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raw/aaer/2019/AAER-4018.txt

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+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 84998 / January 29, 2019 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 4018 / January 29, 2019 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-18971 
+ 
+ 
+In the Matter of 
+ 
+DIGITAL TURBINE, INC.  
+ 
+Respondent. 
+ 
+ 
+ 
+ 
+ 
+ORDER INSTITUTING CEASE-AND-DESIST 
+PROCEEDINGS PURSUANT TO SECTION 
+21C OF THE SECURITIES EXCHANGE ACT 
+OF 1934,MAKING FINDINGS AND 
+IMPOSING A CEASE-AND-DESIST ORDER  
+   
+ 
+I. 
+ 
+ The Securities and Exchange Commission  (“Commission”) deems it appropriate that 
+cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the 
+Securities Exchange Act of 1934 (“Exchange Act”) against Digital Turbine, Inc. (“Respondent”).   
+ 
+II. 
+ 
+ In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
+of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
+purpose of these proceedings and any other proceedings brought by or on behalf of the 
+Commission, or to which the Commission is a party, and without admitting or denying the findings 
+herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
+proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
+And-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
+Findings, and Imposing a Cease-And-Desist Order (“Order”), as set forth below.   
+ 
+ 
+ 
+ 
+ 
+ 2 
+ 
+ 
+III. 
+ 
+ On the basis of this Order and Respondent’s Offer, the Commission finds1 that  
+ 
+Summary 
+ 
+ This matter involves violations of the federal securities laws in connection with the 
+Respondent’s Internal Control over Financial Reporting (“ICFR”).  Respondent failed to create and 
+implement effective ICFR for seven consecutive annual reporting periods from fiscal year ended 
+2011 through fiscal year ended 2017. 
+ 
+Respondent 
+ 
+ 1.  Digital Turbine is a global technology company, based in Austin. Texas.  
+Respondent offers a mobile delivery platform that enhances app advertising, among other 
+technology services.  Respondent’s securities trade on NASDAQ under the symbol APPS.  At all 
+relevant times, Respondent filed periodic reports with the Commission, including Forms 10-K and 
+10-Q, pursuant to Section 13(a) of the Exchange Act and related rules thereunder.  Respondent’s 
+fiscal year ends on March 31st of the calendar year.   
+ 
+Background 
+ 
+ 2. Respondent disclosed  material weaknesses in each of its Forms 10-K over a period 
+of seven years, from fiscal year 2011 through fiscal year 2017.  Respondent’s disclosed material 
+weaknesses, which often repeated year after year, related primarily to its financial close and 
+reporting  process and controls over its accounting information technology systems   
+ 
+3. Respondent’s material weaknesses resulted from, among other things, deficiencies 
+in the design and operation of controls related to its financial close and reporting process, 
+including, during certain periods of time,weaknesses around the review and performance of 
+reconciliations during the close process; and failures to maintain sufficient qualified personnel or 
+adequate accounting information technology systems resulting in a manual close with insufficient 
+documentation of the procedures employed. 
+ 
+ 4. Respondent retained a SOX consultant in 2012 but retained a new SOX Consultant 
+in February 2015 to assist with its remediation and testing efforts.  After the close of fiscal year 
+2015, that consultant provided Respondent with a detailed plan of remediation.  Respondent began 
+implementing the plan in fiscal year 2016.  During fiscal year 2016 and part of fiscal year 2017, the 
+Respondent made some progress towards remediating its material weaknesses.  The Commission 
+                                                 
+1  The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any 
+other person or entity in this or any other proceeding.  
+ 
+ 
+ 3 
+staff contacted the Respondent in May 2016.  In April 2017, the Respondent rehired its SOX 
+consultant to review and test ICFR for fiscal years 2017 and 2018.  
+ 
+ 5. Respondent continued to disclose the existence of material weaknesses and to 
+engage in limited remediation but it did not fully remediate its material weaknesses until the end of 
+fiscal year 2018 when it disclosed in its Form 10-K for the year ended March 31, 2018 that there 
+were no material weaknesses and that its ICFR was effective. 
+  
+ 6. As a result of the conduct described above, Respondent violated Rule 13a-15(a) 
+of the Exchange Act, which require issuers with classes of securities registered pursuant to 
+Section 12 to maintain ICFR. 
+ 
+ 7. As a result of the conduct described above, Respondent violated Section 
+13(b)(2)(B) of the Exchange Act, which requires Section 12 registrants to devise and maintain a 
+system of sufficient internal accounting controls. 
+ 
+Digital Turbine’s Remedial Efforts 
+8. In determining to accept the Offer, the Commission considered remedial acts 
+undertaken by Respondent and cooperation afforded the Commission staff.  
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED that: 
+ 
+ A. Pursuant to Section 21C of the Exchange Act, Respondent cease and desist from 
+committing or causing any violations and any future violations of Section 13(b)(2)(B) of the 
+Exchange Act and Rule 13a-15(a) thereunder.   
+ 
+B. Respondent shall, within 10 days of the entry of this Order, pay a civil money 
+penalty in the amount of $100,000 to the Securities and Exchange Commission for transfer to the 
+general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely 
+payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717.   
+ 
+Payment must be made in one of the following ways:   
+ 
+(1) Respondent may transmit payment electronically to the Commission, which 
+will provide detailed ACH transfer/Fedwire instructions upon request;  
+ 
+(2) Respondent may make direct payment from a bank account via Pay.gov 
+through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
+ 
+ 4 
+ 
+(3) Respondent may pay by certified check, bank cashier’s check, or United 
+States postal money order, made payable to the Securities and Exchange 
+Commission and hand-delivered or mailed to:  
+ 
+Enterprise Services Center 
+Accounts Receivable Branch 
+HQ Bldg., Room 181, AMZ-341 
+6500 South MacArthur Boulevard 
+Oklahoma City, OK 73169 
+ 
+Payments by check or money order must be accompanied by a cover letter identifying 
+Respondent as a Respondent in these proceedings, and the file number of these proceedings; a 
+copy of the cover letter and check or money order must be sent to Melissa Hodgman, Associate 
+Director, Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, 
+Washington, DC 20549-5553.   
+ 
+ C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
+treated as penalties paid to the government for all purposes, including all tax purposes.  To 
+preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
+Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 
+award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
+penalty in this action ("Penalty Offset").  If the court in any Related Investor Action grants such a 
+Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting 
+the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the 
+Penalty Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed 
+an additional civil penalty and shall not be deemed to change the amount of the civil penalty 
+imposed in this proceeding.  For purposes of this paragraph, a "Related Investor Action" means a 
+private damages action brought against Respondent by or on behalf of one or more investors based 
+on substantially the same facts as alleged in the Order instituted by the Commission in this 
+proceeding. 
+ 
+  
+ By the Commission. 
+ 
+ 
+ 
+       Brent J. Fields 
+       Secretary 
+ 

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+UNITED STATES OF AMERICA 
+before the 
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 85250 / March 5, 2019  
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 4027 / March 5, 2019 
+ 
+Admin. Proc. File No. 3-18994  
+ 
+ 
+In the Matter of 
+ 
+JOSEPH S. AMUNDSEN, CPA,  
+MICHAEL T. REMUS, CPA, AND 
+MICHAEL REMUS CPA.  
+ 
+ 
+ 
+NOTICE REGARDING CORRESPONDENCE 
+On February 19, 2019, the Commission received a filing from respondent Joseph S. 
+Amundsen that appears to be a copy of correspondence Amundsen sent to the U.S. Court of 
+Appeals for the Ninth Circuit.  Among other things, Amundsen states that he “received the 
+strangest letter from the District Court, attached,” and asks the Ninth Circuit to “review this 
+matter.”  The attachment that is referenced, though, is the Commission’s Order Instituting 
+Proceedings in this matter.1  Amundsen is reminded that the instant administrative proceeding is 
+set before the Securities and Exchange Commission—and is separate from the civil injunctive 
+action before the U.S. District Court for the Northern District of California.2  In the event that the 
+Commission issues in this proceeding a final order that is adverse to him, Amundsen may seek 
+judicial review in accordance with Section 25(a) of the Securities Exchange Act of 1934. 
+The style of the caption in Amundsen’s correspondence shows that his requests are 
+addressed to the Ninth Circuit; the Ninth Circuit, moreover, has already denied relief.3  Because 
+Amundsen’s correspondence is not directed to the Commission and does not comply with, inter 
+alia, Rule of Practice 152(a)(3), it is hereby stricken from the record.4  All parties, including pro 
+                                                 
+1  Exchange Act Release No. 85081, 2019 WL 497277 (Feb. 8, 2018).   
+2  Case No. 3:83-cv-00711-WHA (N.D. Cal.). 
+3  DE #23, Case No. 13-71472 (9th Cir. Feb. 26, 2019) (“The court will not entertain 
+petitioner’s correspondence . . . . No further filings will be entertained in this closed case.”). 
+4  17 C.F.R. 201.152(a)(3).   
+2 
+ 
+se parties, are expected to comply with the Commission’s Rules of Practice and the orders issued 
+by the Commission.5  No further action will be taken regarding Amundsen’s correspondence. 
+For the Commission, by the Office of the General Counsel, pursuant to delegated 
+authority. 
+ 
+ 
+ 
+       Brent J. Fields 
+           Secretary 
+                                                 
+5  See, e.g., McBarron Capital LLC, Exchange Act Release No. 81789, 2017 WL 4350655, 
+at *4 (Sep. 29, 2017). 

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+UNITED STATES OF AMERICA 
+before the 
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 85310 / March 13, 2019 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 4030 / March 13, 2019 
+ 
+Admin. Proc. File No. 3-18994  
+ 
+ 
+In the Matter of 
+ 
+JOSEPH S. AMUNDSEN, CPA,  
+MICHAEL T. REMUS, CPA, AND 
+MICHAEL REMUS CPA.  
+ 
+ 
+ 
+NOTICE REGARDING CORRESPONDENCE 
+On March 7, 2019, the Commission received a letter from respondent Joseph S. 
+Amundsen requesting that the Commission “return my [February 19, 2019] correspondence to 
+the record.”  Amundsen’s earlier correspondence was stricken because it was directed to the U.S. 
+Court of Appeals for the Ninth Circuit, not to the Commission, and it did not comply with Rule 
+of Practice 152(a)(3).1  His March 7 letter raises no issues that warrant reconsideration of that 
+ruling. 
+Amundsen states that his February 19 letter was “introduced . . . into evidence in a 
+request for summary judgment dated 2-26-2019.”  The Commission is not aware of any such 
+filing.  If Amundsen intends to refer to the Ninth Circuit’s order entered on that date, that order 
+discloses no basis for relief:  The court expressly refused to “entertain petitioner’s 
+correspondence received . . . on August 27, 2018, January 10, 2019, and February 19, 2019,” on 
+the basis that the appeal had been closed since 2013.2 
+Amundsen’s March 7 letter also asserts that “[t]here are four Circuit Court decisions 
+related to my issues,” and that Amundsen has “asked the Ninth Circuit to reconsider based on 
+these decisions, and will request en banc if that appeal is denied.”  Again, this request is directed 
+to the Ninth Circuit, not to the Commission, and the court has already denied it.3 
+                                                 
+1  Joseph S. Amundsen, CPA, Exchange Act Release No. 85250, 2019 WL 1036154, at *1 
+(Mar. 5, 2019). 
+2  DE 23, Case No. 13-71472 (9th Cir. Feb. 26, 2019). 
+3  DE 24, Case No. 13-71472 (9th Cir. Mar. 4, 2019) (“Deficiencies: Case closed, no further 
+filings per 02/26/2019 order.”). 
+2 
+ 
+Amundsen is reminded that the instant administrative proceeding is set before the 
+Securities and Exchange Commission—and is separate from the civil injunctive action before the 
+U.S. District Court for the Northern District of California and his long-since-closed appeals to 
+the Ninth Circuit or to the D.C. Circuit.4  If the Commission issues in this administrative 
+proceeding a final order that is adverse to him, Amundsen may seek judicial review in 
+accordance with Section 25(a) of the Securities Exchange Act of 1934.5   
+In the meantime, Amundsen, like any party to a Commission administrative proceeding, 
+is expected to comply with the deadlines and other requirements set forth in the Commission’s 
+Rules of Practice and the orders issued by the Commission.6  A party that fails to make a 
+required filing, cure a deficient filing, respond to a dispositive motion, or otherwise defend the 
+proceeding may be subject to sanctions, including the entry of a finding of default.7   
+No further action will be taken regarding Amundsen’s February 19 or March 7 
+correspondence. 
+For the Commission, by the Office of the General Counsel, pursuant to delegated 
+authority. 
+ 
+ 
+     Vanessa A. Countryman 
+             Acting  Secretary 
+                                                 
+4  See Case No. 3:83-cv-00711-WHA (N.D. Cal.); Case No. 13-71472 (9th Cir.); Case No. 
+10-17759 (9th Cir.); Case No. 13-1252 (D.C. Cir.). 
+5  15 U.S.C. § 78y(a). 
+6  See, e.g., McBarron Capital LLC, Exchange Act Release No. 81789, 2017 WL 4350655, 
+at *4 (Sep. 29, 2017). 
+7  Rules of Practice 155, 180, 17 C.F.R. §§ 201.155, .180; Joseph S. Amundsen, CPA, 
+Exchange Act Release No. 85081, 2019 WL 497277, at *8 (Feb. 8, 2019). 

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+UNITED STATES OF AMERICA 
+before the 
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 85717 / April 25, 2019 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 4044 / April 25, 2019 
+ 
+Admin. Proc. File No. 3-18994  
+ 
+ 
+In the Matter of 
+ 
+JOSEPH S. AMUNDSEN, CPA,  
+MICHAEL T. REMUS, CPA, AND 
+MICHAEL REMUS CPA.  
+ 
+ 
+ 
+ORDER 
+On February 8, 2019, the Commission issued an order (the “OIP”) instituting 
+administrative and cease-and-desist proceedings pursuant to Sections 4C(a)(2) and (a)(3) and 
+21C of the Securities Exchange Act of 1934 and Rule 102(e)(1)(ii) and (iii) of the Commission’s 
+Rules of Practice against Joseph S. Amundsen, CPA, Michael T. Remus, CPA, and Michael 
+Remus CPA (collectively, Respondents).1  In compliance with the statutory provision governing 
+cease-and-desist proceedings, the OIP specified that a “public hearing before the Commission for 
+the purposes of taking evidence . . . shall be convened not earlier than 30 days and not later than 
+60 days” from service of the OIP.2  The statute also provides that “an earlier or later date” for the 
+hearing may be “set by the Commission with the consent of any respondent so served.”3   
+Respondents were served with the OIP on February 11, 2019.  Amundsen consented that 
+the hearing be held after the 60-day statutory deadline, but has not proposed a specific date.4  
+The other two respondents, Michael T. Remus, CPA, and Michael Remus CPA (the “Remus 
+Respondents”), agreed with the Division of Enforcement that the hearing should begin on June 
+17, 2019.  The Commission finds that it would serve the interests of justice and not result in 
+                                                 
+1  Exchange Act Release No. 85081, 2019 WL 497277 (Feb. 8, 2018). 
+2  Id. at *8. 
+3  15 U.S.C. § 78u-3(b). 
+4  Amundsen waived any right to an earlier hearing by failing to timely dispute the Division 
+of Enforcement’s representation that he separately communicated his “consent that the hearing in 
+this matter be held after the 60-day statutory deadline.”  Joseph S. Amundsen, CPA, Exchange 
+Act Release No. 85284, 2019 WL 1116195, at *1-2 (Mar. 11, 2019).   
+2 
+ 
+prejudice to any party to specify further procedures in this matter.5  To the extent conflicting, the 
+procedures specified in this order supersede those specified in the OIP. 
+Accordingly, IT IS ORDERED that a public hearing for purposes of taking evidence on 
+the questions set forth in Section III of the OIP shall be convened before an Administrative Law 
+Judge on June 17, 2019, as provided by Rule of Practice 110.6  The Chief Administrative Law 
+Judge shall by rotation to the extent practicable designate an ALJ to be the presiding hearing 
+officer.7  The presiding hearing officer shall specify the time and place of the hearing by further 
+order.  The presiding hearing officer shall exercise the full powers conferred by the 
+Commission’s Rules of Practice and the Administrative Procedure Act.8 
+Attention is called to Rule of Practice 151(b) and (c), providing that when, as here, the 
+Commission has assigned a case to a hearing officer, all papers shall be filed with the Office of 
+the Secretary (with a copy provided to the hearing officer) and that all motions, objections, or 
+applications shall be directed to and decided by the presiding hearing officer.9  This includes, 
+without limitation, filings under Rules of Practice 210, 221, 222, 230, 231, 232, 233, and 250.10  
+The parties should comply with the hearing officer’s instructions regarding the provision of 
+electronic courtesy copies. 
+IT IS FURTHER ORDERED that the proposed procedural schedule set forth in the joint 
+report filed by the Division of Enforcement and the Remus Respondents on April 5, 2019 
+following their pre-hearing conference is adopted.  Any request for modification of the schedule 
+shall be directed to and decided by the presiding hearing officer.  That schedule applies to 
+Amundsen notwithstanding his refusal to participate in the pre-hearing conference.   
+Amundsen contends that this administrative proceeding “should wait until” there is a 
+ruling in a separate civil action in the U.S. District Court for the Northern District of California, 
+where there is a pending motion to find Amundsen in contempt of a 1983 injunction.11  But 
+Amundsen has not established—or even attempted to establish—that a stay of this proceeding is 
+                                                 
+5  Rule of Practice 100(c), 17 C.F.R. § 201.100(c).   
+6  17 C.F.R. § 201.110.  The hearing officer shall have authority to give effect to an 
+agreement by all respondents to a different hearing date, but absent such agreement the public 
+hearing must commence by June 17, 2019. 
+7  17 C.F.R. § 200.30-10(a)(2). 
+8  See, e.g., Rule of Practice 111, 17 C.F.R. § 201.111; 5 U.S.C. § 556.   
+9  17 C.F.R. § 201.151(b)-(c).  Any motion or other prehearing request currently pending 
+before the Commission is referred to the hearing officer for disposition. 
+10  17 C.F.R. §§ 201.210, 221, 222, 230, 231, 232, 233, 250. 
+11  See DE 111, Case No. 3:83-cv-00711-WHA (N.D. Cal. Feb. 8, 2019); DE 128, Case No. 
+3:83-cv-00711-WHA (N.D. Cal. Mar. 28, 2019).   
+3 
+ 
+warranted, and the Commission is not aware of any order from the district court suggesting or 
+directing a stay of this administrative proceeding.  As the Commission has repeatedly made 
+clear, the instant proceeding is set before the Securities and Exchange Commission, and is 
+separate from the cases or appeals in other jurisdictions in which Amundsen may also be a 
+party.12  Amundsen, like any party to a Commission administrative proceeding, is expected to 
+comply with the deadlines and other requirements set forth in the Commission’s Rules of 
+Practice and the orders issued by the Commission or the hearing officer.  A party that fails to 
+appear at a hearing or conference of which the party has been notified, make a required filing, 
+cure a deficient filing, respond to a dispositive motion, or otherwise defend the proceeding may 
+be subject to sanctions, including the entry of a finding of default.13 
+IT IS FURTHER ORDERED that, pursuant to Rule of Practice 360(a)(2), the hearing 
+officer shall issue an initial decision no later than 120 days from the occurrence of one of the 
+following events: (A) The completion of post-hearing briefing in a proceeding where the public 
+hearing has been completed; (B) Where the hearing officer has determined that no public hearing 
+is necessary, upon completion of briefing on a motion pursuant to Rule of Practice 250;14 or (C) 
+The determination by the hearing officer that a party is deemed to be in default under Rule of 
+Practice 155 and no public hearing is necessary.15  This proceeding shall be deemed to be one 
+under the 120-day timeframe specified in Rule of Practice 360(a)(2)(i) for the purposes of 
+applying Rules of Practice 233 and 250.16 
+IT IS FURTHER ORDERED that the initial decision be issued on the basis of the record 
+before the hearing officer, as defined by Rule of Practice 350,17 and that the record index shall be 
+prepared and certified in accordance with Rule of Practice 351.18 
+IT IS FURTHER ORDERED that, upon issuance of an initial decision, Rules of Practice 
+360(d), 410, and 411 shall govern further Commission consideration of this matter.19 
+                                                 
+12  See Joseph S. Amundsen, CPA, Exchange Act Release No. 85423, 2019 WL 1353778, at 
+*1-2 (Mar. 26, 2019); Joseph S. Amundsen, CPA, Exchange Act Release No. 85310, 2019 WL 
+1167740, at *1 (Mar. 13, 2019); Joseph S. Amundsen, CPA, Exchange Act Release No. 85250, 
+2019 WL 1036154, at *1 (Mar. 5, 2019).   
+13  Rules of Practice 155, 180, 17 C.F.R. §§ 201.155, .180. 
+14  17 C.F.R. § 201.250. 
+15  17 C.F.R. § 201.155. 
+16  17 C.F.R. §§ 201.233, .250, .360(a)(2)(i).   
+17  17 C.F.R. § 201.350. 
+18  17 C.F.R. § 201.351. 
+19  17 C.F.R. §§ 201.360(d), 410, 411.  Prior to issuance of an initial decision, interlocutory 
+Commission review shall be governed by Rule of Practice 400.  17 C.F.R. § 201.400. 
+4 
+ 
+This order does not preclude the Commission from assigning the matter to the 
+Commission itself or to any member of the Commission at any time. 
+ 
+By the Commission. 
+ 
+ 
+ 
+       Vanessa A. Countryman 
+       Acting Secretary 

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+1 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 86028 / June 4, 2019 
+ 
+ACCOUTING AND AUDITING ENFORCEMENT 
+Release No. 4048 / June 4, 2019 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-19191 
+ 
+ 
+In the Matter of 
+ 
+MICHAEL T. RAND, CPA 
+ 
+Respondent. 
+ 
+ 
+ORDER OF SUSPENSION PURSUANT TO 
+RULE 102(e)(2) OF THE COMMISSION’S 
+RULES OF PRACTICE 
+   
+ 
+I. 
+ 
+The Securities and Exchange Commission deems it appropriate to issue an order of 
+forthwith suspension of Michael T. Rand pursuant to Rule 102(e)(2) of the Commission’s Rules 
+of Practice [17 C.F.R. § 201.102(e)(2)].1  
+ 
+II. 
+ 
+The Commission finds that:  
+ 
+ 1. Rand, age 56, was a certified public accountant (“CPA”) licensed to practice in 
+the State of Georgia.  His CPA licensed lapsed in 2009.  From 1996 until 2007 Rand worked for 
+Beazer Homes USA, Inc. (“Beazer”) in various accounting positions, ultimately rising to the 
+position of Senior Vice President and Chief Accounting Officer of Beazer prior to his 
+termination by Beazer in 2007. 
+ 
+                                                 
+1  Rule 102(e)(2) provides in pertinent part:  “Any ... person who has been convicted of a felony or a 
+misdemeanor involving moral turpitude shall be forthwith suspended from appearing or practicing before t he 
+Commission.” 
+ 
+ 2 
+ 2. On July 18, 2014, a jury in the Western District of North Carolina found Rand 
+guilty of, among other things, charges of conspiracy to:  (a) commit securities and wire fraud, (b) 
+make false or misleading statements to auditors and accountants, (c) circumvent Beazer’s 
+internal accounting controls, and (d) falsify books, records, and accounts of Beazer.  United 
+States v. Rand, 3:10-cr-00182-RJC –DSC (W.D.N.C.).   
+ 
+3. A judgment of criminal conviction against Rand was entered on December 11, 
+2015.  As a result of this conviction, Rand was sentenced to 120 months imprisonment in a 
+federal penitentiary.   
+ 
+III. 
+ 
+In view of the foregoing, the Commission finds that Rand has been convicted of a felony 
+within the meaning of Rule 102(e)(2) of the Commission’s Rules of Practice. 
+ 
+Accordingly, it is ORDERED, that Rand is forthwith suspended from appearing or 
+practicing before the Commission pursuant to Rule 102(e)(2) of the Commission’s Rules of 
+Practice. 
+ 
+ By the Commission. 
+             
+       Vanessa A. Countryman 
+       Acting Secretary 
+ 
+ 
+ 
+ 
+ 

raw/aaer/2019/AAER-4050.txt

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+ 
+UNITED STATES OF AMERICA 
+Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 86107 / June 14, 2019 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 4050 / June 14, 2019 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-19201 
+ 
+In the Matter of 
+ 
+DAVID VOGEL, CPA 
+ 
+Respondent. 
+ 
+ 
+ 
+ 
+ORDER INSTITUTING CEASE-AND-
+DESIST PROCEEDINGS PURSUANT TO 
+SECTION 21C OF THE SECURITIES 
+EXCHANGE ACT OF 1934, MAKING 
+FINDINGS, AND IMPOSING A CEASE-
+AND-DESIST ORDER  
+  
+I. 
+ 
+ The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
+and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
+Exchange Act of 1934 (“Exchange Act”), against David Vogel (“Vogel” or “Respondent”).   
+ 
+II. 
+ 
+ In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
+of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
+purpose of these proceedings and any other proceedings brought by or on behalf of the 
+Commission, or to which the Commission is a party, and without admitting or denying the findings 
+herein, except as to the Commission’s jurisdiction over him and the subject matter of these 
+proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
+and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
+Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below.  
+ 2 
+ 
+III. 
+ 
+ On the basis of this Order and Respondent’s Offer, the Commission finds1 that:  
+ 
+Summary 
+ 
+1. As discussed below, these proceedings arise out of the Respondent’s role in 
+preparing contracts designed to allow KIT Digital, Inc. (“KIT Digital”) to improperly recognize 
+revenue for the year ended December 31, 2011.  As a result, KIT Digital improperly recognized 
+$4.8 million in revenue for the fourth quarter of 2011, as well as understated its net loss before 
+income taxes.  Without this material overstatement of revenue, KIT Digital would not have met 
+either its own revenue guidance or analysts’ expectations.   
+ 
+Respondent  
+ 
+2. Vogel, age 55, was KIT Digital’s senior vice president for finance, reporting 
+directly to KIT Digital’s chief financial officer from March 2010 through March 2012.  Vogel 
+received a bachelor’s degree in mathematics from Hobart and William Smith Colleges in 1987, 
+and an MBA degree from Fairleigh Dickinson University in 1993.  Vogel has been a certified 
+public accountant licensed in New Jersey since 1992.  He currently resides in Randolph, New 
+Jersey. 
+ 
+Relevant Entity 
+ 
+3. KIT Digital, Inc. (“KIT Digital”) was a public Delaware corporation with principal 
+places of business in New York City, Dubai UAE, and Prague, Czech Republic.  KIT Digital was 
+formerly known as ROO Group, and changed its name to KIT Digital in May 2008.  As KIT 
+Digital, the company traded on the OTC Bulletin Board until August 2009, when the company 
+became listed on NASDAQ under the symbol KITD.2  On April 25, 2013, Piksel, Inc. (successor 
+entity to KIT Digital) filed a voluntary petition for reorganization under chapter 11 of the United 
+States Bankruptcy Code.   
+ 
+                                                 
+1  The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any 
+other person or entity in this or any other proceeding.   
+ 
+2  On January 11, 2013, NASDAQ filed a Form 25 to delist KIT Digital’s common stock and to deregister the 
+stock under Section 12(b) of the Exchange Act.  On October 4, 2013, Piksel (successor entity to KIT Digital) fil ed a 
+Form 15 to delist KITD common stock under Section 12(g) of the Exchange Act. 
+ 3 
+The Transaction At Issue 
+ 
+4. In late December 2011, KIT Digital acquired a private company, Corporation X, 
+which offered a “cloud-based video delivery platform”, i.e. a method by which companies could 
+stream video over the Internet.  The deal team for KIT Digital included, among others, KIT 
+Digital’s chief financial officer (“CFO”).  At the time of its negotiations with KIT Digital, 
+Corporation X had a contract to create and deliver a software product for two subsidiaries of a 
+Mexican corporate conglomerate (“Customer A” and “Customer B”).  By the time of the 
+acquisition, Corporation X had not completely delivered the fully functional software product to 
+Customers A and B. 
+ 
+5. In early December 2011, prior to the closing of KIT Digital’s acquisition of 
+Corporation X, KIT Digital’s CFO directed Vogel to create contracts between KIT Digital and 
+Customers A and B and other documents that would provide a basis for KIT Digital to recognize 
+revenue by year-end from those customers.  As part of that effort, the CFO emailed Vogel a list of 
+factors that these contracts would encompass.  As Vogel should have recognized, the facts and 
+circumstances did not allow for revenue recognition consistent with Generally Accepted 
+Accounting Principles (“GAAP”), and the newly created documentation did not alter that 
+conclusion.   
+ 
+6. Over the following weeks, at the direction of and in consultation with KIT Digital’s 
+CFO, Vogel, in concert with others at Corporation X, drafted purportedly new contracts with 
+Customers A and B.  Vogel separated what had been one contract for Customers A and B into two 
+contracts for each customer:  (1) a software “license agreement” and (2) one or more “services” 
+agreements that referenced future services KIT Digital was to provide for Customers A and B in 
+connection with the software license. The “license agreements” made no references to the necessity 
+for any future software development or launch dates, nor did the two agreements reference one 
+another in any way.  The “services” agreements called for KIT Digital to provide maintenance and 
+support, but also to develop the software functionality referenced in the license agreement.  Most 
+of the monetary consideration was put into the license agreements, while the services agreements 
+provided for “negative” consideration—rather than earning money for delivering on the services, 
+the contracts provided for penalties that would reduce the up-front consideration paid for the 
+license should KIT Digital fail to deliver the software functionality by specific deadlines.  
+ 4 
+ 
+7. Under accounting principles applicable to software, KIT Digital could only have 
+recognized the license fee from Customers A and B as revenue in December 2011 if the software 
+did not need significant development or modification and met other general revenue recognition 
+criteria.  If software is sold that does require significant development, then the arrangement should 
+apply contract accounting, which would require KIT Digital to either recognize revenue ratably, as 
+work was completed (the percentage-of-completion method), or recognize full revenue upon total 
+completion of the contract (the completed-contract method), depending on the circumstances.3  
+Rather than altering the application of these accounting principles, the separate license and service 
+agreements served only to hide the true nature of what KIT Digital was contracting for, and thus 
+provide false justification for KIT Digital’s revenue recognition.  With the separate contracts, KIT 
+Digital pretended – based on the “license agreement” – that it had fully delivered the “KIT 
+Platform” product, without any need for development or modification, by the end of December 
+2011, inappropriately misapplying the foregoing accounting principles to immediately recognize 
+the substantial license fees as revenue -- $2.5 million and $2.3 million, respectively, for Customer 
+A and B.  The actual development work that remained to be completed after 2011 was hidden in 
+the “services” agreements, which by its terms provided for only relatively minor maintenance and 
+support fees, together with “penalties” for failure to complete the listed services by certain 
+deadlines that amounted approximately to the license fees.   
+ 
+8. In late December 2011, as the closing of KIT Digital’s acquisition of Corporation X 
+approached, Customers A and B, at Corporation X’s request, terminated their contracts with 
+Corporation X.  KIT Digital and Customers A and B entered into the contracts drafted by Vogel, at 
+the direction of the CFO, on December 30, 2011. 
+ 
+9. KIT Digital delivered no product to Customers A and B in 2011.  Nevertheless, 
+KIT Digital recognized the $4.8 million in “license fees” as revenue in the fourth quarter of 2011.  
+This overstated revenue was reported on KIT Digital’s Form 10-K for the year ended December 
+31, 2011, making that filing materially inaccurate.  The misstatement also resulted in understated 
+liabilities and overstated stockholders’ equity on KIT Digital’s year-end balance sheet. 
+ 
+10. Given his background and expertise as an accountant, Vogel should have known 
+that the new contracts he had created did not justify the $4.8 million in revenue that KIT Digital 
+recognized from the contracts with Customers A and B.      
+ 
+                                                 
+3  Accounting Standards Codification (“ASC”) 985-605-25-2 states: “If an arrangement to deliver software or 
+a software system, either alone or together with other products or services, requires significant production, 
+modification, or customization of software, the entire arrangement shall be accounted for in conformity with 
+Subtopic 605-35, using the relevant guidance in paragraphs 985-605-25-88 through 25-107: on applying contract 
+accounting to certain arrangements involving software.”  ASC 605-35 is entitled Construction-Type and Production-
+Type Contracts and ASC 605-35-25-1 says, “the basic accounting policy decision is the choice between two 
+generally accepted methods: the percentage-of-completion method including units of delivery and the completed -
+contract method.”  The determination of which of the two methods is preferable is based on a careful evaluation of 
+the circumstances because the two methods should not be acceptable alternatives for the same circumstances.” 
+ 
+ 
+ 5 
+11. Also as a result of the conduct described above, KIT Digital violated Section 13(a) 
+of the Exchange Act and Rules 13a-1 and 12b-20 thereunder, which require every issuer of a 
+security registered pursuant to Section 12 of the Exchange Act file with the Commission 
+information, documents, and annual reports as the Commission may require, and mandate that 
+periodic reports contain such further material information as may be necessary to make the 
+required statements not misleading.  
+ 
+12. As a result of the conduct described above, KIT Digital violated Section 
+13(b)(2)(A) of the Exchange Act, which requires reporting companies to make and keep books, 
+records, and accounts which, in reasonable detail, accurately and fairly reflect their transactions 
+and dispositions of their assets.  
+ 
+13. As a result of the conduct described above, KIT Digital also violated Section 
+13(b)(2)(B) of the Exchange Act, which require all reporting companies to devise and maintain a 
+system of internal accounting controls sufficient to provide reasonable assurances that transactions 
+are recorded as necessary to permit preparation of financial statements in accordance with 
+generally accepted accounting principles. 
+ 
+14. Rule 13b2-1 of the Exchange Act provides that no person shall falsify or cause to 
+be falsified any book, record, or account subject to Section 13(b)(2)(A).   
+ 
+15. As a result of the conduct described above, Vogel violated Rule 13b2-1 of the 
+Exchange Act, and caused violations of Sections 13(a) and 13(b)(2)(A) and (B) of the Exchange 
+Act, and Rules 13a-1, 13b2-1, and 12b-20 thereunder. 
+    
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent Vogel’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED that: 
+ 
+ A. Pursuant to Section 21C of the Exchange Act, Respondent Vogel cease and desist 
+from committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A) 
+and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13b2-1 thereunder.   
+ 
+ 
+B. Respondent shall pay civil penalties of $15,000 to the Securities and Exchange 
+Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act 
+Section 21F(g)(3).  Payment shall be made over three years in the following installments: 
+ 
+ $1,500 within 21 days of the entry of this order;  
+ 
+ $300 per quarter for the first year following the entry of this order; 
+ 
+ $1,300 per quarter for the second year following the entry of this order; and 
+ 6 
+ 
+ $1,775 per quarter for the third year following the entry of this order. 
+  
+Payments shall be applied first to post order interest, which accrues pursuant to 31 U.S.C. § 
+3717.  Prior to making the final payment set forth herein, Respondent shall contact the staff of the 
+Commission for the amount due.  If Respondent fails to make any payment by the date agreed 
+and/or in the amount agreed according to the schedule set forth above, all outstanding payments 
+under this Order, including post-order interest, minus any payments made, shall become due and 
+payable immediately at the discretion of the staff of the Commission without further application to 
+the Commission. 
+ 
+Payment must be made in one of the following ways:   
+ 
+(1) Respondent may transmit payment electronically to the Commission, which 
+will provide detailed ACH transfer/Fedwire instructions upon request;  
+ 
+(2) Respondent may make direct payment from a bank account via Pay.gov 
+through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
+ 
+(3) Respondent may pay by certified check, bank cashier’s check, or United 
+States postal money order, made payable to the Securities and Exchange 
+Commission and hand-delivered or mailed to:  
+ 
+Enterprise Services Center 
+Accounts Receivable Branch 
+HQ Bldg., Room 181, AMZ-341 
+6500 South MacArthur Boulevard 
+Oklahoma City, OK 73169 
+ 
+Payments by check or money order must be accompanied by a cover letter identifying 
+David Vogel as a Respondent in these proceedings, and the file number of these proceedings; a 
+copy of the cover letter and check or money order must be sent to Sanjay Wadhwa, Division of 
+Enforcement, Securities and Exchange Commission, New York Regional Office, 200 Vesey Street, 
+New York, New York 10281. 
+ 
+ C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
+treated as penalties paid to the government for all purposes, including all tax purposes.  To 
+preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
+Action, he shall not argue that he is entitled to, nor shall he benefit by, offset or reduction of any 
+award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
+penalty in this action ("Penalty Offset").  If the court in any Related Investor Action grants such a 
+Penalty Offset, Respondent agrees that he shall, within 30 days after entry of a final order granting 
+the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the 
+Penalty Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed 
+an additional civil penalty and shall not be deemed to change the amount of the civil penalty 
+ 7 
+imposed in this proceeding.  For purposes of this paragraph, a "Related Investor Action" means a 
+private damages action brought against Respondent by or on behalf of one or more investors based 
+on substantially the same facts as alleged in the Order instituted by the Commission in this 
+proceeding. 
+V. 
+It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section 
+523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and admitted by 
+Respondent, and further, any debt for disgorgement, prejudgment interest, civil penalty or other 
+amounts due by Respondent under this Order or any other judgment, order, consent order, decree 
+or settlement agreement entered in connection with this proceeding, is a debt for the violation by 
+Respondent of the federal securities laws or any regulation or order issued under such laws, as set 
+forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. §523(a)(19). 
+ 
+ 
+ By the Commission. 
+ 
+ 
+ 
+       Vanessa A. Countryman 
+       Acting Secretary 
+ 
+ 

raw/aaer/2019/AAER-4053.txt

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+ 
+UNITED STATES OF AMERICA  
+Before the  
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No. 86124 / June 17, 2019 
+ACCOUNTING AND AUDITING ENFORCEMENT  
+Release No. 4053 / June 17, 2019 
+ADMINISTRATIVE PROCEEDING  
+File No. 3-15645 
+ 
+In the Matter of  
+Michael Santicchia, CPA  
+ 
+: 
+: 
+: 
+: 
+: 
+: 
+ORDER GRANTING APPLICATION FOR 
+REINSTATEMENT TO APPEAR AND PRACTICE 
+BEFORE THE COMMISSION AS AN ACCOUNTANT 
+ 
+On December 12, 2013, Michael Santicchia, CPA (“Santicchia”) 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 Santicchia pursuant to Rule 
+102(e)(1) of the Commission’s Rules of Practice.1  This order is issued in response to 
+Santicchia’s application for reinstatement to appear and practice before the Commission as an 
+accountant. 
+ 
+The Commission’s order involved misconduct by Santicchia in completing surprise 
+exams pursuant to Section 206(4) of the Advisers Act of 1940 and Rule 206(4)-2 thereunder (the 
+“Custody Rule”).  Freedom One Investment Advisors, Inc. (“Freedom One”), a formerly 
+registered investment adviser, had custody of client assets and was required by the Custody Rule 
+to have an independent public accountant conduct annual surprise exams to verify those assets.  
+For 2006 and 2008, Freedom One engaged UHY LLP to perform the surprise exams.  Santicchia 
+was a partner at UHY LLP and served as a member of the engagement team for both surprise 
+exams.  By failing to complete the surprise exams (i.e. conduct fieldwork, prepare and issue a 
+surprise exam report, and file Forms ADV-E), Santicchia engaged in improper professional 
+conduct and caused Freedom One to violate the Custody Rule. 
+ 
+Santicchia 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 
+                                                 
+1 See Accounting and Auditing Enforcement Release No. 3518 dated December 12, 2013.  Santicchia was permitted, 
+pursuant to the order, to apply for reinstatement after three years upon making certain showings. 
+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, Santicchia 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 Santicchia, it appears that he has complied with the terms of the December 12, 2013 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 Santicchia, 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 Santicchia, by undertaking to 
+comply with all requirements of the Commission and the Public Company Accounting Oversight 
+Board, including, but not limited to, all requirements relating to registration, inspections, 
+concurring partner reviews and quality control standards, in his practice before the Commission 
+as an independent accountant has shown good cause for reinstatement.  Therefore, it is 
+accordingly, 
+ 
+ORDERED pursuant to Rule 102(e)(5)(i) of the Commission’s Rules of Practice that 
+Michael Santicchia, CPA is hereby reinstated to appear and practice before the Commission as 
+an accountant. 
+ 
+By the Commission. 
+ 
+ 
+ 
+Vanessa A. Countryman  
+Acting Secretary  
+ 
+                                                 
+2 Rule 102(e)(5)(i) provides: 
+ 
+“An application for reinstatement of a person permanently suspended or disqualified under paragraph (e)(1) or (e)(3) 
+of this rule 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). 

raw/aaer/2019/AAER-4060.txt

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+ 
+ 
+UNITED STATES OF AMERICA  
+Before the  
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No. 86495 / July 26, 2019 
+ACCOUNTING AND AUDITING ENFORCEMENT  
+Release No. 4060 / July 26, 2019 
+ADMINISTRATIVE PROCEEDING  
+File No. 3-12326 
+ 
+In the Matter of  
+Nevanna Sacks, CPA  
+ 
+: 
+: 
+: 
+: 
+: 
+: 
+ORDER GRANTING APPLICATION FOR 
+REINSTATEMENT TO APPEAR AND PRACTICE 
+BEFORE THE COMMISSION AS AN INDEPENDENT 
+ACCOUNTANT  
+ 
+On June 7, 2006, Nevanna Sacks, CPA (“Sacks”) 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 Sacks pursuant to Rule 102(e) of the 
+Commission's Rules of Practice.1  On February 16, 2010, Sacks was 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.2  This order is issued in response 
+to Sacks’ application for reinstatement to appear and practice before the Commission as an 
+independent accountant. 
+ The Commission alleged that Sacks engaged in improper professional conduct with 
+respect to certain audits and reviews of Peregrine Systems, Inc.’s (“Peregrine”) financial 
+statements by Arthur Andersen LLP (“Andersen”).  Sacks served as audit manager on 
+Andersen’s audit of Peregrine’s fiscal year 2001 financial statements and review of the 
+company’s quarterly financial statements for the third quarter of 2001 and the first, second and 
+third quarters of 2002.  Sacks engaged in improper professional conduct by repeatedly engaging 
+in unreasonable conduct, resulting in a violation of applicable professional standards that 
+indicated a lack of competence to practice before the Commission.  Sacks (i) failed to adequately 
+audit Peregrine’s accounts receivable; (ii) did not obtain sufficient competent evidential matter to 
+                                                 
+1 See Accounting and Auditing Enforcement Release No. 2441 dated June 7, 2006.  Sacks was permitted, pursuant 
+to the order, to apply for reinstatement after two years upon making certain showings.  
+ 
+2 See Accounting and Auditing Enforcement Release No. 3114 dated February 16, 2010. 
+ 
+ 2 
+conclude that Peregrine had a history of collecting on certain sales; (iii) failed to make adequate 
+inquiries into Peregrine’s agreements with customers; (iv) failed to obtain sufficient competent 
+evidential matter to afford a reasonable basis for Andersen to issue a report on the financial 
+statements of Peregrine, which consolidated the financial statements of Peregrine Germany, a 
+material subsidiary, after Arthur Andersen Germany refused to provide an audit report on the 
+financial statements of Peregrine Germany; (v) failed to exercise due professional care in 
+connection with Peregrine’s false and misleading response to a Commission Comment Letter; 
+and (vi) failed to exercise due professional care in connection with the audit and reviews. 
+ 
+Sacks has met all of the conditions set forth in her original suspension order and, in her 
+capacity as an independent accountant, has stated that she 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. 
+ 
+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.”3  This “good cause” determination is 
+necessarily highly fact specific. 
+ 
+On the basis of information supplied, representations made, and undertakings agreed to 
+by Sacks, it appears that she has complied with the terms of the June 7, 2006 order denying her 
+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 her character, integrity, 
+professional conduct or qualifications to practice before the Commission that would be a basis 
+for adverse action against her pursuant to Rule 102(e) of the Commission's Rules of Practice, and 
+that Sacks, 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  
+                                                 
+3 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, b e 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). 
+ 
+ 
+ 3 
+registration, inspections, concurring partner reviews, and quality control standards in her practice 
+before the Commission as an independent accountant, has shown good cause for reinstatement.  
+Therefore, it is accordingly, 
+ 
+ORDERED pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice that 
+Nevanna Sacks, CPA is hereby reinstated to appear and practice before the Commission as an 
+independent accountant. 
+ 
+By the Commission. 
+ 
+ 
+Vanessa A. Countryman 
+Secretary  

raw/aaer/2019/AAER-4061.txt

@@ -0,0 +1,652 @@
+1 
+PRSNL.07937 
+UNITED STATES OF AMERICA 
+Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 86538 / August 1, 2019 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 4061 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-19300 
+ 
+ 
+ 
+ 
+In the Matter of 
+ 
+BRIXMOR PROPERTY GROUP INC., 
+ 
+Respondent. 
+ 
+ 
+ 
+  
+ 
+ORDER INSTITUTING CEASE-AND-
+DESIST PROCEEDINGS PURSUANT 
+TO SECTION 21C OF THE 
+SECURITIES EXCHANGE ACT OF 
+1934, MAKING FINDINGS, AND 
+IMPOSING A CEASE-AND-DESIST 
+ORDER          
+ 
+ 
+ I. 
+ 
+The Securities and Exchange Commission (“Commission”) deems it appropriate that 
+cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the 
+Securities Exchange Act of 1934 (“Exchange Act”), against Brixmor Property Group Inc. 
+(“Brixmor” or “Respondent”).  
+ 
+II. 
+ 
+In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
+of Settlement (“Offer”) which the Commission has determined to accept.  Solely for the purpose 
+of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 
+which the Commission is a party, and without admitting or denying the findings herein, except as 
+to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 
+admitted, Respondent consents to the entry of this Order Instituting Cease-and-Desist 
+Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, 
+and Imposing a Cease-and-Desist Order (“Order”), as set forth below. 
+ 
+ 
+2 
+PRSNL.07937 
+III. 
+ 
+On the basis of this Order and Respondent’s Offer, the Commission finds1  that:  
+ 
+Summary 
+ 
+1. These proceedings arise from Brixmor’s violations of the antifraud and books and 
+records provisions of the Exchange Act.  Brixmor is a publicly-traded real estate investment trust 
+(“REIT”) that is one of the nation’s largest owners and operators of open-air shopping centers.  
+Between the third quarter of 2013 and the third quarter of 2015 (the “Relevant Period”), 
+Brixmor, acting through its then senior executives, manipulated and falsely reported its “Same 
+Property Net Operating Income Growth Rate,” or “SP NOI Growth Rate,” a non-GAAP measure 
+relied on by investors and analysts to assess Brixmor’s financial performance.  During the 
+Relevant Period, Brixmor materially misstated its SP NOI Growth Rate in all but one of its 
+quarterly filings (Forms 10-Q), each of its two annual filings (Forms 10-K), and its related Forms 
+8-K.   
+ 
+ 
+Respondent 
+2. Brixmor is a Maryland corporation with its principal executive offices located in 
+New York, New York.  Throughout the relevant period its common stock was registered with the 
+Commission under Exchange Act Section 12(b) and publicly traded on the New York Stock 
+Exchange “NYSE” (symbol: BRX).  Brixmor files annual and quarterly reports under Exchange 
+Act Section 13.   
+ 
+Facts 
+ 
+SP NOI and SP NOI Growth Rate 
+  
+3. For financial reporting purposes, publicly traded issuers in the United States must 
+follow accounting rules established by the Financial Accounting Standards Board and rules 
+adopted by the Commission, which are commonly referred to as generally accepted accounting 
+principles, or “GAAP.”  Additionally, many REITs, including Brixmor, report supplemental non-
+GAAP financial measures utilized by investors and analysts in understanding and assessing the 
+companies’ operating results.  One of the most important non-GAAP measures that REITs 
+typically report is same property net operating income (“SP NOI”), which is an adjusted version 
+of net operating income (“NOI”), another non-GAAP measure.  Brixmor, like many REITs, 
+defined NOI as rental income less rental operating expenses such as property operating expenses, 
+real estate taxes, and bad debt expense. 
+ 
+                                                           
+1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding 
+on any other person or entity in this or any other proceeding. 
+3 
+PRSNL.07937 
+4. SP NOI represents the NOI of the “Same Property Pool,” or the pool of properties 
+owned by the REIT as of the end of both the current reporting period and the same reporting 
+period in the prior year (the “Comparison Period”) for the entirety of both periods.  SP NOI 
+therefore excludes any NOI attributable to properties that were acquired, constructed, or disposed 
+of between the current reporting period and the Comparison Period.  Brixmor publicly stated 
+that, in addition, it excluded corporate level income, lease termination income and straight-line 
+rent amortization of above/below market leases from its calculation of SP NOI. 
+ 
+5. REITs not only report SP NOI as a dollar amount but also the percentage by 
+which SP NOI has grown between the current reporting period and the Comparison Period, 
+which is also known as “SP NOI Growth Rate.”  Because SP NOI Growth Rate reflects the 
+growth in the NOI of a static pool of properties, REIT management, including Brixmor’s, as well 
+as REIT investors and analysts consider it a valuable measure of a REIT’s ability to generate 
+growth from its existing properties over the course of a year, as opposed to growth through the 
+acquisition or construction of new properties. 
+ 
+Brixmor Publicly Reported False SP NOI Growth Rates during the Relevant Period and 
+Touted This Metric to Investors 
+ 
+6. During the Relevant Period, SP NOI and SP NOI Growth Rate were two of the 
+most important performance metrics to Brixmor’s management because of their importance to 
+analysts and investors.  Each of Brixmor’s Forms 10-Q and 10-K during the Relevant Period 
+reflected that importance.  For example, each filing stated, in identical or substantially similar 
+form, that SP NOI was “utilized to evaluate the operating performance of real estate companies 
+and is frequently used by securities analysts, investors and other interested parties in 
+understanding business and operating results regarding the underlying economics of our business 
+operations,” and that it “provides a more consistent metric for comparing the performance of 
+properties.”   
+ 
+7. From its inception as a public company, Brixmor touted its steady and consistent 
+SP NOI Growth.  In an initial public offering (“IPO”) roadshow presentation before the company 
+went public in October 2013, Brixmor told investors that it would achieve strong and consistent 
+SP NOI Growth over the next few years despite difficulties in the industry by “redeveloping and 
+repositioning” its existing portfolio of properties, rather than by acquiring or constructing new 
+properties.  To accomplish this, Brixmor would capitalize on a significant number of expiring 
+below-market rate leases that could soon be brought to market levels and upgrade its anchor 
+tenants to “best-in-class” grocery stores and other marquee tenants, which in turn would drive 
+small shop occupancy and rent gains. Over the next two years, Brixmor consistently pointed to 
+its SP NOI Growth Rate to demonstrate that these business strategies were successful. 
+ 
+8. Brixmor issued guidance for its SP NOI Growth Rate to the market in the form of 
+a range of projected full-year growth rates.  In December 2013, shortly after completing its IPO, 
+the Company issued SP NOI Growth Rate guidance of 3.9% to 4.0% for 2013 and 3.7% to 4.1% 
+for 2014; in October of 2014, it narrowed the guidance to 3.8% to 4.0% for 2014.  In February 
+2015, the Company issued SP NOI Growth Rate guidance of 3.0% to 3.7% for 2015, which it 
+narrowed to 3.5% to 3.7% in October 2015. 
+4 
+PRSNL.07937 
+ 
+9. Against this guidance, Brixmor, like most REITs, publically reported its actual SP 
+NOI and SP NOI Growth Rate on a quarterly and year to date basis in each of its Form 10-Qs 
+and 10-Ks as well as on a full-year basis in each of its Form 10-Ks, and on a quarterly basis in 
+related Form 8-Ks.  In every quarter but one during the Relevant Period, Brixmor reported SP 
+NOI Growth Rate results that landed squarely within the guidance range it had issued for the 
+year, and often directly in the middle of guidance. 
+ 
+10. In addition, in public statements in numerous earnings calls, investor 
+presentations, industry conferences, and shareholder letters, Brixmor’s then Chief Executive 
+Officer (“CEO”) and Brixmor’s then Chief Financial Officer (“CFO”) touted the company’s 
+consistent and predictable organic growth—as demonstrated by its SP NOI Growth Rate 
+results—as proof that their business strategies were succeeding and that Brixmor was 
+accomplishing the goals set forth during its IPO.   
+ 
+Brixmor Made Improper Adjustments to its Actual SP NOI to Achieve SP NOI Growth 
+Rate Targets During the Relevant Period 
+ 
+11. Contrary to its public disclosures, however, Brixmor’s actual SP NOI Growth 
+Rate was volatile and frequently fell above or below the company’s publically issued guidance 
+range during the Relevant Period.  Brixmor engaged in a multi-year effort to manipulate its 
+accounting to achieve stable and predictable growth rates that hit its guidance, something its 
+CEO, CFO, Brixmor’s then Chief Accounting Officer (“CAO”) and an employee who oversaw 
+the company’s property accounting department during the Relevant Period (“Accounting SVP”) 
+referred to internally as “mak[ing] the sausage.” 
+ 
+12. During each quarter, CEO and CFO set an internal specific quarterly target, typically 
+right down the middle of the Brixmor’s publically issued guidance range, for the company’s SP 
+NOI Growth Rate.  CFO then tasked CAO and Accounting SVP with making adjustments to 
+Brixmor’s actual SP NOI in order to achieve the desired results. 
+13. Brixmor manipulated its SP NOI Growth Rate using three methods, all of which 
+lacked any proper accounting justification:  (i) using an account referred to internally as a “cookie 
+jar” to improperly time the recognition of revenue; (ii) incorporating lease termination income into 
+SP NOI, contrary to the company’s public representation that it excluded lease termination income 
+from its calculation of SP NOI; and (iii) reducing the SP NOI for the Comparison Period in order to 
+make the current quarter’s SP NOI Growth Rate appear higher. 
+ 
+a.  Improper Timing of Revenue Recognition Using the “Cookie Jar” Account  
+ 
+14. Brixmor used an internal books and records account, the “2617 Account,” which 
+was referred to internally as a “cookie jar,” to improperly alter the timing of revenue recognition. 
+ 
+15. Among other things, the purported purpose of the 2617 Account was to hold 
+deferred revenue items whose status was uncertain until it could be determined whether, and when, 
+5 
+PRSNL.07937 
+the revenue should be properly recognized as income.  For example, if the amount of a tenant’s 
+common area maintenance payment or real estate tax payment was in dispute, Brixmor should have 
+held the payment in the 2617 Account until it could determine whether it was properly entitled to 
+recognize the item as income, at which point it would recognize the revenue as income in the 
+quarter that it was earned and collected, in accordance with GAAP.   
+ 
+16. On numerous occasions, however, Brixmor disregarded GAAP and improperly held 
+amounts in the 2617 Account, or selectively recognized such amounts, for the sole purpose of 
+meeting its SP NOI Growth Rate targets.  For example, in February 2015, after Brixmor received a 
+tenant common area maintenance payment, Accounting SVP was asked by his accounting staff 
+whether to recognize all of the payment as income that month.  Although the income should have 
+been recognized when it was received under GAAP, Accounting SVP directed the staff member to 
+leave it in the 2617 Account because it was only midway through the quarter, writing: “We were 
+going to see where results shake out and take it in if we have to.”  Brixmor improperly held the 
+payment in the 2617 Account until October 2015, when in discussing 3Q 2015 results, CAO relayed 
+to CFO that CEO “wants to show a 40 bp increase (3.8%) next qtr [the fourth quarter of 2015].”  
+Accordingly, Accounting SVP reported to CAO the total amount of revenue that was available in 
+the 2617 Account to boost the SP NOI Growth Rate for the fourth quarter of 2015, which included 
+the tenant common area maintenance payment that had been received in February of that year.  
+CAO later acknowledged in an October 2015 email to Accounting SVP that “we are emptying the 
+cookie jar to get to the [SP NOI Growth Rate] for this qtr [the fourth quarter of 2015],” consistent 
+with CEO’s earlier directive.  
+ 
+b. Improperly Incorporating Lease Termination Income into SP NOI   
+ 
+17. Lease termination income, also referred to internally at Brixmor as lease settlement 
+income or “LSI,” is a negotiated lump sum fee that a tenant pays Brixmor for exiting its lease early.  
+Under GAAP, LSI should be recognized in full when the lease is terminated and the payment is 
+received, thus becoming a part of reported GAAP income for that quarter. However, many REITs, 
+including Brixmor, exclude LSI from their calculation of SP NOI because it represents a one-time 
+payment that would otherwise skew the SP NOI Growth Rate as a comparative measure of the 
+growth in SP NOI between the current period and the Comparison Period. 
+ 
+18. In keeping with that industry practice, Brixmor told investors that LSI was excluded 
+from its SP NOI calculation in each of its Forms 10-Q and 10-K during the Relevant Period.  It 
+stated: “Same Property NOI excludes corporate level income (including transaction and other fees), 
+lease termination income, straight-line rent and amortization of above- and below-market leases of 
+the same property pool from the prior year reporting period to the current year reporting period.”   
+ 
+19. In reality, however, and unbeknownst to investors, Brixmor incorporated LSI into 
+SP NOI each quarter in a way that was intended to smooth its impact on Brixmor’s reported quarter-
+to-quarter SP NOI Growth Rate and help the Company achieve its SP NOI Growth Rate targets.  
+Brixmor improperly incorporated LSI into SP NOI in two ways: 
+ 
+20. First, Brixmor amortized each LSI payment over the period of the remaining term of 
+the original lease, and then incorporated those amortized amounts into SP NOI each quarter, until 
+6 
+PRSNL.07937 
+Brixmor secured a new tenant for the vacant space.  Amortizing the LSI had the effect of making it 
+appear that Brixmor was continuing to receive rental income as if the lease had never been 
+terminated.  If, however, Brixmor secured a new tenant for the vacant space, the company no longer 
+had to maintain the appearance of a continuing lease because rental income would soon be coming 
+in from the new tenant.   
+ 
+21. Second, on a number of occasions when additional income was needed to bridge the 
+gap between the company’s actual SP NOI Growth Rate and the Growth Rate target, Brixmor 
+improperly reclassified portions of LSI as “Other Income,” which would immediately be recognized 
+as income.  For example, in the third quarter of 2014, Brixmor improperly classified $425,000 of a 
+$1.3 million LSI payment as “Other Income” so that it could include this amount in its SP NOI 
+calculation for that quarter and thus reach its SP NOI Growth Rate target.   
+ 
+c. Adjusting Comparison Period SP NOI  
+ 
+22. Brixmor also manipulated its SP NOI Growth Rate for certain quarters by 
+improperly reducing the SP NOI of Comparison Periods.  The manipulation of Comparison Period 
+SP NOI was done outside of the accounting system, on a spreadsheet.  Specifically, CFO, CAO and 
+Accounting SVP directed, with CEO’s knowledge, a lower level accounting employee to record 
+these improper adjustments to Comparison Period SP NOI on a spreadsheet that they knew would 
+be provided to investor relations and financial reporting personnel to be included in the Company’s 
+public financial filings. 
+ 
+23. As noted above, the SP NOI Growth Rate for a particular quarter is determined by 
+calculating the percentage by which the SP NOI of that quarter has grown from the SP NOI of the 
+Comparison Period, measured on the Same Property Pool. To ensure that the SP NOI Growth Rate 
+was calculated on the correct Same Property Pool, and consistent with Brixmor’s statements to the 
+public about how it calculated SP NOI Growth Rate as well as industry practice, Brixmor properly 
+adjusted the SP NOI of the current quarter as well as the SP NOI of the Comparison Period to 
+exclude any NOI attributable to properties that were not owned as of the end of both periods and 
+for the entirety of both periods.  Brixmor then calculated the SP NOI Growth Rate based on these 
+adjusted SP NOI figures for both periods.  Brixmor’s Manager of Portfolio Reporting (“Manager 
+1”) kept a “Reconciliation Spreadsheet” each quarter that contained all of the adjustments that were 
+made to NOI to arrive at SP NOI for the current period.    
+ 
+24. In the first quarter of 2015, Brixmor devised the tactic of boosting its SP NOI 
+Growth Rate in the current quarter by making improper adjustments to the Comparison Period SP 
+NOI that had nothing to do with legitimate changes in the Same Property Pool.  Specifically, at the 
+end of the first quarter of 2015, CAO asked Manager 1 to create a new version of the Reconciliation 
+Spreadsheet for the current quarter that made it easier to model the impact of adjustments to the SP 
+NOI of both the current quarter as well as the Comparison Period.  CAO then sent the spreadsheet 
+to CFO, showing that actual SP NOI Growth Rate for the current quarter stood at 3.27%.  Later that 
+afternoon, CFO sent CAO a modified version of the spreadsheet, in which CFO had deducted 
+$250,000 from the SP NOI of the Comparison Period, thereby increasing the SP NOI Growth Rate 
+for the current quarter from 3.27% to 3.39%.  The deduction of $250,000 from the SP NOI of the 
+Comparison Period lacked any proper accounting justification and was done solely for the purpose 
+7 
+PRSNL.07937 
+of boosting the reported SP NOI Growth Rate so that it landed more squarely within the publicly 
+issued guidance range.  Brixmor then reported a SP NOI Growth Rate for the first quarter of 2015 
+of 3.4% (which had been rounded up from 3.39%). 
+ 
+25. Brixmor employed the same tactic again in the third quarter of 2015.  Specifically, 
+Brixmor improperly reversed two payments of $300,000 and $56,000 from the reported SP NOI of 
+the Comparison Period.  This had the impact of boosting the SP NOI Growth Rate for the third 
+quarter of 2015, from 3.4% to 3.6%, a rate that was right down the middle of the guidance range 
+that the Company had publicly projected.   
+ 
+Brixmor Materially Misstated Its SP NOI Growth Rate Based on Improper Adjustments  
+ 
+26. As a result of the improper adjustments, Brixmor reported false SP NOI Growth 
+Rate figures throughout the Relevant Period, therefore misleading investors to believe that 
+Brixmor’s growth was strong, steady, and hitting the middle of its annual guidance range virtually 
+every quarter, as set forth in the following chart: 
+ 
+Reported Same Property NOI Growth vs. Guidance 
+ 
+27. In reality, Brixmor’s SP NOI Growth Rate fluctuated from quarter to quarter and 
+was outside the range of annual guidance in six of the nine quarters of the Relevant Period, as 
+set forth in the following chart: 
+ 
+ 
+ 
+ 
+ 
+2.5
+3.0
+3.5
+4.0
+4.5
+5.0
+3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15
+Percentage % 
+Quarter 
+Reported
+High End
+Guidance
+Low End
+Guidance
+8 
+PRSNL.07937 
+ 
+Actual Same Property NOI Growth vs. Guidance 
+ 
+28. Indeed, in three of the nine quarters during the Relevant Period in which the 
+actual SP NOI Growth Rate exceeded the annual guidance, Brixmor manipulated the figure 
+downward, as the charts above demonstrate, choosing to hide stronger-than-expected growth in 
+order to maintain the narrative of consistent and predictable growth that was central to the 
+company’s investment thesis.  Brixmor’s manipulation of SP NOI also allowed it to hit its full-
+year SP NOI Growth Rate targets for 2013 and its revised 2014 guidance, when the Company 
+otherwise would have missed those targets in both years.    
+ 
+29. During the Relevant Period, Brixmor reported false SP NOI Growth Rate figures 
+in all but one of its quarterly filings (Forms 10-Q), each of its two annual filings (Forms 10-K), 
+and its related Forms 8-K furnishing a press release and supplemental financial disclosure in 
+each quarterly reporting period.  These misstatements are summarized below: 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+2.5
+3.0
+3.5
+4.0
+4.5
+5.0
+3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15
+Percentage % 
+Quarter 
+Actual
+High End
+Guidance
+Low End
+Guidance
+9 
+PRSNL.07937 
+ 3Q13  
+10-Q, 
+8-K  
+8 
+4Q13 
+8-K 
+FY 
+2013 
+10-K 
+1Q14 
+10-Q, 
+8-K 
+2Q14 
+10-Q, 
+8-K 
+3Q14 
+10-Q, 
+8-K 
+4Q14 
+8-K 
+FY 
+2014 
+10-
+K 
+1Q15 
+10-Q, 
+8-K 
+2Q15 
+10-Q, 
+8-K 
+3Q15 
+10-Q, 
+8-K 
+SP NOI Growth 
+Rate as Reported 
+in 
+Contemporaneous 
+Filings 
+3.5% 3.9% 4.0% 3.8% 3.8% 3.9% 3.9% 3.9% 3.4% 3.6% 3.6% 
+Actual 
+SP NOI Growth 
+Rate 
+4.3% 2.8% 3.8% 3.8% 3.5% 2.6% 4.8% 3.7% 3.3% 4.2% 3.5% 
+Full-Year 
+Guidance 
+3.9-
+4.0% 
+3.9-
+4.0% 
+3.9-
+4.0% 
+3.7-
+4.1% 
+3.7-
+4.0% 
+3.8-
+4.0% 
+3.8-
+4.0% 
+3.8-
+4.0% 
+3.0-
+3.7% 
+3.0-
+3.7% 
+3.5-
+3.7% 
+% by which 
+Reported SP NOI 
+Growth Rate was 
+Misstated 
+-18.6% 39.3% 5.3% 0.0% 8.6% 50.0% -18.8% 5.4% 3.0% -14.3% 2.9% 
+ 
+Violations 
+ 
+30. As a result of the conduct described above, the Commission finds that Brixmor 
+violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, which prohibit fraudulent 
+conduct in connection with the purchase or sale of securities. 
+ 
+31. Also, as a result of the conduct described above, the Commission finds that 
+Brixmor violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11and 13a-13 
+thereunder, which require every issuer of a security registered pursuant to Section 12 of the 
+Exchange Act to file with the Commission information, documents, and annual and quarterly 
+reports as the Commission may require, and mandate that periodic reports contain such further 
+material information as may be necessary to make the required statements not misleading.  
+ 
+32. Lastly, as a result of the conduct described above, the Commission finds that 
+Brixmor violated Rule 100(b) of Regulation G of the Exchange Act, which prohibits registrants 
+from making public a non-GAAP financial measure that contains an untrue statement of material 
+fact or omits to state a material fact necessary in order to make the presentation of the non-
+GAAP financial measure, in light of the circumstances under which it is presented, not 
+misleading. 
+ 
+Brixmor’s Internal Investigation, Remediation and Cooperation with SEC Staff 
+ 
+33. On December 23, 2015, an employee in Brixmor’s accounting department 
+submitted an anonymous complaint through the Company’s internal compliance reporting 
+system in which the individual accused Brixmor’s senior management of directing the 
+accounting team to book entries “that are needed solely to help upper management manage 
+earnings to meet guidance or executive expectations.”  The employee reported that he believed 
+that the “core piece of this earnings management” was conducted through a particular internal 
+ledger account—the 2617 account—which was used as a “cookie jar” to hold funds to be “taken 
+into income somewhere down the line to help the company meet earnings guidance.”  After 
+receiving the employee’s complaint, Brixmor’s Audit Committee promptly engaged experienced 
+10 
+PRSNL.07937 
+outside counsel and forensic accountants and together proceeded to conduct an internal 
+investigation (the “Audit Committee Investigation”) into the allegations.  At the conclusion of 
+the Audit Committee Investigation, Brixmor’s Board of Directors asked for the resignation of the 
+CEO, CFO, CAO, and Accounting SVP. 
+ 
+34. On February 8, 2016, Brixmor filed a Form 8-K disclosing that based on the 
+Audit Committee Investigation, its Board had concluded that certain accounting and financial 
+reporting personnel had “smoothed” income items, both up and down, between quarters in an 
+effort to show consistent quarterly SP NOI growth during the Relevant Period.  The Company 
+also announced the resignations of CEO, CFO, CAO, and Accounting SVP.  The announcement 
+set forth revised SP NOI Growth Rates for each of the quarters of the Relevant Period.  
+ 
+35. The Audit Committee Investigation was focused on wrongdoing in the 2617 
+Account.  Accordingly, the revised SP NOI Growth Rates that the Company publicly reported in 
+its February 8, 2016 Form 8-K took into account improper 2617 Account-related adjustments, 
+which comprised the bulk of the total adjustments ultimately recorded by the Company.  The 
+improper LSI and Comparison Period adjustments were later identified by the staff of the 
+Commission.   
+ 
+36. Brixmor self-reported its Audit Committee’s findings to Commission staff before 
+it filed the February 8, 2016 Form 8-K, voluntarily produced additional documents in response to 
+the staff’s requests, and conducted additional analyses with respect to the improper LSI and 
+Comparison Period adjustments.  
+ 
+37. In addition to replacing CEO, CFO, CAO, and Accounting SVP with experienced 
+new management, Brixmor’s Board of Directors and new management team have initiated 
+several remedial measures including: automating much of the process for calculating its non-
+GAAP measures; improving its reconciliation processes related to balance sheet accounts; 
+increasing the segregation of duties within the accounting department; strengthening its internal 
+audit function; and requiring ethics and fraud awareness training for all new employees with 
+accounting or financial reporting responsibilities.  
+ 
+38. In determining whether to accept Brixmor’s Offer, the Commission has 
+considered Brixmor’s cooperation and remediation specified herein. 
+ 
+Undertakings 
+ 
+39. Respondent Brixmor has undertaken to: 
+ 
+a.       Within 30 days of this Order, retain at its own expense an independent 
+consultant (the “Independent Consultant”), not unacceptable to the staff of the 
+Commission.  Within 60 days after retention, require the Independent Consultant to 
+submit a Report (the “First IC Report”) to Brixmor and the Commission staff containing: 
+  
+(i)        its assessment of Brixmor’s policies and procedures as to (x) the 
+accuracy and consistency of Brixmor’s calculation and 
+11 
+PRSNL.07937 
+presentation of the following publicly-disseminated non-GAAP 
+measures as defined by Brixmor: Funds from Operations, Same 
+Property Net Operating Income, and Net Operating Income; and 
+(y) the accuracy and consistency of Brixmor’s calculation and 
+presentation of its publicly-disseminated “Reconciliation of Net 
+Income Attributable to Common Shareholders to Same Property 
+Net Operating Income” and “Reconciliation of Net Operating 
+Income to Net Income Attributable to Common Stockholders”; and  
+(ii)       its recommendations, if any, with respect to improving the 
+Company’s policies and procedures described in paragraph (a)(i), 
+above.   
+ 
+b.        Within 30 days following the filing of Brixmor’s 2019 Form 10-K, require 
+the Independent Consultant to submit a subsequent report to Brixmor and the Commission 
+staff containing its assessment of Brixmor’s implementation of its recommendations, if 
+any, included in the First IC Report;  
+c.         Respondent shall adopt and implement all recommendations contained in 
+the First IC Report within 90 days of receiving the report, provided, however, that within 
+30 days after the Independent Consultant submits the report, Respondent shall in writing 
+advise the Independent Consultant and the Commission of any recommendations that it 
+considers to be unnecessary, impractical, or unduly burdensome or costly.  As to any 
+recommendation on which Respondent and the Independent Consultant do not agree, such 
+parties shall attempt in good faith to reach an agreement within 30 days after Respondent 
+advises the Independent Consultant of its objection. In the event Respondent and the 
+Independent Consultant are unable to agree on an alternative proposal by the end of the 30 
+days, Respondent will abide by the determinations of the Independent Consultant and 
+shall, within 30 days thereafter, adopt and implement all recommendations made by the 
+Independent Consultant. 
+d.        Require the Independent Consultant to enter into an agreement that 
+provides that for the period of engagement and for a period of two years from completion 
+of the engagement, the Independent Consultant shall not enter into any employment, 
+consultant, attorney-client, auditing or other professional relationship with Brixmor or any 
+of its present or former affiliates, directors, officers, employees, or agents acting in their 
+capacity.  The agreement will also provide that the Independent Consultant will require 
+that any firm with which he/she is affiliated or of which he/she is a member, and any 
+person engaged to assist the Independent Consultant in performance of his/her duties 
+under this Order shall not, without prior written consent of the New York Regional Office 
+of the Commission, enter into any employment, consultant, attorney-client, auditing or 
+other professional relationship with Brixmor, or any of its present or former affiliates, 
+directors, officers, employees, or agents acting in their capacity as such for the period of 
+the engagement and for a period of two years after the engagement.   
+12 
+PRSNL.07937 
+e.      Brixmor shall certify, in writing to the Commission staff, within 30 days 
+after implementing the recommendations contained in each of the IC Reports, compliance 
+with the undertakings set forth above.  The certifications shall provide written evidence of 
+compliance in the form of a narrative, and be supported by exhibits sufficient to 
+demonstrate compliance.  The Commission staff may make reasonable requests for further 
+evidence of compliance, and Respondent agrees to provide such evidence.  Respondent 
+shall submit the certifications and supporting material to Sheldon Pollock, Assistant 
+Regional Director, 200 Vesey Street, Suite 400, New York, New York 10281, with a copy 
+to the Office of Chief Counsel of the Enforcement Division. 
+f. Upon request by the Independent Consultant or the Respondent, the 
+Commission staff may extend any procedural time period set forth above for good cause 
+shown. 
+ 
+IV. 
+ 
+In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent Brixmor’s Offer.  
+ 
+Accordingly, it is hereby ORDERED that:  
+ 
+A. Pursuant to Section 21C of the Exchange Act, Respondent Brixmor cease and 
+desist from committing or causing any violations and any future violations Section 10(b) and 
+13(a) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 and Rule 100(b) 
+of Regulation G thereunder. 
+ 
+B. Respondent shall comply with its undertakings as enumerated in Section III 
+above. 
+ 
+C. Respondent shall, within 14 days of the entry of this Order, pay a civil money 
+penalty in the amount of $7,000,000 to the Securities and Exchange Commission for transfer to 
+the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If 
+timely payment is not made, interest shall accrue pursuant to 31 U.S.C. §3717. Payment must be 
+made in one of the following ways: 
+ 
+(1) Respondent may transmit payment electronically to the Commission, which 
+will provide detailed ACH transfer/Fedwire instructions upon request;  
+ 
+(2) Respondent may make direct payment from a bank account via Pay.gov 
+through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
+ 
+(3) Respondent may pay by certified check, bank cashier’s check, or United 
+States postal money order, made payable to the Securities and Exchange 
+Commission and hand-delivered or mailed to:  
+ 
+13 
+PRSNL.07937 
+Enterprise Services Center  
+Accounts Receivable Branch  
+HQ Bldg., Room 181, AMZ-341  
+6500 South MacArthur Boulevard  
+Oklahoma City, OK 73169  
+ 
+Payments by check or money order must be accompanied by a cover letter identifying 
+Brixmor as a Respondent in these proceedings, and the file number of these proceedings; a 
+copy of the cover letter and check or money order must be sent to Lara Shalov Mehraban, 
+Associate Regional Director, Division of Enforcement, Securities and Exchange Commission, 
+200 Vesey Street, Suite 400, New York, New York 10281. 
+ 
+D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall 
+be treated as penalties paid to the government for all purposes, including all tax purposes. To 
+preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
+Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 
+award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
+penalty in this action ("Penalty Offset"). If the court in any Related Investor Action grants such a 
+Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order 
+granting the Penalty Offset, notify the Commission's counsel in this action and pay the amount of 
+the Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be 
+deemed an additional civil penalty and shall not be deemed to change the amount of the civil 
+penalty imposed in this proceeding. For purposes of this paragraph, a "Related Investor Action" 
+means a private damages action brought against Respondent by or on behalf of one or more  
+investors based on substantially the same facts as alleged in the Order instituted by the 
+Commission in this proceeding. 
+ 
+By the Commission.  
+ 
+         Vanessa Countryman  
+         Secretary 
+ 

raw/aaer/2019/AAER-4065.txt

@@ -0,0 +1,596 @@
+ 
+ 
+UNITED STATES OF AMERICA 
+Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 86740 / August 22, 2019 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 4065 / August 22, 2019 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-19373 
+ 
+In the Matter of 
+ 
+DEUTSCHE BANK AG 
+ 
+Respondent. 
+ 
+ 
+ 
+ 
+ 
+ORDER INSTITUTING CEASE-AND-
+DESIST PROCEEDINGS PURSUANT TO 
+SECTION 21C OF THE SECURITIES 
+EXCHANGE ACT OF 1934, MAKING 
+FINDINGS, AND IMPOSING A CEASE-
+AND-DESIST ORDER  
+  
+ 
+ 
+I. 
+ 
+ The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
+and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
+Exchange Act of 1934 (“Exchange Act”), against Deutsche Bank AG (“Deutsche Bank” or 
+“Respondent”).   
+ 
+II. 
+ 
+ In anticipation of the institution of these proceedings, Deutsche Bank has submitted an 
+Offer of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
+purpose of these proceedings and any other proceedings brought by or on behalf of the 
+Commission, or to which the Commission is a party, and without admitting or denying the findings 
+herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
+proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
+and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
+Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below. 
+ 
+ 
+ 2 
+ 
+ 
+ 
+III. 
+ 
+ On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 
+ 
+SUMMARY 
+ 
+1. This matter concerns violations of the books and records and internal accounting controls 
+provisions of the Foreign Corrupt Practices Act of 1977 (the “FCPA”) by Deutsche Bank.  
+Between at least 2006 and 2014, Deutsche Bank provided valuable employment to the relatives of 
+foreign government officials in various parts of the world as a personal benefit to the officials in 
+order to improperly influence them to assist the bank in obtaining or retaining business or other 
+benefits.   
+ 
+2. Deutsche Bank recognized that hiring relatives of foreign government officials and other 
+clients in exchange for business could violate anti-bribery laws, including the FCPA.  In 2010, 
+Deutsche Bank enacted a written hiring policy in the Asia-Pacific region (“APAC”) to detect and 
+prevent its employees from offering temporary employment to candidates referred by current or 
+potential clients to detect and prevent corrupt hiring practices.  This hiring policy was not 
+effectively enforced and did not apply to all categories of hires.  Additionally, Deutsche Bank, 
+although aware of corruption risks in its referral hiring practices, failed to implement global 
+policies sufficiently to address this risk until 2015. 
+   
+3. Deutsche Bank employees created false books and records that concealed corrupt hiring 
+practices and failed to accurately document and record certain related expenses and Deutsche Bank 
+failed to devise and maintain a system of internal accounting controls around its hiring practices 
+sufficient to provide reasonable assurances that its employees did not bribe foreign government 
+officials.      
+ 
+RESPONDENT 
+ 
+4. Deutsche Bank AG (“Deutsche Bank”) is a multinational financial services corporation 
+incorporated and domiciled in Germany.  The company issues and maintains a class of publicly 
+traded securities registered pursuant to Section 12(b) of the Exchange Act and is listed on the New 
+York Stock Exchange (ticker: DB).  Deutsche Bank files periodic reports, including Forms 20-F, 
+with the Commission.  Deutsche Bank operates in more than 70 countries worldwide and is the 
+                                                 
+1  The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any 
+other person or entity in this or any other proceeding. 
+ 
+ 3 
+direct or indirect holding company for Deutsche Bank’s subsidiaries.  Deutsche Bank employees in 
+various parts of the world engaged in the conduct discussed herein.2   
+ 
+FACTS 
+ 
+Deutsche Bank Policies Prohibited Employment in Exchange for Business 
+ 
+5. Since at least 2009, Deutsche Bank’s Global Anti-Corruption Policy prohibited employees 
+from providing “anything of value” to a government official to gain an improper business 
+advantage.  Prior to 2009, various policies and procedures addressed anti-bribery and corruption 
+issues at the bank.  In 2009, Deutsche Bank specifically defined “anything of value” in the Global 
+Anti-Corruption Policy to include job offers and recognized that providing employment at the 
+request of a client, potential client, or government official could violate Deutsche Bank’s anti-
+bribery policies.  A regional compliance memo in 2009 explained, “hiring interns with links to 
+State Owned Enterprises and Government Officials,” hiring interns who “did not appear to meet 
+[Deutsche Bank’s] basic criteria . . . with respect to education, qualifications and credentials,” and 
+hiring interns “within a short period of a mandated deal being awarded or completed” posed 
+corruption risks: 
+ 
+“Because of this significant value and the benefits received there are regulatory and 
+reputational risks that the offering of these internships to our clients (current or prospective) 
+without going through a fair, formal and documented selection process could be perceived 
+as Deutsche Bank trying to gain an improper advantage.” 
+ 
+6. Despite these prohibitions, since at least 2006, Deutsche Bank’s APAC operations engaged 
+in a pattern and practice of providing employment to relatives at the request of SOE executives 
+from whom Deutsche Bank sought business.  In APAC many of the bank’s clients and prospective 
+clients were State-Owned Entities (“SOEs”) whose employees are deemed “foreign officials” 
+under both the FCPA and Deutsche Bank policies.  Client referral hires were primarily known at 
+Deutsche Bank as “Referral Hires” and/or “Relationship Hires.” 
+ 
+7. From the outset, the primary goal of Referral Hiring was to generate business for Deutsche 
+Bank by extending personal favors to clients, including government officials, through hiring their 
+relatives.  For example, during the time Deutsche Bank was working to obtain an IPO from a 
+Chinese client, the client’s Chairman asked Deutsche Bank to hire his son.  The banker working to 
+obtain the IPO told Deutsche Bank management that if Deutsche Bank hired the Chairman’s son, 
+he believed they would be awarded the business.  In other instances, when bankers submitted a 
+client referral hire request, management in APAC asked what role the parent performed at the SOE 
+to determine if the parent could steer business to the bank and asked the banker to quantify the fees 
+Deutsche Bank could expect to earn from the referring client. 
+ 
+                                                 
+2    Deutsche Bank employees referenced in this Order may have worked for one or more Deutsche Bank legal 
+entities during the relevant time.  Deutsche Bank acknowledges it is responsible for ensuring accurate 
+books and records, and sufficient internal accounting controls, within its consolidating businesses. 
+ 4 
+8. Referral Hires bypassed Deutsche Bank’s highly competitive and merit-based hiring 
+process where successful applicants were required, among other things, to have a high grade point 
+average, to pass competency based numerical and verbal skills tests, and advance through multiple 
+rounds of interviews.  In contrast, Referral Hires did not compete against other candidates based on 
+merit or academic qualification and, in many instances, were less qualified than those employees 
+hired through Deutsche Bank’s formal hiring process.  Referral Hires had no formal application 
+process, no defined qualifications such as a minimum grade point average or educational 
+requirement, no competency test requirements, and no specific interview requirements.  To help 
+unqualified Referral Hires appear qualified, some APAC-based Deutsche Bank employees even 
+drafted portions of their resumes, provided them with interview questions and answers in advance, 
+and coached them on how to appropriately respond to questions.  Some were hired without being 
+interviewed at all.  Deutsche Bank provided this preferential treatment to candidates referred by 
+clients and prospective clients, including foreign government officials.  
+ 
+9. Similar misconduct took place from 2009 to 2012 in Russia, where Deutsche Bank 
+employees hired relatives at the request of foreign officials in Russia to obtain or retain business or 
+other benefits.  As was the case in APAC, Russian Referral Hires were sometimes unqualified.  In 
+some instances, if requested by the candidate or parent, Deutsche Bank’s London-based global 
+management authorized unqualified Russian Referral Hires to work in London.  One Russian 
+Referral Hire performed so poorly in London that he was deemed “a liability to the reputation of 
+the program, if not the firm…” by a London-based human resource employee. 
+ 
+Deutsche Bank Created a Hiring Policy in 2010 for the APAC Region 
+10. In 2010, Deutsche Bank implemented a hiring policy specifically for the APAC region 
+(“APAC Hiring Policy”) that prohibited Deutsche Bank’s employees in APAC from offering off-
+cycle internships, i.e., internships outside of Deutsche Bank’s formal internship programs, to any 
+candidate referred by a client, prospective client or government official from whom Deutsche Bank 
+sought or had pending business, subject to an approval process established by the policy.  The 
+APAC Hiring Policy specifically defined employees of SOEs and government ministries as foreign 
+officials.  Importantly, the APAC Hiring Policy also prohibited employees from hiring Referral 
+Hires as a temporary employee or “in other roles” to evade the policy.     
+ 
+11. As part of the APAC Hiring Policy, Deutsche Bank created a questionnaire which required 
+employees who sought approval for a Referral Hire to disclose the source of the referral, identify 
+whether the referral source was a current or prospective client, and disclose whether the Referral 
+Hire was referred by or related to a government official.  The questionnaire was then supposed to 
+be submitted to the compliance and human resources departments for review and approval.  
+However, Deutsche Bank did not ensure that the APAC Hiring Policy was effectively 
+implemented. 
+ 
+12. Significantly, some senior Deutsche Bank employees in APAC, including Deutsche Bank’s 
+Chairman of Corporate Finance, Asia (“Chairman of APAC Corporate Finance”), ignored or 
+deliberately bypassed the APAC Hiring Policy by directing Deutsche Bank’s China-based joint 
+venture (“JV”) to hire a prohibited candidate to obtain business and evade the policy.  This 
+occurred even where the FCPA risk of a specific Referral Hire was known.  For example, the 
+ 5 
+Chairman of an SOE asked Deutsche Bank to hire a candidate while Deutsche Bank was seeking 
+business from the SOE.  The Regional Head of Compliance in APAC rejected the candidate under 
+the APAC Hiring Policy and stated that because Deutsche Bank had “pending business” with the 
+SOE, the hire posed a “higher FCPA” risk.  Senior level bank employees in APAC, who knew the 
+candidate was rejected because of the FCPA risk, then asked the JV to hire the prohibited 
+candidate.  Additionally, a Deutsche Bank employee told the JV that the Referral Hire’s father was 
+“in charge of evaluation of all overseas investments for [SOE]” and explained that Deutsche Bank 
+could not hire the candidate directly because it had pending business with the SOE.  Referral Hires 
+employed through the JV were, at times, permitted to work for Deutsche Bank without 
+documentation, oversight, or compliance authorization.  
+13. While the corruption risks were the same as other Referral Hires, the APAC Hiring Policy 
+did not apply to “lateral” or “experienced” hires.  For example, after Deutsche Bank instructed its 
+JV to hire a Referral Hire, the Chairman of APAC Corporate Finance on-boarded the Referral Hire 
+from the JV to Deutsche Bank several months later as a “lateral” hire that was not covered by 
+Deutsche Bank’s APAC Hiring Policy.  As a result, in addition to using these methods to easily 
+circumvent the policy, certain Deutsche Bank employees in APAC knowingly submitted false and 
+inaccurate documentation in connection with hires, misrepresented the identity of the referral 
+source, falsely claimed that government officials were not the referral source, and concealed the 
+purpose of the hire. 
+ 
+14.  The APAC Hiring Policy did not effectively mitigate known corruption risks in Deutsche 
+Bank’s long standing Referral Hiring practices in APAC.  Senior Deutsche Bank managers and 
+other employees in APAC continued to make hires in part on relationships and to obtain business 
+from SOE clients.  In October 2012, the Co-Head of Investment Banking in China sent an email to 
+other employees inquiring as to whether revenue projections could be generated for recent Referral 
+Hires stating, “Relationship hire decisions are purely based on revenue projection not sector 
+coverage.  We hired 9 analyst[s] in the last 18mths, can we also go one by one on revenue 
+projection except [Referral Hire A]?  Understand none hired through normal process.” 
+ 
+Deutsche Bank Did Not Prohibit Referral Hiring Globally Until 2015 
+ 
+15. While Deutsche Bank had defined “anything of value” in 2009 to specifically include job 
+offers and enacted the APAC Hiring Policy in 2010, it did not implement a global hiring policy 
+with this effect until October 2015.   
+ 
+Deutsche Bank Assigned Referral Hires to Work on Transactions Despite Known Conflicts 
+of Interests and Policy Prohibitions 
+16. In addition to its APAC Hiring Policy, Deutsche Bank had a Global Conflicts of Interest 
+Policy that required management and employees to identify and manage potential conflicts of 
+interest.  Under the policy, employees were supposed to be “walled off” or ring-fenced from 
+business that created a potential conflict of interest, however this policy was also not effectively 
+enforced. 
+ 
+ 6 
+17. Deutsche Bank employees at times assigned Referral Hires to work on deals where the 
+Referral Hire’s parent or other close family member was a key decision maker or the source of the 
+referral in order to further capitalize on their personal relationship.  Deutsche Bank lacked systems 
+to verify compliance with this policy.    
+ 
+Deutsche Bank Obtained Business as a Result of Referral Hiring  
+18. Deutsche Bank, directly or indirectly, hired numerous Referral Hires at the request of 
+government officials in China and Russia including circumstances in which there was evidence 
+connecting the hire to specific business.  Deutsche Bank was unjustly enriched by approximately 
+$10,785,900 from those transactions occurring within the statute of limitations.    
+ 
+APAC Referral Hire A 
+ 
+19. Deutsche Bank hired Referral Hire A whose father was the Chairman of a large Chinese 
+SOE.  SOE executives asked Deutsche Bank to hire Referral Hire A and emailed her resume from 
+the SOE to Deutsche Bank.  Referral Hire A had minimal relevant work experience and, based on 
+academic credentials, would not have qualified for employment at Deutsche Bank.  Deutsche Bank 
+also was not able to directly hire Referral Hire A due to headcount restrictions that were in effect at 
+that time.  Moreover, because the referral was the SOE Chairman’s child, unqualified, and the SOE 
+was a current and prospective Deutsche Bank client, the hire request would likely have been 
+rejected by Deutsche Bank human resources and compliance.    
+20. To avoid these problems, Deutsche Bank’s Chairman of APAC Corporate Finance and 
+Deutsche Bank’s lead banker for the SOE instructed Deutsche Bank’s JV to hire the SOE 
+Chairman’s daughter, Referral Hire A, with the possibility that they would move Referral Hire A 
+from the JV to Deutsche Bank as a lateral hire at a later date.  Thus, Deutsche Bank employees 
+informed the CEO of the JV that he needed to give Referral Hire A, described as “a VIP,” an offer 
+and needed to move the process along quickly.   
+21. Referral Hire A failed the JV’s admissions tests and performed poorly during the 
+interviews.  The CEO of the JV told Deutsche Bank, “she is an average-level candidate based on 
+the interviews but failed 2 tests which means she is not good at analysis.  I’d suggest we reject the 
+candidate if it’s not a must hire case.”  Shortly thereafter, an SOE executive contacted a Deutsche 
+Bank employee to ask for an update on Referral Hire A’s employment status.  After several 
+conversations between Deutsche Bank employees, including the Chairman of APAC Corporate 
+Finance, the JV agreed to hire Referral Hire A.   
+22. After Referral Hire A had worked for the JV for a few months, she threatened to quit if 
+Deutsche Bank did not transfer her from the JV into Deutsche Bank’s Hong Kong office.  During 
+this same time period, Deutsche Bank was working to close one transaction for the SOE and 
+learned that the SOE was considering Deutsche Bank for additional business.  Deutsche Bank 
+employees expressed concern that if they did not accommodate Referral Hire A’s request, the 
+bank’s relationship with the SOE could be negatively affected.      
+ 7 
+23. Over an approximate 3 month time period, Deutsche Bank took the following steps to 
+accommodate Referral A’s request and successfully closed a previously mandated but not yet 
+finalized deal from the referring SOE: 
+ Referral Hire A resigned from the JV and Deutsche Bank flew her to Hong Kong and 
+management in APAC offered her a job.  However, due to a global hiring freeze which 
+required global management approval for all new hires, management in APAC was not 
+authorized to hire new employees.  Because employees in APAC did not have authority to 
+hire Referral Hire A at that time, they agreed to second her from the JV to Deutsche Bank 
+while exploring ways to possibly onboard her without the need for global approval while 
+also continuing to seek authorization for the hire from global management.  In an effort to 
+obtain approval for Referral Hire A’s employment, Deutsche Bank’s lead banker on all 
+deals related to the relevant SOE also itemized approximately $10 million in potential 
+revenue from deals for which Referral Hire A was involved in the pitching process while 
+at the JV, including one deal from the SOE. 
+     
+ The SOE scheduled a meeting with Deutsche Bank, which was also attended by Referral 
+Hire A’s father, to discuss the pending SOE transaction.   
+ 
+ Deutsche Bank’s lead banker for the SOE warned management in APAC that their 
+relationship with the SOE would “turn completely sour” and that Deutsche Bank could 
+face “relationship deadlock” if they did not obtain approval to hire Referral Hire A.  
+  
+ Referral Hire A learned that her “urgent” request was approved by immigration 
+authorities and within days, Referral Hire A’s father met with Deutsche Bank to discuss 
+other potential SOE business, including a lucrative IPO. 
+ 
+ A few days later Deutsche Bank closed one deal for the SOE and obtained $3,750,000 
+from the transaction.   
+ 
+ The next week, Referral Hire A started work at Deutsche Bank but was classified as a 
+“seconded” JV employee because Deutsche Bank still did not have global authorization to 
+hire her directly.  The Chairman of APAC Corporate Finance and other employees 
+continued to petition Deutsche Bank’s global management for approval to hire Referral 
+Hire A noting that Referral Hire A was “very useful” to Deutsche Bank and warning that 
+“we can’t wait until summer.”   
+ 
+��� Shortly thereafter, the Chairman of APAC Corporate Finance learned that the SOE was 
+going to issue a bond and instructed bankers to schedule a meeting with the SOE 
+immediately in an effort to win that business.  That same day, the Chairman of APAC 
+again reiterated the need to give Referral Hire A an employment offer as soon as possible.  
+ 
+ A delegate of the COO of Deutsche Bank’s Corporate & Investment Bank authorized the 
+bank to hire Referral Hire A and she was assigned to work on transactions involving the 
+related SOE.   
+ 8 
+24. During the relevant time period, Deutsche Bank carried out two transactions for the SOE.  
+APAC Referral Hire B 
+ 
+25. Deutsche Bank hired Referral Hire B at the request of his mother, an SOE executive, and a 
+request from the Chairman of another SOE.  Referral Hire B’s father was also an executive at an 
+SOE.  Referral Hire B’s mother and father contacted several employees at Deutsche Bank to 
+inquire about their son’s employment prospects while Deutsche Bank actively sought business 
+from both SOEs.  
+ 
+26. Referral Hire B’s resume contained numerous grammatical errors and typos, but a 
+Deutsche Bank employee revised the resume for him.  Even after Referral Hire B was emailed “a 
+cheat sheet” by a banker in APAC that included interview questions and acceptable responses in 
+advance of the interview, he still interviewed poorly.  Interview notes stated that Referral Hire B’s 
+interviewers did not like him, thought he was one of the worst candidates they interviewed, and 
+thought “he showed very little interest or understanding of markets/finance/current affairs.”  After 
+Referral Hire B’s mother called one banker to follow-up on her son’s employment prospects with 
+Deutsche Bank, the banker suggested to other employees that if Referral Hire B could not get the 
+job based on merit, they should find another way to hire him since his mother was a “fee paying 
+client of the bank.”  Deutsche Bank hired Referral Hire B and bankers were cautioned to “manage 
+the expectations” of, not only Referral Hire B, but also his parents.  The Head of Corporate 
+Finance APAC instructed employees to “get the most out of this” hire.    
+  
+27. Deutsche Bank employees reported that they would “leverage” Referral Hire B’s family 
+connections to obtain business.  In fact, Referral Hire B’s mother personally contacted the 
+Chairman of another SOE, who also referred Referral Hire B to Deutsche Bank, to help Deutsche 
+Bank obtain business from the SOE.  In one instance, Deutsche Bank announced it had obtained a 
+mandate from the SOE where Referral Hire B’s mother worked and congratulated him for 
+“bringing us the deal.”  Referral Hire B was promoted, in part, because he “brought two deals from 
+[SOE where mother employed] and [is] working on a potential transaction with [SOE where father 
+employed].”  During the relevant time period, Deutsche Bank won four transactions from these 
+three SOEs.    
+ 
+APAC Referral Hire C 
+ 
+28. Deutsche Bank attempted to hire Referral Hire C, the son of the Chairman of a Chinese 
+SOE, at the same time Deutsche Bank actively sought business from the SOE.  However, 
+compliance learned of the intended hire and twice rejected him under the APAC Hiring Policy.   
+The Chairman of APAC Corporate Finance then asked the JV to hire Referral Hire C and it did.  A 
+Deutsche Bank employee later summarized Referral Hire C’s employment history: 
+ 
+“I appreciate that this is a high level referral… based on global policy regarding our basic 
+eligibility criteria, [he] doesn’t qualify for the DB grad program… He has also sat (and 
+failed) the numeracy tests on more than one occasion… when he failed those assessments 
+and we discovered the degree classification was below our cut off, he was taken to 
+ 9 
+compliance to get approval to hire as an off-cycle intern, and was rejected there also.  He 
+was then offered work experience with [the JV] directly.”   
+ 
+29. During Referral Hire C’s employment at the JV, Deutsche Bank employees discussed ways 
+to move Referral Hire C from the JV to Deutsche Bank since compliance previously rejected him.  
+One Deutsche Bank employee suggested that Deutsche Bank “hire him as a Trainee analyst and 
+put him on the bootcamp with the other ones who fail to meet grad program standards.”  The COO 
+for investment banking coverage and advisory in APAC responded, “We still have the problem of 
+the SOE connection and being rejected by Compliance twice already, plus if he doesn’t make the 
+hiring standard we could run in to issue as seen at other banks for r’ship hires.”  Compliance never 
+approved the hire.   
+ 
+30. Nonetheless, Deutsche Bank’s Chairman of APAC Corporate Finance allowed Referral 
+Hire C, as a JV employee, to work at Deutsche Bank despite knowing he had been repeatedly 
+rejected by compliance, and touted Referral Hire C’s contributions on joint JV and Deutsche Bank 
+pitches.  Referral Hire C also worked on Deutsche Bank business entirely unrelated to the JV but 
+did not document the work performed or obtain compliance approval for this arrangement.   
+ 
+31. In one instance, a Deutsche Bank APAC employee requested reimbursement for Referral 
+Hire C’s travel expenses.  APAC business management personnel denied reimbursement because 
+Referral Hire C was not a Deutsche Bank employee.  The Deutsche Bank APAC employee who 
+requested reimbursement explained that Deutsche Bank needed to pay for Referral Hire C’s travel 
+expenses because the costs were incurred while Referral Hire C was working on a Deutsche Bank 
+deal that had “nothing to do with [the JV].”  Deutsche Bank has no documentation to explain what 
+work was performed by Referral Hire C.  During the relevant time period, Deutsche Bank was 
+awarded two transactions from the related SOE.  
+ 
+Russian Referral Hire D 
+ 
+32. Deutsche Bank hired Referral Hire D at the request of her father, a Deputy Minister at a 
+Russian government entity from which Deutsche Bank had repeatedly, and unsuccessfully, sought 
+business.  Referral Hire D’s father asked Deutsche Bank Russia’s Chief Country Officer (“Russia 
+Chief”) to hire his daughter to work at a Deutsche Bank office in Moscow, London, or New York 
+in 2009.  The Russia Chief enthusiastically voiced his support for the hire to his supervisors in 
+London, “We must do it!  We should have her in London as it is NOT politically correct to have 
+her in Moscow!”   Deutsche Bank hired Referral Hire D as a temporary employee in Moscow with 
+the understanding that she would be given a permanent job with Deutsche Bank in London.   
+ 
+33. Approximately four months after Deutsche Bank hired Referral Hire D as a temporary 
+employee in Russia, Deutsche Bank was not awarded a deal that it sought from the Russian 
+government.  A senior London-based executive emailed the Russia Chief, “I know you must be all 
+over this disaster.  I am monitoring and obviously keenly interested.  We must get inserted in [the 
+deal].  We must use whatever tactic and political pressure to avoid this embarrassment.  DB not 
+participating is a slap in our face.”  The Russia Chief responded that he had already met with 
+ 10 
+“Russian Deputy Minister [name][Referral Hire D’s father] who is responsible for the process and 
+DB’s supporter.”   
+ 
+34. A few days after that meeting, a London-based executive (“London Executive 1”) told 
+another London-based executive (“London Executive 2”) that Deutsche Bank needed to offer 
+Referral Hire D a permanent job with Deutsche Bank in London.  London Executive 1 stated, 
+“This is the daughter of the Deputy Minister.  She has been interning with us since October with 
+the commitment we hire her in the New Year.  She is part of the HC [permanent headcount] plan.”  
+London Executive 2 questioned why Deutsche Bank would use a permanent headcount position for 
+Referral Hire D when they could just keep her as a temporary employee.  London Executive 1 
+explained that Referral Hire D’s father is the deputy finance minister in Russia and had asked 
+Deutsche Bank to hire her and if they did not find a permanent position for her as promised, they 
+would harm the relationship with Referral Hire D’s father and “significantly undermine our 
+relationship with the [government ministry].” 
+ 
+35. Referral Hire D’s move to London was approved and approximately 10 days after Referral 
+Hire D was transferred to London, Deutsche Bank received a request for proposal signed by 
+Referral Hire D’s father regarding a €2 billion Eurobond issuance which was the first step to obtain 
+the business.   
+ 
+36. Deutsche Bank also added Referral Hire D and Referral Hire D’s father to the itinerary of a 
+previously planned trip for other government officials.  Shortly thereafter, one Deutsche Bank 
+employee emailed other employees and suggested that they meet to discuss “what we may need to 
+do on the Government officials [sic] level in order to position DB to win this time.” Approximately 
+ten days after this email was sent, Russia Chief and his wife attended a vacation with the Deputy 
+Minister, his wife, his daughter (Referral Hire D), and others.  Although the trip lacked any 
+legitimate business purpose and was comprised solely of leisure activities including, hunting, 
+helicopter rides, and fishing, Deutsche Bank falsely recorded the trip as a legitimate business 
+expense.  Shortly after the trip, Deutsche Bank submitted its bid for the transaction and was 
+awarded the transaction.  
+  
+Russian Referral Hire E 
+ 
+37. Deutsche Bank hired Referral Hire E at the request of his father who was a senior executive 
+of a Russian SOE.  After a short time as a temporary employee in Moscow in 2010, Referral Hire 
+E requested a transfer to London.  Human resources in London determined Referral Hire E likely 
+was not eligible for the Bank’s graduate program but acknowledged, “we can always flex this if the 
+business case is the right one.”  The Head of Deutsche Bank’s Corporate and Investment Bank, 
+who was also a member of Deutsche Bank’s Management Board, approved Referral Hire E’s 
+transfer to London.  A London-based human resource employee explained to another employee: 
+ 
+“FYI …the classic nepo situation that we have every year.  Tried to push back on this one 
+... [but the Head of Deutsche Bank’s Corporate and Investment Bank] didn’t push it back 
+once he knew who the client was.  [Referral Hire E] is the son of the head guy at [SOE] and 
+has asked [Russia Chief] to arrange this… I’ve made [Russia Chief] aware of the risks if 
+ 11 
+Referral Hire E doesn’t meet the mark.  [Russia Chief] is happy to remove him from the 
+program and bury him somewhere in the Moscow office if he doesn’t cut it [in] the 
+program.”     
+ 
+38. After only two months of employment in London, the London-based human resource 
+employee stated that irrespective of his father’s position as an important client, Referral Hire E 
+should be terminated because he failed to come to work, cheated on an exam, and was “a liability 
+to the reputation of the program, if not the firm…”   
+ 
+39. Referral Hire E remained at Deutsche Bank in London for another two months and was 
+then transferred back to Deutsche Bank’s Moscow office in December 2011 where he continued to 
+work for approximately two more months.  During the relevant time period, Deutsche Bank carried 
+out one transaction for the related SOE. 
+ 
+LEGAL STANDARDS AND VIOLATIONS 
+ 
+40. Under Section 21C(a) of the Exchange Act, the Commission may impose a cease-and-
+desist order upon any person who is violating, has violated, or is about to violate any provision of 
+the Exchange Act or any rule or regulation thereunder, and upon any other person that is, was, or 
+would be a cause of the violation, due to an act or omission the person knew or should have known 
+would contribute to such violation. 
+  
+41. As a result of the conduct described above, Deutsche Bank violated Section 13(b)(2)(A) of 
+the Exchange Act which requires issuers to make and keep books, records, and accounts, which, in 
+reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the 
+issuer. 
+ 
+42. As a result of the conduct described above, Deutsche Bank violated Section 13(b)(2)(B) of 
+the Exchange Act which requires issuers to devise and maintain a system of internal accounting 
+controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance 
+with management’s general or specific authorization; (ii) transactions are recorded as necessary (I) 
+to permit preparation of financial statements in conformity with generally accepted accounting 
+principles or any other criteria applicable to such statements, and (II) to maintain accountability for 
+assets; (iii) access to assets is permitted only in accordance with management’s general or specific 
+authorization; and (iv) the recorded accountability for assets is compared with the existing assets at 
+reasonable intervals and appropriate action is taken with respect to any differences.    
+ 
+Commission Consideration of Deutsche Bank’s Cooperation and Remedial Efforts 
+ 
+43. In determining to accept the Offer, the Commission considered Deutsche Bank’s 
+cooperation and remedial efforts.  Deutsche Bank shared facts developed in the course of its own 
+internal investigation, including certain of the violative conduct described herein.   
+ 
+44. Deutsche Bank’s cooperation included: responding promptly to the Commission’s requests 
+for information and documents; identifying issues and facts that would likely be of interest to the 
+ 12 
+Commission’s staff; providing regular updates of factual findings developed during the course of 
+its own internal investigation; and identifying key documents and providing factual chronologies to 
+the Commission’s staff.  
+ 
+45. Deutsche Bank’s remedial measures included: enhancements to its internal accounting 
+controls; enhancements to its anti-corruption compliance program and hiring practices on a global 
+basis; requiring that Deutsche Bank’s anti-corruption office reviews and approves each hire of a 
+candidate referred by a client, potential client, or government official; instituting procedures and 
+practices to monitor and audit Referral Hires; and increased anti-bribery training that specifically 
+addresses hiring practices.  Deutsche Bank also undertook employment actions based upon its 
+findings regarding the underlying conduct, and separated from certain employees and made other 
+personnel changes to remediate in the relevant regions and substantially enhanced compliance 
+staffing.  In addition to these completed remedial steps, the company is continuing to develop 
+policies to mitigate corruption risks in lateral hiring, specifically related to its JV, and to ensure that 
+its conflicts of interest policy is enforced.   
+  
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED that: 
+ 
+A. Pursuant to Section 21C of the Exchange Act, Deutsche Bank cease and desist from 
+committing or causing any violations and any future violations of Sections 13(b)(2)(A) and 
+13(b)(2)(B) of the Exchange Act. 
+ 
+B. Respondent shall, within 10 days of the entry of this Order, pay disgorgement of 
+$10,785,900, prejudgment interest of $2,392,950 and a civil money penalty in the amount of 
+$3,000,000 to the Securities and Exchange Commission for transfer to the general fund of the 
+United States Treasury, subject to Exchange Act Section 21F(g)(3).  If timely payment is not 
+made, additional interest shall accrue pursuant to SEC Rule of Practice 600 and 31 U.S.C. §3717.  
+Payment must be made in one of the following ways:   
+ 
+(1) Respondent may transmit payment electronically to the Commission, which will 
+provide detailed ACH transfer/Fedwire instructions upon request;  
+ 
+(2) Respondent may make direct payment from a bank account via Pay.gov through the 
+SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
+ 
+(3) Respondent may pay by certified check, bank cashier’s check, or United States 
+postal money order, made payable to the Securities and Exchange Commission and 
+hand-delivered or mailed to:  
+ 
+Enterprise Services Center 
+ 13 
+Accounts Receivable Branch 
+HQ Bldg., Room 181, AMZ-341 
+6500 South MacArthur Boulevard 
+Oklahoma City, OK 73169 
+ 
+Payments by check or money order must be accompanied by a cover letter identifying 
+Deutsche Bank as a Respondent in these proceedings, and the file number of these proceedings; a 
+copy of the cover letter and check or money order must be sent to Daniel J. Wadley, Director, Salt 
+Lake Regional Office, Securities and Exchange Commission, 351 S. West Temple, Suite 6.100, 
+Salt Lake City, UT 84101.   
+ 
+C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated 
+as penalties paid to the government for all purposes, including all tax purposes.  To preserve the 
+deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it shall 
+not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 
+compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 
+this action ("Penalty Offset").  If the court in any Related Investor Action grants such a Penalty 
+Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 
+Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty 
+Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed an 
+additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 
+in this proceeding.  For purposes of this paragraph, a "Related Investor Action" means a private 
+damages action brought against Respondent by or on behalf of one or more investors based on 
+substantially the same facts as alleged in the Order instituted by the Commission in this 
+proceeding. 
+ 
+D. Respondent acknowledges that the Commission is not imposing a civil penalty in excess of 
+$3,000,000 based upon its cooperation in a Commission investigation or related enforcement 
+action.  If at any time following the entry of the Order, the Division of Enforcement (“Division”) 
+obtains information indicating that Respondent knowingly provided materially false or misleading 
+information or materials to the Commission, or in a related proceeding, the Division may, at its 
+sole discretion and with prior notice to the Respondent, petition the Commission to reopen this 
+matter and seek an order directing that the Respondent pay an additional civil penalty.  Respondent 
+may contest by way of defense in any resulting administrative proceeding whether it knowingly 
+provided materially false or misleading information, but may not: (1) contest the findings in the 
+Order; or (2) assert any defense to liability or remedy, including, but not limited to, any statute of 
+limitations defense. 
+  
+By the Commission. 
+ 
+ 
+ 
+       Vanessa A. Countryman 
+       Secretary 
+ 
+ 14 
+ 
+ 
+ 

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+   
+ 1 
+UNITED STATES OF AMERICA 
+Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+ 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No. 86770 / August 27, 2019 
+ 
+INVESTMENT ADVISERS ACT OF 1940 
+Release No. 5331 / August 27, 2019 
+ACCOUNTING AND AUDITING ENFORCEMENT  
+Release No. 4066 / August 27, 2019 
+ADMINISTRATIVE PROCEEDING  
+File No. 3-19379 
+In the Matter of 
+RSM US LLP 
+(f/k/a McGladrey LLP) 
+Respondent. 
+ORDER INSTITUTING PUBLIC 
+ADMINISTRATIVE AND CEASE-AND-
+DESIST PROCEEDINGS, PURSUANT TO 
+SECTION 203(k) OF THE INVESTMENT 
+ADVISERS ACT OF 1940, SECTIONS 4C 
+AND 21C OF THE SECURITIES 
+EXCHANGE ACT OF 1934 AND RULE 
+102(e) OF THE COMMISSION’S RULES OF 
+PRACTICE, MAKING FINDINGS, AND 
+IMPOSING REMEDIAL SANCTIONS AND 
+A CEASE-AND-DESIST ORDER  
+I.   
+The Securities and Exchange Commission (“Commission”) deems it appropriate 
+that public administrative and cease-and-desist proceedings be, and hereby are, instituted 
+against RSM US LLP (“RSM US” or “Respondent”) pursuant to Section 203(k) of the 
+Investment Advisers Act of 1940 (“Advisers Act”), Sections 4C1and 21C of the Securities 
+                                                      
+1 Section 4C provides, in relevant part, that:  
+ The Commission may censure any person, or deny, temporarily or permanently, to any person the 
+privilege of appearing or practicing before the Commission in any way, if that person is found . . . 
+(1) not to possess the requisite qualifications to represent others; (2) to be lacking in character or 
+integrity, or to have engaged in unethical or improper professional conduct; or (3) to have willfully 
+violated, or willfully aided and abetted the violation of, any provision of the securities laws or the 
+rules and regulations issued thereunder. 
+   
+ 2 
+Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(ii) of the Commission’s 
+Rules of Practice.2 
+II.   
+In anticipation of the institution of these proceedings, Respondent has submitted an 
+Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely 
+for the purpose of these proceedings and any other proceedings brought by or on behalf of 
+the Commission, or to which the Commission is a party, and without admitting or denying 
+the findings herein, except as to the Commission’s jurisdiction over it and the subject matter 
+of these proceedings, which are admitted, Respondent consents to the entry of this Order 
+Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Section 
+203(k) of the Investment Advisers Act of 1940, Sections 4C and 21C of the Securities 
+Exchange Act of 1934, and Rule 102(e) of the Commission’s Rules of Practice, Making 
+Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set 
+forth below. 
+III. 
+On the basis of this Order and Respondent’s Offer, the Commission finds that: 
+Summary  
+1. These proceedings arise from violations of the Commission’s auditor 
+independence rules by public accounting firm RSM US. The Commission’s auditor independence 
+rules prohibit at any point during the audit or professional engagement period certain employment 
+relationships between an audit firm and its audit client and the provision of certain non-audit 
+services, such as management functions including payroll processing, financial information system 
+design or implementation, and broker-dealer, investment adviser or investment banking services. 
+The rules define an “audit client” to include the client’s affiliates and an “accounting firm” to 
+include associated entities, including other member firms of an international network.3  
+2. Deficiencies in certain of RSM US’s quality controls around auditor 
+independence, including certain procedures, systems, and training, between 2014 and 2015 
+resulted in the firm’s failure to identify and avoid prohibited non-audit services and a prohibited 
+employment relationship as to at least 15 audit clients over that time period. Certain of these 
+independence violations remained undetected until at least 2016. RSM US’s violations of the 
+independence rules occurred during RSM US’s work on more than 100 audit reports for such 
+clients as private funds whose Registered Investment Advisers were seeking to comply with the 
+                                                      
+2 Rule 102(e)(1)(ii) provides, in pertinent part, that:  
+ The Commission may . . . deny, temporarily or permanently, the privilege of appearing or practicing before 
+it . . . to any person who is found . . . to have engaged in unethical or improper professional conduct. 
+3  17 C.F.R. § 210-2.01(f)(6) and (f)(2). 
+   
+ 3 
+Custody Rule,4 employee benefit plans that file reports with the Commission on Form 11-K, 
+broker-dealers, and multi-national public companies. 
+3. RSM US represented that it was “independent” in audit reports issued on the 
+clients’ financial statements, which were included or incorporated by reference in public filings 
+with the Commission or provided to private fund investors for the purpose of complying with 
+the Custody Rule.  By doing so, RSM US violated Rule 2-02(b)(1) of Regulation S-X and 
+caused its clients’ violations of Section 17(a)(1) of the Exchange Act and Rule 17a-5 
+thereunder, Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder, Section 
+15(d) of the Exchange Act and Rule 15d-1 thereunder, and Section 206(4) of the Advisers Act 
+and Rule 206(4)-2 thereunder. RSM US’s conduct also constituted improper professional 
+conduct pursuant to Section 4C of the Exchange Act and Rule 102(e) of the Commission’s 
+Rules of Practice. 
+Respondent 
+4. RSM US LLP (f/k/a McGladrey LLP) is an accounting and advisory firm 
+headquartered in Chicago, Illinois. Through more than 80 offices across the country, RSM US 
+provides audit, tax, and consulting services. RSM US is registered with the Public Company 
+Accounting Oversight Board (“PCAOB”) and is the U.S. member firm of the RSM International 
+(“RSMI”) network. 
+Other Relevant Entity 
+5. RSMI, incorporated in London, United Kingdom, is a professional services 
+network of independent audit, tax, and consulting member firms located in over 120 countries. 
+Facts  
+A. Legal Background 
+6. Rule 2-01(c)(4) of Regulation S-X sets forth a non-exhaustive list of non-audit 
+services which an auditor cannot provide to its audit clients and be considered independent. See 
+17 C.F.R. § 210-2.01(c)(4)(i)-(x). Additionally, Rule 2-01(c)(2) of Regulation S-X provides that 
+an auditor is not independent of its audit client if “a current partner, principal, shareholder, or 
+professional employee of the accounting firm is employed by the audit client or serves as a 
+member of the board of directors or similar management or governing body of the audit client.” 
+See 17 C.F.R. § 210-2.01(c)(2). 
+                                                      
+4  Investment advisers registered with the Commission pursuant to the Investment Advisers Act of 1940 
+(“Advisers Act”) are subject to Advisers Act Rule 206(4)-2, known as the “Custody Rule.” The rule requires 
+advisers that have custody of client assets to take steps to safeguard those assets.  One of the ways for an investment 
+adviser to satisfy certain obligations under the Custody Rule is by having the financial statements of its funds 
+audited annually by an independent public accountant that is registered with, and subject to regular inspection by, 
+the Public Company Accounting Oversight Board (“PCAOB”). In order to be independent, the public accountant 
+must meet the standards of independence described in Rule 2-01(b) and (c) of Regulation S-X. Custody Rule audits 
+are generally conducted in accordance with generally accepted auditing standards. 
+   
+ 4 
+7. PCAOB standards also require auditors to be independent with respect to issuer 
+audits.  In addition, PCAOB quality control standards require audit firms to establish policies 
+and procedures “to provide the firm with reasonable assurance that personnel maintain 
+independence (in fact and appearance) in all required circumstances.” (QC 20.09). Audit firms 
+are required to monitor on an ongoing basis whether personnel are complying with the 
+independence requirements, including through “a continuing assessment of client 
+relationships.” (QC 20.08). Such quality controls must be suitably designed in relation to, 
+among other factors, the firm’s size, number of offices, and nature and complexity of the 
+firm’s practice. (QC 20.04). 
+B. Certain RSM US Independence Controls 
+8. RSM US maintains information about client relationships in Client Central, a 
+database used by the firm since at least 2011. Among other things, Client Central contains 
+information about all work billed to clients, both audit and non-audit, across all RSM US 
+offices. Client Central was one database that RSM US engagement teams were required to 
+search as part of client acceptance and continuance procedures. 
+9. To track services RSMI member firms provide to clients worldwide, RSMI 
+maintains a database called the Global Relationship Tracker (the “GRT”). In 2011, RSMI 
+began collecting information from RSMI member firms, including RSM US, about certain 
+audit and non-audit services provided to various entities. The type of information required to 
+be submitted for inclusion in GRT expanded over time. Since 2013, RSMI member firms are 
+required to certify that they have included all required information in GRT regarding audit 
+and non-audit services provided to publicly traded companies, entities within private equity 
+groups, and certain other entities.  As part of and since year-end 2014 audits, RSM US audit 
+engagement teams have been required to search GRT, in addition to performing inquiries of 
+client management, to identify services being provided to clients and their affiliates by RSMI 
+member firms. 
+10. Prior to the 2017 audit year, as part of client acceptance and continuance, all RSM 
+US audit engagement teams were required to complete a computer-based questionnaire called the 
+McGladrey Risk Assessment Model (MRAM) to assess, among other potential engagement risks, 
+those related to auditor independence. Starting in late 2013, RSM US consulting teams were also 
+required to complete a MRAM and perform a search of Client Central to identify any audit or 
+non-audit services RSM US provided to clients. 
+C. RSM US’s Prohibited Services and Relationships 
+11. From 2014 to 2015, RSM US or other RSMI member firms provided prohibited 
+non-audit services to, or had a prohibited employment relationship with, affiliates of at least 15 
+RSM US audit clients subject to the Commission’s independence rules. The audit clients impacted 
+included funds of eight registered investment advisers seeking to comply with the Custody Rule, 
+the employee benefit plans of three public companies that filed reports with the Commission on 
+Form 11-K, two broker-dealers, and two public companies. The prohibited non-audit services 
+included corporate secretarial services, payment facilitation, payroll outsourcing, providing loaned 
+staff, financial information system design or implementation, bookkeeping, internal audit 
+   
+ 5 
+outsourcing, and investment adviser services. In each instance, the audit teams were unaware of 
+the prohibited non-audit services or relationship. 
+12. RSM US did not detect or avoid these prohibited services and relationships, as 
+certain procedures, training, and systems in place during the relevant period were insufficient to 
+provide a reasonable assurance of independence in all required circumstances and adequately 
+monitor for independence on an ongoing basis. For example, in relation to Client Central, 
+engagement teams did not always uniformly enter client names, or properly complete entries such 
+that affiliates were identified in the system. Additionally, some audit and consulting engagement 
+teams failed to search Client Central adequately or understand search results generated. 
+Consequently, certain non-audit services provided by RSM US to affiliates of audit clients were 
+undetected for one or more years.  
+13. RSM US also did not detect that some consulting teams failed to complete the 
+MRAM after it became required for new relationships or provided insufficient or inaccurate 
+responses to MRAM questions regarding affiliate relationships and private equity ownership. 
+Additionally, RSM US did not require consulting teams to complete an MRAM for every ongoing, 
+multi-year consulting relationship and, prior to 2014, the MRAM did not prompt audit engagement 
+teams to perform searches in Client Central to identify affiliate relationships. As a result, some 
+instances of prohibited non-audit services provided by RSM US consulting teams to affiliates of 
+RSM US audit clients were undetected by RSM US for multiple years. 
+14. For example, for fiscal years 2012 through 2014, RSM US was engaged to audit 
+the financial statements of two private funds of Registered Investment Adviser A to satisfy the 
+requirements of the Custody Rule.  In late 2012, RSM US consulting personnel were engaged to 
+provide prohibited financial software consulting services to one portfolio company of the funds; 
+in 2013, to an additional portfolio company; and, in 2014, to a third portfolio company. These 
+services were provided during 2013 and 2014. As noted above, prior to the requirement to 
+complete the MRAM, the consulting teams were not required to search for audit services provided 
+to affiliates of their clients. In 2014, the prohibited services were unrecognized because consulting 
+personnel improperly entered their clients’ names into Client Central and did not tag their clients 
+as related to Registered Investment Adviser A. Additionally, two of the consulting teams failed to 
+complete MRAMs, and the consulting team that did complete the MRAM inaccurately responded 
+that its client was not majority owned by Registered Investment Adviser A. By failing to identify 
+the prohibited non-audit services, RSM US issued audit reports for fiscal year end 2013 while not 
+independent.  RSM US identified the issue in early 2015 and did not issue audit reports for fiscal 
+year end 2014. 
+15. Limitations with the GRT also led to instances in which RSM US did not identify 
+prohibited non-audit services or prohibited relationships being provided to international affiliates 
+of RSM US audit clients by RSMI member firms, leading RSM US personnel to conclude in 2013 
+that it was impossible for them to rely on the GRT as a tool for monitoring independence on an 
+international scale. Because of RSM US’s concerns about the lack of reliability of the information 
+in the GRT, RSM US did not mandate GRT searches by its audit personnel until fiscal year-end 
+2014 audit engagements and, instead, required audit personnel to conduct inquiries of clients. 
+Even after RSM US began mandating GRT searches in 2014, RSM US personnel, at times, did 
+not perform necessary searches of GRT or properly follow-up on search results. Additionally, in 
+   
+ 6 
+certain instances, RSMI member firms did not properly enter services in GRT. This led to a lack 
+of detection of services provided by RSMI member firms to international affiliates of RSM US 
+audit clients. 
+16. For example, in 2013 and 2014, RSM US served as the auditor of Company A, an 
+issuer which was a portfolio company of a fund managed by Registered Investment Adviser B. 
+RSM US did not audit the funds of Registered Investment Adviser B. In 2013, Registered 
+Investment Adviser B purchased Company B, a non-issuer, and RSM US served as Company B’s 
+auditor. Unknown to the RSM US Company B audit engagement team, a tax partner from RSMI’s 
+Australian member firm had served as a non-discretionary board member on the board of 
+Company B’s Australian subsidiary since 2012, on a voluntary basis. This relationship was not 
+identified in GRT. RSMI’s Australian member firm, in turn, could not have identified RSM US’s 
+audit relationship with Company B and its affiliates because RSM US had not updated the GRT to 
+reflect Registered Investment Adviser B’s acquisition of Company B.  
+17. Company A filed financial statements with the Commission accompanied by RSM 
+US’s audit report stating that the audit was performed in accordance with PCAOB standards which 
+require that RSM US be independent. For the fiscal year end 2013 audit, the audit teams for 
+Companies A and B did not search the GRT. The services were identified in March 2015 by a 
+RSM US non-audit professional during an engagement for Company B. By failing to identify 
+this improper relationship, RSM US issued an audit report for Company A for fiscal year end 
+2013, and performed quarterly reviews for Company A in 2014 while not independent. 
+Violations  
+A. Violations of Rule 2-02(b)(1) of Regulation S-X 
+18. At the time of the relevant conduct, Rule 2-02(b)(1) of Regulation S-X provided 
+that an accountant’s report must state whether the audit was made in accordance with generally 
+accepted auditing standards (“GAAS”).5 PCAOB standards require that auditors maintain strict 
+independence from SEC audit clients.  See PCAOB Auditing Standards, Independence, AU § 
+220.02.6 
+19. As a result of the conduct described above, RSM US violated Rule 2 -02(b)(1) 
+of Regulation S-X. For fiscal years 2013 or 2014 , two RSM US audit clients filed financial 
+statements with the Commission on Form 10 -K. For fiscal years 2013, 2014, or 2015, three 
+RSM US employee benefit plan audit clients filed financial statements with the Commission 
+on Form 11-K. The relevant financial statements included audit reports of RSM US or 
+included consents and audit reports of RSM US as exhibits. Those reports incorrectly stated, 
+“[w]e conducted our audits in accordance with the standards of the Public Company 
+                                                      
+5  Pursuant to Commission Release 33-8422, GAAS, as used in Regulation S-X, means “the standards of the 
+PCAOB plus any applicable Commission rules.” Audit reports dated on or after May 24, 2004 – the effective date of 
+PCAOB Auditing Standard 1 – are required to state that they were performed in accordance with PCAOB standard s. 
+PCAOB rules and standards require auditors to be independent from their audit clients. See, e.g., PCAOB Rule 
+3520, PCAOB Rule 3500T, and PCAOB AU § 220. 
+6  References to PCAOB standards are to those that were in effect at the time of the relevant conduc t. 
+   
+ 7 
+Accounting Oversight Board (United States),” because RSM US failed to comply with the 
+independence rules during the relevant audit or professional engagement periods as required 
+by PCAOB standards. 
+B. RSM US Caused Violations of Exchange Act Section 13(a) and Exchange Act 
+Rules 13a-1 and 13a-13 
+20. Section 13(a) of the Exchange Act and Exchange Act Rule 13a-1 require issuers 
+with equity securities registered under Section 12 to file annual reports with the Commission that 
+have been audited by an independent public accountant. Exchange Act Rule 13a-13 requires 
+public issuers with securities to file with the Commission accurate quarterly reports on Form 10-
+Q. Rule 10-01(d) of Regulation S-X requires the interim financial statements included in a Form 
+10-Q to be reviewed by an independent public accountant. 
+21. For fiscal years 2013 or 2014, two RSM US audit clients filed with the 
+Commission annual reports on Form 10-K that included financial statements audited by RSM US 
+or included consents and audit reports of RSM US as exhibits. For certain quarters in fiscal year 
+2014 or 2015, these RSM US audit clients also filed quarterly reports on Forms 10-Q reviewed 
+by RSM US. However, RSM US violated the Commission’s independence rules during the 
+relevant audit or professional engagement periods, and accordingly the filings did not comply 
+with Commission requirements. As such, RSM US caused these audit clients to violate Section 
+13(a) of the Exchange Act and Exchange Act Rules 13a-1 and 13a-13. 
+C. RSM US Caused Violations of Exchange Act Section 15(d) and Exchange Act 
+Rule 15d-1 
+22. Section 15(d) of the Exchange Act and Exchange Act Rule 15d-1 require, 
+among other things, the filing of annual reports on Form 11-K with respect to employee stock 
+purchase, savings and similar plans (collectively, “employee benefit plans”), interests in which 
+constitute securities registered under the Securities Act of 1933. Form 11-K requires the 
+inclusion of financial statements for the employee benefit plans audited by an independent 
+public accountant. 
+23. For fiscal years 2013, 2014, or 2015, three RSM US employee benefit plan audit 
+clients filed with the Commission annual reports on Form 11-K that included financial 
+statements audited by RSM US. However, RSM US violated the independence rules during the 
+relevant audit or professional engagement periods and accordingly, the filings did not comply 
+with the Commission’s requirements. As such, RSM US caused these audit clients to violate 
+Section 15(d) of the Exchange Act and Exchange Act Rule 15d-1. 
+D. RSM US Caused Violations of Exchange Act Section 17(a)(1) and 
+Exchange Act Rule 17a-5 
+24. Section 17(a)(1) of the Exchange Act and Rule 17a-5 thereunder generally 
+require broker-dealers to file annual reports containing financial statements audited by 
+   
+ 8 
+independent public accountants that are registered with the PCAOB.7 Rule 17a-5(g) requires 
+the accountant to prepare its reports in accordance with standards of the PCAOB.  Rule 17a-
+5(i)(2)(i) requires the accountant’s reports to state whether the examinations or review were 
+made in accordance with PCAOB standards.  For fiscal years 2013, 2014, or 2015, two RSM 
+US broker-dealer audit clients filed with the Commission annual reports that included financial 
+statements audited by RSM US. However, RSM US violated the independence rules during the 
+relevant audit or professional engagement periods and, accordingly, the financial statements did 
+not comply with the Commission’s requirements. As such, these RSM US broker-dealer audit 
+clients violated Section 17(a)(1) of the Exchange Act and Exchange Act Rule 17a-5, and RSM 
+US was a cause of these violations. In particular, RSM US caused the broker-dealers to violate 
+Exchange Act Rule 17a-5(i) by stating that its audits were conducted in accordance with GAAS 
+and/or the standards of the PCAOB, as applicable during the relevant periods.8  
+E. RSM US Caused Violations of Investment Advisers Act Section 206(4) and 
+Advisers Act Rule 206(4)-2 
+25. Registered investment advisers with custody of client assets are subject to the 
+Custody Rule under Section 206(4) of the Investment Advisers Act of 1940 (“Advisers Act”) and 
+Advisers Act Rule 206(4)-2, which require certain steps intended to safeguard client assets. 
+26. Advisers to pooled investment vehicles can comply with the Custody Rule 
+if, among other things, the pooled investment vehicle is audited at least annually by a 
+PCAOB-registered independent public accountant that is subject to regular inspection by 
+the PCAOB. See Rule 206(4)-2(b)(4). 
+27. To comply with the Custody Rule, for fiscal years 2013, 2014, 2015, or 2016, 
+eight registered investment advisers engaged RSM US as an independent public accountant to 
+audit annually the financial statements of certain funds. However, during these Custody Rule 
+audits, RSM US was not independent. As such, RSM US caused eight registered investment 
+adviser clients to violate Section 206(4) of the Advisers Act and Advisers Act Rule 206(4)-2. 
+F. Improper Professional Conduct 
+28. Rule 102(e)(1)(ii) of the Commission’s Rules of Practice, as codified in Section 
+4C(a)(2) of the Exchange Act, allows the Commission to censure a person, or deny such person, 
+temporarily or permanently, the privilege of appearing or practicing before the Commission, if it 
+                                                      
+7  17 C.F.R. 240.17a-5(d) and (f)(1). 
+8  The provisions of Exchange Act Rule 17a-5 relevant here changed in 2013. On July 30, 2013, the 
+Commission adopted amendments to Rule 17a-5. See Broker-Dealer Reports, SEC Exch. Act Rel. No. 34-70073 
+(July 30, 2013), 78 Fed. Reg. 51910 (Aug. 21, 2013). Among other things, the amendments require audits of brokers 
+and dealers for fiscal years ending on or after June 1, 2014 to be performed in accordance with PCAOB standards, 
+not “generally accepted auditing standards,” or “GAAS,” as the rule previously required. Although the amended 
+language reflects the change to PCAOB auditing standards, this change does not otherwise affect an auditor’s 
+liability for inaccurately stating in an auditor’s report that its audit was performed in accordance with applicable 
+standards under Rule 17a-5(i). Additionally, the auditor independence requirement of Rule 2 -01 of Regulation S-X 
+applied to broker-dealer audits both before and after the July 30, 2013 amendments.  
+   
+ 9 
+finds that such person has engaged in “improper professional conduct.” For accountants, the 
+definition of “improper professional conduct” includes: 
+1. “intentional or knowing conduct, including reckless conduct, that results in a 
+violation of applicable professional standards.” Exchange Act Section 4C(b)(1), 
+Rule 102(e)(1)(iv)(A); or 
+2. Either of the following two types of negligent conduct: 
+(A) a single instance of highly unreasonable conduct that results in a 
+violation of applicable professional standards in circumstances in which an 
+accountant knows, or should know, that heightened scrutiny is warranted; or 
+(B) 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.9 
+Exchange Act Section 4C(b)(2). 
+29. As described above, during the relevant period RSM US failed to maintain an 
+adequate independence quality control system. These failures resulted in repeated instances of 
+unreasonable conduct in which RSM US violated the auditor independence rules. Consequently, 
+RSM US engaged in improper professional conduct, as defined by Section 4C(a)(2) of the 
+Exchange Act and Rule 102(e)(l)(ii) of the Commission’s Rules of Practice. 
+Findings 
+30. Based on the foregoing, the Commission finds that Respondent: (a) committed 
+violations of Rule 2-02(b)(1) of Regulation S-X; (b) caused violations of Exchange Act Section 
+13(a) and Exchange Act Rules 13a-1 and 13a-13 by certain SEC registrant audit clients; (c) 
+caused violations of Exchange Act Section 15(d) and Exchange Act Rule 15d-1 by certain SEC 
+registrant audit clients; (d) caused violations of Advisers Act Section 206(4) and Advisers Act 
+Rule 206(4)-2 by certain audit client funds of SEC registrants; (e) caused violations of Section 
+17(a)(1) and Rule 17a-5 of the Exchange Act by certain SEC registrant audit clients; and (f) 
+engaged in improper professional conduct as defined by Exchange Act Section 4C(a)(2) and Rule 
+102(e)(1)(ii) of the Commission’s Rules of Practice. 
+Respondent’s Remedial Efforts 
+31. Since the time period at issue in this Order, Respondent has implemented 
+remedial measures to enhance its existing policies, procedures, systems, and training over time 
+regarding auditor independence including, among other things: (1) increasing training of audit 
+and non-audit professionals regarding SEC independence rules and instituting targeted training 
+                                                      
+9  In October 1998, the Commission amended its definition of “improper professional conduct” to include 
+these two negligence standards, noting that “a negligent auditor can do just as much harm to the Commission’s 
+process as one who acts with an improper motive.” See, Amendment to Rule 102(e) of the Commission’s Rules of 
+Practice, 63 Fed. Reg. 57,164, 57,167 (October 26, 1998) (codified at 17 C.F.R. Part 201).  
+   
+ 10 
+for certain industries and non-audit professionals; (2) disciplining employees who failed to 
+proactively identify independence violations; (3) augmenting pre-existing client acceptance and 
+continuance procedures, including by adding redundant inquiry and search requirements beyond 
+searching Client Central or GRT; (4) increasing personnel within the independence group in 
+RSM US’s National Office; and (5) implementing an enhanced risk assessment program with 
+additional independence inquiries, and establishing a conflicts-check team to centralize the 
+process of and aid in identifying professional services RSM US and other RSMI member firms 
+provide to RSM US clients and their affiliates.  
+32. In determining to accept the Offer, the Commission considered the remedial 
+acts undertaken by Respondent. 
+Undertakings  
+33. Respondent RSM US has undertaken to: 
+a. Retain, at its own expense, an independent consultant (the “Independent 
+Consultant”), not unacceptable to the staff of the Commission, within 120 days 
+after the entry of this Order. The Independent Consultant will perform and 
+complete a review and evaluation (the “Review”), with the assistance of RSM US, 
+of the sufficiency and adequacy of RSM US’s current quality controls (“RSM 
+US’s Policies”) relating to educating and monitoring for compliance by its 
+personnel with the independence requirements under PCAOB standards and 
+Commission rules that prohibit the performance of certain non-audit services by 
+RSM US or its associated entities to RSM US audit clients or their affiliates. 
+b. The Review shall be completed within 120 days of the retention of the 
+Independent Consultant and shall assess the following areas to determine whether 
+RSM US’s Policies are adequate and sufficient to provide reasonable assurance 
+of compliance with PCAOB and SEC independence rules concerning the 
+provision of prohibited non-audit services by RSM US or its associated entities to 
+RSM US audit clients or their affiliates: 
+(1) The sufficiency of personnel and expertise within RSM US’s National 
+Office of Independence, including with respect to independence issues 
+related to private equity clients. 
+(2) The sufficiency of RSM US’s independence quality controls to prevent and 
+detect prohibited non-audit services, including monitoring systems designed to 
+check conflicts and preventively consider independence issues across all RSM US 
+and RSM US Wealth Management LLC engagements. 
+(3) The sufficiency of RSM US’s independence guidance and training of 
+personnel, including education regarding independence issues related to private 
+equity clients and RSM US Wealth Management LLC clients. 
+c. Require the Independent Consultant to make recommendations for any necessary 
+changes or improvements to RSM US’s Policies. 
+   
+ 11 
+d. Provide a copy of the engagement letter within 14 days of the date of retention of 
+the Independent Consultant detailing the Independent Consultant’s 
+responsibilities to the Commission staff. 
+e. Cooperate fully with the Independent Consultant and provide the Independent 
+Consultant with access to its own files, books, records, and personnel as 
+reasonably requested for the Review. RSM US shall require the Independent 
+Consultant to report to the Commission staff on their activities as the staff may 
+request. 
+f. Require that the Independent Consultant issue a report (the “Report”), within 60 
+days of completing the Review, summarizing the Review and reporting on the 
+findings and any recommendations regarding RSM US’s Policies. 
+Simultaneously with providing the Report to RSM US, the Independent 
+Consultant shall transmit a copy to Amy L. Friedman, Assistant Director, 
+Division of Enforcement, Securities and Exchange Commission, 100 F Street 
+NE, Washington, DC 20549, and to PCAOB staff in care of the Office of the 
+Secretary, Attention Phoebe W. Brown, Secretary, Public Company Accounting 
+Oversight Board, 1666 K Street NW, Washington, DC 20006. 
+g. Devise a plan to adopt all recommendations in the Report within 120 days from 
+the date the Report is issued; however, within 30 days after the Independent 
+Consultant serves the Report, RSM US shall advise the Independent Consultant 
+and the Commission, in writing of any recommendations that it consi ders 
+unnecessary, unduly burdensome, impractical, or unjustifiably costly. With 
+respect to any recommendation that RSM US considers unnecessary, unduly 
+burdensome, impractical, or unjustifiably costly, RSM US need not adopt that 
+recommendation at that time but shall propose in writing an alternative policy, 
+procedure, or system designed to achieve the same objective or purpose. As to any 
+recommendation on which RSM US and the Independent Consultant do not agree, 
+such parties shall attempt in good faith to r each an agreement within 30 days after 
+RSM US serves the written advice. In the event that RSM US and the Independent 
+Consultant are unable to agree on an alternative proposal, RSM US will either 
+abide by the determinations of the Independent Consultant or  seek approval from 
+the Commission staff pursuant to paragraph 3 3.i below to engage, at RSM US’s 
+expense, a qualified third party acceptable to the Commission staff to promptly 
+resolve the issue(s). 
+h. Require the Independent Consultant to enter into an agreement with RSM US that 
+provides that, for the period of engagement and for a period of two (2) years from 
+completion of the engagement, the Independent Consultant shall not enter into any 
+employment, consultant, attorney-client, auditing, or other professional 
+relationship with RSM US, or any of its present or former affiliates, directors, 
+officers, employees, or agents acting in their capacity as such. The agreement will 
+also provide that the Independent Consultant will require that any firm with which 
+he or she is affiliated or of which he or she is a member, and any person engaged 
+to assist the Independent Consultant in performance of his or her duties under this 
+   
+ 12 
+Order shall not, without prior written consent of the Securities and Exchange 
+Commission’s Division of Enforcement, enter into any employment, consultant, 
+attorney-client, auditing, or other professional relationship with RSM US, or any 
+of its present or former affiliates, directors, officers, employees, or agents acting in 
+their capacity as such for the period of the engagement and for a period of two (2) 
+years from completion of the engagement. 
+i. To ensure the independence of the Independent Consultant, RSM US:  (1) shall not 
+have the authority to terminate the Independent Consultant or substitute another 
+independent consultant for the initial Independent Consultant without the prior 
+written approval of the Commission staff; and (2) shall compensate the 
+Independent Consultant and persons engaged to assist the Independent Consultant 
+for services rendered pursuant to this Order at their reasonable and customary 
+rates. 
+j. Within 150 days of issuance of the Report, RSM US’s chief risk officer (“CRO”)  
+must certify to the Commission staff in writing that RSM US has adopted and has 
+implemented or will implement all recommendations contained in the Report. To 
+the extent that RSM US has not implemented all recommendations contained in the 
+Report within 120 days of issuance of the Report, RSM US’s CRO must certify to 
+the Commission staff in writing, 30 days after their implementation, that RSM US 
+has adopted and has implemented all recommendations contained in the Report. 
+The certifications by RSM US’s CRO shall identify the undertakings, provide 
+written evidence of adoption and implementation in the form of a narrative, and be 
+supported by exhibits sufficient to demonstrate adoption and implementation. The 
+Commission staff may make reasonable requests for further evidence of adoption 
+and implementation, and RSM US agrees to provide such evidence. The 
+certification and supporting material shall be submitted to (i) Amy L. Friedman, 
+Assistant Director, Division of Enforcement at the address provided above, with a 
+copy to the Office of Chief Counsel of the Enforcement Division; and (ii) PCAOB 
+staff in care of the Office of the Secretary, Attention Phoebe W. Brown, Secretary, 
+Public Company Accounting Oversight Board, 1666 K Street NW, Washington, 
+DC 20006. 
+k. For good cause shown, the Commission staff may extend any of the procedural 
+dates set forth above. Deadlines for procedural dates shall be counted in calendar 
+days, except if the last day falls on a weekend or federal holiday, the next 
+business day shall be considered the last day. 
+34. RSM agrees that if the Division of Enforcement believes that RSM has not 
+satisfied these undertakings, it may petition the Commission to reopen the matter to determine 
+whether additional sanctions are appropriate. 
+35. These undertakings shall be binding upon any acquirer of or successor-in-
+interest to RSM US’s audit practice. 
+I V. 
+   
+ 13 
+In view of the foregoing, the Commission deems it appropriate to impose the 
+sanctions agreed to in Respondent’s Offer. 
+Accordingly, it is hereby ORDERED, effective immediately, that: 
+A. Respondent shall cease and desist from committing or causing any violations 
+and any future violations of Rule 2-02(b)(1) of Regulation S-X, Sections 13(a), 15(d), and 
+17(a)(1) of the Exchange Act, Exchange Act Rules 13a-1, 13a-13, 15d-1, and 17a-5, and 
+Advisers Act Section 206(4) and Advisers Act Rule 206(4)-2. 
+B. Respondent is censured. 
+C. Respondent shall comply with the undertakings enumerated in paragraphs 
+33(a) – (k), above. 
+D. Respondent shall, within thirty (30) days of the entry of this Order, pay a civil 
+money penalty of $950,000 to the Securities and Exchange Commission for transfer to the general 
+fund of the United States Treasury in accordance with Exchange Act Section 21F(g)(3).  If timely 
+payment is not made on the civil money penalties, additional interest shall accrue pursuant to 31 
+U.S.C. § 3717. 
+Payment must be made in one of the following ways: 
+(1) Respondent may transmit payment electronically to the Commission, which 
+will provide detailed ACH transfer/Fedwire instructions upon request; 
+(2) Respondent may make direct payment from a bank account via Pay.gov 
+through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
+(3) Respondent may pay by certified check, bank cashier’s check, or 
+United States postal m oney order, made payable to the Securities and 
+Exchange Commission and hand-delivered or mailed to: 
+Enterprise Services Center  
+Accounts Receivable Branch  
+HQ Bldg., Room 181, AMZ-341  
+6500 South MacArthur Boulevard 
+Oklahoma City, OK 73169 
+Payments by check or money order must be accompanied by a cover letter identifying 
+RSM US as a Respondent in these proceedings, and the file number of these proceedings; a copy 
+of the cover letter and check or money order must be sent to Carolyn M. Welshhans, Associate 
+Director, Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, 
+Washington, DC 20549. 
+E. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
+treated as penalties paid to the government for all purposes, including all tax purposes. To 
+preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
+Action it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 
+   
+ 14 
+award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
+penalty in this action (“Penalty Offset”). If the court in any Related Investor Action grants such a 
+Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order 
+granting the Penalty Offset, notify the Commission’s counsel in this action and pay the amount 
+of the Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be 
+deemed an additional civil penalty and shall not be deemed to change the amount of the civil 
+penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor Action” 
+means a private damages action brought against Respondent by or on behalf of one or more 
+investors based on substantially the same facts as alleged in the Order instituted by the 
+Commission in this proceeding. 
+By the Commission. 
+ 
+     Vanessa A. Countryman 
+     Secretary 
+ 
+ 
+ 

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+ 
+ 
+UNITED STATES OF AMERICA 
+Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 86812 / August 29, 2019 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 4069 / August 29, 2019 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-19397 
+ 
+ 
+In the Matter of 
+ 
+JUNIPER NETWORKS, INC., 
+ 
+Respondent. 
+ 
+ 
+ORDER INSTITUTING CEASE-AND-
+DESIST PROCEEDINGS PURSUANT 
+TO SECTION 21C OF THE 
+SECURITIES EXCHANGE ACT OF 
+1934, MAKING FINDINGS, AND 
+IMPOSING A CEASE-AND-DESIST 
+ORDER  
+  
+I. 
+ 
+ The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
+and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
+Exchange Act of 1934 (“Exchange Act”), against Juniper Networks, Inc. (“Juniper” or 
+“Respondent”).   
+ 
+II. 
+ 
+ In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
+of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
+purpose of these proceedings and any other proceedings brought by or on behalf of the 
+Commission, or to which the Commission is a party, and without admitting or denying the findings  
+herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
+proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
+and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
+Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below.   
+ 
+ 2 
+III. 
+ 
+ On the basis of this Order and Respondent’s Offer, the Commission finds1 that:  
+ 
+Summary 
+ 
+1. These proceedings arise out of Juniper’s violations of the internal accounting 
+controls and recordkeeping provisions of the Foreign Corrupt Practices Act of 1977 (the "FCPA") 
+[15 U.S.C. § 78m], through its subsidiaries operating in Russia and China. 
+ 
+2. From 2008 through 2013, certain sales employees of the Russian representative 
+office of Juniper’s subsidiary, JNN Development Corp. (“JNN”) secretly agreed with third party 
+channel partners to increase the incremental discount on sales made to customers through those 
+channel partners without passing those increased discounts on to customers.  Instead, the channel 
+partners diverted the additional discounts into a fund held by the channel partners for travel and 
+marketing expenses.  These off-book funds were referred to as “common funds” and were directed 
+in part by JNN sales representatives.  These “common funds” were used in part to pay for customer 
+trips, including trips for government officials, some of which were predominately leisure in nature 
+and had little to no educational or business purpose.  Included in the customer travel paid for 
+through the “common fund” were instances of customer travel for foreign officials to various 
+locations where there were no Juniper facilities or industry conferences related to Juniper’s 
+business.  In late 2009, Juniper learned of these off-book “common fund” accounts and improper 
+use of additional discounts, both of which were prohibited under Juniper policies.  Despite this, 
+JNN’s off-book accounts, funded through diverted additional discounts, and improper travel 
+practices continued through 2013. 
+ 
+3. Additionally, from 2009 through 2013, certain sales employees of Juniper’s 
+Chinese subsidiaries falsified trip and meeting agendas for customer events that understated the 
+true amount of entertainment involved on the trips.  The sales employees submitted these 
+falsified and misleading trip agendas to Juniper’s Legal Department to obtain event approval.  In 
+contravention of Juniper’s travel policies, Juniper’s Legal Department approved numerous trips 
+without adequate review and after the event had taken place. 
+ 
+4. Juniper failed to accurately record the incremental discounts and travel and 
+marketing expenses in its books and records, and failed to devise and maintain a system of 
+internal accounting controls sufficient to prevent and detect off-book accounts, unauthorized 
+customer trips, falsified travel agendas and after-the-fact travel approvals. 
+ 
+ 
+ 
+                                                 
+1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other 
+person or entity in this or any other proceeding.   
+ 
+ 
+ 
+ 3 
+ 
+Respondent 
+ 
+5. Juniper is a Delaware corporation headquartered in Sunnyvale, California.  
+Juniper designs, manufactures, and sells networking equipment products and services.  Juniper’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 under the symbol “JNPR.” Juniper provides 
+routers, switches, and security firewalls to telecommunication network service providers.  As 
+part of the procurement process, Juniper products are tested pursuant to an objective international 
+standard, RFC 2544, and if met, are certified as eligible to enter into a competitive bidding 
+process through which Juniper’s end-user customers make purchases. Juniper’s sales to end-user 
+customers are made through third party intermediaries, known as “channel partners.”  These 
+channel partners provide end-user customers with technical expertise, system integration 
+services, and product maintenance and servicing.   
+ 
+Other Related Entities 
+ 
+6. During the relevant time period, JNN was a wholly-owned subsidiary of Juniper, 
+headquartered in Delaware and operated a representative office in Moscow, Russia.   
+ 
+7. During the relevant time period, Juniper Networks R&D Ltd. was a wholly-
+owned foreign subsidiary of Juniper based in Hong Kong (“Juniper Hong Kong”). 
+ 
+8. During the relevant time period, Juniper Networks Shanghai Ltd., was a wholly-
+owned foreign subsidiary of Juniper based in China (“Juniper Shanghai,” or, together with 
+Juniper Hong Kong, “Juniper China”). 
+ 
+Facts 
+ 
+A. Improper Travel Practices in Russia 
+ 
+9. From 2008 to 2013, certain JNN sales employees in Russia misrepresented to 
+senior management the need for increased discounts to meet competition.  In fact, these JNN 
+sales employees secretly agreed with channel partners that these increased discounts would not 
+be passed on to end-user customers but instead retained by the channel partners.2  These 
+incremental discounts created additional pools of money which were held by channel partners in 
+off-book accounts, known as “common funds.”  
+ 
+10. The involved JNN employees structured these transactions in this manner to keep 
+the common funds off of Juniper’s books so that the local JNN employees and channel partners 
+could thereafter direct the funds without obtaining proper internal Juniper approvals.  The 
+                                                 
+2 Juniper’s sales to these channel partners are made at a discount from the end -user customer price.  The channel 
+partners retain a certain percentage of this discount as their own profit margin and then resell Juniper’s products 
+and services to end-user customers.   
+ 
+ 4 
+practice of these JNN employees to inflate and divert discounts into off-book accounts also 
+created a risk that these funds could be embezzled or applied to other improper uses. 
+ 
+11. The proceeds from the common funds were in part used by local JNN employees 
+and channel partners to fund trips for end-user customer employees, including some trips that 
+were excessive, inconsistent with Juniper policy, predominantly leisure in nature, and had little 
+to no legitimate business purpose.  These specific trips included customers, including foreign 
+officials, traveling to international tourist destinations, such as Italy, Portugal, and various U.S. 
+cities, where there were no Juniper facilities, industry specific conferences, or other legitimate 
+business justifications.  In some of these instances, the trips included sightseeing tours, 
+amusement parks, national park excursions and meals and entertainment for customers and, in 
+some instances, customer family members.  Former JNN employees discussed their desire to 
+have a business impact based on this leisure travel and entertainment.  In one instance, in an 
+internal communication seeking approval for a five day international sightseeing trip, a JNN 
+employee explained that the “purpose of the trip” was to meet with a “top [state-owned 
+customer] manager to speed up Q2 bookings,” and as such this employee directly linked the trip 
+and future bookings.  In another instance, a JNN employee asked to take a state-owned customer 
+on a seven day leisure trip to the U.S., explaining his belief that if the trip was not approved, 
+Juniper would lose customer sales.  
+ 
+12. In late 2009, a then member of senior management initially learned that JNN 
+employees in Russia had created off-book accounts that were funded in part by improperly 
+obtaining incremental discounts, both violations of Juniper policies.  Although Juniper instructed 
+JNN employees to discontinue these practices, Juniper’s overall remedial efforts were ineffective, 
+and JNN employees continued these practices through 2013.  At times, these JNN employees used 
+personal communication devices instead of corporate email, in one instance cautioning each other to 
+“not write about additional discounts in exchange for something else via e-mail.”  
+ 
+13. As a consequence, Juniper failed to properly account for these off-book funds, 
+and failed to implement or maintain a system of effective internal accounting controls to 
+prevent off-book accounts, improper expenses, and the misuse of product discounts.  
+ 
+B. Improper Travel Practices in China 
+ 
+14. From 2009 to 2013, local employees of Juniper China paid for the domestic travel 
+and entertainment of customers, including foreign officials, that was excessive and inconsistent 
+with Juniper policy.  Certain local Juniper China marketing employees falsified agendas for trips 
+provided to end-user customer employees.  These falsified trip agendas understated the true 
+amount of entertainment involved on the trips. 
+ 
+15. Juniper China marketing employees submitted these falsified and misleading trip 
+agendas to Juniper’s Legal Department to obtain event approval.  In some cases, these Juniper 
+China marketing employees also provided these falsified agendas to their customer invitees to 
+assist the invitees in obtaining their own internal approvals to attend the events.  In several 
+instances, Juniper China’s marketing staff did not follow Juniper’s policy which required prior 
+ 
+ 5 
+approval of the proposed events from Juniper’s Legal Department.  In violation of Juniper’s 
+policies and undermining its internal accounting controls over travel and entertainment, the 
+Juniper Legal Department staff responsible for reviewing third-party hospitality within the Asia-
+Pacific region regularly approved events that had already been conducted despite the requirement 
+that such events receive prior review and approval.  
+ 
+ 
+Legal Standards and Violations 
+ 
+16. Under Section 21C(a) of the Exchange Act, the Commission may impose a cease-
+and-desist order upon any person who is violating, has violated, or is about to violate any 
+provision of the Exchange Act or any rule or regulation thereunder, and upon any other person 
+that is, was, or would be a cause of the violation, due to an act or omission the person knew or 
+should have known would contribute to such violation. 
+ 
+17. Under Section 13(b)(2)(A) of the Exchange Act, issuers are required to make and 
+keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the 
+transactions and disposition of the assets of the issuer. 
+ 
+18. Under Section 13(b)(2)(B) of the Exchange Act, issuers are required to devise and 
+maintain a system of internal accounting controls sufficient to provide reasonable assurances that 
+(i) transactions are executed in accordance with management’s general or specific authorization; 
+(ii) transactions are recorded as necessary (I) to permit preparation of financial statements in 
+conformity with generally accepted accounting principles or any other criteria applicable to such 
+statements, and (II) to maintain accountability for assets; (iii) access to assets is permitted only in 
+accordance with management’s general or specific authorization; and (iv) the recorded 
+accountability for assets is compared with the existing assets at reasonable intervals and 
+appropriate action is taken with respect to any differences. 
+ 
+19. As a result of the conduct described above, Juniper violated Section 13(b)(2)(A) 
+because its books and records, did not, in reasonable detail, accurately and fairly reflect certain 
+expenses.  Juniper violated Section 13(b)(2)(B) because it did not devise and maintain internal 
+accounting controls over the approval processes for incremental discounting and travel that were 
+sufficient to provide reasonable assurances that access to assets and transactions were executed 
+in accordance with management’s authorization. 
+ 
+Juniper’s Cooperation and Remedial Efforts 
+ 
+20. Juniper’s cooperation included timely disclosure of facts developed during an 
+internal investigation initiated after learning of the investigation being conducted by Commission 
+staff.  The company voluntarily produced and translated documents and provided the staff 
+presentations regarding its investigation.  
+ 
+21. Juniper’s remedial actions included revising its compliance policies and making 
+enhancements to its compliance group.  The Company has realigned its compliance function into 
+ 
+ 6 
+an integrated unit, all reporting into a newly created and empowered Chief Compliance Officer.  
+The Company has created an independent and expert investigations function.  It also has 
+implemented a mandatory escalation policy to ensure that the Company’s Board of Directors is 
+informed of serious issues.  The Company has instituted mandatory due diligence and prior 
+approval processes by the Compliance Department of channel partners and other vendors.  The 
+Company has instituted a compliance preview and required pre-approval of non-standard 
+discounts and required pre-approval for third-party gifts, travel, and entertainment, channel 
+partner marketing expenses, and even certain operating expenses in high risk markets.  Juniper 
+has conducted additional employee training on anti-corruption issues and improved its processes 
+for conducting internal investigations of potential violations of anti-corruption laws. 
+ 
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent Juniper’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED that: 
+ 
+ A. Pursuant to Section 21C of the Exchange Act, Respondent cease and desist from 
+committing or causing any violations and any future violations of Sections 13(b)(2)(A) and 
+13(b)(2)(B) of the Exchange Act.   
+ 
+ B. Respondent shall, within 10 days of the entry of this Order, pay $4,000,000 in 
+disgorgement, $1,245,018 prejudgment interest,  and a civil penalty of $6,500,000, for a total 
+payment of $11,745,018 to the Securities and Exchange Commission for transfer to the general 
+fund of the United States Treasury, subject to  Exchange Act Section 21F(g)(3).  If timely payment 
+is not made, additional interest shall accrue pursuant to SEC Rule of Practice 600 and 31 U.S.C. § 
+3717.” 
+ 
+Payment must be made in one of the following ways:   
+ 
+(1) Respondent may transmit payment electronically to the Commission, which will 
+provide detailed ACH transfer/Fedwire instructions upon request;  
+ 
+(2) Respondent may make direct payment from a bank account via Pay.gov through the 
+SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
+ 
+(3) Respondent may pay by certified check, bank cashier’s check, or United States 
+postal money order, made payable to the Securities and Exchange Commission and 
+hand-delivered or mailed to:  
+ 
+Enterprise Services Center 
+Accounts Receivable Branch 
+HQ Bldg., Room 181, AMZ-341 
+6500 South MacArthur Boulevard 
+ 
+ 7 
+Oklahoma City, OK 73169 
+ 
+Payments by check or money order must be accompanied by a cover letter identifying 
+Juniper Networks, Inc. as a Respondent in these proceedings, and the file number of these 
+proceedings; a copy of the cover letter and check or money order must be sent to Daniel J. Wadley, 
+Salt Lake Regional Director, Division of Enforcement, U.S. Securities and Exchange Commission, 
+351 South West Temple, Suite 6.100, Salt Lake City, Utah 84101.  
+ 
+ C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
+treated as penalties paid to the government for all purposes, including all tax purposes.  To 
+preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
+Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 
+award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
+penalty in this action ("Penalty Offset").  If the court in any Related Investor Action grants such a 
+Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting 
+the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the 
+Penalty Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed 
+an additional civil penalty and shall not be deemed to change the amount of the civil penalty 
+imposed in this proceeding.  For purposes of this paragraph, a "Related Investor Action" means a 
+private damages action brought against Respondent by or on behalf of one or more investors based 
+on substantially the same facts as alleged in the Order instituted by the Commission in this 
+proceeding. 
+ 
+D.   Respondent acknowledges that the Commission is not imposing a civil penalty in 
+excess of $6,500,000 based upon its cooperation in a Commission investigation or related 
+enforcement action.  If at any time following the entry of the Order, the Division of Enforcement 
+(“Division”) obtains information indicating that Respondent knowingly provided materially false 
+or misleading information or materials to the Commission, or in a related proceeding, the Division 
+may, at its sole discretion and with prior notice to the Respondent, petition the Commission to 
+reopen this matter and seek an order directing that the Respondent pay an additional civil penalty.  
+Respondent may contest by way of defense in any resulting administrative proceeding whether it 
+knowingly provided materially false or misleading information, but may not:  (1) contest the 
+findings in the Order; or (2) assert any defense to liability or remedy, including, but not limited to, 
+any statute of limitations defense. 
+ 
+ By the Commission. 
+ 
+ 
+       Vanessa A. Countryman 
+       Secretary 

raw/aaer/2019/AAER-4079.txt

@@ -0,0 +1,138 @@
+ 
+ 
+ UNITED STATES OF AMERICA 
+ before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 87032 / September 19, 2019 
+ 
+INVESTMENT ADVISERS ACT OF 1940 
+Release No. 5357 / September 19, 2019 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 4079 / September 19, 2019 
+  
+ADMINISTRATIVE PROCEEDING 
+File No. 3-19473 
+ 
+In the Matter of 
+David R. Gibson,  
+Respondent. 
+ 
+ORDER INSTITUTING PUBLIC 
+ADMINISTRATIVE PROCEEDINGS 
+ PURSUANT TO RULE 102(e) OF THE 
+COMMISSION’S RULES OF PRACTICE, 
+AND SECTION 203(f) OF THE 
+INVESTMENT ADVISERS ACT OF 1940, 
+MAKING FINDINGS, AND IMPOSING 
+REMEDIAL SANCTIONS 
+ 
+ 
+I. 
+ 
+ The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
+public interest that public administrative proceedings be, and hereby are, instituted against David 
+R. Gibson (“Respondent”) pursuant to Rule 102(e)(3)(i) of the Commission’s Rules of Practice, 
+and Section 203(f) of the Investment Advisers Act of 1940 (“Advisers Act”).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, Respondent admits the Commission’s 
+jurisdiction over him and the subject matter of these proceedings, and the findings contained in 
+Sections III.3. and III.5. below, and consents to the entry of this Order Instituting Public 
+Administrative Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, and 
+Section 203(f) of the Advisers Act, Making Findings, and Imposing Remedial Sanctions (“Order”), 
+as set forth below.   
+ 
+III. 
+ 
+ On the basis of this Order and Respondent’s Offer, the Commission finds that:  
+ 
+1. Respondent, age 62, was the Chief Financial Officer of Wilmington Trust 
+Corporation (“Wilmington”) from 2002 until July 2011.  From 2011 to the present, Respondent has 
+been associated with an investment adviser registered with the Commission. 
+ 
+ 2. Wilmington was, at all relevant times, a bank holding company based in 
+Wilmington, Delaware and incorporated under the laws of the State of Delaware. Its securities 
+were registered with the Commission pursuant to Section 12(b) of the Securities Exchange Act of 
+1934 (“Exchange Act”), and its common stock traded on the New York Stock Exchange under the 
+symbol “WL.”  
+ 
+ 3. On May 6, 2015, the Commission filed a complaint against Respondent and 
+others in SEC v. Gibson, et al., 15-cv-363 (RGA) (D. Del.). On September 17, 2019, the Court 
+entered an order permanently enjoining Respondent, by consent, from future violations of Section 
+17(a) of the Securities Act of 1933 [15 U.S.C. § 77q(a)]; and Sections 10(b) and 13(b)(5) of the 
+Exchange Act, and Rules 10b-5, 13b2-1, and 13a-14 thereunder [15 U.S.C. §§ 78j(b) and 
+78m(b)(5),  and 17 C.F.R. §§ 240.10b-5, 240.13b2-1 and 240.13a-14]; and from aiding and 
+abetting 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 [ 15 U.S.C. §§ 78(m)(a), 78m(b)(2)(A), and 
+78m(b)(2)(B), and 17 C.F.R. §§ 240.12b-20, 240.13a-1, 240.13a-11, and 240.13a-13]. Respondent 
+also was also ordered, by consent, to pay disgorgement of alleged ill-gotten gains in the amount of 
+$50,000, and $20,367.72 in prejudgment interest thereon. 
+ 
+  4.  The Commission’s complaint alleges, among other things, that from the 
+third quarter of 2009 through the second quarter of 2010, Respondent knowingly or, in the 
+alternative, negligently made, and/or substantially participated in making, material false or 
+misleading disclosures concerning Wilmington’s loans 90 days or more past due.  More 
+specifically, the complaint alleges that Respondent and others at Wilmington knowingly or, in the 
+alternative, negligently engaged in conduct that misled investors concerning the extent of past due, 
+matured and extended loans in Wilmington’s commercial loan portfolio. 
+ 
+ 3 
+ 
+5.  In a related criminal proceeding, United States v. David R. Gibson, 15-CR-
+23 (D. Del.), Respondent was convicted of, inter alia, securities fraud and conspiracy to commit 
+securities fraud, in violation of 18 U.S.C. §§ 1348 and 2; and 15 U.S.C. §§ 78m(a) and 78ff, which 
+conviction is pending appeal.  
+ 
+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: 
+ 
+Pursuant to Rule 102(e)(3)(i) of the Commission’s Rules of Practice, David R. 
+Gibson is suspended from appearing or practicing before the Commission as an 
+accountant; and  
+ 
+Pursuant to Section 203(f) of the Advisers Act David R. Gibson is barred from 
+association with any broker, dealer, investment adviser, municipal securities dealer, 
+municipal advisor, transfer agent, or nationally recognized statistical rating 
+organization.  
+ 
+Any reapplication for association by the Respondent will be subject to the applicable laws 
+and regulations governing the reentry process, and reentry may be conditioned upon a number of 
+factors, including, but not limited to, the satisfaction of any or all of the following:  (a) any 
+disgorgement ordered against the Respondent, whether or not the Commission has fully or partially 
+waived payment of such disgorgement; (b) any arbitration award related to the conduct that served 
+as the basis for the Commission order; (c) any self-regulatory organization arbitration award to a 
+customer, whether or not related to the conduct that served as the basis for the Commission order; 
+and (d) any restitution order by a self-regulatory organization, whether or not related to the conduct 
+that served as the basis for the Commission order.    
+ 
+ By the Commission. 
+ 
+ 
+ 
+Vanessa A. Countryman 
+       Secretary 

raw/aaer/2019/AAER-4083.txt

@@ -0,0 +1,332 @@
+ 
+UNITED STATES OF AMERICA 
+Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 87038 / September 20, 2019 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 4083 / September 20, 2019 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-19479 
+ 
+ 
+In the Matter of 
+ 
+DONALD F. MCGRAW, JR., 
+ 
+Respondent. 
+ 
+ORDER INSTITUTING CEASE-AND-
+DESIST PROCEEDINGS PURSUANT TO 
+SECTION 21C OF THE SECURITIES 
+EXCHANGE ACT OF 1934, MAKING 
+FINDINGS, AND IMPOSING A CEASE-
+AND-DESIST ORDER  
+  
+I. 
+ 
+ The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
+and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
+Exchange Act of 1934 (“Exchange Act”) against Donald F. McGraw, Jr. (“McGraw” or 
+“Respondent”).   
+ 
+II. 
+ 
+ In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
+of Settlement (“Offer”) which the Commission has determined to accept.  Solely for the purpose of 
+these proceedings and any other proceedings brought by or on behalf of the Commission, or to 
+which the Commission is a party, and without admitting or denying the findings herein, except as 
+to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are 
+admitted, and except as provided herein in Section V, Respondent consents to the entry of this 
+Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities 
+Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set 
+forth below.   
+ 
+ 
+ 
+2 
+III. 
+ 
+ On the basis of this Order and Respondent’s Offer, the Commission finds1 that 
+ 
+ SUMMARY 
+1. This matter concerns failures between April 2012 and September 2014 of The 
+Bancorp, Inc. (“Bancorp”) to properly classify certain loans and to take appropriate charges for 
+individually impaired loans, resulting in Bancorp materially understating its Allowance for Loan 
+and Lease Losses (“ALLL”) and its Provision for Loan and Lease Losses (“PLLL”) in its requisite 
+periodic reports filed with the Commission.  Bancorp repeatedly overlooked indicators of 
+borrowers’ and guarantors’ financial distress as it failed to assign appropriate risk ratings to certain 
+loans and to identify certain large lending relationships as containing impaired or otherwise 
+substandard loans.  
+2. As a result of these failures, on September 28, 2015, Bancorp restated its financial 
+results and financial statements for certain prior fiscal years.  Pursuant to the restatement, the 
+aggregate adjustment to the PLLL for the fiscal years 2010 through 2013 was approximately 
+$138.6 million.  Pursuant to the adjustments to the historical ALLL set forth in the restatement, 
+Bancorp’s ALLL for 2012 increased by 78.23% from the balance previously reported, and the 
+ALLL for 2013 increased by 73.97%.  In its annual Report on Form 10-K for its fiscal year 2014, 
+which contained the restated financial statements, Bancorp disclosed a material weakness in its 
+internal control over financial reporting for its fiscal years 2012, 2013, and 2014 related to its 
+“failure to maintain controls over credit file maintenance, including the risk-rating of borrowers and 
+the evaluation of collateral.”   
+3. In his position as Bancorp’s Chief Credit Officer during those fiscal years, McGraw 
+was ultimately responsible for Bancorp’s credit file maintenance, including ensuring that credit 
+files contained necessary, appropriate, and current information.  However, as a result of his 
+conduct described herein, McGraw failed to provide reasonable assurances that Bancorp’s credit 
+files contained necessary and current documentation. 
+4. In addition, beginning in October 2011, McGraw was one of four members of the 
+Bancorp committee tasked with evaluating loan modifications to determine if they were Troubled 
+Debt Restructurings (“TDRs”).  Moreover, it was McGraw’s responsibility to identify loans for 
+review by the committee and to draft the materials presented to the committee.  However, as a result 
+of his conduct described herein, McGraw failed to provide the committee with information 
+sufficient for it to make appropriate determinations.  Consequently, McGraw knew or should have 
+known that the determinations made by the committee at times were likely to be inaccurate. 
+                                                 
+1  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any 
+other person or entity in this or any other proceeding. 
+ 
+ 
+3 
+5. As a result of the conduct described above, McGraw caused Bancorp’s violations of 
+Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and violated Rule 13b2-1 thereunder. 
+FACTS 
+A. Respondent 
+6. Donald F. McGraw, Jr. has been Bancorp’s Chief Credit Officer since 2000.  
+Previously, McGraw was a Federal Deposit Insurance Corporation bank examiner.  McGraw, age 
+62, is a resident of Media, Pennsylvania. 
+B. Other Relevant Entity 
+7. Bancorp is a Delaware corporation with its principal executive offices in 
+Wilmington, Delaware.  Its common stock is registered with the Commission pursuant to 
+Section 12(b) of the Exchange Act and trades on the NASDAQ Stock Market under the ticker 
+symbol TBBK.  Bancorp is the bank holding company for The Bancorp Bank (“Bancorp Bank”), a 
+regional bank headquartered in Wilmington, Delaware.  Bancorp Bank is Bancorp’s primary 
+wholly-owned subsidiary. 
+C. Accounting Guidance 
+8. Banking institutions carry loans on their balance sheets as assets and record on their 
+income statements any interest revenue on the loans.  According to Generally Accepted 
+Accounting Principles (“GAAP”), an individual loan is impaired when “based on current 
+information and events, it is probable that a creditor will be unable to collect all amounts due 
+according to the contractual terms of the loan agreement.”  Accounting Standards Codification 
+(“ASC”) 310-10-35.  Furthermore, loan losses must be recognized for impairment of large groups 
+of smaller balance loans and loans with similar risk characteristics when it is probable that the asset 
+is impaired as of the date of the financial statements and the amount of loss can be reasonably 
+estimated.  Id. 
+9. GAAP also requires that when a loan is modified—whether by restructure, 
+extension, renewal, or other modification—the transaction must be evaluated to determine if the 
+loan modification constitutes a Troubled Debt Restructuring (“TDR”).  Pursuant to ASC 310-40-
+15, a loan is a TDR if there is a restructuring for a borrower in financial difficulty and the creditor 
+grants a concession to the borrower that it would not otherwise consider.  A loan restructured as a 
+TDR is an impaired loan.  ASC 310-40-35. 
+10. The ALLL is the current estimate of the aggregate probable loss inherent in a loan 
+portfolio and is reflected on the balance sheet as a reduction to the loan balance.  The ALLL 
+encompasses the effects of two types of loan losses:  (1) loans identified and evaluated for 
+impairment individually; and (2) loans grouped by common risk characteristics and analyzed for 
+impairment on an aggregate basis.  ASC 310-10-35.  The PLLL reflects the income statement 
+impact of impaired loans for the period being reported.   
+ 
+ 
+4 
+D. Bancorp’s Restatement 
+ 
+11. On September 28, 2015, Bancorp filed its annual Report on Form 10-K for its fiscal 
+year 2014, which included restated financial data for its fiscal years 2010 through 2013 and 
+restated financial statements for its fiscal years 2012 and 2013, as well as for the first three quarters 
+of 2013 and 2014.  The restatement included an aggregate adjustment to the PLLL of 
+approximately $138.6 million in Bancorp’s commercial loan portfolio from 2010 to 2013.  That 
+total adjustment included an adjustment adding $90.5 million to the loan loss provision for 2012 
+and an adjustment adding $28.9 million to the provision for 2013.  The adjustment for 2012 
+exceeded the $24.4 million in income before taxes previously reported by Bancorp, resulting in an 
+overall loss for that fiscal year.  
+12. In the annual Report on Form 10-K for its fiscal year 2014, Bancorp also disclosed 
+a material weakness in its internal control over financial reporting for its fiscal years 2012, 2013, 
+and 2014 related to its “failure to maintain controls over credit file maintenance, including the risk-
+rating of borrowers and the evaluation of collateral and industry-specific information that 
+[Bancorp] believed to be relevant in determining the occurrence of a loss event and measuring 
+impairment under ASC 310.”   
+E. Bancorp’s Business Model 
+13. During the relevant time period, Bancorp engaged in a business model called 
+“relationship banking.”  Bancorp sought to develop long-standing banking relationships with 
+certain individuals and businesses within Bancorp Bank’s geographic region and provide them 
+with the attention of senior Bancorp Bank management.  Bancorp’s focus on long-standing 
+relationships with borrowers and guarantors holding multiple Bancorp Bank loans was intended to 
+encourage cross-selling, provide insight into borrowers’ risk, and increase customer loyalty.  
+Bancorp executives also believed that this model allowed Bancorp Bank to cross-collateralize 
+loans and take a holistic approach to loan management. 
+14. However, Bancorp made risk rating and impairment decisions that relied too 
+heavily on borrowers’ and guarantors’ reputations, their historic business and banking relationship 
+with Bancorp Bank, and their expected future prospects for more business, while overlooking 
+indicators of financial distress.  This was particularly the case with respect to certain large or high-
+profile lending relationships and with respect to borrowers and guarantors with long relationships 
+with Bancorp Bank.  As a result, Bancorp failed to identify loan impairments and credit 
+deterioration within individual loans and repeatedly failed to re-evaluate loans and downgrade risk 
+ratings when confronted with negative information.  This caused Bancorp to materially understate 
+its PLLL from 2010 through 2013 and its ALLL from 2010 through the third quarter of 2014. 
+F. McGraw’s Role 
+15. For its fiscal years 2012, 2013, and 2014, Bancorp had devised internal accounting 
+controls for credit file maintenance, but failed to maintain the controls.  The controls were intended 
+ 
+ 
+5 
+to provide reasonable assurance that Bancorp’s credit files contained relevant information, 
+including timely appraisals and relevant financial information regarding borrowers.  In his role as 
+Chief Credit Officer, McGraw was responsible for this process.  He had responsibility for ensuring 
+that credit files contained necessary, appropriate, and current information.  In fact, between at least 
+April 2012 and September 2014, Bancorp’s credit files were incomplete.  The lack of complete 
+credit files contributed to Bancorp’s failure during this period to fairly and accurately assign risk 
+ratings and estimate loan impairment.  
+16. Current appraisals were important for properly evaluating the real estate collateral 
+underlying many Bancorp Bank loans and therefore for fairly and accurately assigning risk ratings 
+and estimating impairment.  Bancorp policies required new appraisals under certain 
+circumstances.  In his role as Chief Credit Officer, McGraw did not consistently enforce the 
+appraisal policy.  As a result, Bancorp frequently relied upon outdated appraisals in connection 
+with assignment of risk ratings and impairment decisions.  In multiple instances, Bancorp relied 
+upon pre-financial crisis real estate appraisals well after the crisis had ended.   
+17. McGraw failed on at least two occasions to provide reasonable assurances that 
+Bancorp’s credit files included contemporaneous information concerning criminal cases involving 
+borrowers or guarantors.  In one of those instances, although McGraw was aware by January 2013 
+that the guarantor in a large lending relationship had pleaded guilty to bank fraud, there was no 
+mention of the criminal case in the loan paperwork for a March 2013 maturity extension or in the 
+loan paperwork for a line of credit increase in September 2013.  In connection with the restatement 
+of its financial statements, Bancorp recognized some impairment losses for all loans in this 
+relationship during the fourth quarter of 2012.  
+18. Bancorp also failed to record instances of delinquency within credit files.  Even 
+when additional credit was granted in order to allow delinquent borrowers to bring their loan 
+payments current, McGraw did not require the lending staff to document the delinquencies in the 
+credit requests for these increases.  
+19. Additionally, under McGraw’s oversight, Bancorp at times did not provide 
+reasonable assurances that current financial statements that met the requirements of loan 
+agreements were obtained and included in its credit files.  On one occasion, when it extended the 
+maturity of an entity’s $1.5 million line of credit, Bancorp failed to obtain timely financial 
+information required under the terms of the line of credit.  Instead, it relied upon outdated tax 
+returns and financial statements and projections that had not been reviewed and audited as 
+required. 
+20. As a result of the conduct described above, Bancorp failed to maintain internal 
+accounting controls over credit file maintenance sufficient to provide reasonable assurances that 
+transactions were recorded as necessary to permit preparation of financial statements in accordance 
+with GAAP.  By his acts and omissions described above, including his failure to ensure that the 
+credit files contained timely appraisals and negative information concerning borrowers and 
+guarantors, and his failure to include references to delinquencies in credit requests, McGraw 
+ 
+ 
+6 
+contributed to Bancorp’s failure, and McGraw knew or should have known that his acts or 
+omissions would so contribute.   
+21. In addition, from its inception, McGraw was a member of the Bancorp committee 
+that evaluated loan modifications to determine if they were TDRs.  From October 2011 through 
+October 2013, he was the committee member tasked with compiling materials and creating 
+summaries for the committee.  His summaries often failed to include important information about 
+the loans being considered, including information concerning the financial difficulties of borrowers 
+or guarantors of modified loans.  As a result, the committee was not provided with information 
+sufficient to accurately identify TDRs.  
+22. For example, McGraw prepared the materials for the committee’s evaluation of 
+March 2012 modifications that extended the maturity and interest-only periods of certain loans in a 
+$44 million loan relationship with a long-time Bancorp Bank customer.  The materials described 
+the modifications as short-term, interest-only requests from a borrower that was not experiencing 
+financial difficulties and failed to mention the delinquency of the loans or the customer’s recent 
+federal felony conviction.  The committee determined that the modifications were not TDRs.  In 
+the restatement of its financial statements, Bancorp determined that it should have taken 
+impairment charges related to those loans as of the March 2012 modifications.  
+23. During this time, as described above, Bancorp failed to make and keep books, 
+records, and accounts, which in reasonable detail, accurately and fairly reflected its transactions and 
+the disposition of its assets.  By his acts and omissions described above, including his failure to 
+maintain accurate and current credit files and his providing summaries to the TDR identification 
+committee that omitted important information regarding loans, borrowers, and guarantors, McGraw 
+contributed to Bancorp’s failure, and McGraw knew or should have known that his acts or 
+omissions would so contribute.   
+24. By his conduct described above, McGraw, directly or indirectly, falsified or caused 
+to be falsified, books, records, and accounts that Bancorp was required to make and keep, in 
+reasonable detail, to accurately and fairly reflect its transactions and the disposition of its assets.   
+ 
+G. Violations 
+25. As a result of the conduct described above, Respondent caused Bancorp’s violation 
+of Section 13(b)(2)(B) of the Exchange Act, which requires an issuer of securities registered 
+pursuant to Section 12 of the Exchange Act to devise and maintain a system of internal accounting 
+controls sufficient to provide reasonable assurances that:  transactions are executed in accordance 
+with management’s general and specific authorization; transactions are recorded as necessary to 
+permit preparation of financial statements in conformity with GAAP or any other criteria 
+applicable to such statements, and to maintain accountability for assets; access to assets is 
+permitted only in accordance with management’s general or specific authorization; and the 
+recorded accountability for assets is compared with the existing assets at reasonable intervals and 
+appropriate action is taken with respect to any differences. 
+ 
+ 
+7 
+26. As a result of the conduct described above, Respondent caused Bancorp’s violation 
+of Section 13(b)(2)(A) of the Exchange Act, which requires an issuer of securities registered 
+pursuant to Section 12 of the Exchange Act to make and keep books, records, and accounts which, 
+in reasonable detail, accurately and fairly reflect the issuer’s transactions and dispositions of assets. 
+27. As a result of the conduct described above, Respondent violated Rule 13b2-1 under 
+the Exchange Act by directly or indirectly falsifying or causing to be falsified books, records, and 
+accounts required to be maintained by Bancorp. 
+ 
+IV. 
+ In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent Donald F. McGraw, Jr.’s Offer. 
+ Accordingly, it is hereby ORDERED that: 
+ A. Pursuant to Section 21C of the Exchange Act, Respondent cease and desist from 
+committing or causing any violations and any future violations of Sections 13(b)(2)(A) and 
+13(b)(2)(B) of the Exchange Act and Rule 13b2-1 thereunder.   
+B. Respondent shall pay a civil money penalty in the amount of $50,000 to the 
+Securities and Exchange Commission for transfer to the general fund of the United States 
+Treasury, subject to Exchange Act Section 21F(g)(3).  Payment shall be made in the following 
+installments:  $20,000 to be paid within 10 days of the entry of this order, $10,000 to be paid 
+within 120 days of the entry of this order, $10,000 to be paid within 240 days of the entry of this 
+order, and $10,000 to be paid within 350 days of the entry of this order.  Payments shall be applied 
+first to post-order interest, which accrues pursuant to 31 U.S.C. § 3717.  Prior to making the final 
+payment set forth herein, Respondent shall contact the staff of the Commission for the amount due.  
+If Respondent fails to make any payment by the date agreed and/or in the amount agreed according 
+to the schedule set forth above, all outstanding payments under this Order, including post-order 
+interest, minus any payments made, shall become due and payable immediately at the discretion of 
+the staff of the Commission without further application to the Commission. 
+Payment must be made in one of the following ways:   
+(1) Respondent may transmit payment electronically to the Commission, which 
+will provide detailed ACH transfer/Fedwire instructions upon request;  
+(2) Respondent may make direct payment from a bank account via Pay.gov 
+through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
+(3) Respondent may pay by certified check, bank cashier’s check, or United 
+States postal money order, made payable to the Securities and Exchange 
+Commission and hand-delivered or mailed to:  
+ 
+ 
+8 
+Enterprise Services Center 
+Accounts Receivable Branch 
+HQ Bldg., Room 181, AMZ-341 
+6500 South MacArthur Boulevard 
+Oklahoma City, OK 73169 
+Payments by check or money order must be accompanied by a cover letter identifying 
+Donald F. McGraw, Jr. as a Respondent in these proceedings, and the file number of these 
+proceedings; a copy of the cover letter and check or money order must be sent to Carolyn M. 
+Welshhans, Associate Director, Division of Enforcement, Securities and Exchange Commission, 
+100 F St., NE, Washington, DC 20549. 
+ C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
+treated as penalties paid to the government for all purposes, including all tax purposes.  To 
+preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
+Action, he shall not argue that he is entitled to, nor shall he benefit by, offset or reduction of any 
+award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
+penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants such a 
+Penalty Offset, Respondent agrees that he shall, within 30 days after entry of a final order granting 
+the Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the 
+Penalty Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed 
+an additional civil penalty and shall not be deemed to change the amount of the civil penalty 
+imposed in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a 
+private damages action brought against Respondent by or on behalf of one or more investors based 
+on substantially the same facts as alleged in the Order instituted by the Commission in this 
+proceeding. 
+V. 
+It is further Ordered that, solely for purposes of exceptions to discharge set forth in 
+Section 523 of the Bankruptcy Code, 11 U.S.C. § 523, the findings in this Order are true and 
+admitted by Respondent, and further, any debt for disgorgement, prejudgment interest, civil 
+penalty or other amounts due by Respondent under this Order or any other judgment, order, 
+consent order, decree or settlement agreement entered in connection with this proceeding, is a debt 
+for the violation by Respondent of the federal securities laws or any regulation or order issued 
+under such laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. 
+§ 523(a)(19). 
+ 
+ By the Commission. 
+ 
+       Vanessa A. Countryman 
+       Secretary 
+ 

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+1 
+ 
+ 
+ 
+UNITED STATES OF AMERICA 
+Before the 
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No. 87055 / September 23, 2019 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No. 4087 / September 23, 2019 
+ 
+Administrative Proceeding  
+File No. 3-19493 
+ 
+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 TechnipFMC plc 
+(“TechnipFMC” or “FTI” or “Respondent”). 
+II. 
+ In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
+of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
+purpose of these proceedings and any other proceedings brought by or on behalf of the 
+Commission, or to which the Commission is a party, Respondent admits the Commission’s 
+jurisdiction over it and the subject matter of these proceedings, and consents to the entry of 
+this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities 
+Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), 
+as set forth below.   
+ 
+In the Matter of 
+ 
+TechnipFMC plc., 
+ 
+Respondent. 
+2 
+ 
+ 
+ 
+III. 
+On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 
+Summary 
+1. These proceedings arise from violations of the Foreign Corrupt Practices Act 
+of 1977 (the “FCPA”) [15 U.S.C. 78 dd] by Respondent’s predecessor FMC Technologies, 
+an oil field services company headquartered in Houston, TX.  From at least 2008 through 
+2013, FMC Technologies made over $794,000 in payments to a third party consultant, which 
+used at least some of those funds to pay bribes to Iraqi government officials to procure 
+business with Iraq state-owned oil companies.  The bribes were paid in connection with FMC 
+Technologies obtaining contracts to provide metering technologies for oil and gas production 
+measurement to the Iraqi government.  The payments were not accurately reflected in FMC 
+Technologies’ books and records.  FMC Technologies also failed to have sufficient internal 
+accounting controls in place, which contributed to the misconduct in Iraq.   
+Respondent  
+2. Technip FMC Technologies plc (“TechnipFMC”) is a global provider of oil 
+and gas services.  TechnipFMC was formed following the January 2017 merger of two 
+predecessor companies, FMC Technologies and Technip.  Prior to the merger, FMC 
+Technologies was a publicly traded global energy services company based in Houston, TX that 
+provided, among other products and services, metering technologies for oil and gas production 
+measurement.  Throughout the relevant period, FMC Technologies’ common stock was 
+registered in the United States pursuant to Section 12(b) of the Exchange Act and traded on the 
+New York Stock Exchange under the Ticker “FTI.”  Following completion of the merger on 
+January 16, 2017, FMC Technologies’ shares were delisted from the NYSE and Technip shares 
+were delisted from Euronext Paris.  The newly formed combined company, TechnipFMC 
+began trading in the United States on Tuesday, January 17, 2017 under FMC Technologies’ old 
+ticker, “FTI.”  In an unrelated matter in 2010, the Commission ordered Technip to cease-and-
+desist from committing FCPA violations and to pay $98 million in disgorgement and pre-
+judgment interest. 
+Relevant Entities 
+3. Intermediary Company was a Monaco-based company that acted as an 
+intermediary in the oil and gas services industry.  Intermediary Company acted as a consultant 
+to FMC.  Intermediary Company and its executives and subagents were agents of FMC, the 
+“issuer,” as that term is used in the FCPA, Title 15, United States Code, Section 78dd-1(a). 
+4. The Iraq Ministry of Oil (“MOO”) was an Iraqi government agency that was 
+responsible for Iraqi petroleum.  MOO was controlled by Iraq and performed government 
+                                                           
+1  The findings herein are made pursuant to Respondent's Offer of Settlement and are not  
+binding on any other person or entity in this or any other proceeding.   
+ 
+3 
+ 
+ 
+ 
+functions, and thus was a “department” and “agency” of a foreign government, as those terms 
+are used in the FCPA, Title 15, United States Code, Section 78dd-1. 
+5. The South Oil Company of Iraq (“SOC”) was an Iraqi state-owned and state-
+controlled oil company headquartered in Basra, Iraq, that operated to refine, produce and 
+distribute oil, oil products, gas, biofuels and energy.  SOC was owned and controlled by MOO 
+and performed government functions, and thus was an “agency” and ���instrumentality” of a 
+foreign government as those terms are used in the FCPA, Title 15, United States Code, Section 
+78dd-1. 
+6. The Missan Oil Company (“MOC”) was an Iraqi state-owned and state-
+controlled oil company headquartered in Maysan Governorate, Iraq that operated to refine, 
+produce and distribute oil, oil products, gas, biofuels and energy.  MOC was owned and 
+controlled by MOO and performed government functions, and thus was an “agency” and 
+“instrumentality” of a foreign government, as those terms are used in the FCPA, Title 15, 
+United States Code, Section 78dd-1. 
+Facts 
+Background/Overview 
+7. From 2008 through 2013, FMC Technologies, its employees and agents, 
+together with others, engaged in a scheme to pay bribes to Iraqi oil officials to win numerous 
+contracts to provide metering technologies for oil and gas production measurement to the Iraqi 
+government.  FMC Technologies entered into a series of agreements with Intermediary 
+Company, which passed the bribes to the Iraqi officials on FMC Technologies’ behalf and in 
+some instances, passed the bribes to subagents that forwarded the payments to the Iraqi officials.  
+FMC Technologies used the agreements to conceal the bribery scheme and to capitalize on 
+Intermediary Company’s relationships with Iraqi oil officials directly involved in the decision 
+making process for contracts sought by FMC Technologies.  An FMC Technologies Sales 
+Manager outside of the United States took active steps to engage in the bribery.  FMC 
+Technologies personnel in the United States communicated with Intermediary Company 
+throughout this period, including sending numerous documents and emails and approving 
+payments from the United States.   
+8. FMC Technologies entered into numerous agreements with Intermediary 
+Company, some of which covered time periods that pre-dated the execution of those 
+agreements.  Numerous red flags were overlooked and payments were made to Intermediary 
+Company without evidence of services rendered.  FMC Technologies allowed Intermediary 
+Company to use sub-agents and success-fee based compensation without adequate due 
+diligence.  FMC Technologies falsely characterized the payments in its books and records as site 
+installation payments.  Further, FMC Technologies failed to properly assess and manage its anti-
+corruption risks in Iraq, and devoted insufficient resources to compliance concerning its Iraq 
+business.  In addition, FMC Technologies lacked appropriate internal accounting controls with 
+respect to the use of the consultants in Iraq. 
+ 
+4 
+ 
+ 
+ 
+Iraq Bribery Scheme 
+9. At the time FMC Technologies entered into a relationship with Intermediary 
+Company, it already had an agent in Iraq but Intermediary Company advised that “any of [the 
+agent’s] past contacts that held sway in the old regime [were now] worthless” and suggested that 
+Intermediary Company “could direct funds on projects that were in their interest.”  An FMC 
+Technologies Sales Manager agreed that “[Intermediary Company] may have a role to play,” 
+According to a contemporaneous report prepared by Intermediary Company.     
+10. From approximately 2009 through 2013, FMC Technologies entered into at least 
+eleven agreements with Intermediary Company related to Iraq—ten consultancy agreements and 
+one site installation agreement.  The consultancy agreements between FMC Technologies and 
+Intermediary Company were agreements designed to disguise FMC Technologies’ payments to 
+Intermediary Company reimbursing them for bribes paid to Iraqi oil officials to obtain or retain 
+business at Iraqi state-owned oil companies.  Under the consultancy agreements, Intermediary 
+Company was to be paid a success-based commission percentage on each contract that FMC 
+Technologies won in Iraq.  FMC Technologies agreed to pay the commissions and other 
+payments to Intermediary Company after FMC Technologies received payment from the Iraqi 
+government. 
+11. FMC Technologies through Intermediary Company used a number of schemes 
+to provide payments and other improper benefits to Iraqi officials in exchange for them taking 
+action that benefited FMC Technologies in obtaining or retaining a contract with Iraq.  Such 
+schemes included:  (i) direct corrupt payments from Intermediary Company to Iraqi officials, 
+including for example two high level officials at SOC; and (ii) payments from Intermediary 
+Company to sub-agents who in turn made payments to Iraqi government officials.  While 
+representing FMC, Intermediary Company also placed a relative of an Iraqi official on retainer, 
+and provided improper favor and assistance to an Iraqi official.   
+12. One 2007 Intermediary Company internal report for example discussed its 
+efforts to curry favor with a high-level Iraqi official at the South Oil Company of Iraq (“SOC”).  
+The report noted that the Intermediary Company had arranged for the Iraqi official’s new 
+passport to be processed and issued without the usual necessity of the official having to travel to 
+Baghdad to have the passport issued.  Intermediary Company noted that “this was a very big 
+brownie point and something [the Iraqi official] really appreciate[d],” and that Intermediary 
+Company was “using it for all it’s worth.”    
+5 
+ 
+ 
+ 
+Initial Efforts to Win South Oil Contracts 3614-3620 
+13. In or around early 2008, SOC invited FMC Technologies to bid for SOC 
+contracts 3614-3620 to provide metering technologies for oil and gas production in connection 
+with seven projects.  With knowledge of FMC Technologies, Intermediary Company engaged in 
+a number of schemes to funnel bribes and other improper benefits to Iraqi officials to win the 
+contracts.  Documents and emails circulated within Intermediary Company discussing the bribe 
+scheme were very explicit.  For example, a September 13, 2008 email string between 
+Intermediary Company employees discussed what commission percentage a specific Iraqi 
+official required to give his support to FMC Technologies in winning 3614-3620.  Other 
+examples include discussions between Intermediary Company employees regarding whether the 
+amount of commission Intermediary Company was splitting with a sub-agent was worthwhile 
+given the influence or lack of influence of the subagent, and discussions between Intermediary 
+Company employees regarding the identity of Iraqi officials who received payments and other 
+benefits to improperly assist FMC Technologies in winning the contracts.   
+14. In December 2009, when Intermediary Company sought to increase its 
+commission payments associated with 3614-3620 internal Intermediary Company emails 
+discussing the increase stated that an FMC Technologies manager told an Intermediary 
+Company employee that “it would be much cleaner to have one contract for 12% then two split 
+contract with the same party, which the auditors would question. . . .”   
+ 
+15. In total FMC Technologies and Intermediary Company entered into three 
+consultancy agreements relating to 3614 – 3620 with the agreements covering the period from 
+February 6, 2008 through December 31, 2010 collectively.  Each of the three agreements related 
+largely to a time period that had already passed.   
+ 
+16. Despite these efforts, FMC Technologies was ultimately not awarded contracts 
+3614-3618.  Nonetheless, the company continued its relationship with Intermediary Company 
+ 
+Success in Winning Missan Oil Company Projects 
+17. In or about early 2009, MOC invited FMC Technologies to bid on a contract to 
+provide metering technologies for oil and gas production in Iraq in connection with two projects 
+(“MOC 4046”).  FMC Technologies thereafter submitted a technical proposal.  On or about 
+April 1, 2009, FMC Technologies and Intermediary Company entered into a System Sales 
+Consultant Agreement in connection with FMC’s efforts to win the contract and the agreement 
+provided that Intermediary Company would receive a nine percent commission after FMC 
+Technologies received “full customer payment” from the Iraqi government for work on MOC 
+4046.  In or about October 2009, MOC awarded the MOC Projects 58-09-4046 contract to 
+FMC, subject to approval from the MOO. 
+18. In a December 8, 2009, an internal Intermediary Company email discussing 
+MOC 4046, an Intermediary Company executive noted that the MOC Projects contract was 
+valued at approximately $3.5 million and that he needed “US $20K” because the “[t]otal sub-
+agents fee here is $35K, of which I need $20 now and carry $15 for later date.”  On or about 
+April 1, 2010, Intermediary Company emailed a sub-agent, stating that MOC had decided to 
+6 
+ 
+ 
+ 
+retender MOC 4046, and that Intermediary Company was “willing to give $40k on opening the 
+[letter of credit] if [Sub-Agent] can persuade our friend [an Iraqi official] to talk to [a high-level 
+MOC official] to see what the hell he is doing and to award to FMC Technologies as per the 
+recommendation of his own people and committee members.”  On or about October 11, 2010, 
+Intermediary Company sent an email to the same sub-agent requesting assistance with FMC’s 
+bid on the MOC 4046 contract, and stating, “As you can see the job is small and the commission 
+is not great but you can have most of it if you help us out.  I have allocated $60,000 for your 
+friend [an Iraqi official] . . .”  MOO ultimately approved MOC’s award of the MOC 4046 
+contract to FMC. 
+ 
+19. In or about mid-2010, MOC invited FMC Technologies to bid on a contract to 
+provide metering technologies for oil and gas production in Iraq in connection with another 
+project (“MOC 4079”).  Thereafter, FMC Technologies submitted a technical proposal to MOC 
+for MOC 4079.  On or about September 1, 2010, FMC Technologies and Intermediary 
+Company entered into a System Sales Consultant Agreement in connection with FMC’s efforts 
+to win the MOC 4079.  The agreement provided that Intermediary Company would receive a 
+nine percent commission after FMC Technologies received “full customer payment” from the 
+Iraqi government for work on MOC 4079.  On or about October 30, 2010, MOC awarded the 
+MOC Project 58-10-4079 contract to FMC.  MOO thereafter approved the award. 
+ 
+Success Winning South Oil Company Contracts 4165-4168 
+ 
+20. In 2011 FMC’s then three-year long efforts to get a contract with SOC using 
+consultancy services provided by Intermediary Company paid off when FMC Technologies was 
+successful in winning four SOC contracts, SOC Contract No.s:  4165 through 4168 (“4165-
+4168”).  4165-4168 related to the supply and installation of metering skids at four different 
+locations in Iraq.  In or around August 2010 FMC Technologies received an invitation to tender 
+from SOC relating to 4165-4168.  The tender was by invitation only and three companies 
+including FMC Technologies bid.  The tender closing date was originally set as September 15, 
+2010 but was later extended to November 28, 2010.   
+ 
+21. On October 16, 2010, a little over a month before the tender closing date for 
+4165-4168, Intermediary Company met with an Iraqi official to discuss a variety of topics and 
+projects concerning various companies, including 4165-4168.  In an internal Intermediary 
+Company report describing the meeting Intermediary Company noted that during the meeting it 
+sought from Iraqi official “a clear position . . .where he stands on this job” as he was “aware that 
+[FMC Technologies’ competitor for the award of 4165-4168]’s agent is very active and gaining 
+friends with his generosity.”  The report also noted that during the meeting Intermediary 
+Company arranged to have the nephew of the Iraq official put on retainer to “act as a go 
+between [so] [  ] [they] could stay in constant touch.”  Then on October 19, 2010, three days 
+later, Intermediary Company reached out to another Iraqi official by email regarding 4165-4168 
+writing “Enquiry 4165, 4166, 4167 & 4168.  This is metering station and you are being added to 
+the evaluation committee.  Please discuss this job only with me.”  Improper payments and other 
+inducements were made to the above Iraqi officials to influence the award of the contracts to 
+FMC Technologies. 
+ 
+7 
+ 
+ 
+ 
+22. On January 15, 2011—while SOC was in the process of determining the winner 
+of the 4165-4168 tender—Intermediary Company again met with an Iraqi official.  Intermediary 
+Company reported that during the meeting the official “deemed it important that he and 
+[Intermediary Company] meet at least once a month, as events [are] changing daily on the 
+ground,” and that “if possible [their] meeting should be before the last Wednesday of each 
+month, when the Ministry meets SOC.”   
+ 
+23. Within a month of the January meeting, in February 2011, after having been the 
+only bidder to pass SOC’s technical evaluation stage, FMC Technologies’ bid went to the Iraqi 
+official whose approval was required before SOC’s award could be granted for review.  The 
+Iraqi official approved the award of contracts for FMC Technologies to provide services on four 
+Iraq oil fields.  The award was then sent to SOC’s legal department for review.  SOC’s legal 
+department raised question as to how FMC Technologies was the only company that received 
+technical approval.   
+ 
+24. As of mid-March 2011, SOC’s legal department had not approved the award to 
+FMC Technologies.  In an internal Intermediary Company email, an Intermediary Company 
+executive explained that Intermediary Company needed to get the award grant past the impasse 
+in SOC’s legal department.  In a March 15, 2011 email to Intermediary Company, a FMC 
+Technologies Sales Manager stated, “As discussed last night please be advised that your 
+commission on this project is 9% for the system provided by FMC.  The site work was 
+separately quoted by Intermediary Company and the value of this scope of work is 
+$1,950,000.00, no commission was included for this.”  Within two days of this communication, 
+the impasse had been resolved and SOC’s legal department approved the award to FMC 
+Technologies.  On March 17, 2011 the FMC Technologies Sales Manager wrote Intermediary 
+Company an email sharing the news.  In his email the FMC Technologies Sales Manager wrote 
+to Intermediary Company, “As I mentioned, we should not appear like we are asking for illegal 
+help as I want this to move in accordance with the normal channels . . . . . . . . . . .I am sure you 
+understand what I am saying.”  Notably, the consultancy agreement and site installation 
+agreement contracts were both signed after the effective dates.   
+ 
+25. In March 2011 FMC Technologies was granted the award for contracts 4165-
+4168 for the four oil fields.  Eight days later the Intermediary Company met again with an Iraqi 
+official.  In an internal Intermediary Company report describing the meeting, Intermediary 
+Company noted that “[the Iraqi official] signed award to FMC Technologies metering station 
+worth $17 million I thanked him for that.”  $17 million was the approximate combined contract 
+amount for projects 4165-4168.   
+ 
+26. After FMC Technologies was awarded the contracts, while the precise terms of 
+the contracts were being negotiated, FMC Technologies encountered another issue when SOC 
+wanted to include a provision in the contracts withholding 30% of the contract price until the 
+last payment to FMC Technologies rather than withholding only 10%.  Intermediary Company 
+intervened to assist with this issue.  On June 18, 2011 Intermediary Company reached out to one 
+of its subagents via email for assistance asking the subagent to get an Iraqi official to intervene 
+to change the amount to 10% of the contract value.  The requested change was made and in the 
+final version of the 4165-4168 contracts the final payment to FMC Technologies amounted to 
+8 
+ 
+ 
+ 
+10% of the contract value.   
+ 
+27. In July 2011 SOC and FMC Technologies executed SOC Contract No.s: 4165-
+4168.  In total, per the contract amounts, FMC Technologies was to receive combined gross 
+revenue of $18,074,020.00 for contracts 4165-4168. 
+ 
+28. On or about September 12, 2012, FMC Technologies entered into a Site 
+Installation Agreement with Intermediary Company subcontracting to Intermediary Company 
+site installation services in connection with 4165-4168.  The Site Installation Agreement, 
+executed on or around September 2012, treated 4165-4168 collectively, as one contract and the 
+purchase order related to the Site Installation Agreement, Purchase Order No. 31390, covered 
+all four contracts.  Intermediary Company submitted to FMC Technologies a bid to perform the 
+installation work for 4165-4168.  Like the consultancy agreement for 4165-4168 the Site 
+Installation Agreement was in part a means by which to transfer funds from FMC Technologies 
+to Intermediary Company to compensate Intermediary Company for its payment of bribes and 
+other inducements to Iraqi Officials for their assistance in getting FMC Technologies contracts 
+4165-4168. 
+ 
+29. On or about June 2013—almost two years after FMC Technologies signed the 
+contracts for 4165-4168 and after FMC Technologies had already begun to deliver to SOC the 
+products that were the subject of those contracts—FMC Technologies and Intermediary 
+Company entered into a Consultancy Agreement relating to 4165-4168.  The consultancy 
+agreement covered all four contracts and treated them as one.  Under the agreement FMC 
+Technologies was to pay Intermediary Company a 6.5% commission for work performed 
+relating to 4165-4168.  Although the consultancy agreement was entered into in June 2013, it 
+covered the period May 1, 2013 through December 31, 2013.  The consultancy agreement was 
+used to paper over and make appear legitimate improper benefits Intermediary Company had 
+already provided Iraqi officials in connection with getting FMC Technologies 4165-4168.  FMC 
+Technologies’ internal accounting controls allowed this contract covering historical activity to 
+be paid without question.   
+ 
+30. The site installation and consultancy agreement were falsely characterized in 
+FMC Technologies’ books and records as legitimate payments and despite the lack of 
+appropriate support were paid through interstate and international wire, from its bank account in 
+Texas, through the Eastern District of New York, to a bank account in Monaco in the name of 
+Intermediary Company.  In total, FMC Technologies earned over $4 million in illicit profits 
+from the award of the contracts with SOC. 
+ 
+Failure to Maintain Accurate Books and Records 
+ 
+31. FMC Technologies directly and through its wholly-owned subsidiaries, failed to 
+make and keep books, records, and accounts that accurately and fairly reflected FMC 
+Technologies’ transactions with the Intermediary Company.  The transactions intended as 
+conduits for the bribe payments were inaccurately characterized as legitimate transactions and 
+thereby concealed within FMC Technologies’ books and records.   
+9 
+ 
+ 
+ 
+ 
+Failure to Maintain Adequate Internal Accounting Controls 
+ 
+32. FMC Technologies failed to devise and maintain a system of internal accounting 
+controls sufficient to provide reasonable assurances that illicit payments were not being made 
+by Intermediary Company to foreign officials.  FMC Technologies failed to require adequate 
+supporting documentation and adequate due diligence prior to making payments to Intermediary 
+Company.  Further, FMC Technologies made payments to Intermediary Company based upon 
+contracts covering periods prior to the execution date, purchase orders with inaccurate scopes of 
+work, and invoices with documentation that pre-dated purchase orders.  While FMC 
+Technologies’ internal accounting controls required due diligence on third parties, inadequate 
+due diligence was conducted with respect to Intermediary Company despite entering into 
+numerous vague contracts with Intermediary Company that were renewed  over multiple years.  
+Despite these red flags, FMC Technologies nonetheless paid Intermediary Company $794,000, 
+some of which was used for illicit purposes.   
+ 
+Legal Standards and Violations 
+33. Under Section 21C of the Exchange Act, the Commission may impose a cease-
+and-desist order upon any person who is violating, has violated, or is about to violate any 
+provision of the Exchange Act or any rule or regulation thereunder, and upon any other person 
+that is, was, or would be a cause of the violation, due to an act or omission the person knew or 
+should have known would contribute to such violation. 
+ 
+34. As a result of the conduct described above, TechnipFMC violated Section 30A 
+of the Exchange Act, which prohibits any issuer with a class of securities registered pursuant to 
+Section 12 of the Exchange Act or which is required to file reports under Section 15(d) of the 
+Exchange Act, or any officer, director, employee, or agent acting on behalf of such issuer, in 
+order to obtain or retain business, from corruptly giving or authorizing the giving of, anything of 
+value to any foreign official for the purposes of influencing the official or inducing the official 
+to act in violation of his or her lawful duties, or to secure any improper advantage, or to induce a 
+foreign official to use his influence with a foreign governmental instrumentality to influence any 
+act or decision of such government or instrumentality. [15 U.S.C. § 78dd-1]. 
+ 
+35. As a result of the conduct described above, TechnipFMC violated Section 
+13(b)(2)(A) of the Exchange Act, which requires issuers that have a class of securities registered 
+pursuant to Section 12 of the Exchange Act and issuers with reporting obligations pursuant to 
+Section 15(d) of the Exchange Act to make and keep books, records, and accounts which, in 
+reasonable detail, accurately and fairly reflect their transactions and disposition of their assets.  
+[15 U.S.C. § 78m(b)(2)(A)].] 
+ 
+36. As a result of the conduct described above TechnipFMC violated Section 
+13(b)(2)(B) of the Exchange Act, which requires issuers that have a class of securities registered 
+pursuant to Section 12 of the Exchange Act and issuers with reporting obligations pursuant to 
+Section 15(d) of the Exchange Act to devise and maintain a system of internal accounting 
+controls sufficient to provide reasonable assurances that (i) transactions are executed in 
+10 
+ 
+ 
+ 
+accordance with management’s general or specific authorization; (ii) transactions are recorded 
+as necessary (I) to permit preparation of financial statements in conformity with generally 
+accepted accounting principles or any other criteria applicable to such statements, and (II) to 
+maintain accountability for assets; (iii) access to assets is permitted only in accordance with 
+management’s general or specific authorization; and (iv) the recorded accountability for assets 
+is compared with the existing assets at reasonable intervals and appropriate action is taken with 
+respect to any differences.  [15 U.S.C. § 78m(b)(2)(B)]. 
+ 
+TechnipFMC’s Cooperation and Remedial Efforts 
+ 
+37. In determining to accept the Offer, the Commission considered TechnipFMC’s’ 
+cooperation afforded the Commission staff and remedial acts undertaken.  TechnipFMC did not 
+self-report to the SEC until after being contacted by the United States Department of Justice.  
+TechnipFMC did cooperate during the investigation.  It provided the staff with the results of its 
+investigation into its relationship with Intermediary Company including retaining accounting 
+experts to identify payments to Intermediary Company, and provided supporting documentation 
+requested.  It also provided summary charts and downloads of employee interviews. 
+ 
+38. TechnipFMC’s remedial actions included:  (i) separating employees who were 
+primarily responsible for the conduct; (ii) implementing certain third party controls, including 
+new financial controls, enhanced due diligence and prohibiting the use of certain third parties; 
+and (iii) making improvements to its compliance program, including by increasing its headcount 
+and adding experienced personnel in key positions, enhancing its ethics and compliance 
+policies, and providing additional training for certain third parties and employees.   
+ 
+Undertakings 
+ 
+Respondent undertakes to: 
+ 
+39. Cooperate fully with the Commission in any and all investigations, litigations or 
+other proceedings relating to or arising from the matters described in the Order.  TechnipFMC 
+agrees that cooperation includes the following: 
+ 
+a. On an ongoing basis, producing, subject to applicable law and regulations, 
+without service of a notice or subpoena, to the Commission non-privileged 
+documents and other materials, wherever located, in Respondent’s possession, 
+custody, or control, and appropriate privilege logs, as requested by the Division 
+of Enforcement’s (“Division”) staff and within 14 days of request unless 
+otherwise agreed to in writing by the Division’s staff; 
+b. Using its best efforts to secure the full, truthful, and continuing cooperation of 
+Respondent’s current and former directors, officers, employees and agents, 
+including making those persons available for interviews and the provision of 
+testimony in any and all investigations, litigation or other proceedings relating to 
+or arising from matters described in the Order when requested to do so by the 
+11 
+ 
+ 
+ 
+Division’s staff, at Respondent’s expense; 
+c. Using its best efforts to ensure its directors, officers, and employees testify at trial 
+and other judicial or administrative proceedings when requested to do so by the 
+Division’s staff. 
+40. Report to the Commission staff periodically during a three-year term, the status 
+of its remediation and implementation of compliance measures, particularly as to the areas of 
+due diligence on prospective and existing third-party consultants and vendors, FCPA training 
+and the testing of relevant controls including the collection and analysis of compliance data. 
+During this period, should Respondent discover credible evidence, not already reported to 
+Commission staff, that questionable or corrupt payments or questionable or corrupt transfers of 
+value may have been offered, promised, paid, or authorized by Respondent, or any entity or 
+person acting on behalf of Respondent, or that related false books and records have been 
+maintained, Respondent shall promptly report such conduct to the Commission staff.  During 
+this three-year period, Respondent shall: (1) conduct an initial review and submit an initial 
+report and (2) conduct and prepare two follow-up reviews and reports, as described below: 
+ 
+a. Respondent shall submit to the Commission staff a written report within 180 
+calendar days of the entry of this Order setting forth a complete description of its 
+FCPA and anti-corruption related remediation efforts to date, its proposals 
+reasonably designed to improve the policies and procedures of Respondent for 
+ensuring compliance with the FCPA and other applicable anticorruption laws, 
+and the parameters of the subsequent review (the “Initial Report”). The Initial 
+Report shall be transmitted to Tracy L. Price, Deputy Chief, FCPA Unit, Division 
+of Enforcement, Securities and Exchange Commission, 100 F St., NE, 
+Washington, DC 20549-5631.  Respondent may extend the time period for 
+issuance of the Initial Report with prior written approval of the Commission staff. 
+ 
+b. Respondent shall undertake two follow-up reviews, incorporating any comments 
+provided by the Commission staff on the previous report, to further monitor and 
+assess whether the policies and procedures of Respondent are reasonably 
+designed to detect and prevent violations of the FCPA and other applicable anti-
+corruption laws (the “Follow-Up Reports”). 
+ 
+c. The Follow-up Report shall be completed by no later than 270 days after the 
+Initial Report. The second Follow-up Report shall be completed by no later than 
+450 days after the completion of the Initial Report. Respondent may extend the 
+time period for issuance of the Follow-up Reports with prior written approval of 
+the Commission staff. 
+ 
+d. The periodic reviews and reports submitted by Respondent will likely include 
+proprietary, financial, confidential, and competitive business information. Public 
+disclosure of the reports could discourage cooperation, impede pending or 
+potential government investigations and thus undermine the objectives of the 
+reporting requirement. For these reasons, among others, the reports and the 
+contents thereof are intended to remain and shall remain nonpublic, except (a) 
+12 
+ 
+ 
+ 
+pursuant to court order, (b) as agreed by the parties in writing, (c) to the extent 
+that the Commission staff determines in its sole discretion that disclosure would 
+be in furtherance of the Commission’s discharge of its duties and responsibilities, 
+or (d) is otherwise required by law. 
+ 
+e. During this three-year period of review, Respondent shall provide its external 
+auditors with its annual internal audit plan and reports of the results of internal 
+audit procedures and its assessment of its FCPA compliance policies and 
+procedures. 
+ 
+f. During the three-year period of review, Respondent shall provide Commission 
+staff with any written reports or recommendations provided by Respondent’s 
+external auditors in response to Respondent’s annual internal audit plan, reports 
+of the results of internal audit procedures, and its assessment of its FCPA 
+compliance policies and procedures. 
+ 
+g. In the event the Commission staff finds, in its sole discretion, that there exists a 
+change of circumstances sufficient to eliminate the need for the requirements in 
+Paragraph 40, and that the other provisions of the Order have been satisfied, the 
+requirements in Paragraph 40 may be terminated early. 
+ 
+41. Certify, in writing, compliance with the undertaking(s) set forth above. The 
+certification shall identify the undertaking(s), provide written evidence of compliance in the 
+form of a narrative, and be supported by exhibits sufficient to demonstrate compliance. The 
+Commission staff may make reasonable requests for further evidence of compliance, and 
+Respondent agrees to provide such evidence. The certification and supporting material shall be 
+submitted to Tracy L. Price, Deputy Chief, FCPA Unit, Division of Enforcement, Securities and 
+Exchange Commission, 100 F St., NE, Washington, DC 20549-5631 no later than sixty (60) 
+days from the date of the completion of the undertakings. 
+ 
+Deferred Prosecution Agreement 
+TechnipFMC has entered into a three-year deferred prosecution agreement with the 
+United States Department of Justice that acknowledges responsibility for criminal conduct 
+relating to findings in the Order.   
+ 
+Non-Imposition of a Civil Penalty 
+            TechnipFMC acknowledges that the Commission is not imposing a civil penalty based 
+upon the imposition of a $296,184,000 criminal fine as part of its resolution with the Department 
+of Justice.   
+ 
+ 
+ 
+ 
+13 
+ 
+ 
+ 
+IV. 
+ In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent TechnipFMC’s Offer. 
+ 
+ Accordingly, pursuant to Section 21C of the Exchange Act, it is hereby ORDERED that:   
+ 
+A. Respondent TechnipFMC cease-and-desist from committing or causing any 
+violations and any future violations of Sections 30A, 13(b)(2)(A) and 13(b)(2)(B)  of the Exchange 
+Act [15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(2)(B), and 78dd-1]. 
+ 
+B. Respondent shall comply with its Undertakings as enumerated in paragraphs 39 to 
+41 above.  
+ 
+C. Respondent shall, within fourteen days of the entry of this Order, pay disgorgement 
+of $4,327,194.00 and prejudgment interest of $734,712.00, for total payment of $5,061,906.00 to 
+the Securities and Exchange Commission for transfer to the general fund of the United States 
+Treasury, subject to Exchange Act Section 21F(g)(3).  If payment of disgorgement and 
+prejudgment interest is not made by the date the payment is required by this Order, additional 
+interest shall accrue pursuant to SEC Rule of Practice 600.     
+ 
+ Payment must be made in one of the following ways:    
+ 
+(1) Respondent may transmit payment electronically to the Commission, which 
+will provide detailed ACH transfer/Fedwire instructions upon request; 
+ 
+(2) Respondent may make direct payment from a bank account via Pay.gov 
+through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
+ 
+(3) Respondent may pay by certified check, bank cashier’s check, or United 
+States postal money order, made payable to the Securities and Exchange 
+Commission and hand-delivered or mailed to:  
+ 
+Enterprise Services Center 
+Accounts Receivable Branch 
+HQ Bldg., Room 181, AMZ-341 
+6500 South MacArthur Boulevard 
+Oklahoma City, OK 73169 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+14 
+ 
+ 
+ 
+ Payments by check or money order must be accompanied by a cover letter identifying 
+TechnipFMC as a Respondent in these proceedings, and the file number of these proceedings; a 
+copy of the cover letter and check or money order must be sent to Tracy L. Price, Deputy Chief, 
+FCPA Unit, Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, 
+Washington, DC 20549-5631. 
+ 
+ 
+ 
+ By the Commission. 
+ 
+       Vanessa Countryman 
+       Secretary 

raw/aaer/2019/AAER-4090.txt

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+UNITED STATES OF AMERICA  
+Before the  
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934  
+Release No. 87068 / September 23, 2019 
+ACCOUNTING AND AUDITING ENFORCEMENT  
+Release No. 4090 / September 23, 2019 
+ADMINISTRATIVE PROCEEDING  
+File No. 3-15395 
+ 
+In the Matter of  
+Subramanian Krishnan, 
+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 July 30, 2013, Subramanian Krishnan, CPA (“Krishnan”) was suspended from 
+appearing or practicing before the Commission as an accountant as a result of settled public 
+administrative proceedings instituted by the Commission against him pursuant to Rule 102(e)(3) 
+of the Commission’s Rules of Practice.1  This order is issued in response to Krishnan’s 
+application for reinstatement to appear and practice before the Commission as an accountant 
+responsible for the preparation or review of financial statements required to be filed with the 
+Commission. 
+The Commission found that Krishnan had been permanently enjoined by a United States 
+District Court from future violations of Section 17(a) of the Securities Act of 1933 and Sections 
+10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5, 
+13b2-1, 13b2-2, and 13a-14 thereunder, and aiding and abetting violations of Sections 13(a), 
+13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 
+thereunder in an action brought by the Commission.  In its complaint in the injunctive action, the 
+Commission alleged that Krishnan engaged in a course of conduct which resulted in Digi 
+International, Inc. (“Digi”) filing inaccurate reports and accompanying certifications in Digi’s 
+annual reports on Form 10-K and Digi’s quarterly reports on Form 10-Q for the period from 
+March 2005 through May 2010. The complaint also alleged that Krishnan engaged in certain 
+actions and inactions resulting in corporate funds being used to pay for unauthorized expenses. 
+                                                 
+1 See Accounting and Auditing Enforcement Release No. 3473 dated July 30, 2013.  Krishnan was permitted, 
+pursuant to the order, to apply for reinstatement after five years upon making certain showings. 
+ 
+ 2 
+The complaint further alleged that Krishnan aided and abetted Digi’s violations by making and 
+keeping inaccurate books and records, failing to maintain a sufficient system of internal 
+accounting controls, and making inaccurate representations to auditors. 
+ 
+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, Krishnan 
+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.  Krishnan 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, Krishnan’s 
+suspension from practice before the Commission as an independent accountant continues in 
+effect until the Commission determines that a sufficient showing has been made in this regard in 
+accordance with the terms of the original suspension order. 
+ 
+Rule 102(e)(5) of the Commission’s Rules of Practice governs applications for 
+reinstatement, and provides that the Commission may reinstate the privilege to appear and 
+practice before the Commission “for good cause shown.”2  This “good cause” determination is 
+necessarily highly fact specific. 
+ 
+On the basis of information supplied, representations made, and undertakings agreed to 
+by Krishnan, it appears that he has complied with the terms of the July 30, 2013 order 
+suspending him from appearing or practicing before the Commission as an accountant, that no 
+information has come to the attention of the Commission relating to his character, integrity, 
+professional conduct or qualifications to practice before the Commission that would be a basis 
+for adverse action against him pursuant to Rule 102(e) of the Commission's Rules of Practice, 
+and that Krishnan, 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 rule 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). 
+ 
+ 
+ 3 
+ 
+ORDERED pursuant to Rule 102(e)(5)(i) of the Commission’s Rules of Practice that 
+Subramanian Krishnan, 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. 
+ 
+ 
+Vanessa A. Countryman  
+Secretary  

raw/aaer/2019/AAER-4099.txt

@@ -0,0 +1,301 @@
+ 
+ 
+ 
+ UNITED STATES OF AMERICA 
+ Before the 
+ SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No.  87281 / October 10, 2019 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No.  4099 / October 10, 2019 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-19582 
+ 
+ 
+In the Matter of 
+ 
+NORTHWEST 
+BIOTHERAPEUTICS, INC.  
+ 
+Respondent. 
+ 
+ 
+ 
+ 
+ 
+ORDER INSTITUTING CEASE-AND-
+DESIST PROCEEDINGS, PURSUANT TO 
+SECTION 21C OF THE SECURITIES 
+EXCHANGE ACT OF 1934 , MAKING 
+FINDINGS, AND IMPOSING A CEASE-
+AND-DESIST ORDER  
+   
+ 
+I. 
+ 
+ The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
+and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
+Exchange Act of 1934 (“Exchange Act”) against Northwest Biotherapeutics, Inc. (“Respondent”).    
+ 
+II. 
+ 
+ In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
+of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
+purpose of these proceedings and any other proceedings brought by or on behalf of the 
+Commission, or to which the Commission is a party, and without admitting or denying the findings 
+herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
+proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
+And-Desist Proceedings, Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
+Findings, and Imposing a Cease-And-Desist Order (“Order”), as set forth below.   
+ 
+ 
+ 2 
+ 
+ 
+III. 
+ 
+ On the basis of this Order and Respondent’s Offer, the Commission finds1 that  
+ 
+Summary 
+ 
+ These proceedings involve violations of the federal securities laws in connection with the 
+Respondent’s Internal Control over Financial Reporting (“ICFR”).  Respondent failed to create and 
+implement effective ICFR for twelve consecutive annual reporting periods from 2007 through 2018. 
+ 
+Respondent  
+ 
+1. Northwest Biotherapeutics, Inc. is a clinical stage biotechnology company, founded 
+in 1996, headquartered in Bethesda, Maryland, and focused on developing cancer vaccines 
+designed to treat a broad range of solid tumor cancers.  NWBO has a class of securities registered 
+pursuant to Section 12(g) of the Exchange Act and its common stock trades on the OTC market 
+under the symbol NWBO.  At all relevant times, Respondent filed periodic reports with the 
+Commission, including Forms 10-K and 10-Q, pursuant to Section 13 of the Exchange Act and 
+related rules thereunder. 
+ 
+Background 
+ 
+2. Respondent publicly disclosed material weaknesses in each of its Forms 10-K over 
+a period of twelve years, from 2007 through 2018.  Respondent’s disclosed material weaknesses 
+often repeated year after year, relating to numerous areas of importance, including the review, 
+supervision and monitoring of accounting operations throughout the organization. 
+ 
+3. In each of the most recent five fiscal years from 2014 through 2018, Respondent 
+publicly disclosed that its policies and procedures with respect to the review, supervision and 
+monitoring of accounting operations throughout the organization were either not designed and in 
+place or not operating effectively.  Similarly, Respondent disclosed in nine of the last twelve fiscal 
+years that it lacked controls in place, including those surrounding related party transactions, to 
+ensure that all material transactions and developments impacting the financial statements are 
+reflected and properly recorded.   
+ 
+4. In its most recent Form 10-K filed for FY2018, Respondent continued to disclose 
+material weaknesses, including two newly-identified weaknesses, one of which is the lack of 
+formalized and implemented policy and procedure documentation to evidence a system of ICFR.   
+ 
+                                              
+1  The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any 
+other person or entity in this or any other proceeding.  
+ 
+ 3 
+5. In addition, Respondent has failed to file timely its annual report on Form 10-K for 
+sixteen consecutive years, which includes all twelve years (from 2007 through 2018) in which 
+NWBO’s management was required to perform an annual assessment of ICFR under SOX.   
+ 
+6. From 2012 through 2015, Respondent reported that the material weaknesses in its 
+internal controls had not been resolved, though Respondent did take certain steps to attempt to 
+improve controls.  These remediation steps included hiring a Controller and a senior administrative 
+staffer; outsourcing its accounting and financial reporting functions; and recruiting an in-house 
+counsel.   
+ 
+7. Although Respondent hired a SOX consultant in spring 2016, there was limited 
+progress in remediating material weaknesses prior to t he staff’s outreach . In 2016, the Respondent 
+remediated certain material weaknesses, including those related to segregation of duties and its 
+lack of an effective anti-fraud program designed to detect and prevent fraud.  In 2017, the 
+Respondent adopted enhanced governance guidelines and policies, among other improvements.  In 
+2018, the Respondent remediated material weaknesses involving related party transactions.  
+Despite these efforts, Respondent continues to report material weaknesses.   
+ 
+8. As a result of the conduct described above, Respondent violated Rule 13a-15(a) of 
+the Exchange Act, which requires issuers with classes of securities registered pursuant to Section 
+12 to maintain ICFR. 
+ 
+9. As a result of the conduct described above, Respondent violated Section 
+13(b)(2)(B) of the Exchange Act, which requires Section 12 registrants to devise and maintain a 
+system of internal accounting controls sufficient to provide reasonable assurance that, among other 
+things, transactions are recorded in accordance with GAAP. 
+  
+Northwest Biotherapeutics’s Remedial Efforts 
+10. In determining to accept the Offer, the Commission considered remedial acts 
+undertaken by Respondent and cooperation afforded the Commission staff.   
+Undertakings 
+ 
+Respondent has undertaken to:  
+ 
+11. Retain, at its own expense, a qualified independent consultant (the “Consultant”) 
+not unacceptable to the Commission staff, to review and evaluate Respondent’s ICFR and to 
+provide recommendations for improvements as may be needed to complete its remediation plan 
+and ensure compliance with ICFR requirements. This review and evaluation shall include an 
+assessment of Respondent’s policies and procedures involving the approval and recording of 
+current and historic transactions with related parties, policies and procedures regarding public 
+disclosures, and corporate governance matters. 
+ 
+ 4 
+12. The Consultant should not have provided legal, auditing, or other services to, or 
+have had any affiliations with, the Respondent, or any related party, during the two years prior to 
+the issuance of this Order. 
+ 
+13. Respondent and the Consultant shall agree that the Consultant is an independent 
+third-party and not an employee or agent of the Respondent. In addition, Respondent and the 
+Consultant agree that no attorney-client relationship shall be formed between them. 
+ 
+14. The Consultant shall be required to enter into an agreement that provides that for 
+the period of engagement and for a period of two years from completion of the engagement, the 
+Consultant shall not enter into any employment, consultant, attorney-client, auditing or other 
+professional relationship with the Respondent, or any of its present or former affiliates, directors, 
+officers, employees, or agents acting in their capacity. The agreement will also provide that the 
+Consultant will require that any firm with which he/she is affiliated or of which he/she is a 
+member, and any person engaged to assist the Consultant in performance of his/her duties under 
+this Order shall not, without prior written consent of the staff, enter into any employment, 
+consultant, attorney-client, auditing or other professional relationship with Respondent, or any of 
+its present or former affiliates, directors, officers, employees, or agents acting in their capacity as 
+such for the period of the engagement and for a period of two years after the engagement. 
+ 
+15. The reports by the Consultant will likely include confidential financial, 
+proprietary, competitive business or commercial information.  Public disclosure of the reports 
+could discourage cooperation, impede pending or potential government investigations or 
+undermine the objectives of the reporting requirement.  For these reasons, among others, the 
+reports and the contents thereof are intended to remain and shall remain non-public, except (1) 
+pursuant to court order, (2) as agreed to by the parties in writing, (3) to the extent that the 
+Commission determines in its sole discretion that disclosure would be in furtherance of the 
+Commission’s discharge of its duties and responsibilities, or (4) is otherwise required by law. 
+ 
+16. Respondent shall provide, within sixty (60) days of the issuance of this Order, a 
+copy of the engagement letter detailing the Consultant’s responsibilities to Melissa Hodgman, 
+Associate Director, Division of Enforcement, Securities and Exchange Commission, 100 F St., 
+NE, Washington, DC 20549-5553. 
+ 
+17. Respondent shall cooperate fully with the Consultant, including providing the 
+Consultant with access to its files, books, records, and personnel as reasonably requested for the 
+above-referenced review, and obtaining the cooperation of respective employees or other persons 
+under Respondent’s control. 
+ 
+18. Respondent shall require the Consultant to report to the Commission staff on its 
+activities as the Commission staff may request. 
+ 
+19. Respondent shall require the Consultant, within thirty (30) days of being retained 
+(unless otherwise extended by the Commission staff for good cause), to provide Respondent and 
+the Commission staff with (i) an estimate of the time needed to complete the review and analysis, 
+ 5 
+and (ii) a proposed deadline, subject to the approval of the Commission staff, for the preparation 
+of a written report describing the review and analysis (“Report”). 
+ 
+20. Respondent shall require the Consultant to issue the Report by the approved 
+deadline and provide the Report simultaneously to Respondent and the Commission staff. The 
+Report shall evaluate the adequacy of Respondent’s ICFR, including controls over related party 
+transactions, as well as controls over public disclosures, and corporate governance matters, and 
+make recommendations for improvements, as may be needed. 
+ 
+21. Within thirty (30) days of the issuance of the Report, Respondent and the 
+Consultant shall advise the staff of the date by which Respondent will adopt and implement any 
+recommendations in the Report. As to any recommendation that Respondent considers to be, in 
+whole or in part, unduly burdensome or impractical, Respondent may submit in writing to the 
+Consultant and the Commission staff a proposed alternative reasonably designed to accomplish 
+the same objectives, within thirty (30) days of the Consultant’s issuance of the Report. 
+Respondent shall then attempt in good faith to reach an agreement with the Consultant relating to 
+each disputed recommendation and request that the Consultant reasonably evaluate any 
+alternative proposed by Respondent.  If, upon evaluating Respondent’s proposal, the Consultant 
+determines that the suggested alternative is reasonably designed to accomplish the same 
+objectives as the recommendations in question, then the Consultant shall approve the suggested 
+alternative and make the recommendations.  If the Consultant determines that the suggested 
+alternative is not reasonably designed to accomplish the same objectives, the Consultant shall 
+reject Respondent’s proposal. The Consultant shall inform Respondent and the Commission staff 
+of the Consultant’s final determination concerning any recommendation that Respondent 
+considers to be unduly burdensome or impractical within fourteen (14) days after the conclusion 
+of the discussion and evaluation by Respondent and the Consultant. Within fourteen (14) days 
+after the final determination of any disputed recommendation, Respondent shall submit to the 
+Consultant and the Commission staff the date by which Respondent will adopt and implement the 
+recommendation, subject to the approval of the Commission staff. 
+ 
+22. Respondent agrees that the Commission staff may extend any of the dates set 
+forth above at the direction of the Commission staff. 
+ 
+23. Within thirty (30) days after Respondent notifies the Consultant that the 
+recommendations have been implemented, Respondent shall certify, in writing, compliance with 
+the undertakings set forth above. The certification shall identify the undertaking(s), provide 
+written evidence of compliance in the form of a narrative, and be supported by exhibits sufficient 
+to demonstrate compliance. The Commission staff may make reasonable requests for further 
+evidence of compliance, and Respondent agrees to provide such evidence. The certification and 
+supporting material shall be submitted to Melissa Hodgman, Associate Director, with a copy to 
+the Office of Chief Counsel of the Enforcement Division, no later than sixty (60) days from the 
+completion of the undertakings. 
+ 
+ 
+ 
+ 6 
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED that: 
+ 
+ A. Pursuant to Section 21C of the Exchange Act, Respondent cease and desist from 
+committing or causing any violations and any future violations of Sections 13(b)(2)(B) of the 
+Exchange Act and Rule 13a-15(a), thereunder.   
+ 
+ B. Respondent shall comply with paragraphs 11 through 23 above. 
+ 
+C. Respondent shall, within 10 days of the entry of this Order, pay a civil money 
+penalty in the amount of $250,000 to the Securities and Exchange Commission for transfer to the 
+general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely 
+payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717.   
+ 
+Payment must be made in one of the following ways:   
+ 
+(1) Respondent may transmit payment electronically to the Commission, which 
+will provide detailed ACH transfer/Fedwire instructions upon request;  
+ 
+(2) Respondent may make direct payment from a bank account via Pay.gov 
+through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
+ 
+(3) Respondent may pay by certified check, bank cashier’s check, or United 
+States postal money order, made payable to the Securities and Exchange 
+Commission and hand-delivered or mailed to:  
+ 
+Enterprise Services Center 
+Accounts Receivable Branch 
+HQ Bldg., Room 181, AMZ-341 
+6500 South MacArthur Boulevard 
+Oklahoma City, OK 73169 
+ 
+Payments by check or money order must be accompanied by a cover letter identifying 
+Respondent as a Respondent in these proceedings, and the file number of these proceedings; a 
+copy of the cover letter and check or money order must be sent to Melissa Hodgman, Associate 
+Director, Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, 
+Washington, DC 20549-5553.   
+ 
+ D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
+treated as penalties paid to the government for all purposes, including all tax purposes.  To 
+preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
+ 7 
+Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 
+award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
+penalty in this action ("Penalty Offset").  If the court in any Related Investor Action grants such a 
+Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting 
+the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the 
+Penalty Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed 
+an additional civil penalty and shall not be deemed to change the amount of the civil penalty 
+imposed in this proceeding.  For purposes of this paragraph, a "Related Investor Action" means a 
+private damages action brought against Respondent by or on behalf of one or more investors based 
+on substantially the same facts as alleged in the Order instituted by the Commission in this 
+proceeding. 
+ 
+  
+ By the Commission. 
+ 
+ 
+ 
+       Vanessa A. Countryman 
+       Secretary 

raw/aaer/2019/AAER-4102.txt

@@ -0,0 +1,334 @@
+UNITED STATES OF AMERICA 
+Before the  
+SECURITIES AND EXCHANGE COMMISSION 
+ 
+SECURITIES EXCHANGE ACT OF 1934 
+Release No.  87611 / November 25, 2019 
+ 
+ACCOUNTING AND AUDITING ENFORCEMENT 
+Release No.  4102 / November 25, 2019 
+ 
+ADMINISTRATIVE PROCEEDING 
+File No. 3-19607 
+ 
+ 
+In the Matter of 
+ 
+ CALUMET SPECIALTY 
+ PRODUCTS PARTNERS, L.P.  
+ 
+Respondent . 
+ 
+ORDER INSTITUTING CEASE-AND-
+DESIST PROCEEDINGS PURSUANT TO 
+SECTION 21C OF THE SECURITIES 
+EXCHANGE ACT OF 1934, MAKING 
+FINDINGS, AND IMPOSING A CEASE-
+AND-DESIST ORDER  
+  
+I. 
+ 
+ The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
+and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
+Exchange Act of 1934 (“Exchange Act”) against Calumet Specialty  Products Partners, L.P. 
+(“Calumet” or “Respondent”). 
+ 
+II. 
+ 
+ In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
+of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
+purpose of these proceedings and any other proceedings brought by or on behalf of the 
+Commission, or to which the Commission is a party, and without admitting or denying the findings 
+herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
+proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
+And-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
+Findings, and Imposing a Cease-And-Desist Order (“Order”), as set forth below.   
+ 
+III. 
+ 
+ On the basis of this Order and Respondent’s Offer, the Commission finds that:  
+ 
+ 
+ 
+ 
+  
+2 
+ 
+SUMMARY 
+ 
+1. This matter concerns material misstatements made by Calumet in its March 2018 
+earnings release concerning its financial results for the year ending December 31, 2017 (“2017 
+Financial Results”). 
+2. Calumet disclosed in its third-quarter 2017 Form 10 -Q that, beginning in September 
+2017, Calumet’s implementation of its new enterprise resource planning (“ERP”) system had 
+resulted in various “operating and reporting disruptions, including limitations on [Calumet’s] 
+ability to ship product and bill customers, project [its] inventory requirements, manage [its] 
+supply chain, maintain current and complete books and records, maintain an effective internal 
+control environment and meet external reporting deadlines.” 
+3. Between October and December 2017, three senior finance and accounting managers, 
+including the company’s interim controller, left the company. 
+4. Calumet was seven weeks late filing its financial results for the third quarter of 2017 
+and, in that filing, announced two material weaknesses in internal control over financial 
+reporting (“ICFR”).   
+5. Calumet’s ERP implementation issues and material weaknesses in ICFR continued 
+into March 2018.  On March 1, Calumet’s independent auditor identified a potential additional 
+material weakness in the company’s ICFR with respect to the financial statement closing 
+process. 
+6. Calumet investors, concerned that Calumet would not be able to disclose its 2017 
+Financial Results on time, began pressuring the company to issue an earnings release  consistent 
+with Calumet’s practice in prior years.   
+7. Despite the departure of senior finance and accounting managers, the pervasive ERP 
+implementation and internal control issues, and the seven-week delay in the filing of its third 
+quarter 2017 Form 10-Q, Calumet issued an earnings release on March 8, 2018, announcing the 
+company’s 2017 Financial Results.  The earnings release was furnished as an exhibit to a Form 
+8-K, which was filed with the Commission. 
+8. The earnings release materially misstated, among other things, the company’s earnings 
+for 2017.   
+9. On March 19, Calumet filed a Form 8-K with the Commission disclosing that it 
+expected its 2017 Financial Results to differ from what had been reported in the March 8 
+earnings release.  Calumet’s shares declined over eight percent that day. 
+10. On April 2, Calumet filed its 2017 Annual Report on Form 10-K (“2017 Form 10-K”).  
+The 2017 Financial Results reported in the 2017 Form 10-K were materially different from what 
+had been reported in the March 8 earnings release.  For example, in its March 8 earnings release, 
+Calumet had reported 2017 earnings before interest, taxes, depreciation, and amortization 
+ 
+  
+3 
+ 
+(“EBITDA”) that were $18.7 million (7.6 percent) higher than what it reported in the 2017 Form 
+10-K and had under-reported its 2017 net loss also by $18.7 million (eighteen percent).   
+Calumet’s misstatements were directly related to the problems resulting from Calumet’s ERP 
+implementation and ICFR weaknesses.  .  
+RESPONDENT 
+ 
+11. Calumet Specialty Products Partners, L.P., a producer of specialty hydrocarbon 
+products, is a Delaware limited partnership with its headquarters in Indianapolis, Indiana.  
+Calumet’s common units are registered with the Commission pursuant to Section 12(b) of the 
+Exchange Act.  Calumet’s common units trade on the NASDAQ Global Select Market.  Calumet 
+files periodic reports, including Forms 10-K and 10-Q, and current reports on Form 8-K, with the 
+Commission pursuant to Section 13(a) of the Exchange Act and the related rules thereunder.  
+FACTS 
+ 
+Calumet Filed Its Third Quarter Form 10-Q Seven Weeks Late Due to the ERP Implementation 
+Problems and ICFR Weaknesses . 
+12. In September 2017, Calumet transitioned to a new ERP system, in an attempt to 
+enhance the effectiveness of its business operations, including invoicing, inventory control, and 
+financial reporting.   
+13. Calumet knew that deploying the new ERP system involved risks inherent in the 
+conversion to a new computer system, including loss of information, disruption to normal 
+operations, and changes in accounting procedures and ICFR. 
+14. Calumet disclosed in its third-quarter 2017 Form 10 -Q that, beginning in September 
+2017, , Calumet’s implementation of its new ERP system resulted in various “operating and 
+reporting disruptions, including limitations on [Calumet’s] ability to ship product and bill 
+customers, project [its] inventory requirements, manage [its] supply chain, maintain current and 
+complete books and records, maintain an effective internal control environment and meet 
+external reporting deadlines.” 
+15. As a result of these disruptions, Calumet implemented a manual process to track 
+shipments, goods received, and accounts payable invoices, which caused significant backlogs 
+and stress on the company’s operating and accounting staff.  
+16. In late October 2017, Calumet’s interim controller left the company.    
+ 
+  
+4 
+ 
+17. In November 2017, Calumet identified two material weaknesses in its ICFR,1 
+including a failure to “exercise sufficient corporate governance and oversight, design effective 
+controls over the ERP implementation to ensure appropriate data conversion and data integrity, 
+or provide sufficient end user training to [its] employees to ensure that [its] employees could 
+effectively operate the system and carry out their responsibilities.” 
+18. In December 2017, Calumet’s director of internal audit and compliance and the 
+company’s financial planning manager both departed the company.  At the same time, Calumet 
+suffered from significant employee turnover in its accounts payable department. 
+19. Also in December 2017, Calumet management informed the company’s audit 
+committee that Calumet likely would not have a stable ERP system until at least sometime in the 
+first quarter of 2018. 
+20. Because of these and other challenges, Calumet did not file its Form 10-Q for the third 
+quarter of 2017 until December 28, 2017 — approximately seven weeks late.  The company 
+disclosed the two material weaknesses described above at that time. 
+Calumet’s ERP Implementation Problems and ICFR Weaknesses  Persisted into Early 2018 and 
+Investors Pressure d the Company to Pre-Announce Earnings. 
+21. Despite remedial efforts undertaken by the company, Calumet’s internal financial 
+reporting challenges and material weaknesses created by the ERP transition continued into 2018.   
+22. As of mid-February 2018, Calumet had not announced when it expected to issue an 
+earnings release, as it had done in prior years.  Calumet had typically issued an earnings release 
+prior to filing its annual report on Form 10-K in order to highlight for investors those results and 
+messages that management believed were most important. 
+23. Calumet was informed by its external investor relations firm that investors were 
+concerned that Calumet again was having problems reporting its financial results on time.  
+Investors, analysts, and the media began asking when Calumet would release earnings and the 
+reasons for the delay in doing so.   
+24. In addition, Calumet management had been planning to repurchase (or “call”) $400 
+million in high-interest secured notes by mid-March 2018 and wanted to issue the earnings 
+release at the same time that it announced that redemption to achieve a stronger market impact.  
+25. Calumet, therefore, was under significant pressure to file its Form 10-K by the March 
+16, 2018 deadline for doing so and, consistent with its usual practice, to issue an earnings release 
+                                              
+1  A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over 
+financial reporting such that there is a reasonable possibility that a material misstatement of the 
+registrant’s annual or interim financial statements will not be prevented or detected on a timely basis.  
+Rule 1-02(a)(4) of Regulation S-X.   
+ 
+  
+5 
+ 
+several days prior to filing the Form 10-K. 
+26. In the face of those pressures, and notwithstanding the material weaknesses and the 
+continuing challenges with its ERP system — all of which created a significant risk that Calumet 
+would misstate its year-end financial statements — Calumet announced on February 28, 2018, 
+that it would issue an earnings release on March 8. 
+27. On March 1, Calumet’s independent auditor sent a member of Calumet management a 
+draft memo noting that the “pervasive ERP system issues have also resulted in a delay in the 
+financial statement close process and execution of certain financial statement controls, including 
+timely account reconciliation, analysis and review, not operating as intended for all financial 
+statement accounts.”  Calumet later concluded that this issue constituted a third material 
+weakness, and it disclosed it on April 2, 2018. 
+28. On March 6, Calumet management presented to Calumet’s audit committee and the 
+board of directors a draft of Calumet’s 2017 Form 10-K and the earnings release that included 
+the company’s 2017 Financial Results.   
+29. During those meetings, Calumet management made a presentation describing the 
+ongoing pervasive problems with the company’s accounting and ICFR, including that: (a) the 
+company still had a “long way to go” to stabilize the ERP system; (b) the company had various 
+enterprise-wide issues adversely affecting downstream accounting activities; and (c) the 
+company’s accounts payable invoice backlog was “a major issue,” with at least 6,900 invoices in 
+backlog (compared to a “stabilized level” of 1,500). Also at the March 6 meeting, the company’s 
+independent auditor informed Calumet’s audit committee that its audit of the company’s 2017 
+year-end financial statements was still not complete, and that the “pervasive ERP system issues” 
+had delayed the financial statement closing process and had resulted in over 150 post-closing 
+accounting adjustments, which had substantially impacted all of the company’s financial 
+statement accounts.  The audit committee and the board of directors voted to approve the Form 
+10-K, which was scheduled to be filed on March 16.  
+Despite Persistent ERP Implementation Problems and ICFR Weaknesses , Calumet Issued the 
+2017 Earnings Release . 
+30. On March 6, shortly after the board of directors had approved the 2017 Financial 
+Results, Calumet began to make additional accounting journal entries.  Those accounting 
+adjustments caused the company’s “limited partners’ interest basic and diluted net loss per unit”2 
+to increase by four percent, from $1.03 per unit to $1.07 per unit.  The company’s “net loss 
+before income tax from continuing operations” increased by 33 percent, from $9.1 million to 
+$12.1 million. 
+31. Calumet issued the earnings release on March 8, despite additional accounting 
+                                              
+2  “Limited partners’ interest basic and diluted net loss per unit” is a measure of “earnings per share” for 
+master limited partnerships such as Calumet. 
+ 
+  
+6 
+ 
+adjustments that had been recorded from March 6 to March 8, and although Calumet’s auditor 
+had identified a potential additional material weakness in the company’s ICFR with respect to 
+the financial statement closing process.  The earnings release was furnished as an exhibit to a 
+Form 8-K, which was filed with the Commission.  The 2017 Financial Results included in the 
+earnings release were presented as the company’s final results, not preliminary results .  Calumet 
+management also held a conference call with investors in the morning of March 8 to discuss the 
+company’s financial results.   
+32. However, by March 13, Calumet realized that the earnings release would need to be 
+corrected.  Acknowledging that “reality [had] finally set in,” a member of Calumet management 
+explained in an email that Calumet likely would have to “make downward adjustments” to the 
+2017 Financial Results that had been disclosed in the March 8 earnings release, as well as 
+disclose a third material weakness.  The email also noted that the company had a “lack of 
+practice and confidence in [its] ability to close the [accounting] system,” that the company’s 
+accounts receivable, accounts payable, and “other piles of issues” would “likely not be 
+mitigated” in the next two weeks, and that Calumet therefore probably would be “late in filings 
+for 2-3 quarters.” 
+33. On March 19, Calumet filed a Form 8-K disclosing that it expected its 2017 Form 10-
+K to contain 2017 Financial Results that differed from what had been reported in the March 8 
+earnings release.    
+34. Investors reacted negatively.  The price of Calumet stock declined over eight percent 
+that day, and trading volume increased by over 415 percent from the previous trading day.  One 
+investor told Calumet that it was concerned that it could no longer rely on the company’s public 
+data and that the incident “tarnishes the confidence that investors have in the company.” 
+35. The misstatements in the earnings release principally were the result of (1) Calumet’s 
+failure to accurately record all invoices into the company’s accounting system, and (2) Calumet’s 
+failure to accurately reconcile accounts, caused in part by a large backlog of unpaid invoices and 
+goods receipts.  Those failures were directly related to the persistent ERP implementation and 
+ICFR problems that Calumet management had described during the March 6 meeting of 
+Calumet’s audit committee, prior to issuing the earnings release.   
+36. On April 2, 2018, Calumet filed its 2017 Form 10-K, in which it disclosed a third 
+material weakness concerning the “untimely and insufficient operation of controls in the 
+financial statement close process, specifically the lack of timely account reconciliation, analysis 
+and review related to all financial statement accounts.”   
+37. The 2017 Financial Results reported in that Form 10-K were materially different from 
+what had been reported in the March 8 earnings release.  For example, Calumet reported in its 
+March 8 earnings release 2017 EBITDA of $265.4  million, which was $18.7 million (7.6 
+percent) higher than it reported in its 2017 Form 10-K, and a net loss of $85.1 million, which 
+was $18.7 million lower than the net loss of $103.8 million (eighteen percent) reported in the 
+2017 Form 10-K.  The company’s “limited partners’ interest basic and diluted net loss per unit” 
+ 
+  
+7 
+ 
+increased from $1.07 per unit to $1.31 per unit, an understatement of over eighteen percent. 
+VIOLATIONS 
+38. Section 13(a) of the Exchange Act and Rules 13a-11 and 12b-20 promulgated 
+thereunder collectively require issuers of securities registered pursuant to Section 12 of the 
+Exchange Act to file with the Commission accurate current reports on Form 8-K that contain 
+material information necessary to make the required statements made in the reports not 
+misleading.  
+39. As a result of the conduct described above, Calumet violated Section 13(a) of the 
+Exchange Act and Rules 13a-11 and 12b-20 promulgated thereunder with respect to the        
+Form 8-K filed on March 8, 2018.  
+IV. 
+ 
+ In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
+agreed to in Respondent’s Offer. 
+ 
+ Accordingly, it is hereby ORDERED that: 
+ 
+ A. Pursuant to Section 21C of the Exchange Act, Respondent cease and desist from 
+committing or causing any violations and any future violations of Section 13(a) of the Exchange 
+Act and Rules13a-11 and 12b-20 promulgated thereunder. 
+ 
+B. Within 21 days of the entry of this Order, Calumet shall pay a civil money penalty 
+in the amount of $250,000 to the Securities and Exchange Commission for transfer to the general 
+fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3).  If timely payment 
+is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.   
+ 
+Payment must be made in one of the following ways:   
+ 
+(1) Respondent may transmit payment electronically to the Commission, which 
+will provide detailed ACH transfer/Fedwire instructions upon request;  
+ 
+(2) Respondent may make direct payment from a bank account via Pay.gov 
+through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
+ 
+(3) Respondent may pay by certified check, bank cashier’s check, or United 
+States postal money order, made payable to the Securities and Exchange 
+Commission and hand-delivered or mailed to:  
+ 
+Enterprise Services Center 
+Accounts Receivable Branch 
+HQ Bldg., Room 181, AMZ-341 
+ 
+  
+8 
+ 
+6500 South MacArthur Boulevard 
+Oklahoma City, OK 73169 
+ 
+Payments by check or money order must be accompanied by a cover letter identifying the 
+Respondent’s name in these proceedings, and the file number of these proceedings; a copy of the 
+cover letter and check or money order must be sent to Antonia Chion, Division of Enforcement, 
+Securities and Exchange Commission, 100 F St., N.E., Washington, DC 20549-5720. 
+ 
+ Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated 
+as penalties paid to the government for all purposes, including all tax purposes.  To preserve the 
+deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it shall 
+not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 
+compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 
+this action (“Penalty Offset”).  If the court in any Related Investor Action grants such a Penalty 
+Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 
+Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty 
+Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed an 
+additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 
+in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a private 
+damages action brought against a Respondent by or on behalf of one or more investors based on 
+substantially the same facts as alleged in the Order instituted by the Commission in this 
+proceeding. 
+  
+ By the Commission. 
+ 
+ 
+ 
+Vanessa A. Countryman 
+Secretary 
+ 
+