UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Securities Exchange Act of 1934
Accounting and Auditing Enforcement
IN THE MATTER OF JOHN J. CANEPA, CPA
SEC INSTITUTES ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS AGAINST FORMER ANDERSEN PARTNER JOHN J. CANEPA
The Commission announced today that it has instituted administrative and cease-and-desist proceedings against John J. Canepa, a certified public accountant and former audit partner at Andersen, for his role in connection with the improper recognition of revenue by Anika Therapeutics, Inc. ("Anika"). In the Order Instituting Proceedings ("Order"), the Division of Enforcement alleges that Canepa caused Anika to improperly recognize approximately $1.3 million in revenue in 1999 and 2000 from certain sales of its product, Orthovisc, to a distributor, in violation of generally accepted accounting principles ("GAAP"). The Order further alleges that Canepa engaged in improper professional conduct within the meaning of Rule 102(e)(1) of the Commission's Rules of Practice, in connection with this same activity.
According to the Order, Anika improperly recorded on its books and records and reported in periodic Commission filings revenue from three large "bill-and-hold" transactions with a distributor. In such transactions, the customer agrees to purchase goods, but the seller retains possession until a later date. Anika improperly recognized revenue at the time of invoicing and prior to delivery of the product to the customer, contrary to GAAP. The Order further alleges that Canepa reviewed and approved Anika's recognition of revenue from its bill-and-hold transactions. Moreover, the Order alleges that Canepa caused Anika to improperly recognize over $300,000 in revenue from a 1998 bill-and-hold transaction in its restatement of revenue in March 2000, which resulted in the company filing a second restatement in September 2001.
A hearing will be held before an administrative law judge to determine whether Canepa caused violations of Sections 13(a) and 13(b)(2)(A) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 12b-20, 13a-1, and 13a-13 thereunder, and whether he engaged in improper professional conduct within the meaning of Rule 102(e)(1) of the Commission's Rules of Practice, and if so, whether he should be ordered to cease and desist from future violations of the above provisions of the Exchange Act, and whether remedial sanctions should be entered against him, including a censure or temporary or permanent denial of the privilege of appearing or practicing before the Commission.
In related proceedings, the Commission today instituted settled administrative proceedings against Anika and two of its former officers, J. Mellville Engle and Sean F. Moran. [See In the Matter of Anika Therapeutics, Inc. et al., Rel. 34-47167, File No. 3-11006].