James T. Rush

SECURITIES EXCHANGE ACT OF 1934
Release No. 44501 / July 2, 2001

ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1418 / July 2, 2001

ADMINISTRATIVE PROCEEDING
File No. 3-10529

I.

The Securities and Exchange Commission ("Commission") deems it appropriate to institute public administrative proceedings pursuant to Rule 102(e)¹ of the Commission's Rules of Practice against James T. Rush ("Respondent" or "Rush").

II.

In anticipation of the institution of these administrative proceedings, Respondent has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings, and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings set forth below, except that he admits the Commission's finding that a Final Judgment of Permanent Injunction and Other Relief has been entered against him as set forth in Paragraph III.C below and admits the Commission's jurisdiction over him and over the subject matter of these proceedings, Respondent consents to the entry of this Order Instituting Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions ("Order").

III.

FINDINGS

The Commission makes the following findings:²

A. Rush, 52, now of Sioux Falls, South Dakota, became the Chief Financial Officer of Paracelsus Healthcare Corporation ("Paracelsus") in 1985, a position he held until August 1996. Rush was licensed as a Certified Public Accountant with the State of California in 1973. Rush's CPA license was cancelled on February 1, 2000, because he was delinquent in paying his licensing fees. However, Rush can reinstate his license by reapplying and meeting all continuing education requirements.

B. Paracelsus is a California corporation which registered a bond offering and began filing periodic reports with the Commission pursuant to Section 15(d) of the Securities Exchange Act of 1934 ("Exchange Act") in 1993. In August 1996, Paracelsus registered offerings of common stock and notes and an exchange offer for the outstanding common stock of Champion Healthcare Corporation ("Champion"). Paracelsus raised $365 million in the offerings, merged with Champion, and became a publicly held, Section 12(b) reporting company, listed on the New York Stock Exchange.

C. On June 18, 2001, the Commission filed a complaint against Rush and others in the United States District Court for the Southern District of Texas, Houston Division, SEC v. Ron Messenger, et al, CIV. NO. H-01-2022 (S.D. TX, Houston Div.). Solely for the purpose of settling these proceedings, Rush consented to the entry of a Final Judgment of Permanent Injunction and Other Relief ("Final Judgment") against him, without admitting or denying the allegations of the complaint, except as to subject matter jurisdiction, which he admitted. On June 20, 2001, the United States District Court for the Southern District of Texas, Houston Division, entered the Final Judgment, which (1) permanently enjoins Rush from (i) violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13; and (ii) orders Rush to pay a civil penalty of $50,000.

D. The Commission's complaint alleges that while Rush was Paracelsus' Chief Financial Officer, he participated in misconduct by which Paracelsus inflated its quarterly and annual earnings in filings with the Commission from at least 1993 through August 1996. Specifically, the complaint alleges that Rush and others created and used "cookie jar" reserves which were inappropriate under Generally Accepted Accounting Principles, because no probable and reasonably estimable exposures justified their creation, and because their later decrease artificially boosted Paracelsus' earnings and concealed a decline in earnings. Rush and others also concealed Paracelsus' failure to properly write off certain uncollectible psychiatric receivables, which also artificially boosted Paracelsus' earnings and concealed a decline in earnings. Additionally, the complaint alleges that Rush and others failed to disclose all material facts regarding the misconduct to Paracelsus' auditors.

IV.

In view of the foregoing, the Commission deems it appropriate to accept Rush's Offer and to impose the sanctions agreed to therein.

Accordingly, IT IS HEREBY ORDERED, effective immediately, that:

A. Rush is denied the privilege of appearing or practicing before the Commission as an accountant.

B. After three years from the date of this Order, Rush may request that the Commission consider his reinstatement by submitting an application (attention: Office of the Chief Accountant) to resume appearing or practicing before the Commission as:

1. a preparer or reviewer, or a person responsible for the preparation or review, of any public company's financial statements that are filed with the Commission. Such an application must satisfy the Commission that Rush's work in his practice before the Commission will be reviewed either by the independent audit committee of the public company for which he works or in some other acceptable manner, as long as he practices before the Commission in this capacity; and/or

2. an independent accountant. Such an application must satisfy the Commission that: (a) Rush, or the firm with which he is associated, is a member of the SEC Practice Section of the American Institute of Certified Public Accountants Division for CPA Firms ("SEC Practice Section"); (b) Rush, 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 (c) as long as Rush appears or practices before the Commission as an independent accountant he will remain either a member of the SEC Practice Section or associated with a member firm of the SEC Practice Section, and will comply with all applicable SEC Practice Section requirements, including all requirements for periodic peer reviews, concurring partner reviews, and continuing professional education.

C. The Commission's review of an application by Rush to resume appearing or practicing before the Commission may include consideration of, in addition to the matters referenced above, any other matters relating to Rush's character, integrity, professional conduct, or qualifications to appear or practice before the Commission.

By the Commission.

Jonathan G. Katz
Secretary

Footnotes