UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 42813 / May 23, 2000
ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1259
File No. 3-10208
In the Matter of : ORDER INSTITUTING PUBLIC
: PROCEEDINGS PURSUANT TO
Intile Designs, Inc. : SECTION 21C OF THE SECURITIES
: EXCHANGE ACT OF 1934, MAKING
Respondent. : FINDINGS AND IMPOSING A CEASE -
: AND-DESIST ORDER
The Securities and Exchange Commission ("Commission") deems it appropriate that public cease-and-desist proceedings against Intile Designs, Inc. ("Intile" or "Respondent") be initiated pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act").
In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement ("Offer"), that the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings contained herein, except that Respondent admits the Commission's jurisdiction over it and over the subject matter of these proceedings, Respondent has consented to the entry of this Order Instituting Public Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings and Imposing a Cease-and-Desist Order ("Order") and to the entry of the cease-and-desist order set forth below.
On the basis of this Order and the Offer submitted by Respondent, the Commission finds that:
A. Intile Designs, Inc., a Delaware corporation with its principal office in Houston, Texas, made a registered offering and began filing periodic reports with the Commission pursuant to Section 15(d) of the Exchange Act in 1993.
B. Intile was in the business of importing and distributing brick, stone and ceramic building products from 1993 through at least 1997. The company conducted business in several Texas cities and one location in Georgia, and employed as many as 100 individuals.
C. During much of this period, however, Intile experienced a serious cash flow problem. Consequently, in order to decrease its expenses, Intile underreported the value of its inventory by 85 - 90% in tax reports or renditions filed with the property taxing authorities in the various locales in which it conducted business. In reliance on these false inventory valuations, the local taxing authorities annually under-assessed the amount of property taxes Intile owed.
D. Because of its failure to accrue the full amount of property taxes it owed, Intile failed to comply with Generally Accepted Accounting Principles in preparing its annual and quarterly reports. Intile's "accrued expenses and other liabilities" in its balance sheet were understated by as much as 55% in its annual reports filed with the Commission on Form 10-K for fiscal years 1994 through 1996, and in its quarterly reports filed with the Commission on Form 10-Q during fiscal years 1994 through 1997. Also, as a result of its underaccrual of taxes, Intile overstated its income before income taxes in its income statement by as much as 46% in its annual reports filed with the Commission on Form 10-K for fiscal years 1994 through 1996 and failed to make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflected the transactions and dispositions of its assets.
E. As a result of the foregoing, Intile committed and caused violations of Sections 10(b), 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder.
In view of the foregoing the Commission deems it appropriate and in the public interest to impose the sanctions agreed to in the Offer.
Accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the Exchange Act,
that Respondent, Intile, cease and desist from committing or causing any violation and any future violation of Sections 10(b), 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder.
By the Commission
Jonathan G. Katz