserved for returns at the rate of 5%.  Fish determined, 
+nonetheless, that Take-Two’s reserves were adequate without, for example, examining 
+other returns from fiscal year 2000, or inquiring of the customers regarding these 
+particular sales. In actuality, the four “sales” with abnormally high return rates were 
+parking transactions.  Fish’s auditing methodology, therefore, was not in accordance with 
+GAAS. 
+E. LEGAL ANALYSIS 
+Rule 102(e)(1)(ii) of the Commission’s Rules of Practice provides that the 
+Commission may censure or deny, temporarily or permanently, the privilege of appearing 
+or practicing before the Commission to any person who is found by the Commission to 
+have engaged in improper professional conduct.  Rule 102(e)(1)(iv), in relevant part, 
+defines improper professional conduct with respect to persons licensed to practice as 
+accountants as “ . . . (B) Either of the following two types of negligent conduct:  (1) A 
+single instance of highly unreasonable conduct that results in a violation of applicable 
+professional standards in circumstances in which the . . . associated person knows, or 
+should know, that heightened scrutiny is warranted; or (2) Repeated instances of 
+unreasonable conduct, each resulting in a violation of applicable professional standards, 
+that indicate a lack of competence to practice before the Commission.”  An accountant’s 
+conduct is highly unreasonable when the accountant fails to employ heightened scrutiny 
+with regard to matters that are important or material, or when warning signs or other 
+factors should alert an accountant to a heightened risk.  See, e.g., James Thomas 
+McCurdy, Exchange Act Rel. No. 34-49182 (Feb. 4, 2004), 82 SEC Docket 271, 286, 
+aff’d, McCurdy v. SEC, 396 F.3d 1258 (D.C. Cir. 2005). 
+Fish’s performance on Take-Two’s fiscal year end 2000 audit constituted 
+improper professional conduct under each standard of negligent conduct. 
+The Applicable GAAS Standards 
+The Commission’s rules require that auditors of public company financial 
+statements adhere to GAAS, which requires that auditors exercise due professional care 
+in performing an audit or review and in preparing the audit report.  AU § 230.01. Under 
+7
+
+AU § 230.04, “due professional care concerns what the independent auditor does and 
+how well he does it.” Due professional care requires further that the auditor exercise 
+professional skepticism in performing audit and review procedures and gathering and 
+analyzing audit evidence. AU §§ 230.07-.08. “Gathering and objectively evaluating 
+audit evidence requires the auditor to consider the competency and sufficiency of the 
+evidence.” AU § 230.08. Furthermore, in “exercising professional skepticism, the 
+auditor should not be satisfied with less than persuasive evidence because of a belief that 
+management is honest.”  AU § 230.09. 
+GAAS also requires auditors to obtain sufficient competent evidential matter 
+when conducting audits, and that such evidential matter be obtained through inspection, 
+observation, inquiries, and confirmations to afford a reasonable basis for an opinion 
+regarding the financial statements under audit.  AU § 326.01. In addition, the auditor 
+should recognize “the possibility that the financial statements may not be fairly presented 
+in conformity with generally accepted accounting principles” and should “consider 
+relevant evidential matter regardless of whether it appears to corroborate or contradict the 
+assertions in the financial statements.” AU § 326.25. For information obtained through 
+the confirmation process to be competent, it must be reliable and relevant.  AU § 330.11. 
+When obtaining evidence for assertions not adequately addressed by confirmations, an 
+auditor should consider other audit procedures to complement confirmation procedures or 
+to be used instead of confirmation procedures.  AU § 330.12. 
+When the auditor has not received replies to positive confirmation requests, he or 
+she should apply alternative procedures to the nonresponses to obtain the evidence 
+necessary to reduce audit risk to an acceptably low level.  AU § 330.31. When 
+examining accounts receivable, “alternative procedures may include examination of 
+subsequent cash receipts (including matching such receipts with the actual items being 
+paid), shipping documents or other client documentation to provide evidence for the 
+existence assertion.” AU § 330.32. Finally, after any alternative procedures have been 
+performed, the auditor should evaluate the combined evidence provided by the 
+confirmations and alternative procedures, considering in particular “the nature of any 
+exceptions, including the implications, both quantitative and qualitative, of those 
+exceptions . . . .” AU § 330.33. 
+Fish Engaged in Improper Professional Conduct by Failing to Exercise Due 
+Professional Care and Professional Skepticism, and Failed to Obtain Sufficient 
+Competent Evidential Matter as Required by GAAS 
+Fish departed from GAAS in his auditing of Take-Two’s accounts receivable, 
+which was Take-Two’s single most important asset.  As previously discussed, Fish sent 
+out 15 requests for confirmation to test a reported $104 million in domestic Company 
+receivables as of October 31, 2000. In response to the 15 requests for confirmation sent, 
+only one confirmation was returned for $2 million – less than 2% of the total domestic 
+accounts receivable balance, which was a red flag to Fish that he should have 
+investigated further. Among the 14 confirmations outstanding were three that included 
+parking transaction sales worth over $8 million that shipped on October 31, the last day 
+8
+
+of the fiscal year. In response to the lack of confirmations, Fish employed a subsequent 
+cash receipts testing methodology that was not in accordance with GAAS because he 
+knew, or should have known, that Take-Two had no way of reliably applying cash 
+receipts to specific invoices.  Fish failed to exercise due professional care because the 
+alternative procedures employed were insufficient to reduce audit risk to an acceptably 
+low level as GAAS requires. AU §§ 230.01, 330.31. Fish also failed to obtain sufficient 
+competent evidential matter regarding Take-Two’s accounts receivable and relied on 
+alternative audit procedures that could not effectively verify the Company’s accounts 
+receivable balance. AU §§ 326.01, 330.12, 330.31 and 330.32. Fish’s departures from 
+GAAS constituted improper professional conduct. 
+In conducting his fiscal year end 2000 audit, Fish failed to exercise due 
+professional care and professional skepticism by failing to respond appropriately to the 
+fact that Take-Two accepted returns at a rate exceeding 75%, far in excess of the 
+Company’s reserves for a 5% rate of return.  Although Fish and others at PwC at his 
+direction performed certain analytical procedures on historical sales returns and examined 
+five specific returns made after year end, Fish did not compare the returns to the original 
+sales invoices. Had he done so, he would have discovered that in four of the five 
+instances, more than 75% of the games purportedly purchased had been returned when 
+Take-Two only reserved for returns at the rate of 5%. Fish’s conduct constituted 
+improper professional conduct. 
+By departing from GAAS in his testing of Take-Two’s accounts receivable and 
+reserve accounting for returns, Fish engaged in improper professional conduct.   
+Failure to Render an Accurate Audit Report 
+In conducting an audit, an auditor is required to state in the auditor’s report 
+whether, in the auditor’s opinion, the financial statements are fairly presented in all 
+material respects in conformity with GAAP.  AU §§ 410 and 411. An auditor may 
+express that the financial statements are presented in conformity with GAAP only when 
+the auditor has formed such an opinion on the basis of an audit performed in accordance 
+with GAAS.  AU § 508.07. 
+Based on the foregoing, in connection with the audit of Take-Two’s fiscal year 
+2000 financial statements, Fish failed to render an accurate audit report when he opined 
+that Take-Two’s financial statements had been prepared in conformity with GAAP and 
+the audit had been performed in accordance with GAAS.  In fact, the financial statements 
+were not in conformity with GAAP, and the audit was not performed in accordance with 
+GAAS. 
+F. FINDINGS 
+Based on the foregoing, the Commission finds that Respondent engaged in 
+improper professional conduct (as set forth under Rules 102(e)(1)(iv)(B)(1) and (2) of the 
+9
+
+Commission’s Rules of Practice) pursuant to Rule 102(e)(1)(ii) of the Commission’s 
+Rules of Practice.  
+IV. 
+In view of the foregoing, the Commission deems it appropriate to impose the 
+sanctions agreed to in Respondent's Offer. 
+Accordingly, it is hereby ORDERED that, effective immediately: 
+A. Respondent is denied the privilege of appearing or practicing before the 
+Commission as an accountant.   
+B. After one year from the date of this order, Respondent may request that 
+the Commission consider his reinstatement by submitting an application (attention: 
+Office of the Chief Accountant) to resume appearing or practicing before the 
+Commission as: 
+1. a preparer or reviewer, or a person responsible for the 
+preparation or review, of any public company’s financial statements that are filed with 
+the Commission.  Such an application must satisfy the Commission that Respondent’s 
+work in his practice before the Commission will be reviewed either by the independent 
+audit committee of the public company for which he works or in some other 
+acceptable manner, as long as he practices before the Commission in this capacity; 
+and/or 
+2. an independent accountant. Such an application must satisfy 
+the Commission that: 
+(a) Respondent, or the public accounting firm with which he is 
+associated, is registered with the Public Company Accounting Oversight Board (“Board”) 
+in accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be 
+effective; 
+(b) Respondent, or the registered public accounting firm with 
+which he is associated, has been inspected by the Board and that inspection did not 
+identify any criticisms of or potential defects in the Respondent’s or the firm’s quality 
+control system that would indicate that the Respondent will not receive appropriate 
+supervision; 
+(c) Respondent has resolved all disciplinary issues with the 
+Board, and has complied with all terms and conditions of any sanctions imposed by the 
+Board (other than reinstatement by the Commission); and 
+(d) Respondent acknowledges his responsibility, as long as 
+Respondent appears or practices before the Commission as an independent accountant, to 
+comply with all requirements of the Commission and the Board, including, but not 
+10
+
+limited to, all requirements relating to registration, inspections, concurring partner 
+reviews and quality control standards. 
+C. The Commission will consider an application by Respondent to resume 
+appearing or practicing before the Commission provided that his state CPA license is 
+current and he has resolved all other disciplinary issues with the applicable state boards 
+of accountancy. However, if state licensure is dependent on reinstatement by the 
+Commission, the Commission will consider an application on its other merits.   
+The Commission’s review may include consideration of, in addition to the matters 
+referenced above, any other matters relating to Respondent’s character, integrity, 
+professional conduct, or qualifications to appear or practice before the Commission. 
+By the Commission. 
+        N ancy M. Morris
+        S ecretary 
+11

raw/aaer/2008/AAER-2814.txt

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+UNITED STATES OF AMERICA  
+Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No. 57224 / April 28, 2008 
+ACCOUNTING AND AUDITING ENFORCEMENT  
+Release No. 2814 / April 28, 2008 
+ADMINISTRATIVE PROCEEDING  
+File No. 3-8967 
+: ORDER GRANTING APPLICATION FOR 
+: REINSTATEMENT TO APPEAR AND PRACTICEIn the Matter of : BEFORE THE COMMISSION AS AN ACCOUNTANT 
+: RESPONSIBLE FOR THE PREPARATION OR Calvin Kirk French, CPA : REVIEW OF FINANCIAL STATEMENTS REQUIRED 
+: TO BE FILED WITH THE COMMISSION 
+On March 5, 1996, Calvin Kirk French, CPA (“French”) 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 him pursuant to Rule 102(e) of 
+the Commission's Rules of Practice.1  French consented to the entry of the order without 
+admitting or denying the findings therein.  This order is issued in response to French’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. 
+During 1989 and 1990 Chambers Development Company, Inc. (“Chambers”) understated 
+its expenses and overstated its earnings by engaging in certain fraudulent capitalization practices 
+in violation of GAAP. French served as the audit manager and engagement administrator for 
+audit of Chambers’s 1989 financial statements by Grant Thornton LLP.  He served as the senior 
+manager for the audit of Chambers’s 1990 financial statements.  With respect to these audits, the 
+Commission found that French engaged in improper professional conduct within the meaning of 
+Rule 102(e) by failing to conduct them in accordance with GAAS.  French failed to obtain 
+sufficient competent evidential matter to afford a reasonable basis for Grant Thornton’s opinion 
+on Chambers’s financial statements, failed to assess properly whether the company’s financial 
+statements were fairly presented in accordance with GAAP, and failed to exercise due 
+professional care in the performance of the audit. 
+1 See Accounting and Auditing Enforcement Release No. 767 dated March 5, 1996.  French was permitted, pursuant 
+to the order, to apply for reinstatement after 18 months upon making certain showings. 
+In his capacity as a preparer or reviewer, or as a person responsible for the preparation or 
+review, of financial statements of a public company to be filed with the Commission, French 
+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. French 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 order in this regard.  Therefore, the denial of French’s 
+privilege of appearing and practicing 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 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 French, it appears that he has complied with the terms of the March 5, 1996 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 French, 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 
+Calvin Kirk French, CPA is hereby reinstated to appear and practice before the Commission as 
+an accountant responsible for the preparation or review of financial statements required to be 
+filed with the Commission. 
+By the Commission. 
+Nancy M. Morris 
+Secretary 
+3

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+              Urs Kamber, Stephan Husi and Richard Jon May
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+        Urs Kamber, Stephan Husi and Richard Jon May
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+                   U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 20605 / May 30, 2008 
+
+ Accounting and Auditing Enforcement Release No. 2835 / May 30, 2008 
+
+  SEC v. Urs Kamber, Stephan Husi and Richard Jon May , Civil Action No. 1:07-CV-01867 (JDB) (D.D.C.) 
+
+ Former Centerpulse Chief Financial Officer Settles Fraud Charges With SEC 
+
+ On May 30, 2008, the Securities and Exchange Commission announced that Urs Kamber, the former Chief Financial Officer of Centerpulse Ltd., agreed to settle the Commission's charges against him arising from his alleged involvement in the fraudulent inflation of Centerpulse's income during the third and fourth quarters of 2002. Without admitting or denying the Commission's allegations against him, Kamber has consented to the entry of a final judgment in the Commission's litigation pending in the U.S. District Court for the District of Columbia. The final judgment, which is subject to approval by the Honorable John D. Bates, orders Kamber to pay a $50,000 civil penalty, $65,013 in disgorgement, and $22,824 in prejudgment interest. The final judgment also bars Kamber for five years from acting as an officer or director of any public company that has securities registered with, or is required to file reports with, the Commission, and permanently enjoins him from violating the antifraud, falsification of books and records, and annual certification provisions of the federal securities laws â€" Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act), and Exchange Act Rules 10b-5, 13a-14 and 13b2-1 â€" and from aiding and abetting violations of the reporting, books and records and internal controls provisions of the federal securities laws â€" Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Exchange Act Rules 12b-20, 13a-1 and 13a-16. 
+
+ As part of this settlement, and following the entry of the proposed final judgment against him, Kamber (who is a Chartered Accountant in Switzerland) has consented, without admitting or denying the Commission's allegations against him, to the issuance of an administrative order pursuant to Rule 102(e) of the Commission's Rules of Practice, suspending him from appearing or practicing before the Commission as an accountant, with the right to apply for reinstatement after five years. 
+
+ The Commission's complaint alleges that Kamber, along with two other former Centerpulse executives, (1) fraudulently inflated Centerpulse's third quarter 2002 income by improperly deferring recognition of a $25 million expense, refusing to write down $3.4 million in costs associated with an impaired asset, and approving $3.6 million in improper reserve adjustments; and (2) fraudulently inflated Centerpulse's fourth quarter and fiscal 2002 income by refusing to increase a reserve to cover at least $18 million in liabilities, improperly using anticipated refund credits to offset another $5 million in expenses, and again refusing to write down $3.4 million in costs associated with an impaired asset. 
+
+ In related administrative proceedings, Dennis L. Hynson, CPA, Christopher W. Kelford and Paula J. Norbom, CPA, the former vice presidents of finance for Centerpulse's three U.S. divisions, have consented to the entry of cease-and-desist orders relating to improper accounting decisions they made during the third quarter of 2002.  See  Administrative Proceeding No. 3-13047 / Accounting and Auditing Enforcement Release No. 2832 / Release No.  57889  (May 30, 2008); Administrative Proceeding No. 3-13048 / Accounting and Auditing Enforcement Release No. 2833 / Release No.  57890  (May 30, 2008); and Administrative Proceeding No. 3-13049 / Accounting and Auditing Enforcement Release No. 2834 / Release No.  57891  (May 30, 2008). 
+
+ The Commission's litigation against former Centerpulse Controller Stephan Husi and the former group vice president of finance, tax counsel and treasurer of Centerpulse USA Holding, Richard May, is ongoing.  See  Litigation Release No.  20336  (October 17, 2007) / Accounting and Auditing Enforcement Release No.  2741  (October 17, 2007). 
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raw/aaer/2008/AAER-2842.txt

@@ -0,0 +1,83 @@
+UNITED STATES OF AMERICA  
+Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No. 58023 / June 25, 2008 
+ACCOUNTING AND AUDITING ENFORCEMENT  
+Release No. 2842 / June 25, 2008 
+ADMINISTRATIVE PROCEEDING  
+File No. 3-12065 
+: 
+In the Matter of 
+William E. Caswell, CPA  
+: 
+: 
+: 
+: 
+ORDER GRANTING APPLICATION FOR 
+REINSTATEMENT TO APPEAR AND PRACTICE 
+BEFORE THE COMMISSION AS AN ACCOUNTANT 
+: 
+On September 30, 2005, William E. Caswell (“Caswell”) 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 Caswell pursuant to Rule 
+102(e) of the Commission's Rules of Practice.1  Caswell consented to the entry of the September 
+30, 2005 order without admitting or denying the findings therein.  This order is issued in 
+response to Caswell’s application for reinstatement to practice before the Commission as an 
+accountant. 
+Caswell was found to have engaged in improper professional conduct with respect to the 
+audits of Adelphia Communications Corporation’s (“Adelphia”) financial statements for the year 
+ended December 31, 2000 by Deloitte & Touche LLP (“Deloitte”).  During this time Caswell 
+served as a director and held the most senior, non-partner position on Deloitte’s Adelphia 
+engagement.  The Commission found that Adelphia’s 2000 financial statements were materially 
+false and misleading and failed to comply with Generally Accepted Accounting Principles 
+(“GAAP”). In its Form 10-K for the year ended December 31, 2000, Adelphia understated its 
+co-borrowing debt by $1.6 billion and improperly netted related party receivables and payables 
+between Adelphia and certain entities owned or controlled by Adelphia’s controlling 
+shareholders. Adelphia also failed to disclose the nature and extent of thousands of related party 
+transactions between Adelphia and these shareholders.  Caswell reasonably should have known 
+that Adelphia’s 2000 financial statements had not been prepared in conformity with GAAP.  He 
+1 See Accounting and Auditing Enforcement Release No. 2326 dated September 30, 2005.  Caswell was permitted, 
+pursuant to the order, to apply for reinstatement after two years upon making certain showings. 
+nonetheless failed to object to the issuance by Deloitte of its audit report containing an 
+unqualified opinion. Caswell also failed to comply with Generally Accepted Auditing Standards 
+during the audit of Adelphia’s 2000 Financial Statements and engaged in improper professional 
+conduct within the meaning of Rule 102(e)(1)(ii) of the Commission’s Rules of Practice. 
+Caswell has met all of the conditions set forth in the original 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, Caswell 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 Caswell, it appears that he has complied with the terms of the September 30, 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 Caswell, 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 Caswell, 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 
+William E. Caswell, CPA is hereby reinstated to appear and practice before the Commission as 
+an accountant. 
+By the Commission. 
+Florence E. Harmon  
+Acting Secretary 

raw/aaer/2008/AAER-2867.txt

@@ -0,0 +1,194 @@
+         
+____________________________________ 
+UNITED STATES OF AMERICA 
+Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 58433 / August 27, 2008 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 2867 / August 27, 2008 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-13148 
+: 
+In the Matter of : ORDER INSTITUTING CEASE-AND- 
+: DESIST PROCEEDINGS PURSUANT 
+CON-WAY INC. : TO SECTION 21C OF THE 
+: SECURITIES EXCHANGE ACT OF 
+: 1934, MAKING FINDINGS, AND 
+: IMPOSING A CEASE-AND-DESIST 
+Respondent. : ORDER 
+: 
+____________________________________: 
+I. 
+The Securities and Exchange Commission (“Commission”) deems it appropriate and in 
+the public interest that cease-and-desist proceedings be, and hereby are, instituted pursuant to 
+Section 21C of the Securities Exchange Act of 1934 (“Exchange Act”) against Con-way Inc. 
+(“Respondent” or “Con-way”). 
+II. 
+In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
+of Settlement (the “Offer”) that the Commission has determined to accept.  Solely for the 
+purpose of these proceedings and any other proceedings brought by or on behalf of the 
+Commission, or to which the Commission is a party, and without admitting or denying the 
+findings herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
+proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 
+Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, 
+Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below.1 
+III. 
+On the basis of this Order and Respondent’s Offer, the Commission finds2 that: 
+Summary 
+1. This matter involves Con-way’s violations of the books and records, and internal 
+controls provisions of the Foreign Corrupt Practices Act (“FCPA”) through a Philippine-based 
+firm, Emery Transnational.  From 2000 to 2003, Emery Transnational made hundreds of small 
+payments totaling at least $417,000 to Philippine customs officials and to officials of numerous 
+majority foreign state-owned airlines.  These payments were made with the purpose and effect of 
+improperly influencing these foreign officials to assist Emery Transnational to obtain or retain 
+business. In connection with these improper payments, Con-way failed to accurately record 
+these payments on the company’s books and records, and knowingly failed to implement or 
+maintain a system of effective internal accounting controls. 
+Respondent 
+2. Con-way is a Delaware corporation headquartered in San Mateo, California.  
+Con-way is an international freight transportation and logistics services company that conducts 
+operations in a number of foreign jurisdictions.  During the relevant period, the company was 
+named CNF, Inc.  The company changed its name to Con-way in April 2006.  Con-way’s 
+common stock is registered with the Commission pursuant to Section 12(b) of the Exchange Act 
+and is listed on the New York Stock Exchange. 
+Other Relevant Entities 
+3. Menlo Worldwide Forwarding, Inc. (“Menlo Forwarding”)3 was a wholly-owned 
+U.S-based subsidiary of Con-way that Con-way purchased in 1989.  During the relevant period, 
+Menlo Forwarding was headquartered in Redwood City, California and had a 55% voting 
+interest in Emery Transnational.  Con-way sold Menlo Forwarding to United Parcel Service of 
+America, Inc. (“UPS”) in December 2004. 
+1 The Commission has contemporaneously filed a complaint in the United States District Court for the 
+District of Columbia against Con-way alleging violations of Section 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the 
+Exchange Act and seeking a civil penalty. Without admitting or denying the Commission’s allegations, Con-way 
+has consented to the entry of a final judgment by the Court that requires the company to pay a $300,000 civil penalty.  
+See SEC v. Con-way Inc., No. 1:08-cv-01478 (Aug. 27, 2008) (D.D.C). 
+2 The findings herein are made pursuant to Respondent’s Offer and are not binding on any other person or 
+entity in this or any other proceeding. 
+3 During the relevant period, Menlo Forwarding was named Emery Air Freight Corporation. 
+2 
+
+4. Emery Transnational was a Manila, Philippines-based firm engaged in shipping 
+and freight operations within the Philippines.  Emery Transnational was also sold to UPS in 
+December 2004. 
+Facts 
+A. Lack of Oversight Over Emery Transnational 
+5. During the relevant period, Con-way and Menlo Forwarding engaged in little 
+supervision or oversight over Emery Transnational.  Neither Con-way nor Menlo Forwarding 
+took steps to devise or maintain internal accounting controls concerning Emery Transnational, to 
+ensure that it acted in accordance with Con-way’s FCPA policies, or to make certain that its 
+books and records were detailed or accurate. 
+6. During the relevant period, Con-way and Menlo Forwarding required only that 
+Emery Transnational periodically report back to Menlo Forwarding its net profits, from which 
+Emery Transnational then paid Menlo Forwarding a yearly 55% dividend.  Menlo Forwarding 
+incorporated the yearly 55% dividend into its financial results, which were then consolidated in 
+Con-way’s financial statements.  Neither Con-way nor Menlo Forwarding asked for or received 
+any other financial information from Emery Transnational.  Accordingly, neither Con-way nor 
+Menlo Forwarding maintained or reviewed any of the books and records of Emery Transnational 
+– including the records of operating expenses, which should have reflected the illicit payments 
+made to foreign officials. 
+B. Payments to Philippine Customs Officials 
+7. Emery Transnational made hundreds of small payments to foreign officials at the 
+Philippines Bureau of Customs and the Philippine Economic Zone Area between 2000 and 2003 
+in order to obtain or retain business. These payments were made to influence the acts and 
+decisions of these foreign officials and to secure a business advantage or economic benefit.  By 
+these payments, foreign officials were induced to: (i) violate customs regulations by allowing 
+Emery Transnational to store shipments longer than otherwise permitted, thus saving the 
+company transportation costs related to its inbound shipments; and (ii) improperly settle Emery 
+Transnational’s disputes with the Philippines Bureau of Customs, or to reduce or not enforce 
+otherwise legitimate fines for administrative violations. 
+8. To generate funding for these payments, Emery Transnational employees 
+submitted a Shipment Processing and Clearance Expense Report (“SPACER”) to Emery 
+Transnational’s finance department.  These SPACER reports requested cash advances to 
+complete customs processing.  The cash advances were then issued via checks made payable to 
+Emery Transnational employees, who cashed the checks and paid the money to designated 
+foreign officials. Unlike legitimate customs payments, the payments at issue were not supported 
+by receipts from the Philippines Bureau of Customs and the Philippine Economic Zone Area.  
+Emery Transnational did not identify the true nature of these payments in its books and records.  
+During the period 2000 to 2003, these payments total at least $244,000. 
+3 
+
+C. Payments to Officials of Majority State-Owned Airlines 
+9. Emery Transnational, in order to obtain or retain business, also made numerous 
+payments to foreign officials at fourteen state-owned airlines that did business in the Philippines 
+between 2000 and 2003.4  These payments were made with the intent of improperly influencing 
+the acts and decisions of these foreign officials and to secure a business advantage or economic 
+benefit. Emery Transnational made two types of payments.  The first type were known as 
+“weight shipped” payments, which were made to induce airline officials to improperly reserve 
+space for Emery Transnational on the airplanes.  These payments were valued based on the 
+volume of the shipments the airlines carried for Emery Transnational.  The second type were 
+known as “gain shares” payments, which were paid to induce airline officials to falsely under-
+weigh shipments and to consolidate multiple shipments into a single shipment, resulting in lower 
+shipping charges. Emery Transnational paid the foreign officials 90% of the reduced shipping 
+costs. 
+10. Both types of payments to foreign airline officials were paid in cash by members 
+of Emery Transnational’s management team.  Checks reflecting the amount of the “weight 
+shipped” and “gain shares” payments were issued to these managers, who cashed the checks and 
+personally distributed the cash payments to the foreign airline officials.  Emery Transnational did 
+not characterize these payments in its books and records as bribes.  During the period 2000 to 
+2003, these payments totaled at least $173,000. Neither Con-way nor Menlo Forwarding 
+requested or received any records of these payments, or any of Emery Transnational’s expenses, 
+during this period. 
+D. Discovery of Improper Payments and Internal Investigation 
+11. Con-way discovered potential FCPA issues at Emery Transnational in early 2003.  
+Starting in January 2003, Menlo Forwarding initiated steps to increase Emery Transnational’s 
+internal reporting requirements, including requiring Emery Transnational to begin reporting its 
+income and expenses, in addition to its net profits.  As a result, in reviewing Emery 
+Transnational’s records, Menlo Forwarding employees noticed unusually high customs and 
+airline-related expenditures. 
+12. Menlo Forwarding conducted an internal investigation of the suspicious payments 
+at Emery Transnational and determined that Emery Transnational employees had been making 
+regular cash payments to customs officials and employees of majority state-owned airlines.  
+Based on Menlo Forwarding’s investigation, Con-way conducted a broader review of all of 
+Menlo Forwarding’s foreign businesses and voluntarily disclosed the existence of possible FCPA 
+violations to the staff. After completing its internal investigation, Con-way imposed heightened 
+financial reporting and compliance requirements on Emery Transnational.  Menlo Forwarding 
+Such payments were made to foreign officials at the following majority state-owned airlines:  Air France, 
+Alitalia (Italy), China Airlines, EgyptAir, Emirates (Dubai), Gulf Air (Bahrain, Abu Dhabi, Oman), Kuwait Airways, 
+Malaysian Airlines, Pakistan International Airlines, Royal Brunei Airlines, Saudi Arabian Airlines, SilkAir 
+(Singapore), Singapore Airlines, and Thai Airways International. 
+4 
+4 
+terminated a number of the Emery Transnational employees involved in the misconduct, and 
+Con-way provided additional FCPA training and education to its employees and strengthened its 
+regulatory compliance program. 
+Legal Analysis 
+13. The FCPA, enacted in 1977, added Exchange Act Section 13(b)(2)(A) to require 
+public companies to make and keep books, records and accounts, which, in reasonable detail, 
+accurately and fairly reflect the transactions and dispositions of the assets of the issuer, and 
+added Exchange Act Section 13(b)(2)(B) to require such companies to devise and maintain a 
+system of internal accounting controls sufficient to provide reasonable assurances that: (i) 
+transactions are executed in accordance with management’s general or specific authorization; 
+and (ii) transactions are recorded as necessary to permit preparation of financial statements in 
+conformity with generally accepted accounting principles or any other criteria applicable to such 
+statements, and to maintain accountability for assets.  15 U.S.C. §§ 78m(b)(2)(A) and 
+78m(b)(2)(B). 
+14. As detailed above, Con-way’s books, records, and accounts did not properly 
+reflect the illicit payments made by Emery Transnational to Philippine customs officials and to 
+officials of majority state-owned airlines.  As a result, Con-way violated Exchange Act Section 
+13(b)(2)(A). 
+15. Con-way also failed to devise or maintain sufficient internal controls to ensure 
+that Emery Transnational complied with the FCPA and to ensure that the payments it made to 
+foreign officials were accurately reflected on its books and records.  As a result, Con-way 
+violated Exchange Act Section 13(b)(2)(B). 
+16. Exchange Act Section 13(b)(5), 15 U.S.C. § 78m(b)(5), prohibits any person or 
+company from knowingly circumventing or knowingly failing to implement a system of internal 
+accounting controls as described in Section 13(b)(2)(B), or knowingly falsifying any book, 
+record, or account as described in Section 13(b)(2)(A). 
+17. By knowingly failing to implement a system of internal accounting controls 
+concerning Emery Transnational, Con-way also violated Exchange Act Section 13(b)(5). 
+Con-way’s Remedial Efforts 
+In determining to accept the Offer, the Commission considered the remedial acts 
+undertaken by Con-way and cooperation afforded the Commission staff. 
+5 
+
+IV. 
+On the basis of the foregoing, the Commission deems it appropriate to accept the 
+Respondent’s Offer. 
+Accordingly, pursuant to Section 21C of the Exchange Act, it is hereby ORDERED that 
+Con-way cease and desist from committing or causing any violations and any future violations of 
+Exchange Act Sections 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5). 
+By the Commission. 
+Florence E. Harmon 
+Acting Secretary 
+6 

raw/aaer/2008/AAER-2879.txt

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+                    CORRECTED  
+
+ U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 20717 / September 15, 2008 
+
+ Accounting and Auditing Enforcement Release No. 2879 / September 15, 2008 
+
+  Securities and Exchange Commission v. Bruce E. Karatz , United States District Court for the Central District of California, Civil Action No. CV 08-06012 AHM (FFMx) 
+
+ SEC Announces $7.2 Million Settlement With Former KB Home Chairman and CEO for Stock Option Backdating and Self-Dealing 
+
+ The Securities and Exchange Commission today filed settled civil fraud charges against Bruce E. Karatz, the former chairman and CEO of Los Angeles homebuilder KB Home, Inc., for his participation in a multi-year scheme to backdate stock options to himself and other KB Home officers and employees. 
+
+ The Commission's complaint, filed in federal court in Los Angeles, alleges that from at least 1999 through 2005, Karatz enriched himself and others at KB Home by using hindsight to pick advantageous grant dates for KB Home's annual stock option grants. On many occasions, the grant dates coincided with dates of low monthly closing prices for the company's common stock. In addition, the complaint alleges that Karatz continued to use hindsight for stock option grant dates even after the Sarbanes-Oxley Act of 2002 imposed stricter reporting requirements on officers of public companies. The complaint also alleges that, because of the backdating scheme, KB Home filed periodic reports and proxy statements with the SEC that inaccurately stated that KB Home granted options at fair-market-value on the date of the grant. Karatz received backdated annual stock option awards amounting to 2,860,000 shares of KB Home stock and profited more than $6 million from exercising many of these options. 
+
+ Karatz agreed to settle the Commission's charges without admitting or denying the allegations in the complaint. Under the settlement, Karatz consented to the entry of an order that (i) permanently enjoins him from future violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 14(a), and 16(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13a-14, 13b2-1, 14a-9, and 16a-3 thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder; (ii) requires him to pay $6,714,819.27 in disgorgement and interest and a civil penalty of $480,000; and (iii) bars him from serving as an officer or director of a public company for five years. The settlement is subject to approval by the court. 
+
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raw/aaer/2008/AAER-2892.txt

@@ -0,0 +1,113 @@
+UNITED STATES OF AMERICA 
+before the 
+SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 58672 / September 29, 2008 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 2892 / September 29, 2008 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-13248 
+: 
+: 
+: 
+In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+: PROCEEDINGS PURSUANT TO RULE 
+   KEVIN MORANO (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 Kevin 
+Morano (“Respondent” or “Morano”) pursuant to Rule 102(e)(3)(i) of the Commission’s Rules of 
+Practice.1 
+1 Rule 102(e)(3)(i) provides, in relevant part, that: 
+The Commission, with due regard to the public interest and without preliminary hearing, may, by order, . . . 
+suspend from appearing or practicing before it any . . . accountant . . . who has been by name . . . permanently 
+enjoined by any court of competent jurisdiction, by reason of his or her misconduct in an action brought by the 
+Commission, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of 
+the rules and regulations thereunder. 
+II. 
+In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
+of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
+purpose of these proceedings and any other proceedings brought by or on behalf of the 
+Commission, or to which the Commission is a party, and without admitting or denying the findings 
+herein, except as to the Commission’s jurisdiction over him and the subject matter of these 
+proceedings, and the findings contained in Section III.3 below, which are admitted, Respondent 
+consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) 
+of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions 
+(“Order”), as set forth below.   
+III. 
+On the basis of this Order and Respondent’s Offer, the Commission finds that: 
+1. Morano, age 55, is and has been a certified public accountant licensed to 
+practice in the State of New Jersey.  He served as Chief Financial Officer of Lumenis Ltd. 
+(“Lumenis”) from March 2002 until August 2004. 
+2. Lumenis was, at all relevant times, an Israeli corporation with corporate 
+executive offices in New York, New York.  Lumenis was engaged in the business of manufacturing 
+laser and light based systems for aesthetic, surgical and other applications.  At all relevant times, 
+Lumenis’ common stock was registered with the Commission pursuant to Section 12(g) of the 
+Securities Exchange Act of 1934 (“Exchange Act”) and traded on the NASDAQ National Market. 
+3. On September 9, 2008, a final consent judgment was entered against 
+Morano, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 
+1933 and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13a-14, 13b2-1 and 
+13b2-2 thereunder, and from aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A) 
+and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 
+thereunder, in the civil action entitled Securities and Exchange Commission v. Lumenis, Ltd., et 
+al., Civil Action Number 06 CV 3225 (LAK), in the United States District Court for the Southern 
+District of New York.  Morano also was ordered to pay a $55,000 civil money penalty.   
+4. The Commission’s complaint alleged, among other things, that Morano 
+permitted Lumenis to recognize revenue in a number of transactions despite red flag warnings that 
+should have prevented such recognition and, as a result, made materially false and misleading 
+statements in periodic reports filed with the Commission in 2002 and 2003, including by certifying 
+the accuracy of financial statements contained in those reports.  Morano neither admitted nor 
+denied the allegations of the complaint. 
+2
+
+IV. 
+In view of the foregoing, the Commission deems it appropriate and in the public interest to 
+impose the sanction agreed to in Respondent Morano’s Offer. 
+Accordingly, it is hereby ORDERED, effective immediately, that: 
+A. Respondent is suspended from appearing or practicing before the Commission as an 
+accountant.   
+B. After five years from the date of this Order, Respondent may request that the 
+Commission consider his reinstatement by submitting an application (attention: Office of the 
+Chief Accountant) to resume appearing or practicing before the Commission as: 
+1. a preparer or reviewer, or a person responsible for the preparation or 
+review, of any public company’s financial statements that are filed with the Commission.  Such 
+an application must satisfy the Commission that Respondent’s work in his practice before the 
+Commission will be reviewed either by the independent audit committee of the public company 
+for which he works or in some other acceptable manner, as long as he practices before the 
+Commission in this capacity; and/or 
+2. an independent accountant.  Such an application must satisfy the 
+Commission that: 
+(a) Respondent, or the public accounting firm with which he is 
+associated, is registered with the Public Company Accounting Oversight Board (“Board”) in 
+accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; 
+(b) Respondent, or the registered public accounting firm with which he 
+is associated, has been inspected by the Board and that inspection did not identify any criticisms 
+of or potential defects in the Respondent’s or the firm’s quality control system that would 
+indicate that the Respondent will not receive appropriate supervision;
+ (c) Respondent has resolved all disciplinary issues with the Board, and 
+has complied with all terms and conditions of any sanctions imposed by the Board (other than 
+reinstatement by the Commission); and 
+(d) Respondent acknowledges his responsibility, as long as 
+Respondent appears or practices before the Commission as an independent accountant, to 
+comply with all requirements of the Commission and the Board, including, but not limited to, all 
+requirements relating to registration, inspections, concurring partner reviews and quality control 
+standards. 
+C. The Commission will consider an application by Respondent to resume 
+appearing or practicing before the Commission provided that his state CPA license is 
+current and he has resolved all other disciplinary issues with the applicable state boards of 
+3
+
+accountancy. However, if state licensure is dependent on reinstatement by the 
+Commission, the Commission will consider an application on its other merits.  The 
+Commission’s review may include consideration of, in addition to the matters referenced 
+above, any other matters relating to Respondent’s character, integrity, professional conduct, 
+or qualifications to appear or practice before the Commission. 
+ By the Commission. 
+       F lorence E. Harmon
+       A cting Secretary 
+4

raw/aaer/2008/AAER-2898.txt

@@ -0,0 +1,1381 @@
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+                   U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 20803 / November 13, 2008 
+
+ Accounting and Auditing Enforcement Release No. 2898 / November 13, 2008  
+
+  Securities and Exchange Commission  v. Lawrence B. Evans et al.,  , Civil Action No. 07-CV-10027-JLT (D. Mass) (January 8, 2007) 
+
+ Former Aspen Technology, Inc. Chairman and CEO Settle SEC Charges For Their Roles in Corporate Accounting Fraud 
+
+ The Securities and Exchange Commission ("Commission") announced today that on November 12, 2008, the United States District Court for the District of Massachusetts entered final judgments by consent against former Aspen Technology, Inc. ("Aspen") founder and Chairman of the Board of Directors Lawrence B. Evans and former Chief Executive Officer David L. McQuillin in a case filed by the Commission in January 2007.  The Commission's action charged Evans and McQuillin with, among other things, securities fraud in connection with their participation in a revenue inflation scheme with another senior officer of Aspen, a Cambridge, Massachusetts software company.  Without admitting or denying the allegations in the Commission's complaint, McQuillin and Evans each consented to the entry of a final judgment enjoining them from violating the anti-fraud and other provisions of the securities laws.  McQuillin was also ordered to pay an $85,000 civil penalty, $28,381.61 in disgorgement and pre-judgment interest, and was barred from serving as an officer or director of any public company, and Evans was ordered to pay a $75,000 civil penalty and $21,478.01 in disgorgement and pre-judgment interest. 
+
+ According to the Commission's complaint, Evans and McQuillin, along with former Aspen Chief Financial Officer Lisa W. Zappala, caused Aspen to report inflated revenue in the company's publicly-filed financial statements and in press releases on at least six software transactions during fiscal years 1999 through 2002.  The Complaint alleged that the three defendants caused Aspen to recognize revenue during the relevant period despite knowing that Aspen was prohibited from doing so under Generally Accepted Accounting Principles because contracts were not signed within the appropriate quarter and/or the earnings process was incomplete due to contingency arrangements which changed the terms of the customers' payment commitments under the contracts.  The Complaint alleged that, as a result of the fraudulent scheme, Aspen overstated license revenue for its fiscal year ended June 30, 2000 by 5.5% and for the fiscal year ended June 30, 2001 by 9.3%.  The Complaint further alleged that, as a result of prematurely recognized revenue from those earlier periods, license revenue for the fiscal years ended June 30, 2002, 2003, and 2004 was understated by 1.8%, 13.9%, and 4.0% respectively. 
+
+ Separately, in a related criminal action, McQuillin pled guilty to one count each of conspiracy and securities fraud.  In October 2007, the United States District Court for the Southern District of New York sentenced McQuillin to three years of probation and a $12,000 criminal fine for that conduct. 
+
+ In addition to the financial penalties (and, as to McQuillin, the officer and director bar), the final judgments imposed permanent injunctions prohibiting Evans and McQuillin from violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934, and Exchange Act Rules 10b-5, 13b2-1 and 13b2-2; and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Exchange Act Rules 12b-20, 13a-1, 13a-11 and 13a-13. 
+
+ The Commission's action against Zappala remains pending. 
+
+ The Commission acknowledges the assistance of the U.S. Attorney's Office for the Southern District of New York and the FBI. 
+
+ For further information, please see: Litigation Release No.  19960  (January 8, 2007), Litigation Release No.  20059  (March 29, 2007), and Administrative Proceeding File No. 3-12718 (July 31, 2007).  
+
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raw/aaer/2008/AAER-2904.txt

@@ -0,0 +1,109 @@
+   
+UNITED STATES OF AMERICA  
+Before the  
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No. 59047 / December 3, 2008 
+ACCOUNTING AND AUDITING ENFORCEMENT  
+Release No.  2904 / December 3, 2008 
+ADMINISTRATIVE PROCEEDING  
+File No. 3-11582 
+ 
+In the Matter of  
+Gary L. Seidelman, CPA  
+ 
+: 
+: 
+: 
+: 
+: 
+: 
+ORDER GRANTING APPLICATION FOR 
+REINSTATEMENT TO APPEAR AND PRACTICE 
+BEFORE THE COMMISSION AS AN ACCOUNTANT 
+RESPONSIBLE FOR THE PREPARATION OR 
+REVIEW OF FINANCIAL STATEMENTS REQUIRED 
+TO BE FILED WITH THE COMMISSION 
+ 
+On August 11, 2004, Gary L. Seidelman, CPA (“Seidelman”) 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 Seidelman pursuant to Rule 
+102(e) of the Commission's Rules of Practice.1  Seidelman consented to the entry of the order 
+without admitting or denying the findings therein.  This order is issued in response to 
+Seidelman’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. 
+ From the first quarter of 1998 through th e first quarter of 2000, certain of Anicom, 
+Inc.’s (“Anicom”) officers and employees engaged in improper earnings management techniques 
+that inflated Anicom’s revenues by over $38 million and net income by over $20 million.  
+During this period, Seidelman served as the engagement partner for PricewaterhouseCoopers 
+LLP’s audits and interim reviews of the financial statements of Anicom.  The Commission found 
+that Seidelman engaged in improper professional conduct within the meaning of Rule 
+102(e)(1)(ii) of the Commission’s Rules of Practice in connection with PwC’s 1999 audit and 
+first quarter 2000 interim review of Anicom’s financial statements.  The Commission 
+additionally found that Seidelman violated Section 10A(b)(1) of the Securities Exchange Act of 
+1934 (“Exchange Act”) and that Seidelman caused Anicom’s violations of Section 13(a) of the 
+Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. 
+                                                 
+1 See Accounting and Auditing Enforcement Release No. 2078 dated August 11, 2004.  Seidelman was permitted, 
+pursuant to the order, to apply for reinstatement after three years upon making certain showings. 
+ 
+In his capacity as a preparer or reviewer, or as a person responsible for the preparation or 
+review, of financial statements of a public company to be filed with the Commission, Seidelman 
+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.  Seidelman 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, Seidelman’s 
+denial of the privilege of appearing or practicing 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 Seidelman, it appears that he has complied with the terms of the August 11, 2004 order 
+denying him the privilege of appearing or practicing before the Commission as an accountant, 
+that no information has come to the attention of the Commission relating to his character, 
+integrity, professional conduct or qualifications to practice before the Commission that would be 
+a basis for adverse action against him pursuant to Rule 102(e) of the Commission's Rules of 
+Practice, and that Seidelman, 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 
+Gary L. Seidelman, 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. 
+ 
+ 
+Florence E. Harmon 
+Acting Secretary  
+ 3

raw/aaer/2008/AAER-2907.txt

@@ -0,0 +1,153 @@
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No.  59071 / December 9, 2008 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No.  2907 / December 9, 2008 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No.  3-13305 
+      
+ 
+      :  
+ :  
+ :   
+ In the Matter of : ORDER INSTITUTING ADMINISTRATIVE 
+      : PROCEEDINGS PURSUANT TO RULE
+ ROBERT P. VERHEECKE (CPA), : 102(e)  OF THE COMMISSION’S RULES OF 
+      : PRACTICE, MAKING FINDINGS, AND 
+ Respondent.    : IMPO SING REMEDIAL SANCTIONS 
+      :  
+      :  
+____________________________________ :   
+  
+  
+I. 
+ 
+ The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
+public interest that public administrative proceedings be, and hereby are, instituted against Robert 
+P. Verheecke (“Respondent”) pursuant to Rule 102(e)(3)(i) of the Commission’s Rules of 
+Practice.
+1   
+ 
+                                                 
+1 Rule 102(e)(3)(i) provides, in relevant part, that: 
+ 
+ The Commission, with due regard to the public interest and without  preliminary hearing, 
+may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has 
+been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his 
+or her misconduct in an action brought by the Commission, from violating or aiding and abetting 
+the violation of any provision of the Federal securities laws or of the rules and regulations 
+thereunder. 
+ 2
+II. 
+ 
+ In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
+of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
+purpose of these proceedings and any other proceedings brought by or on behalf of the 
+Commission, or to which the Commission is a party, and without admitting or denying the findings 
+herein, except as to the Commission’s jurisdiction over him and the subject matter of these 
+proceedings, and the findings contained in Section III.3 below, which are admitted, Respondent 
+consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) 
+of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions 
+(“Order”), as set forth below.   
+ 
+III. 
+ 
+ On the basis of this Order and Respondent’s Offer, the Co mmission finds that: 
+ 
+1. Respondent, age 56, is and has been a certified public accountant licensed to practice 
+in the State of California.  He served as senior vice president, chief financial officer, and secretary 
+of Blue Coat Systems, Inc. (“Blue Coat”) from May 2001 until May 2005 and continued to work on 
+special projects for Blue Coat until January 2006. 
+ 
+2. Blue Coat was, at all relevant times, a Delaware corporation with its principal place 
+of business in Sunnyvale, California.  Blue Coat was engaged in the business of making appliances 
+to secure and monitor computer networks.  At all relevant times, Blue Coat’s common stock was 
+registered with the Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 
+(“Exchange Act”), and traded on the NASDAQ National Market. 
+ 
+3. On November 12, 2008, the Commission filed a complaint against Respondent in 
+SEC v. Blue Coat Systems, Inc.
+ (Civil Action No. CV 08-5127 JF).  On November 21, 2008, the 
+court entered an order permanently enjoining Respondent, by consent, from future violations of 
+Section 17(a) of the Securities Act of 1933 (“Securities Act”), Sections 10(b) and 13(b)(5) of the 
+Exchange Act, and Rules 10b-5, 13a-14, 13b2-1, and 13b2-2 thereunder, and from aiding and 
+abetting violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and 
+Rules 12b-20, 13a-1, 13a-11, 13a-13, and 14a-9 thereunder.  Respondent was also ordered to pay 
+$30,000 in disgorgement, $5,946 in prejudgment interest, and a $150,000 civil money penalty. 
+ 
+ 4. The Commission’s complain t alleged, among other things, that from at least 2001 
+through 2005, Blue Coat and Verheecke backdated stock options granted to company employees 
+and executives and failed to disclose millions of dollars in expenses to Blue Coat shareholders.  
+Verheecke used hindsight to pick dates corresponding to low stock prices for stock option grants, 
+prepared or distributed misleading documents that made it appear as if the options had been 
+granted on the earlier dates, and prepared or approved financial statements and Commission filings 
+that omitted necessary expenses for backdated options and falsely described Blue Coat’s option 
+granting practices. 
+ 
+ 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’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED, effective immediately, that: 
+ 
+ A. Respondent is suspended from appearing or practicing before the Commission as an 
+accountant. 
+ 
+ B. After five years from the date of th is order, Respondent may request that the 
+Commission consider his reinstatement by submitting an application (attention: Office of the 
+Chief Accountant) to resume appearing or practicing before the Commission as: 
+      
+       1. a preparer or reviewer, or  a person responsible for the preparation or 
+review, of any public company’s financial statements that are filed with the Commission.  Such 
+an application must satisfy the Commission that Respondent’s work in his practice before the 
+Commission will be reviewed either by the independent audit committee of the public company 
+for which he works or in some other acceptable manner, as long as he practices before the 
+Commission in this capacity; and/or 
+      
+  2.    an independent accountant.  Such an application must satisfy the 
+Commission that: 
+      
+           (a) Respondent, or the public accounting firm with which he is 
+associated, is registered with the Public Company Accounting Oversight Board (“Board”) in 
+accordance with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; 
+ 
+   (b) Respondent, or the registered  public accounting firm with which he 
+is associated, has been inspected by the Board and that inspection did not identify any criticisms 
+of or potential defects in the Respondent’s or the firm’s quality control system that would 
+indicate that the Respondent will not receive appropriate supervision; 
+   (c) Respondent has resolved all di sciplinary issues with the Board, and 
+has complied with all terms and conditions of any sanctions imposed by the Board (other than 
+reinstatement by the Commission); and 
+ 
+   (d) Respondent acknowledges his responsibility, as long as 
+Respondent appears or practices before the Commission as an independent accountant, to 
+comply with all requirements of the Commission and the Board, including, but not limited to, all 
+requirements relating to registration, inspections, concurring partner reviews, and quality control 
+standards.   
+      
+C. The Commission will consider an application by Respondent to resume 
+appearing or practicing before the Commission provided that his state CPA license is 
+current and he has resolved all other disciplinary issues with the applicable state boards of 
+ 4
+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. 
+ 
+ 
+ 
+       F l o r e n c e  E .  H a r m o n  
+       A c t i n g  S e c r e t a r y  

raw/aaer/2008/AAER-2910.txt

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+                   U.S. SECURITIES AND EXCHANGE COMMISSION 
+
+ Litigation Release No. 20825 / December 11, 2008  
+
+ Accounting and Auditing Enforcement Release No.  2910 / December 11, 2008 
+
+  SEC v. Zurich Financial Services , 08 Civ. 10760 (WHP)(S.D.N.Y.), December 11, 2008 
+
+ ZURICH PAYS $25 MILLION CIVIL PENALTY TO SETTLE SECURITIES FRAUD CHARGES 
+
+ The Securities and Exchange Commission today announced the filing and settlement of charges against Zurich Financial Services Group for aiding and abetting a fraud by Converium Holding AG involving the use of finite reinsurance transactions to inflate improperly Converium's financial performance.  Under the settlement, Zurich consents to the entry of a final judgment directing it to pay a $25 million penalty plus $1 in disgorgement and, in a related administrative proceeding, consents to the entry of a cease-and-desist order against it.  
+
+ The Commission's complaint, filed today, alleges that beginning in 1999, the management of Zurich's reinsurance group, which operated under the name Zurich Re, developed three reinsurance transactions for the purpose of obtaining the financial benefits of reinsurance accounting.  However, in order for a company to obtain the benefits of reinsurance accounting, the reinsurance transaction must transfer risk.  Here, Zurich Re management designed the transactions to make them appear to transfer risk to third-party reinsurers, when, in fact, no risk was transferred outside of Zurich-owned entities.  For two of the transactions at issue, Zurich Re ceded risk to third-party reinsurers, but took it back through reinsurance agreements â€" known as retrocessions â€" with another Zurich entity.  For the third transaction, Zurich Re ceded the risk to a third-party reinsurer but simultaneously entered into an undisclosed side agreement with the reinsurer pursuant to which Zurich Re agreed to hold the reinsurer harmless for any losses realized under the reinsurance contracts.  Because the ultimate risk under the reinsurance contracts remained with Zurich-owned entities, these transactions should not have been accounted for as reinsurance.   
+
+ The complaint also alleges that, in March 2001, Zurich announced its intent to spin off its reinsurance group in an initial public offering.  Zurich then created and capitalized Converium, which assumed the rights and obligations of Zurich's assumed reinsurance business.  On December 11, 2001, Zurich spun off Converium in an IPO.  At the conclusion of the IPO, the members of Zurich Re management responsible for the three reinsurance transactions ceased to be affiliated with Zurich.  As a result of the improper accounting treatment the reinsurance transactions received, the historical financial statements in Converium's IPO documents, including the Form F-1 it filed with the Commission, were materially misleading.  Among other things, Converium understated its reported loss before taxes by approximately $100 million (67%) in 2000 and by approximately $3 million (1%) in 2001.  In addition, for certain periods, the transactions had the effect of artificially decreasing Converium's reported loss ratios for certain reporting segments â€" the ratio between losses paid by an insurer and premiums earned that is frequently cited by analysts as a key performance metric for insurance companies.   
+
+ The complaint further alleges that Converium's misstatements relate to fact that were material to investors who purchased shares in the IPO.  Through the IPO, which was the largest reinsurance IPO in history, Zurich raised significantly more than it would have raised had Zurich and Converium not improperly inflated Converium's financial performance.   
+
+ The Commission's complaint alleges that Zurich aided and abetted Converium's violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.   
+
+ In connection with the settlement, Zurich has agreed, without admitting or denying the allegations in the Commission's complaint, to pay a $25 million penalty, plus $1 in disgorgement.  In a related administrative proceeding, Zurich has also agreed, without admitting or denying the Commission's findings, to the issuance of an order that requires Zurich to cease and desist from committing or causing any violation and any future violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.   
+
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raw/aaer/2008/AAER-2913.txt

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+ UNITED STATES OF AMERICA 
+ Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No.  59172 / December 29, 2008 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 2913 / December 29, 2008 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-13320 
+In the Matter of 
+STEWART ENTERPRISES, 
+INC., KENNETH C. BUDDE, 
+CPA, AND MICHAEL G. 
+HYMEL, 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 
+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 Stewart Enterprises, Inc. (“Stewart”), Kenneth C. 
+Budde (“Budde”), and Michael G. Hymel (“Hymel”) (collectively, the “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 
+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 a Cease-and-Desist Order (“Order”), as set forth below.   
+III. 
+On the basis of this Order and Respondents’ Offers, the Commission finds that: 
+RESPONDENTS 
+1. Stewart Enterprises, Inc. is a Louisiana corporation headquartered in Jefferson, 
+Louisiana.  At all relevant times, Stewart’s common stock was registered with the Commission 
+under Section 12(g) of the Exchange Act and was traded publicly on the NASDAQ under the 
+symbol “STEI.” Over its last five fiscal years, Stewart’s total revenues have averaged 
+approximately $498 million per year. 
+2. Kenneth C. Budde, age 60, of Metairie, Louisiana, is Stewart’s former chief 
+executive officer (“CEO”) and chief financial officer (“CFO”).  Budde joined Stewart as a 
+divisional CFO in 1984, was promoted to CFO in 1998, and further promoted to CEO in June 2004.  
+In June 2006, Budde retired.  Budde was a CPA, licensed in Louisiana and employed at a major 
+public accounting firm in the late 1970s.  Budde allowed his CPA license to lapse in the early 1990s 
+and is currently retired. 
+3. Michael G. Hymel, age 52, of Harahan, Louisiana, is currently Stewart’s vice-
+president of taxation, budgeting and planning.  In 1989, Stewart hired Hymel as a tax manager, and 
+in 1990, Hymel became a divisional controller.  In 1998 Budde promoted Hymel to the position of 
+chief accounting officer (“CAO”). In 2006, Hymel assumed his current position at Stewart.  Hymel 
+was a CPA licensed in Louisiana and employed by a major public accounting firm from 1978 
+through 1989. He has remained a licensed CPA current throughout his career at Stewart. 
+SUMMARY 
+4. From 2001 through 2005, Stewart’s public filings with the Commission repeatedly 
+represented that it utilized a delivery method to recognize cemetery merchandise sold prior to the 
+need for a funeral (“pre-need cemetery merchandise”), pursuant to which, upon delivery, Stewart 
+would recognize as revenue the full contract amount paid by the customer.  However, Stewart 
+could not readily identify the actual pre-need contract amount and instead developed an estimate of 
+the amount of revenue to be recognized.  Stewart’s failure to disclose this methodology of 
+estimating revenues in its public filings with the Commission rendered its financial statements not 
+in conformity with Generally Accepted Accounting Principles (“GAAP”).  Errors arising from the 
+assumptions underlying Stewart’s methodology for estimating revenues resulted in an 
+overstatement of net revenue from 2001 through 2005 by more than $72 million, overstated annual 
+net earnings before taxes during this period by amounts ranging from 10.76% to 38.76%, and were 
+the primary basis for a subsequent material restatement of earnings.  As a result, Stewart 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, Budde and Hymel caused such violations, and Budde directly violated Exchange Act 
+Rule 13a-14. 
+2
+
+FACTS 
+Background 
+5. Stewart is the second largest publicly traded death care services provider in the 
+country. Stewart provides a complete range of death care services, including both funeral 
+operations (memorial services, caskets, cremations) and cemetery operations (cemetery lots, burial 
+vaults, headstones, markers).  Stewart’s business is further divided between time of death services, 
+called “at need,” and advance purchase pre-need services.  Pre-need cemetery merchandise 
+revenue represented approximately 10% to 12% of Stewart’s total delivered revenue during the 
+relevant time period. 
+6. Stewart grew rapidly during the 1990s, primarily by acquiring smaller funeral 
+homes and cemeteries.  In 1991, Stewart had 43 funeral homes and 29 cemeteries in six states.  By 
+1999, Stewart owned 633 funeral homes and 161 cemeteries, located in 30 states, Puerto Rico and 
+several other countries. 
+Stewart Changes its Revenue Recognition Policy 
+7. In December 1999, in an effort to clarify the Commission staff’s positions with 
+respect to selected issues of revenue recognition, the Commission’s Division of Corporation 
+Finance and Office of the Chief Accountant (“OCA”) released Staff Accounting Bulletin 101 
+(“SAB 101”). SAB 101 reminded issuers that, under GAAP, revenue for the sale of merchandise 
+should typically be recognized upon delivery to the customer.  Prior to the issuance of SAB 101, 
+Stewart, along with other public issuers in the death care services industry, recognized revenue 
+from the sale of pre-need cemetery merchandise at the time of sale. 
+8. In early 2000, Stewart, along with other major industry participants, entered into 
+discussions with OCA regarding whether, with respect to the sale of pre-need cemetery 
+merchandise, revenue could be recognized upon time of sale rather than delivery.  OCA clarified 
+that GAAP required Stewart, and other industry participants, to recognize revenue from the sale of 
+pre-need cemetery merchandise at the time of delivery.  Stewart reflected the change beginning in 
+its first quarter of fiscal 2001 as a cumulative effect of change in accounting principles. 
+9. On March 6, 2001, Hymel, on behalf of Stewart, issued a letter to OCA indicating 
+that for pre-need cemetery merchandise revenue, Stewart would defer the recognition of that 
+revenue until the point in time “when the customer takes possession/delivery of the specific item 
+purchased” or when Stewart “has no further obligation or involvement related to the merchandise.” 
+Stewart Delays Implementing an Actual Delivery Method, 
+Instead Developing the “A/P Method”
+10. Shortly after announcing its shift to a delivery method to recognize revenue for the 
+sale of pre-need cemetery merchandise, Stewart realized that, because its prior revenue recognition 
+methodology was based on time of sale, it had no effective system in place to fully identify either: 
+3
+
+(a) the physical delivery of cemetery merchandise to particular customers; or (b) the specific pre-
+need contract for which delivery of certain cemetery merchandise was actually being made.  These 
+difficulties were heightened by virtue of Stewart’s having grown through the acquisition of 
+hundreds of funeral homes and cemeteries throughout the country and abroad.  These funeral 
+homes and cemeteries had sold hundreds of thousands of pre-need contracts, and, because prior to 
+SAB 101 Stewart recognized revenue at the time of sale, it was not necessary to input the specific 
+pricing details and original customers amounts paid into Stewart’s accounting systems. 
+11. Stewart quickly realized, though, that the undertaking to create and fully implement 
+an automated delivery system would take a significant amount of time, likely several years, and be 
+highly resource intensive. Stewart notified its outside auditors of these difficulties in implementing 
+such an automated delivery system.  Although Stewart undertook efforts to develop an automated 
+delivery system, it did not dedicate, upfront, the full resources necessary to address all of these 
+difficulties. Stewart’s accounting department, operating under Budde and Hymel, instead 
+developed a unique methodology for estimating both the physical delivery and amount of revenue 
+to be recorded in its accounting records.  This process was intended to be used until the automated 
+delivery system was fully developed and implemented. 
+12. With respect to identifying the point in time at which the physical delivery of pre-
+need cemetery merchandise occurred, Stewart determined that it could use the receipt of its own 
+vendor invoices as a proxy for actual physical delivery, as Stewart did not produce any of the pre-
+need cemetery merchandise itself, and stored very little cemetery merchandise.  Stewart assumed 
+that because vendors typically invoiced Stewart for cemetery merchandise after it had been 
+delivered, any vendor invoice for cemetery merchandise that was sold pre-need would likely 
+correspond to the delivery of that merchandise to Stewart’s customer.  As this system relied on 
+accounts payable invoices as proxies for physical delivery, Stewart referred to this method of 
+revenue recognition internally as the “A/P Method.” 
+13. To quantify the amount of revenue to be recognized, Stewart developed an 
+accounting estimate, called the “mark-up” factor, because it could not readily identify the actual 
+pre-need contract for the delivery of specific cemetery merchandise to specific contracts.  In 
+determining the mark-up factor, Stewart calculated the ratio between what it believed to be its 
+vendor costs to acquire cemetery merchandise and the historical prices as sold to customers for this 
+merchandise.  Upon receiving a vendor invoice for pre-need cemetery merchandise, Stewart 
+calculated the amount of revenue that should be recognized for that product by multiplying its own 
+vendor invoice cost by the appropriate mark-up factor. 
+14. Budde and Hymel reviewed the A/P Method and approved the decision to begin 
+utilizing the A/P Method and its underlying estimates to formally book revenue for the first quarter 
+of Stewart’s fiscal year ended October 31, 2001.  From the outset, Stewart’s outside auditor 
+questioned Stewart’s use of estimates to record revenue.  While conceding in its annual 
+management letter that Stewart’s inability to  “properly account and track the status and delivery of 
+pre-need cemetery merchandise contracts” required Stewart to estimate revenues, the outside 
+auditor cautioned Stewart that “[c]ontinued use of [the A/P Method] heightens the possibility of 
+misstatements on the amount of revenue recognized in a period.”  Starting in 2001, the outside 
+4
+
+auditor also recommended that Stewart move to a revenue recognition system based on “actual 
+deliveries of cemetery merchandise and its associated cost without having to be as dependant on 
+estimates.”  Despite these comments, the outside auditor issued unqualified audit opinions for each 
+year that Stewart used the A/P Method. 
+Stewart’s Deferred Revenue Project Identifies Material Problems
+with its Reported Revenue under the A/P Method and Weaknesses in Internal Controls
+15. Over time, Stewart identified and corrected what it determined to be immaterial 
+errors in the A/P Method. Stewart continually reviewed the mark-up factor utilized in the A/P 
+Method and made adjustments to the mark-up accordingly.  In 2002, Stewart assigned a former 
+division CFO to review the A/P Method and to accelerate efforts to develop and implement an 
+automated delivery system for recognizing cemetery merchandise revenue.   
+16. In October 2004, Stewart launched a review of its internal accounting controls and 
+financial reporting in anticipation of the requirements of Section 404 of the Sarbanes-Oxley Act of 
+2002 (“Sarbanes-Oxley”).  Earlier in 2004, Stewart had begun to roll out and test its automated 
+delivery system for revenue recognition, and had noted revenue recognition discrepancies that it 
+initially attributed to the automated system’s design.  The Section 404 undertaking quickly focused 
+on Stewart’s revenue recognition policies and the amounts of deferred revenue on Stewart’s 
+financial statements.  As the project progressed, Stewart concluded that it was necessary to devote 
+substantial resources to finding, reviewing, and inputting the pricing details from all pre-need 
+contracts. This was a significant undertaking, ultimately requiring the review of nearly 700,000 
+pre-need contracts. Stewart referred to this review as the “Deferred Revenue Project.” 
+17. By October 2005, as a result of the progress of the Deferred Revenue Project, 
+Stewart believed that a restatement of its prior period financial statements could be warranted.  On 
+October 21, 2005, Stewart filed a Form 8-K disclosing the existence and purpose of the Deferred 
+Revenue Project and announcing that a restatement was likely to occur, with an estimated impact 
+of $60 million or less to shareholder equity.  No portion of this Form 8-K made any reference or 
+description to Stewart’s use of an estimated methodology to book revenue for pre-need cemetery 
+merchandise. 
+18. In January 2006, Stewart realized that errors in the A/P Method had likely caused a 
+material overstatement of revenue for fiscal years 2001 through the first three quarters of fiscal 
+year 2005. These errors primarily occurred because Stewart had used incorrect internal vendor 
+costs for its cemetery merchandise in calculating the mark-up factor. 
+19. On February 17, 2006, Stewart filed its 2005 Form 10-K, which announced the 
+results of both the completion of the Deferred Revenue Project and its Sarbanes-Oxley Section 404 
+internal controls assessment. The Deferred Revenue Project ultimately resulted in a $93 million 
+charge against shareholder equity (of which $72 million was directly attributable to errors in the 
+A/P Method mark-up factor) for fiscal years 2001 through the third quarter of 2005.  The chart 
+below illustrates the impact on Stewart’s net earnings before taxes for fiscal years 2001 through 
+2005 attributable to the errors in the A/P Method. 
+5
+
+Fiscal 
+Year 
+Net Earnings (loss), Before Taxes 
+(“EBT”) (prior to 2005 restatement) 
+(000’s omitted) 
+Amount of Reported EBT 
+Attributable to Errors within 
+A/P Method (000’s omitted) 
+Percentage of EBT 
+Improperly Reported due 
+to A/P Method Errors 
+2001 ($197,427) $21,253 10.76% 
+2002 $47,882 $18,561 38.76% 
+2003 ($44,757) $12,019 26.85% 
+2004 $68,428 $10,963 16.02%
+ 2005* $26,404 $9,516 36.04% 
+* These figures only represent the first nine months of Fiscal Year 2005. 
+20. In addition to disclosing these restatements, Stewart also identified in its 2005 Form 
+10-K that it “did not maintain effective internal control over financial reporting” and had “material 
+weaknesses relating to … revenue recognition of pre-need cemetery merchandise and services 
+contracts….” As with the language related to the restatement, however, no portion of the internal 
+controls assessment identified Stewart’s prior use of the A/P Method and its underlying use of 
+estimates. 
+21. After learning of the problems in the A/P Method uncovered during the Deferred 
+Revenue Project and identifying the corresponding weaknesses in internal controls, Stewart’s 
+outside auditor advised that it would no longer approve the use of the A/P Method.  Only at this 
+point in time, when Stewart was completing its compliance obligations under Sarbanes-Oxley 
+Section 404 and its outside auditor indicated it would no longer approve of the use of the A/P 
+Method did Stewart finalize the implementation of and begin booking revenue through an actual 
+delivery system. 
+Stewart Did Not Disclose its Use of the A/P Method 
+and Misleadingly Described its Revenue Recognition Policies
+22. In general, beginning with Stewart’s March 15, 2001 Form 8-K that attached 
+Stewart’s letter to OCA, and continuing through its filing of its Form 10-K for its fiscal year ended 
+October 31, 2004, Stewart’s filings with the Commission contained misleading statements that “for 
+preneed sales of cemetery merchandise, primarily vaults and markers … t he associated revenue 
+and certain costs to acquire the sale are deferred until the merchandise is delivered.”   
+23. Stewart’s Forms 10-K for fiscal years 2001 through 2003, filed with the 
+Commission between 2002 and 2004, contained additional misleading statements and omissions 
+suggesting that Stewart could identify the actual amount of revenue to be recognized from the sale 
+of its pre-need cemetery merchandise.  Specifically, these filings misleadingly stated that, “[w]hen 
+the … merc handise is delivered, the Company recognizes as revenue the full contract amount.”  As 
+Stewart had no systems in place to allow it to identify the underlying contracts on which revenue 
+was being recognized, Stewart was in actuality utilizing the A/P Method to estimate the “full 
+contract amount.”  Stewart’s Forms 10-Q for the first quarter of fiscal year 2002, filed March 18, 
+2002, and for the second quarter of fiscal year 2003, filed June 13, 2003, also referenced this 
+misleading language within the Forms 10-K regarding the “full contract amount” of revenue being 
+recognized upon delivery. 
+6
+
+24. Budde and Hymel signed each of the Forms 10-K and Forms 10-Q that contained 
+these misleading descriptions and omissions, while Hymel signed and Budde reviewed the March 
+2001 Form 8-K.  Pursuant to Sarbanes-Oxley Section 302 and Exchange Act Rule 13a-14, Budde 
+also certified Stewart’s 2003 Form 10-K and second quarter 2003 Form 10-Q as CFO.  In each 
+respective certification, Budde attested that, based on his knowledge, the respective Forms 10-K 
+and 10-Q did not “contain any untrue statement of a material fact or omit to state a material fact 
+necessary to make the statements made . . . not misleading.” 
+ACCOUNTING ANALYSIS 
+25. Under GAAP, revenue from the sale of merchandise should generally be 
+recognized upon delivery of the merchandise to the buyer, even if the sale precedes delivery.  
+FASB Statement of Concepts (“SFAC”) No. 5, Recognition and Measurement in Financial 
+Statements of Business Enterprises, ¶ 84(a), (b).  Upon delivery, the seller should typically 
+recognize as revenue the amount received from the buyer.  See SFAC No. 5 at ¶ 83 (“Revenues 
+and gains of an enterprise during a period are generally measured by the exchange values of the 
+assets . . . .”); SFAC No. 6, Elements of Financial Statements, ¶ 78 (“Revenues are inflows or 
+other enhancements of assets of an entity . . . from delivering or producing goods . . .  .”).  GAAP 
+further requires that the amount of revenue recorded must be “measurable with sufficient 
+reliability.” SFAC No. 5 at ¶ 63; see also SFAC No. 2, Qualitative Characteristics of Accounting 
+Information, ¶ 72 (“Reporting accounting numbers as certain and precise if they are not is a 
+negation of reliable reporting.”).  GAAP further requires issuers to disclose any significant 
+deviation from these basic revenue recognition policies.  Accounting Principles Board Opinion No. 
+22, specifically requires issuers to disclose, among other things:  (1) “important judgments as to the 
+appropriateness of principles relating to recognition of revenue;” and (2) “[u]nusual or innovative 
+applications of [GAAP] (and, as applicable, of principles and methods peculiar to the industry in 
+which the reporting entity operates).”  Stewart’s failure to disclose its use of the A/P Method and 
+its underlying layers of estimates therefore rendered its financial statements not in conformity with 
+GAAP. 
+LEGAL ANALYSIS 
+Stewart Violated the Reporting, Books and Records and Internal Controls Provisions 
+of the Exchange Act, and Budde and Hymel Caused Such Violations 
+26. Section 13(a) of the Exchange Act requires issuers to file such periodic and other 
+reports as the Commission may prescribe and in conformity with such rules as the Commission 
+may promulgate. Rules 13a-1, 13a-11 and 13a-13 require the filing of annual, current and 
+quarterly reports, respectively.  “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 Section 13(a) 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). Rule 12b-20 of the Exchange Act requires an issuer to include any 
+7
+
+additional material information necessary to make the required statements in the filing not 
+misleading.  No showing of scienter is necessary to establish an issuer’s violation of Section 13(a) 
+of the Exchange Act. SEC v. Wills, 472 F. Supp. 1250, 1268 (D.D.C. 1978). 
+27. Stewart violated Exchange Act Section 13(a) and Rules 12b-20, 13a-1, 13a-11 and 
+13a-13 thereunder because its filings with the Commission between 2001 and 2005 contained 
+materially misleading statements and omitted material information concerning Stewart’s revenue 
+recognition policies and materially misstated Stewart’s revenues in reports filed with the 
+Commission as a result of errors directly attributable to the estimates underlying the A/P Method.  
+Budde and Hymel caused these violations by Stewart because they reviewed and approved of these 
+filings and knew or should have known that they did not disclose the use of the A/P Method and 
+inaccurately described Stewart’s revenue recognition policies as being based on recognition of the 
+“full contract amount,” when Stewart was instead utilizing the A/P Method to estimate the actual 
+contract amount. 
+28. Section 13(b)(2)(A) of the Exchange Act requires issuers with securities registered 
+under the Exchange Act to make and keep books, records, and accounts that in reasonable detail 
+accurately and fairly reflect the issuer’s transactions and dispositions of  assets. Section 
+13(b)(2)(B) of the Exchange Act requires the same issuers to devise and maintain a system of 
+internal accounting controls which provide reasonable assurance that transactions are recorded as 
+necessary to permit the preparation of financial statements in conformity with GAAP.  The 
+Commission need not show scienter to prove violations of Section 13(b)(2).  SEC v. World-Wide 
+Coin Inv., Ltd., 567 F. Supp. 724, 749 (N.D. Ga. 1983).  
+29. Stewart violated Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B) because its 
+internal books, records, and accounts improperly and inaccurately reflected numerous transactions 
+for which revenue should not have been recognized.  Stewart’s February 2006 restatement 
+acknowledged the multiple errors in revenue recognition that had occurred and led to a $93 million 
+charge against shareholder equity, of which $72 million was directly attributable to errors in the 
+A/P Method. Stewart further lacked sufficient accounting procedures and controls by which it 
+could identify the specific pre-need contract and corresponding amount of revenue for which 
+cemetery merchandise had been delivered.  Budde and Hymel caused these internal controls and 
+books and records violations by Stewart.  Budde and Hymel had ultimate responsibility for the 
+adequacy of Stewart’s internal controls and the accuracy of Stewart’s accounting records.  They 
+knew or should have known that Stewart lacked adequate internal controls to identify the 
+appropriate amount of revenue to recognize from the sale of pre-need cemetery merchandise and, 
+thus, that Stewart’s internal accounting records were inaccurate. 
+Budde Violated Exchange Act Rule 13a-14 
+30. Sarbanes-Oxley Section 302 provides that the Commission shall, by rule, require 
+the principal executive officer and the principal financial officer of companies filing periodic 
+reports under Section 13(a) of the Exchange Act to make certain certifications in each annual or 
+quarterly report.  To implement Section 302, the Commission promulgated Exchange Act Rule 
+13a-14, which provides that an issuer’s annual and quarterly reports shall include certifications 
+8
+
+signed by the principal executive and principal financial officer of the issuer that the report, to the 
+best of their knowledge, does not contain any untrue statement of material fact or omit to state a 
+material fact necessary to make the statements made not misleading with respect to the period 
+covered by the report. 
+31. Budde certified Stewart’s 2003 Form 10-K and second-quarter 2003 Form 10-Q as 
+CFO, in each certification attesting that, based on his knowledge, the respective Forms 10-K and 
+10-Q did not “contain any untrue statement of a material fact or omit to state a material fact 
+necessary to make the statements made . . . not misleading.”  As set forth above, these filings 
+contained materially misleading statements and omissions regarding Stewart’s revenue recognition 
+policies and methodologies.  Accordingly, Budde violated Exchange Act Rule 13a-14. 
+REMEDIAL EFFORTS 
+In determining to accept the Offers, the Commission considered remedial acts 
+promptly undertaken by Stewart and cooperation afforded the Commission staff. 
+IV. 
+In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondents’ Offers. 
+Accordingly, it is hereby ORDERED that: 
+A. Pursuant to Section 21C of the Exchange Act, Respondent Stewart cease and desist 
+from committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A),  
+and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. 
+B. Pursuant to Section 21C of the Exchange Act, Respondent Budde cease and desist 
+from committing or causing any violations and any future violations of Exchange Act Rule 13a-14 
+and cease and desist from causing any violations and any future violations of Section 13(a), 
+13(b)(2)(A),  and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 
+thereunder. 
+C. Pursuant to Section 21C of the Exchange Act, Respondent Hymel cease and desist 
+from causing any violations and any future violations of Sections 13(a), 13(b)(2)(A), and 
+13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. 
+ By the Commission. 
+       F lorence E. Harmon
+       A cting Secretary 
+9