==========================================START OF PAGE 1====== UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7374 / December 16, 1996 SECURITIES EXCHANGE ACT OF 1934 Release No. 38050 / December 16, 1996 ACCOUNTING AND AUDITING ENFORCEMENT Release No. 864 / December 16, 1996 ADMINISTRATIVE PROCEEDING File No. 3-9202 ______________________________ : In the Matter of : : ORDER INSTITUTING PROCEEDINGS ERNEST W. GRENDI, CPA, : AND OPINION AND ORDER PURSUANT : TO RULE 102(e) OF THE : COMMISSION'S RULES OF PRACTICE : Respondent. : ______________________________: I. The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and they hereby are, instituted pursuant to Rule 102(e)(1)(ii) and (iii) of the Commission's Rules of Practice against Ernest W. Grendi, CPA ("Grendi").-[1]- ---------FOOTNOTES---------- -[1]- Paragraphs (1)(ii) and (1)(iii) of Rule 102(e) provide, in relevant part, that: (1) The Commission may censure a person or deny, temporarily or permanently, the privilege of appearing or practicing before it in any way to any person who is found by the Commission after notice and opportunity for hearing in the matter . . . (ii) to be lacking in character or integrity or to have engaged in . . . improper professional conduct, or (iii) to have willfully violated . . . any provision of the Federal securities laws (15 U.S.C.  77a to 80b-20), or the rules and regulations thereunder. ==========================================START OF PAGE 2====== II. In anticipation of the institution of this proceeding, Grendi has submitted an Offer of Settlement ("Offer"), which the Commission has determined is in the public interest to accept. Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, and prior to a hearing pursuant to the Commission's Rules of Practice, Grendi consents, without admitting or denying the findings herein, except that he admits to the finding in Section III.D. below and admits the jurisdiction of the Commission over him and over the subject matter of this proceeding, to the issuance of this Order Instituting Proceedings And Opinion And Order Pursuant To Rule 102(e) Of The Commission's Rules Of Practice ("Order") and to the entry of the findings and imposition of the remedial sanctions as set forth below. III. FINDINGS On the basis of this Order and the Offer submitted by Grendi, the Commission finds that: A. Grendi is a certified public accountant and has been licensed to practice by the State of New York since 1974. From at least January 1991 until his termination in August 1992, Grendi held the title of Executive Vice President and Chief Financial Officer of JWP, Inc. ("JWP"), currently known as EMCOR Group, Inc. ("EMCOR"). From at least January 1991 until his resignation in October 1992, Grendi was also a member of the JWP Board of Directors. B. JWP was a Delaware corporation with principal executive offices located in Rye Brook, New York, and was a world-wide technical services company specializing in facility and information systems. During the period January 1991 through August 1992 ("Relevant Period"), JWP's common stock was registered with the Commission pursuant to Section 12(b) of the Securities Exchange Act of 1934 ("Exchange Act"). On December 21, 1993, certain JWP subordinated debtholders filed an involuntary petition under Chapter 11 of the U.S. Bankruptcy Code ("Bankruptcy Code") against JWP. On February 14, 1994, JWP converted the involuntary petition to a voluntary proceeding under Chapter 11 of the Bankruptcy Code. On December 15, 1994, JWP emerged from bankruptcy and since then has been conducting business as a private company under the name EMCOR. ==========================================START OF PAGE 3====== C. On September 21, 1995, the Commission filed a Complaint against EMCOR, Grendi, and certain other former officers (SEC v. Ernest W. Grendi, et al., 95 Civ. 8085 (DAB)). The Commission's Complaint alleges, among other things, that during the Relevant Period, Grendi knowingly or recklessly participated in a fraudulent accounting scheme, whereby he caused, directly or indirectly, the recording of fictitious, and other improper, accounting entries, the failure to record expenses properly, the overstatement of assets on the books and records of JWP and its subsidiaries, and false and misleading information to be provided to JWP's independent auditors. As a result, for its year ended December 31, 1991, JWP reported net income of $60.3 million, which was materially overstated by approximately $31.4 million; for its quarter ended March 31, 1992, JWP reported net income of $1.4 million, which was materially overstated by approximately $14.6 million; and, for its quarter ended June 30, 1992, JWP disclosed net income of $393,000, which was materially overstated by approximately $54 million. Grendi also caused JWP to report materially misstated financial results in a registration statement and Schedule 14D-1 filed with the Commission during the Relevant Period. As a result of the fraudulent accounting scheme, Grendi was unjustly enriched when he sold shares of JWP common stock that were overvalued and thereby avoided losses; when he donated shares of JWP common stock and received inflated tax benefits; and when he received a bonus from JWP which was based on the materially overstated financial results. D. On August 21, 1996, the United States District Court for the Southern District of New York entered, on Grendi's consent, a Final Judgment of Permanent Injunction and Other Equitable Relief As to Defendant Ernest W. Grendi against Grendi, whereby he is, among other things, permanently enjoined from violating Section 17(a) of the Securities Act of 1933 ("Securities Act"), and Sections 10(b), 13(a) and 14(e) of the Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5, 13a-1, 13a-13, 13b2-1 and 13b2-2. E. By reason of the conduct set forth in the Order and in the Commission's Complaint, the Commission finds that Grendi willfully violated Section 17(a) of the Securities Act, and Sections 10(b) and 14(e) of the Exchange Act, and Rules 10b-5, 13b2-1 and 13b2-2, and willfully aided and abetted violations of Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13, and engaged in improper professional conduct within the meaning of Rule 102(e) of the Commission's Rules of ==========================================START OF PAGE 4====== Practice. ==========================================START OF PAGE 5====== IV. ORDER IMPOSING SANCTIONS Based on the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Grendi and accordingly, IT IS HEREBY ORDERED, effective immediately, that Grendi be, and hereby is, permanently denied the privilege of appearing or practicing before the Commission as an accountant. By the Commission. Jonathan G. Katz Secretary