UNITED STATES OF AMERICA
In the Matter of
NELSON BARBER, CPA
|ORDER INSTITUTING PUBLIC ADMINSTRATIVE PROCEEDINGS PURSUANT TO RULE 102(e) OF THE COMMISSION'S RULES OF PRACTICE AND FINDINGS AND ORDER OF THE COMMISSION|
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that administrative proceedings be, and hereby are, instituted against Nelson Barber ("Respondent") pursuant to Rule 102(e)(3) of the Commission's Rules of Practice.1
In anticipation of the institution of these public administrative proceedings, Barber has submitted an Offer of Settlement, which the Commission has determined to accept. Solely for the purposes 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, except that he admits to the Commission's finding that a Final Judgment of Permanent Injunction ("Final Judgment") has been entered against him, and admits the jurisdiction of the Commission over him and over the subject matter of this proceeding, Barber consents to the entry of this Order Instituting Public Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice and Findings and Order of the Commission ("Order").
On the basis of this Order and Barber's Offer of Settlement, the Commission makes the following findings:2
Nelson Barber is a certified public accountant licensed in Connecticut. After several years as Fine Host's Treasurer, Barber served as Senior Vice President and CFO from 1995 to April 1997. He continued to work for the Company in the capacity of treasurer until December 1997, when he was terminated by the board of directors because of his role in the Company's financial fraud.
Fine Host Corporation is a Connecticut-based company that, at all times relevant to this Order, provided food and beverage concession, catering and other services to approximately 400 facilities in 38 states. Fine Host conducted an initial public offering in June 1996, and a secondary offering in February 1997. Its stock was registered with the Commission under Section 12(g) of the Securities Exchange Act of 1934 ("Exchange Act") and listed for trading on the NASAQ National Market System. Based on an internal investigation, Fine Host issued a restatement of its financial statements in February 1998, reflecting that from 1992 through the third quarter of fiscal year 1997, Fine Host had overstated its pretax income by over $49 million. For fiscal years 1994, 1995 and 1996, Fine Host had overstated pretax income by 149%, 213%, and 197%. For the first, second, and third quarters of fiscal year 1997, it had overstated pretax income by 324%, 320%, and 170%, respectively. Fine Host's market capitalization peaked in October 1997 at approximately $390 million, but declined to a nominal amount after the disclosure of its financial fraud. On January 7, 1999, subsequent to the extensive restatement of its financial statements, Fine Host entered a proceeding under Chapter 11 of the U.S. Bankruptcy Code. Pursuant to its plan of reorganization, Fine Host has now become a private entity.
On December 27, 2001, the Commission filed a complaint against Barber in Securities and Exchange Commission v. Nelson Barber, ("SEC v. Barber"), Civil Action No. 1:01CV02670 (D.D.C.). On December 27, 2001, Barber consented to the entry of a Final Judgment against him in SEC v. Barber, without admitting or denying the allegations in the complaint, except as to jurisdiction, to which Barber admitted. On January 3, 2002, the United States District Court for the District of Columbia entered the Final Judgment, which permanently enjoins Barber from violating Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 promulgated thereunder, and further enjoins him from aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder.
The Commission's complaint in SEC v. Barber alleges, among other things, that Barber engaged in an extensive financial fraud that, when detected, resulted in the collapse of Fine Host's stock price. The scheme predated Fine Host's June 1996 initial public offering by several years and continued through the third quarter of the fiscal year ended December 31, 1997. It involved, as its primary mechanism, the improper capitalization as assets millions of dollars in Company expenses. Barber also manipulated acquisition reserve accounts, income from vendor rebates, and other accounts for the purpose of managing reported earnings. During the period of its fraudulent reporting, Fine Host obtained approximately $91 million from investors through its IPO and a February 1997 secondary offering of its common stock. After the public exposure of its financial fraud in early 1998, Fine Host's market capitalization declined from a high of approximately $390 million to approximately $0.
Based on the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer of Settlement submitted by Barber and accordingly,
IT IS HEREBY ORDERED, effectively immediately, that:
Nelson Barber is denied the privilege of appearing or practicing before the Commission as an accountant.
By the Commission.
Jonathan G. Katz
|1|| Paragraph (3) of Rule 102(e) provides, in relevant part, that:
...(i) The Commission, with due regard to the public interest...may...suspend from appearing or practicing before it any...accountant...who has been by name...permanently enjoined by any court of competent jurisdiction, by reason of his or her misconduct in an action brought by the Commission, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of the rules and regulations thereunder.
|2||The findings herein are made pursuant to Barber's Offer of Settlement and are not binding on any other person or entity in this or in any other proceeding.|
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