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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. 8191 / February 13, 2003

ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1716 / February 13, 2003

ADMINISTRATIVE PROCEEDING
File No. 3-10858


In the Matter of

Glen Morinaka, CPA,

Respondent.


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ORDER MAKING FINDINGS AND IMPOSING A CEASE-AND-DESIST ORDER PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF 1933 AND IMPOSING SANCTIONS PURSUANT TO RULE 102(e) OF THE COMMISSION'S RULES OF PRACTICE AS TO GLEN MORINAKA, CPA

I.

In these proceedings instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act"), and Rule 102(e)(1)(iii) of the Rules of Practice of the Securities and Exchange Commission ("Commission"),1 Respondent Glen Morinaka, CPA ("Morinaka") has submitted an offer of settlement that the Commission has determined to accept.2

II.

Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over him and the subject matter of these proceedings, Respondent consents to the entry of this Order Making Findings and Imposing a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 and Imposing Sanctions Pursuant to Rule 102(e) of the Commission's Rules of Practice ("Order"), as set forth below.

III.

On the basis of this Order and Respondent's Offer, the Commission finds3 that:

Respondent

A. Morinaka, age 47, of Monterey Park, California, is licensed as a Certified Public Accountant in the State of California. He is the Chief Financial Officer and the Chairman of the Board of Directors of Gas & Oil. He is currently a sole practitioner of accounting in Los Angeles and is a member of both the American Institute of Certified Public Accountants and the California Society of CPAs.

Other Relevant Person and Entity

B. Gas and Oil Technologies, Inc. ("Gas & Oil") is a Delaware corporation headquartered in Woodland Hills, California. It has no public market for its securities but has applied to have its common stock quoted on NASDAQ under the symbol "GAOL." On October 15, 2001, Gas & Oil filed a registration statement on Form S-1, seeking to raise up to $60 million from the sale of its common stock in an initial public offering.

C. Ingrid Aliet-Gass ("Gass"), age 50, of Monrovia, California, is the Chief Executive Officer and a director of Gas & Oil. Gass organized Gas & Oil and holds a controlling interest in its stock. At all times relevant to this matter she has personally carried out and/or supervised all aspects of the business of Gas & Oil.

Facts

D. The registration statement filed by Gas & Oil on October 15, 2001 included financial statements for the year ended December 31, 2000, and for periods ended June 30, 2001, and September 30, 2001. Morinaka prepared these financial statements on behalf of Gas & Oil.

E. In the financial statements for the periods ended June 30 and September 30, 2001, Gas & Oil valued certain technology patents the company had acquired from a Russian scientist based solely on the stated value of $21.75 million in the "Certified Certificate of Valuation" on Patent No. 1776 issued by the Ministry of Justice of the Russian Federation. This accounting was contrary to generally accepted accounting principles ("GAAP"). GAAP requires that patents be recorded consistent with Accounting Principles Board Opinion No. 17, which states that intangibles should be recorded at cost at date of acquisition. If these costs are not determinable, GAAP requires that the patents be recorded at their fair value.

F. Nevertheless, in its financial statements for the periods ended June 30 and September 30, 2001, Gas & Oil recorded the value of these patents at $21.75 million without any reasonable basis for doing so. It also recorded both an asset and income from the purchase of patents in the amount of $21.75 million which represented 100% of both its assets and income, without receiving any persuasive evidence of either the fair value of the patents or their cost at date of acquisition.

G. Because of the method utilized by Gas & Oil for the recording of the acquisition of patents, the financial statements included in the Form S-1 were not prepared in accordance with GAAP. In fact, they materially overstated Gas & Oil's assets, equity and income.

H. The registration statement also omitted certain material information about the patents; for example, it omitted to state that the patents had not been filed or registered in any country other than Russia.

I. The registration statement also contained affirmative material misrepresentations. It refers to Gas & Oil's factories and its sales of product, but Gas & Oil has had no factories and has never made a sale. Further, it stated Gas & Oil had used net cash of $8.4 million in operating activities for the nine months ended September 30, 2001, and had used net cash of $21.7 million in investing activities for the same period, when, in fact, the company had virtually no cash.

J. Gass and Morinaka assisted in the preparation and drafting of the disclosures in the registration statement. They were intimately familiar with the company's business and knew very well that it had no factories, no sales of product, no cash and no operations. Gass and Morinaka knew that the patents had not been filed or registered in any country other than Russia.

K. As a result of the conduct described above, Morinaka willfully violated Section 17(a) of the Securities Act.

IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondent Morinaka's Offer.

Accordingly, IT IS HEREBY ORDERED, effective immediately, that:

A. Morinaka shall cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act.

B. Morinaka is denied the privilege of appearing or practicing before the Commission as an accountant.

For the Commission, by its Secretary, pursuant to delegated authority.

Jonathan G. Katz
Secretary

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1 Rule 102(e)(1)(iii) provides, in relevant part, that:
The Commission may deny, temporarily or permanently, the privilege of appearing or practicing before it any person who is found...to have willfully violated, or willfully aided and abetted the violation of any provision of the Federal securities laws or the rules and regulations thereunder.
2 An Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice and Notice of Hearing was issued by the Commission on August 2, 2002.
3 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.


http://www.sec.gov/litigation/admin/33-8191.htm


Modified: 02/13/2003