UNITED STATES OF AMERICA
|In the Matter of
|ORDER INSTITUTING PUBLIC
PURSUANT TO RULE 102(e)
OF THE COMMISSION'S RULES
OF PRACTICE, MAKING FINDINGS
AND IMPOSING REMEDIAL SANCTION
The Securities and Exchange Commission ("Commission") deems it appropriate that a public administrative proceeding be instituted against Edward Cheramy ("Cheramy") pursuant to Rule 102(e)/ of the Commission's Rules of Practice.
Accordingly, IT IS HEREBY ORDERED that said proceeding be, and hereby is, instituted.
In anticipation of the institution of this public administrative proceeding, Cheramy has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of this proceeding 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 in this Order, except that Cheramy admits the jurisdiction of the Commission over him and over the subject matter of this proceeding and the entry of a Final Judgment of Permanent Injunction and Other Relief against him as set forth in paragraph III.E., Cheramy consents to the entry of this Order Instituting Public Administrative Proceeding Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings and Imposing Remedial Sanction ("Order") as set forth below.
On the basis of this Order and the Offer, the Commission finds that:
A. Cheramy, age 56, was the President of IDB Communications Group, Inc., a member of its Board of Directors and a member of the Board's audit committee during the relevant period. Cheramy ceased to be employed by IDB Communications Group, Inc. as of December 30, 1994. Cheramy is now retired and resides in Jackson Hole, Wyoming. Previously, Cheramy was licensed as a certified public accountant by the State of California from 1974 to 1989.
B. IDB Communications Group, Inc. ("IDB") is a telecommunications company that during the relevant period was based in the Los Angeles, California area. Until IDB was acquired in 1995, its common stock was registered with the Commission under Section 12(g) of the Securities Exchange Act of 1934 ("Exchange Act") and traded on the over-the-counter market through NASDAQ.
C. On September 30, 1997, the Commission filed a Complaint in the United States District Court for the Central District of California alleging that three IDB officers, including Cheramy, had engaged in a scheme to fraudulently inflate IDB's 1994 first quarter earnings from $9 million to $15 million. Securities and Exchange Commission v. Jeffrey P. Sudikoff, Edward Cheramy and Rudy Wann, Civil Action No. 97-7207 DDP (RCx) (C.D. Cal.). The Complaint further alleged that Cheramy, among other things, made false statements to securities analysts and IDB's auditors, made false adjusting entries on IDB's books in circumvention of IDB's internal controls in order to inflate IDB's earnings, and publicly disseminated IDB's inflated earnings through an IDB press release and IDB Form 10-Q and Form 8-K filings with the Commission.
D. On May 28, 1999, Cheramy pled guilty to one count of securities fraud in violation of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], in the related criminal action, United States of America v. Jeffrey Sudikoff and Edward Cheramy, CR 97-1176 DDP (C.D. Cal.). Pursuant to his guilty plea, on December 16, 1999, Cheramy was sentenced to pay a $250,000 fine, and to three years probation and 500 hours of community service.
E. On August 21, 2000, the United States District Court for the Central District of California entered a Final Judgment Of Permanent Injunction And Other Relief Against Defendant Edward Cheramy ("Judgment"), which: (1) permanently enjoins Cheramy from future violations of Sections 10(b), 13(a), 13(b)(5) and 16(a) of the Exchange Act and Rules 10b-5, 12b-20, 13a-11, 13a-13, 13b2-1, 13b2-2 and 16a-3 thereunder; (2) orders Cheramy to pay a $100,000 civil penalty to the U.S. Treasury under Section 21(d)(3) of the Exchange Act; and (3) bars Cheramy for a period of ten years, pursuant to Section 21(d)(2) of the Exchange Act, from serving as an officer or director of a reporting company. Cheramy consented to the entry of the Judgment without admitting or denying any of the allegations of the First through Fifth Claims or the Seventh Claim for Relief in the Complaint.
Based on the foregoing, the Commission deems it appropriate to accept the Offer submitted by Cheramy and to impose the remedial sanction specified in the Offer.
Therefore, IT IS HEREBY ORDERED, effective immediately, that Cheramy is denied the privilege of appearing or practicing before the Commission as an accountant.
By the Commission.
Jonathan G. Katz
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