UNITED STATES OF AMERICA
|In the Matter of
CRAIG CONSUMER ELECTRONICS,
ORDER MAKING FINDINGS AND IMPOSING SANCTION BY DEFAULT
The Securities and Exchange Commission (Commission) initiated this proceeding on September 27, 2000, by an Order Instituting Proceeding (OIP), issued pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Exchange Act). The OIP sets out allegations by the Division of Enforcement (Division) charging Respondent Craig Consumer Electronics, Inc. (Craig) with violating Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 12b-20 thereunder. The OIP was served on Craig's registered agent on October 4, 2000. (Div. Ex. 1.)1 Craig has not answered the OIP.
The Division filed a "Status Report" on October 13, 2000, which included the Declaration of Roger D. Boudreau, a staff accountant at the Commission's Pacific Regional Office. Mr. Boudreau conducted an investigation and concluded that Craig "no longer exists as an active corporation." The Division requested that I postpone the hearing because it believed that no representative of Craig would appear. Craig's registered agent was served with a copy of the Status Report on October 20, 2000.2 (Div. Ex. 2.)
On October 17, 2000, I issued an Order Scheduling Prehearing (Prehearing Order) for November 6, 2000, at 12:30 p.m. The Commission's records indicate that the Office of the Secretary received confirmation that a representative of Craig received a copy of the Prehearing Order on October 31, 2000. Craig was not represented at the telephonic prehearing conference on November 6, 2000. (Tr. 2-3.)
On November 17, 2000, the Division filed a Motion for Default and Supporting Brief of Points and Authorities (Motion for Default) pursuant to Commission Rule 155(a). 17 C.F.R. § 201.155(a). The service list shows that a copy was sent to Craig's registered representative. No response was received from Craig.
Craig is in default because it failed to answer the OIP, it did not appear at the prehearing conference, and it did not respond to a dispositive motion, the Motion for Default, within the time provided. See Commission Rules 155(a)(2) and 220(f), 17 C.F.R. §§ 201.155(a), .220(f). Accordingly, I find that:3
1. Craig is a Delaware corporation whose common stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act.
2. Craig failed to file annual reports on Form 10-K and quarterly reports on Form 10-Q since the fiscal quarter that ended March 31, 1997, in violation of Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder.
3. Craig materially misrepresented its precarious financial position and severe liquidity problems through its annual reports on Form 10-K and second and third quarter reports on Form 10-Q for the fiscal year that ended December 31, 1996, and its first quarter report for the fiscal year that ended December 31, 1997, in violation of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 12b-20 thereunder.
4. Craig failed to conform to Generally Accepted Accounting Principles by improperly recognizing and reporting sales of defective merchandise thus materially overstating revenues and understating its pre-tax loss through its first quarter report (Form 10-Q) for the fiscal year that ended December 31, 1997, in violation of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 12b-20 thereunder.
5. Craig filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code on August 1, 1997. (Div. Ex. 3 at 82, Div. Ex. 4.) Craig's reorganization efforts were unsuccessful, and the company's assets were liquidated in a process that was completed in January 1998. (Div. Ex. 3 at 82-83.) The U.S. Bankruptcy Court for the Central District of California closed the bankruptcy proceeding on August 8, 1998. (Div. Ex. 4.)
Based on these violations of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 12b-20, I find it necessary for the protection of investors to revoke the registration of Craig pursuant to Section 12(j) of the Exchange Act.
It is ORDERED that the registration pursuant to Section 12(g) of the Exchange Act of the common stock of Craig Consumer Electronics, Inc. is revoked.
Brenda P. Murray
Chief Administrative Law Judge
1 (Tr. __) refers to the transcript of the prehearing conference. I will refer to the Exhibits attached to the Division's Motion for Default and Supporting Brief of Points and Authorities as (Div. Ex. __).
2 The date on the exhibit is unreadable. I accept declarant's representation. Declaration of E. David Hwa In Support of Motion for Default.
3 The findings in this order are made pursuant to Craig's default and are not binding on any other person in any other proceeding.
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