-------------------- BEGINNING OF PAGE #1 ------------------- UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION Securities Exchange Act of 1934 Release No. 36673 / January 3, 1995 Accounting and Auditing Enforcement Release No. 749 / January 3, 1995 ADMINISTRATIVE PROCEEDING File No. 3-8914 ------------------------- In the Matter of: : ORDER INSTITUTING PUBLIC : PROCEEDINGS PURSUANT TO : SECTION 21C OF THE SECURITIES EDMUND C. LIPINSKI : EXCHANGE ACT OF 1934, MAKING : FINDINGS AND IMPOSING A Respondent. : CEASE AND DESIST ORDER ------------------------- I. The Commission deems it appropriate and in the public interest that public proceedings be instituted pursuant to Section 21C of the Securities Exchange Act of 1934 (Exchange Act), against Edmund C. Lipinski (Lipinski). Accordingly, IT IS HEREBY ORDERED that these proceedings be, and hereby are, instituted. II. In anticipation of these proceedings, Lipinski has submitted an Offer of Settlement which the Commission has determined to accept. Soley for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission, or to which the Commission is a party, and prior to a hearing pursuant to the Commission's Rules of Practice, 17 C.F.R. Section 201.1 et seq., Lipinski consents, without admitting or denying any findings set forth herein, except the findings contained in paragraphs III.1. through III.4., which are admitted, to the entry of this Order Instituting Public Proceedings Pursuant to Section 21C of the Exchange Act, Making Findings and Imposing a Cease and Desist Order (Order), and to the entry of the findings and imposition of the remedial sanctions set forth below. III. On the basis of this Order and Lipinski's Offer of Settlement, the Commission finds that:-[1]- --------- FOOTNOTES --------- -[1]- Any findings contained herein are solely for the purpose of this proceeding and are not binding on any other person or entity named as a respondent in any other proceeding. -------------------- BEGINNING OF PAGE #2 ------------------- 1. Datronic Equipment Income Fund XVI, L.P. (Fund XVI), Datronic Equipment Income Fund XVII, L.P. (Fund XVII), Datronic Equipment Income Fund XVIII, L.P. (Fund XVIII), Datronic Equipment Fund XIX, L.P. (Fund XIX), Datronic Equipment Income Fund XX, L.P. (Fund XX) and Datronic Finance Income Fund I, L.P. (FIFI) (collectively referred to as "the limited partnerships"), are Delaware limited partnerships formed for the purpose of investing in equipment leases. 2. Datronic Rental Corporation (Datronic), an Illinois corporation, was the general partner of the limited partnerships, raised funds for them and managed and controlled their day-to- day operations. 3. Edmund J. Lopinski (Lopinski), age 44, was the president, chief executive officer and chairman of the board of directors of Datronic from 1985 until May 1992. At all relevant times, Lopinski was the majority shareholder of Datronic. 4. Lipinski, age 43, was the vice-president of administration, secretary, and a director of Datronic from 1989 to 1992. 5. Capitol Lease Investment Corporation (CLIC) was an Illinois corporation incorporated on October 2, 1990. At all relevant times Lopinski was a director of CLIC and Lipinski was a director and secretary of CLIC. 6. Investors who invested in the limited partnerships were provided with Partnership Agreements (Agreements) signed by Lopinski. The Agreements provided for strict limitations on the nature and terms of any transactions between the partnerships and Datronic or its affiliates. The Agreements also limited the fees and compensation payable to Datronic or its affiliates. 7. An "affiliate" of a person is defined in the Agreements to include any other person under direct or indirect common control with the person, and, for an entity, 10% shareholders or officers or directors. CLIC and Datronic were "affiliates" within the meaning of the Agreements in that Datronic and CLIC were under the common control of Lopinski, Lopinski was a director of both Datronic and CLIC, and Lipinski was a director and secretary of both Datronic and CLIC. 8. In his position as an officer and director of Datronic, Lipinski had responsibilities with regard to the transfer of limited partnership funds. 9. From October 1990 to May 1992, Lipinski, as an officer and director of Datronic, failed to ensure that Datronic devised and maintained for the limited partnerships a system of internal accounting controls sufficient to provide reasonable assurances that transactions were recorded as necessary to maintain accountability for partnership funds. Specifically, Lipinski failed to ensure such accountability for partnership funds which were transferred under circumstances making it reasonably forseeable that post-closing conditions would occur which would necessitate the return of a portion of the funds to the partnerships. 10. From October 1990 to May 1992, Lopinski was able to misappropriate approximately $15 million of limited partnership funds for his direct or indirect benefit. The funds were diverted from the limited partnerships in connection with two -------------------- BEGINNING OF PAGE #3 ------------------- major transactions which Lopinski caused the limited partnerships to enter into with CLIC. These transactions did not comply with the limitations provided for in the Agreements regarding the terms of transactions between the partnerships and an affiliate of Datronic. 11. In connection with these transactions, Lopinski caused funds belonging to the limited partnerships, or for which limited partnership assets were pledged as security, to be wire- transferred to bank accounts in the name of CLIC. Lopinski was a signatory on these CLIC accounts. The funds were transferred to the CLIC accounts under circumstances making it reasonably foreseeable that post-closing conditions would occur which would necessitate the return of a portion of the funds to the limited partnerships. 12. From October 1990 to May 1992, Lopinski, for his own direct or indirect personal benefit, caused wire transfers to be made from these bank accounts in the name of CLIC which contained partnership funds. 13. Lopinski used the funds wire transferred from the bank accounts described in Paragraph A.12 above for the acquisition of various personal assets by Lopinski. 14. Lipinski caused the limited partnerships to violate Section 13(b)(2)(B) of the Exchange Act by failing to ensure that Datronic devised and maintained internal controls for the partnerships sufficient to provide reasonable assurances that transactions were recorded as necessary to maintain accountability for partnership funds which were transferred under circumstances making it reasonably foreseeable that post-closing conditions would occur which would necessitate the return of a portion of the funds to the limited partnerships. IV. In view of the foregoing, it is in the public interest to impose the sanctions agreed to in the Offer of Settlement. Accordingly, IT IS HEREBY ORDERED that, pursuant to Section 21C of the Exchange Act, Edmund C. Lipinski cease and desist from causing any violation, and any future violation, of Section 13(b)(2)(B) of the the Exchange Act. By the Commission. Jonathan G. Katz Secretary