U.S. Securities & Exchange Commission
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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before The
SECURITIES AND EXCHANGE COMMISSION

SECURITIES ACT OF 1933
Release No. 7916 / November 16, 2000

SECURITIES EXCHANGE ACT OF 1934
Release No. 43571 / November 16, 2000

ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1344 / November 16, 2000

ADMINISTRATIVE PROCEEDING
File No. 3-10365

In the Matter of

GLEN DONALD LANG
Respondent.

ORDER INSTITUTING PUBLIC
PROCEEDINGS PURSUANT TO
SECTION 8A OF THE SECURITIES ACT
OF 1933 AND SECTION 21C OF THE
SECURITIES EXCHANGE ACT OF 1934,
MAKING FINDINGS AND IMPOSING
CEASE-AND-DESIST ORDER

I.

The Securities and Exchange Commission ("Commission") deems it appropriate that public administrative proceedings be instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Glen Donald Lang ("Lang").

In anticipation of the institution of these proceedings, Lang has submitted an Offer of Settlement, which Offer the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, Lang, by his Offer of Settlement, admits the jurisdiction of the Commission over him and the subject matter of these administrative proceedings and consents to the entry of this Order Instituting Public Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings and Imposing Cease-and-Desist Order ("Order"), without admitting or denying the Commission's findings, except as for those contained in paragraph III.A. below, which are admitted.

II.

Accordingly, IT IS HEREBY ORDERED THAT proceedings pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act be, and hereby are, instituted.

III.

On the basis of this Order and the Offer of Settlement by Lang, the Commission makes the following findings1:

BACKGROUND

A. From January 1995 until August 1996, Lang was the president and chief executive officer of Imonics Corporation ("Imonics"), a computer software development and consulting company based in Cary, North Carolina. Imonics was a wholly-owned subsidiary of an Atlanta-based supplier of business management services to physicians and hospitals (the "Company"). The Company's securities were registered with the Commission pursuant to Section 12(g) of the Exchange Act.

LANG'S EFFECT ON THE COMPANY'S 1995
FINANCIAL RESULTS AS REPORTED TO THE COMMISSION

B. In late 1995, Imonics and a German company agreed to form a joint venture to market Imonics products and services to clients in Europe. The licensing agreement between the two companies was executed in December 1995, although the joint venture was not actually formed until the following year.

C. Upon the execution of the licensing agreement, the German company delivered a note for $3.5 million to Imonics for the use of software developed by Imonics. The Company, through Imonics, recognized this amount as revenue in the fourth quarter of 1995.

D. In January 1996, Lang sent a letter to the head of the German partner in the joint venture in which he stated that Imonics would not ask its German partner to actually pay the $3.5 million until the joint venture between the two companies had produced profits sufficient to cover this amount. Lang also stated that Imonics would waive any interest payments due on the $3.5 million. Lang did not send a copy of this letter to the Company's corporate headquarters.

E. Lang's letter materially varied the terms of the payment due to Imonics under the licensing agreement. The terms of the payment created a contingency for the fee payable that, under Generally Accepted Accounting Principles, precluded recognition of the license fee revenue until the contingency was removed. Therefore, the Company's recognition of $3.5 million of revenue from the Joint Venture in the fourth quarter of 1995 was improper.

F. On February 6, 1996, the Company issued an earnings release reporting that it had earned net income of $2.4 million and $0.4 million for the quarter and year ended December 31, 1995, respectively. On April 1, 1996, the Company filed its 1995 Form 10-K with the Commission, reporting these same amounts. On April 3, 1996, the Company filed a registration statement on Form S-4 with the Commission to register shares for an acquisition. This Form S-4 incorporated by reference the financial results provided in the Company's 1995 Form 10-K. On May 31, 1996, the Company filed another registration statement on Form S-4 with the Commission to register shares for an acquisition. This statement also incorporated by reference the results provided in the 1995 Form 10-K. On June 28, 1996, the Company filed a registration statement on Form S-8 with the Commission to register shares for an employee benefits plan. This statement also incorporated by reference the financial results reported in the Company's 1995 Form 10-K.

G. In September 1996, Company operating and financial personnel visiting Germany received a copy of Lang's letter and faxed it back to Atlanta for inspection by the Company's accountants and outside auditors. On October 22, 1996, the Company announced that, because of the discovery of the letter, it was restating its operating results as originally reported in its 1995 Form 10-K. It no longer recognized the $3.5 million as revenue and restated its results to report net losses for both the quarter and year ended December 31, 1995.

VIOLATIONS OF THE FEDERAL SECURITIES LAWS

H. Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder make it unlawful to employ, or cause to be employed, devices, schemes or artifices to defraud, to make any untrue statement of material fact or omit to state material facts in connection with the offer, purchase or sale of securities. Furthermore, the antifraud provisions make it unlawful to engage in any act, practice or course of business which operates or would operate as a fraud in connection with the offer, purchase or sale of securities.

I. Section 13(a) of the Exchange Act and Rule 13a-1 thereunder require issuers of registered securities to file with the Commission annual reports prepared in conformity with the requirements of the Commission's rules and regulations. Courts have held that it is implicit in this requirement that the information provided be accurate and contain no material misrepresentations or omissions. See, e.g., SEC v. Savoy Industries, Inc., 587 F.2d 1149, 1165 (D.C. Cir. 1978), cert. denied, 440 U.S. 913 (1979). In addition, Exchange Act Rule 12b-20 requires that these periodic reports contain all information necessary to ensure that the statements made in them are not materially misleading. No showing of scienter is necessary to establish a violation of Section 13(a). Savoy Industries, 587 F.2d at 1167. A violation occurs when a materially false statement is filed. SEC v. Kalvex, Inc., 425 F.Supp. 310, 316 (S.D.N.Y. 1975).

J. Section 13(b)(2)(A) of the Exchange Act requires issuers of securities to make and keep books, records and accounts which accurately and fairly reflect their transactions and the dispositions of their assets. Exchange Act Rule 13b2-1 prohibits any person from, directly or indirectly, falsifying or causing to be falsified any book, record or account subject to Section 13(b)(2)(A).

K. Lang directly violated Section 17(a) of the Securities Act and Section 10(b) the Exchange Act and Rule 10b-5 thereunder through his side letter to Imonics' German partner in the joint venture. This letter contained terms that materially varied the payment obligations and created a contingency that made improper the Company's recognition of the $3.5 million of revenue due from the German company in the fourth quarter of 1995. The Company reported its materially inflated net income to the investing public in an earnings release on February 6, 1996. The Company incorporated the financial results reported in its 1995 Form 10-K in three registration statements intended to offer securities filed with the Commission in May, April and June 1996. Lang also directly violated Rule 13b2-1 by causing the Company's books and records to falsely record the $3.5 million owed to Imonics as revenue for the fourth quarter and year ended December 31, 1995.

L. Additionally, Lang caused the Company to violate the federal securities laws. Lang's letter caused the Company to file an inaccurate 1995 Form 10-K in violation of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder. Lang also caused the Company's violation of Section 13(b)(2)(A) of the Exchange Act by causing the Company's books and records to inaccurately record its revenue transactions.

M. By the acts and omissions alleged in paragraphs III.A. through III.L., Lang committed violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder and caused the Company to violate Section 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder.

IV.

In view of the foregoing, the Commission deems it appropriate to accept Lang's Offer of Settlement.

ACCORDINGLY, IT IS HEREBY ORDERED, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act that Lang cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act and Sections 10(b), 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13b2-1 thereunder.

By the Commission.

Jonathan G. Katz

Secretary


Footnote

1 The findings herein are made pursuant to Lang's Offer of Settlement and are not binding on any other person or entity named in this or any other proceeding.

http://www.sec.gov/litigation/admin/33-7916.htm


Modified:11/17/2000