UNITED STATES OF AMERICA
In the Matter of
|Order Granting Application for Reinstatement To Practice as an Accountant Responsible for the Preparation or Review of Financial Statements Required To Be Filed With the Commission|
On May 2, 1996, John Picardi ("Picardi") was suspended by the Commission from practicing as an accountant before the Commission as a result of an agreement reached with Picardi in settlement of public administrative proceedings instituted by the Commission against Picardi pursuant to Section 8A of the Securities Act, Section 21C of the Exchange Act and Rule 102(e) of the Commission's Rules of Practice.1 This order is issued in response to his application for reinstatement to practice before the Commission as an accountant responsible for the preparation or review of financial statements required to be filed with the Commission.
During both 1991 and 1992, Sulcus Computer Corporation ("Sulcus") filed with the Commission periodic reports which contained financial statements that were materially false and misleading and not presented in conformity with generally accepted accounting principles, and that failed to disclose that certain increases in revenue and decreases in expenses were non-recurring and not representative of Sulcus' ongoing operations. The misstatements resulted from improper accounting employed in connection with a series of acquisitions Sulcus completed in 1991 and 1992. On May 17, 1994, Sulcus restated its financial statements for 1991 and 1992, which resulted in a decrease in net income to $1,692,338 from $1,937,090 for 1991, and a decrease in net income to $3,221,786 from $5,180,292 for 1992.
Picardi was at all relevant times the chief financial officer of Sulcus Hospitality Group ("SHG"), the largest component of Sulcus' operations, and was responsible for all accounting performed at the SHG level, including the purchase accounting utilized in connection with numerous acquisitions. Picardi was also primarily responsible for the accounting functions of SHG's foreign hospitality operations, and participated in the drafting of Sulcus' MD&A.
The suspension order states that Picardi was negligent in his accounting for several business acquisitions in 1991 and 1992, which resulted in, among other things, the recording of unwarranted purchase contingencies, the improper capitalization of operating expenses, the inappropriate recording of post-acquisition revenue of an acquired business, and the failure to properly record liabilities associated with a firm purchase commitment. As the chief financial officer of SHG, Picardi had the authority and responsibility to direct the financial management and policies of SHG, and he was aware of the impact that his accounting decisions had on the financial statements of Sulcus. Picardi caused violations of the reporting, books and records, and internal accounting controls provisions of the federal securities laws.
Picardi's resumption of practice before the Commission as a preparer or reviewer of financial statements required to be filed with the Commission or a person responsible for the preparation or review of financial statements required to be filed with the Commission is predicated on his showing that his work will be reviewed by the independent audit committee of any company with which he is or becomes associated, or in some other manner acceptable to the staff of the Commission. Mr. Picardi has indicated that the senior management of the company by which he is currently employed believes that it is in the company's best interests to have him available from time to time to respond to requests that he participate in the preparation or review of the company's financial statements required to be filed with the Commission. In connection therewith, the company's board of directors has passed a resolution of the audit committee designating the company's chief financial officer and controller, both of whom are certified public accountants, with the responsibility of reviewing Mr. Picardi's participation in the preparation or review of financial statements of the company or any group of the company. Furthermore, Mr. Picardi has provided to the staff an affidavit representing that if he is reinstated to practice before the Commission as a preparer or reviewer, or a person responsible for the preparation or review of financial statements required to be filed with the Commission, he will undertake to have such financial statements reviewed by the independent audit committee of any company with which he is or becomes associated, or in some other manner acceptable to the staff of the Commission.
On the basis of information supplied by Picardi, it appearing that Picardi has complied with the terms of his suspension from practice before the Commission as an accountant responsible for the preparation or review of financial statements required to be filed with the Commission,2 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 Picardi pursuant to Rule 102(e) of the Commission's Rules of Practice, and that Mr. Picardi's offer to condition his reinstatement is fair and in the public interest, it is accordingly,
ORDERED pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice that John Picardi is 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.
Jonathan G. Katz
-- See Accounting and Auditing Enforcement Release No. 778, dated May 2, 1996. Mr. Picardi was allowed, pursuant to the order, to apply for reinstatement after thirty months upon making certain showings.
--Should Picardi wish to resume practice before the Commission as an independent accountant, he must submit another application to the Commission demonstrating his compliance with the conditions stated in the suspension order.
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