UNITED STATES OF AMERICA
|In the Matter of
JOSEPH M. MORRIS, CPA,
ORDER INSTITUTING PUBLIC
PROCEEDING, MAKING FINDINGS AND
ORDER PURSUANT TO RULE 102(e)
OF THE COMMISSION'S
RULES OF PRACTICE
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest to institute an administrative proceeding against Respondent Joseph M. Morris pursuant to paragraph (3) of Rule 102(e) of the Commission's Rules of Practice [17 C.F.R. § 201.102(e)].1
In anticipation of the institution of this proceeding, Morris has submitted an Offer of Settlement ("Offer"), which the Commission has determined 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 without admitting or denying the Commission's findings contained herein, except that he admits the jurisdiction of the Commission over him and over the matters set forth in this Order and admits the Commission's finding that a Final Judgment of Permanent Injunction has been entered against him as set forth in Section II, Morris consents to the entry of findings and the imposition of the remedial sanctions set forth below.
The Commission finds the following: 2
A. At all relevant times, Morris, a certified public accountant, was the Chief Financial Officer of Itex Corporation.
B. Itex Corporation is a Portland, Oregon based barter exchange business whose stock was listed on the NASDAQ Small Cap market until its delisting in December 1998.
C. On September 27, 1999, the Commission filed a complaint against Morris and others in the United States District Court for the District of Oregon. SEC v. Itex Corporation, Terry L. Neal, Michael T. Baer, Graham H. Norris, Cynthia Pfaltzgraff and Joseph M. Morris, CIV. NO. 99-1361-BR (D.Ore.). The Commission's complaint alleged, among other things, that: (1) from at least January 1996 through February 1998, Morris, as CFO of Itex, knowingly or recklessly participated in material overstatement of Itex's assets, revenues and earnings in its financial statements, and failed to disclose numerous suspect and in many cases sham barter deals between Itex and various related party transactions; (2) Morris sold Itex stock at times when he knew or was reckless in not knowing that the publicly disclosed information about Itex was materially false and misleading; (3) Morris knowingly circumvented and failed to implement internal accounting controls; and (4) Morris made and caused others to make materially false and misleading statements and omissions to Itex's auditors in connection with audits for fiscal years ended July 31, 1996 and 1997.
D. On January 24, 2000 a final judgment was entered by the United States District Court for the District of Oregon that: (i) permanently enjoins Morris from violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, (ii) orders Morris to disgorge unjust enrichment of $45,380 and prejudgment interest thereon, provided, however, that payment of all of that disgorgement and all of the prejudgment interest is waived; and (iii) pursuant to Section 20(e) of the Securities Act, Section 21(d)(2) of the Exchange Act and the Court's equitable jurisdiction, prohibits Morris for a period of five years from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act. Morris consented to entry of the judgment without admitting or denying the allegations of the Commission's complaint.
E. On July 30, 1998 , the Commission filed a complaint against Morris and others in the United States District Court for the District of Colorado. SEC v. Ronald J. Hottovy, Jimmy Duckworth, Joseph M. Morris and Eugene A. Breitenbach, Civil Action No. 98-S-1636 (D. Col.). The Commission's complaint alleged, among other things, that during 1993 through 1995, Morris, in his position as corporate controller of Scientific Software-Intercomp, Inc. ("SSI"), knowingly or recklessly participated in the material overstatement of SSI's revenue and earnings. On January 21, 2000, the Court , by consent of the parties, dismissed with prejudice the matter as to Morris in light of the injunction entered against Morris in SEC v. Itex Corporation et al.
Based on the foregoing, the Commission deems it appropriate and in the public interest to accept Morris's Offer of Settlement and accordingly,
IT IS HEREBY ORDERED, effective immediately, that Morris is denied the privilege of appearing or practicing before the Commission as an accountant.
IT IS FURTHER ORDERED, that five years from the date of this Order, Morris may apply to the Commission by submitting an application to the Office of the Chief Accountant which requests that he be permitted to resume appearing or practicing before the Commission as:
a. a preparer or reviewer, or a person responsible for the preparation or review, of financial statements of a public company to be filed with the Commission upon submission of an application satisfactory to the Commission in which Morris undertakes that, in his practice before the Commission, his work will be reviewed by the independent audit committee of the company for which he works or in some other manner acceptable to the Commission;
b. an independent accountant upon submission of an application containing a showing satisfactory to the Commission that:
(i) Morris, or any firm with which he is or becomes associated in any capacity, is and will remain a member of the SEC Practice Section of the American Institute of Certified Public Accountants Division for CPA Firms ("SEC Practice Section") as long as he appears or practices before the Commission as an independent accountant;
(ii) Morris or the firm has received an unqualified report relating to his or the firm's most recent peer review conducted in accordance with the guidelines adopted by the SEC Practice Section; and
(iii) Morris will comply with all applicable SEC Practice Section requirements, including all requirements for periodic peer reviews, concurring partner reviews, and continuing professional education, as long as he appears or practices before the Commission as an independent accountant; and
IT IS FURTHER ORDERED, that the Commission's review of any request or application by Morris to resume appearing or practicing before the Commission may include consideration of, in addition to the matters referenced above, any other matters relating to his character, integrity, professional conduct or qualifications to appear or practice before the Commission.
By the Commission.
Jonathan G. Katz
1 Rule 102(e) provides, in pertinent part:
(3)(i) 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:
(A) Permanently enjoined by any court of competent jurisdiction by reason of his misconduct in an action brought by the Commission, from violation or aiding and abetting the violation of any provision of the Federal securities laws (15 U.S.C. §§ 77a--80b-20) or of the rules and regulations thereunder . . . .
(iv) . . . A person who has consented to the entry of a permanent injunction . . . without admitting the facts set forth in the complaint shall be presumed for all purposes under this paragraph (3) to have been enjoined by reason of the misconduct alleged in the complaint.
2 The findings herein are made pursuant to the Respondent's Offer and are not binding on any other person or entity in this or any other proceeding.
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