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U.S. Securities and Exchange Commission

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION


Securities and Exchange Commission,

Plaintiff,   

v.

CUMULUS MEDIA INC., RICHARD J. BONICK, JR., DANIEL O'DONNELL and RICHARD W. WEENING,

Defendants.   


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Civil Action File No.

COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES AND OTHER EQUITABLE RELIEF

Plaintiff Securities and Exchange Commission (Commission) alleges the following:

1. Between January 1999 and March 2000, Defendant Cumulus Media Inc. (Cumulus) and certain of its officers engaged in two separate schemes to artificially inflate Cumulus' financial condition that was reported to the investing public and filed with the Commission. First, Cumulus and its Chief Financial Officer, Richard J. Bonick, Jr. (Bonick) overstated Cumulus' net revenues and broadcast cash flows and understated its net losses for the first and third quarters of 1999 by prematurely recording revenue from package advertising contracts into Cumulus' books, records and accounts. Second, Cumulus' Executive Chairman, Richard W. Weening (Weening), and Cumulus' Vice President of Finance, Daniel O'Donnell (O'Donnell), engaged in an attempt to manage Cumulus' earnings and broadcast cash flow for the fourth quarter of 1999 in order to bring those figures in line with analyst expectations for that quarter.

2. Defendant Cumulus, directly and indirectly, has engaged, and unless enjoined, will continue to engage in transactions, acts, practices and courses of business which constitute violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. 77q(a)(2) and 77q(a)(3)], Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act [15 U.S.C. 78m(a), 78m(b)(2)(A), 78m(b)(2)(B) and 78m(b)(5)] and Rules 12b-20, 13a-13 and 13b2-1 [17 CFR 240.12b-20, 240.13a-13 and 240.13b2-1] promulgated thereunder.

3. Defendant Bonick, directly and indirectly, has engaged, and unless enjoined, will continue to engage in transactions, acts, practices and courses of business which constitute violations of or aiding and abetting violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. 77q(a)(2) and 77q(a)(3)], Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act [15 U.S.C. 78m(a), 78m(b)(2)(A), 78m(b)(2)(B) and 78m(b)(5)] and Rules 12b-20, 13a-13 and 13b2-1 [17 CFR 240.12b-20, 240.13a-13 and 240.13b2-1] promulgated thereunder.

4. Defendant O'Donnell, directly and indirectly, has engaged, and unless enjoined, will continue to engage in transactions, acts, practices and courses of business which constitute violations of or aiding and abetting violations of Sections 13(b)(2)(A) and 13(b)(5) of the Exchange Act [15 U.S.C. 78m(b)(2)(A) and 78m(b)(5)] and Rules 13b2-1 and 13b2-2 [17 CFR 240.13b2-1 and 240.13b2-2] promulgated thereunder.

5. Defendant Weening, directly and indirectly, has engaged, and unless enjoined, will continue to engage in transactions, acts, practices and courses of business which constitute violations of or aiding and abetting violations of Sections 13(b)(2)(A) and 13(b)(5) of the Exchange Act [15 U.S.C. 78m(b)(2)(A) and 78m(b)(5)] and Rules 13b2-1 and 13b2-2 [17 CFR 240.13b2-1 and 240.13b2-2] promulgated thereunder.

6. Plaintiff Commission brings this action to enjoin such transactions, acts, practices and courses of business and for other equitable relief pursuant to Sections 20(b) and 20(d) of the Securities Act [15 U.S.C. 77t(b) and 77t(d)] and Sections 21(d) and 21(e) of the Exchange Act [15 U.S.C. 78u(d) and 78u(e)].

JURISDICTION AND VENUE

7. The Court has jurisdiction over this action pursuant to Sections 20 and 22 of the Securities Act [15 U.S.C. 77t and 77v], Sections 21(e) and 27 of the Exchange Act [15 U.S.C. 78u and 78aa] and 28 U.S.C. 1331. Venue is proper in this Court pursuant to Section 22 of the Securities Act [15 U.S.C. 77v] and Section 27 of the Exchange Act [15 U.S.C. 78aa].

8. In connection with the transactions, acts, practices and courses of business alleged in this Complaint, each of the Defendants, directly or indirectly has made use of the means or instrumentalities of interstate commerce and of the mails.

9. The transactions, acts, practices and courses of business constituting the violations herein have occurred within the jurisdiction of the United States District Court for the Northern District of Illinois and elsewhere.

THE CORPORATE DEFENDANT

10. At all relevant times, Cumulus was an Illinois corporation with its accounting department located in Chicago, Illinois and its corporate headquarters located in Milwaukee, Wisconsin. Cumulus is engaged in the acquisition, operation and development of radio stations in small and mid-sized markets throughout the United States.

11. Cumulus is a publicly-held company, whose common stock is registered pursuant to Section 12(g) of the Exchange Act [15 U.S.C.78l(g)]. At all relevant times, Cumulus' stock has been listed on NASDAQ.

12. Pursuant to Section 13(a) of the Exchange Act [15 U.S.C.78m(a)] and the rules and regulations promulgated thereunder, Cumulus files periodic reports with the Commission, including Forms 10-Q and 10-K. These annual and quarterly reports contain Cumulus' consolidated financial statements. Cumulus' fiscal year begins on January 1.

THE INDIVIDUAL DEFENDANTS

13. Defendant Bonick, age 51, lives in Evanston, Illinois. At all relevant times, Bonick served as Cumulus' Chief Financial Officer and Vice President and worked at Cumulus' Chicago, Illinois office. Among other things, Bonick's job responsibilities included reviewing and signing Cumulus' Form 10-Qs, incorporating revenue from Cumulus' financial statements into Cumulus' registration statements and prospectuses and developing and implementing Cumulus' internal accounting controls.

14. Defendant O'Donnell, age 42, lives in Chicago, Illinois. At all relevant times, O'Donnell served as Cumulus' Vice President of Finance and an officer and worked at Cumulus' Milwaukee, Wisconsin and Chicago, Illinois offices. Among other things, O'Donnell's job responsibilities included preparing and reviewing drafts of Cumulus filings with the Commission and conversing with analysts regarding Cumulus' financial position.

15. Defendant Weening, age 56, lives in West Palm Beach, Florida. At all relevant times, Weening served as Cumulus' Executive Chairman, Treasurer and a Director and worked at Cumulus' Milwaukee, Wisconsin office. Among other things, Weening's job responsibilities included supervising Bonick and O'Donnell, reviewing and approving Cumulus' filings with the Commission and conversing with analysts regarding Cumulus. In addition to his employment with Cumulus, since 1989 Weening has owned Quaestus Management Corporation (Quaestus), a venture capital and research company. Quaestus provided services to Cumulus from 1997 to May 2000.

ADDITIONAL ENTITIES INVOLVED

16. At all relevant times, Quaestus was a Delaware corporation with its principal offices located in Milwaukee, Wisconsin. In March 1998, Quaestus entered into a written agreement with Cumulus to provide Cumulus with industry research, market support, due diligence support, transaction management and corporate finance services. Defendant Weening founded Quaestus in 1989 and served as its Chairman and Chief Executive Officer from June 1989 until June 1998 and from June 2000 through the present. At all relevant times, Weening has owned and controlled Quaestus.

17. At all relevant times, Stratford Research, Inc. (Stratford) was a Georgia corporation with its principal offices located in Atlanta, Georgia. In March 1998, Stratford entered into a written agreement with Cumulus to provide Cumulus with programming and branding consulting and market research services. Cumulus' current Chief Executive Officer (and former Executive Vice Chairman) founded Stratford in September 1985 and served as its president from its inception until March 1998. At all relevant times, Cumulus' current Chief Executive Officer controlled Stratford.

FACTS

A. Premature Recognition of Advertising Revenue

18. Beginning in late 1998 and continuing through at least 1999, Cumulus sold non-traditional "package" advertising contracts that coupled radio advertisements with other non-radio forms of advertising such as mailed advertisements or remote broadcasts by Cumulus' radio stations. Cumulus' traffic scheduling system, however, was designed principally to record revenue from on-air advertisements and could not generally calculate the amount of revenue generated by the sale of non-radio advertisements. Since the traffic scheduling system could not calculate revenue from non-radio advertisements, throughout 1999 Cumulus from time to time prematurely recorded into its books, records and accounts revenue from the package advertising contracts at the time the contracts were sold, not at the time the on-air advertisements were broadcast or the non-radio events occurred.

19. Beginning in the first quarter of 1999 and continuing throughout 1999, Bonick was informed about the premature recording of revenue by Cumulus' assistant controllers, who received telephone calls from Cumulus employees questioning the manner in which revenue from package advertising contracts was being recorded in Cumulus' books and records.

20. Upon discovery of this problem, Bonick took responsibility for answering all questions about the recording of revenue from package advertising contracts.

21. In July 1999, Bonick sent an e-mail to Cumulus' sales managers and sales directors describing how to record revenue from the package advertising contracts pursuant to Generally Accepted Accounting Principles (GAAP). GAAP requires a company to defer recognition of a portion of the revenue from contracts that span more than one fiscal period into the periods in which the revenue is actually earned.

22. However, Bonick did not send the e-mail to the individuals at the radio stations who were responsible for entering information from the package advertising contracts into Cumulus' traffic scheduling system nor did Bonick address the problems with Cumulus' traffic scheduling system. As a result, the improper premature recording of revenue from the package advertising contracts continued for several months after Bonick's July 1999 e-mail.

23. At all relevant times, Cumulus lacked adequate internal accounting controls over revenue recognition. Cumulus' internal accounting controls over revenue recognition only required that the individuals who entered information from advertising contracts into Cumulus' traffic scheduling system inform their managers about any advertising contracts that looked "odd." These individuals were not given instruction as to what contracts should be considered "odd" and thus, could not make such a determination.

24. In September 1999, one of the assistant controllers told Bonick that the amount of prematurely recorded revenue could be material and could force Cumulus to restate its previous financial statements. As a result, it should have been clear to Bonick that his earlier limited efforts to inform Cumulus' sales managers and sales directors about the proper method to record revenue from package advertising contracts were ineffective.

25. Bonick took no further action to correct the premature recording of revenue and incorporated the prematurely recorded revenue into Cumulus' third quarter 1999 financial statements.

26. At all relevant times, Bonick was familiar with accounting rules concerning the recognition of revenue from sales contracts, including GAAP. In particular, Bonick was familiar with the GAAP requirement that when a contract spans more than one quarter, a company must defer a portion of the revenue from the contract for the quarters in which particular events contemplated by the contract occur.

27. Despite knowing the proper method of recording revenue from package advertising contracts pursuant to GAAP and knowing that Cumulus' employees had prematurely recorded such revenue into the traffic scheduling system, Bonick incorporated the prematurely recorded revenue into Cumulus' financial statements before it was earned, in violation of GAAP.

28. Bonick incorporated the prematurely recorded revenue into Cumulus' first and third quarter 1999 Form 10-Qs that he signed and caused to be filed with the Commission.

29. Bonick also incorporated the prematurely recorded revenue into Cumulus' Form S-3 registration statements and prospectuses for secondary offerings of Cumulus' common stock in July and November 1999 that were also filed with the Commission.

30. As a result of Bonick's actions, Cumulus materially overstated its net revenues and broadcast cash flows and materially understated its net losses in its Form 10-Qs for the first and third quarters of 1999 and in its Form S-3 registration statements and prospectuses for secondary offerings of Cumulus' common stock during July and November 1999.

31. Specifically, in its Form 10-Q for the first quarter of 1999 and its Form S-3 registration statement and prospectus filed with the Commission in June 1999 for the sale of securities in July 1999, Cumulus reported net revenue of $31,915,000, broadcast cash flow of $5,045,000 and a net loss of $14,639,000. These first quarter 1999 financial statements overstated Cumulus' net revenue by approximately 2.21% and its broadcast cash flow by approximately 12.09% and understated its net loss by approximately 4.27%.

32. In addition, in the financial statements contained in Cumulus' Form 10-Q for the third quarter of 1999 and its Form S-3 registration statement filed with the Commission in October 1999 for the sale of securities in November 1999, Cumulus reported net revenue of $48,017,000 broadcast cash flow of $17,094,000 and a net loss of $3,958,000. These third quarter 1999 financial statements overstated Cumulus' net revenue by approximately 1.51% and its broadcast cash flow by approximately 4.10% and understated its net loss by approximately 22.06%.

B. Attempted Earnings Management

33. In January 2000, O'Donnell and one of Cumulus' assistant controllers told Weening that the preliminary financial results for the fourth quarter of 1999 showed Cumulus falling short of its published analyst expectations for the quarter. Specifically, Cumulus had missed its analyst expectations for earnings by approximately 42.63% and the analyst expectations for broadcast cash flow by approximately 33.48%. "Broadcast cash flow," which consists of operating income/loss before depreciation, amortization, local marketing agreement fees, non-cash stock compensation expense and corporate general and administrative expense, is widely used by analysts for the broadcast industry to evaluate a radio company's operating performance.

34. To improve Cumulus' performance for the fourth quarter of 1999, Weening devised a plan to inflate Cumulus' earnings and broadcast cash flow.

35. In furtherance of the plan, in January 2000, Weening instructed O'Donnell to amend Cumulus' existing related party agreements with Quaestus and Stratford to require Quaestus and Stratford to pay Cumulus a refund of a portion of the money Cumulus paid Quaestus and Stratford during 1999. The amounts of the refunds were directly tied to the amount by which Cumulus had failed to meet its analyst expectations.

36. Specifically, Weening instructed O'Donnell to draft amendments with an effective date of the fourth quarter of 1999. Weening further instructed O'Donnell to add a provision to the agreements with Quaestus and Stratford that would condition the amount of money paid by Cumulus to Quaestus and Stratford on Cumulus' performance as compared to analyst expectations. At the time he instructed O'Donnell to amend the Quaestus and Stratford agreements, Weening knew that Cumulus' performance for the fourth quarter of 1999 was below analyst expectations. At that time, Weening also knew that the amendments would require Quaestus and Stratford to refund money paid to them by Cumulus in order for Cumulus to meet analysts' expectations for the fourth quarter of 1999.

37. Weening also instructed O'Donnell to include a provision in the amendments stating that if Cumulus met or exceeded published analyst expectations for a given quarter, Quaestus and Stratford would receive a bonus from Cumulus in addition to their regular fees. At the time Weening instructed O'Donnell to amend the Quaestus and Stratford agreements, Weening knew that the amendments would not result in a bonus being paid to Quaestus and Stratford for the fourth quarter of 1999.

38. In a further effort to persuade O'Donnell to draft the amendments, Weening misrepresented to O'Donnell that Cumulus' Board of Directors had previously approved the amendments to the Quaestus and Stratford agreements during the fourth quarter of 1999. At the time of Weening's misrepresentation to O'Donnell, the Quaestus and Stratford amendments had not been drafted or presented to Cumulus' Board of Directors for approval.

39. At all relevant times, Cumulus' internal accounting controls over related party transactions required Cumulus' Board of Directors to approve all agreements and amendments to agreements with related parties. When Weening made the misrepresentation to O'Donnell concerning the Board of Directors' approval, both he and O'Donnell knew that Cumulus' internal accounting controls over related party transactions required the Board of Directors' to approve all agreements and amendments to agreements with related parties. In addition, at that time, Weening knew that the Board of Directors had not approved the Quaestus and Stratford amendments. Weening also knew that he had previously instructed O'Donnell and others not to communicate directly with Cumulus' Board of Directors.

40. During January 2000, at Weening's direction, O'Donnell drafted the amendment to Cumulus' agreement with Stratford. The amendment required Stratford to refund money to Cumulus if Cumulus did not meet its analyst expectations for a particular quarter, including the fourth quarter of 1999. Based on Weening's instructions, O'Donnell backdated the effective date of the amendment to the fourth quarter of 1999.

41. At or around this time, Weening signed the Stratford amended agreement on behalf of Cumulus.

42. During February 2000, at Weening's direction, O'Donnell drafted a corresponding amendment to Cumulus' agreement with Quaestus and backdated the effective date of the amendment to October 15, 1999.

43. Also during February 2000, Weening and O'Donnell instructed one of Cumulus' assistant controllers to record refunds from Quaestus and Stratford into Cumulus' books and records based on the terms of the amended agreements. Specifically, Weening and O'Donnell instructed the assistant controller to record in Cumulus' general ledger reductions in expenses of $576,000 from Quaestus and $2,849,000 from Stratford.

44. The refunds from Quaestus and Stratford, recorded at Weening and O'Donnell's direction, were the largest of a number of adjustments made to Cumulus' books and records for the fourth quarter of 1999. After those adjustments were made, Cumulus exceeded its analyst expectations for earnings by 2.35% and came within .1% of the analyst expectations for broadcast cash flow. The Quaestus and Stratford refunds accounted for more than 46% of the total adjustment made to Cumulus' earnings and more than 47% of the total adjustment made to Cumulus' broadcast cash flow.

45. At the time the assistant controller recorded the refunds from Quaestus and Stratford into Cumulus' books and records, the assistant controller told Weening that Cumulus should tell its independent auditors about the agreements. Weening told the assistant controller not to give the agreements to Cumulus' independent auditors. Nevertheless, on or about February 15, 2000, the assistant controller provided the independent auditors with a copy of the Stratford amendment.

46. After Cumulus' independent auditors received the Stratford amendment, the independent auditors informed Cumulus' management, including Weening and O'Donnell, that the auditors were concerned about Cumulus' failure to disclose the amended agreements in its third quarter 1999 Form 10-Q and its October 1999 Form S-3 registration statement and prospectus. The independent auditors also began investigating the circumstances surrounding the Quaestus and Stratford amendments.

47. In February 2000, as part of their investigation, the independent auditors specifically asked Weening and O'Donnell to provide them with a copy of the Quaestus amendment providing for refunds from Quaestus to Cumulus. Weening and O'Donnell replied that they would produce a copy of the Quaestus amendment to the auditors. At the time of the auditors' request for the Quaestus amendment, both O'Donnell and Weening knew that the amended agreement had not even been drafted.

48. During February and March 2000, the independent auditors asked O'Donnell if Cumulus had assessed the Quaestus and Stratford amendments in light of Securities and Exchange Commission Staff Accounting Bulletins 79 and 101. Even though no such assessment had been made, in an attempt to convince the auditors of the legitimacy and timing of the amendments, O'Donnell misrepresented to the independent auditors that he had previously performed such an assessment. O'Donnell then reflected his analysis in two accounting memoranda. O'Donnell backdated these memoranda to October 31, 1999 and gave the memoranda to the independent auditors and to Weening. At the time O'Donnell provided the memoranda to the independent auditors, both Weening and O'Donnell knew that the accounting memoranda did not exist in October 1999. Yet, neither Weening nor O'Donnell took any steps to dispel the auditors' impression that the accounting memoranda and the Quaestus and Stratford amendments were drafted in October 1999.

49. Despite these facts, Cumulus' independent auditors discovered that both the accounting memoranda and the Quaestus and Stratford amendments were drafted during 2000. On March 3, 2000, the independent auditors told Weening that the manner in which he was attempting to record the effect of the amendments was indicative of earnings management.

50. Subsequently, during March 2000, Weening solicited and ultimately received an opinion from a law firm stating that Cumulus could void the amendments because Cumulus' Board of Directors had not approved them. Weening solicited this opinion even though he knew that he previously had represented to O'Donnell that Cumulus' Board had approved the amendments. After Weening received this opinion, Cumulus voided the agreements and reversed the entries made in its books and records based upon the amendments prior to including them in Cumulus' 1999 Form 10-K.

COUNT I

Violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. 77q(a)(2) and 77(q)(a)(3)]

51. Plaintiff realleges paragraphs 1 through 50 and incorporates them by reference as if set forth fully herein.

52. Defendants Cumulus and Bonick knew or should have known of the activities described in paragraph 51.

53. Between January 1999 and at least November 1999, as specifically alleged in paragraphs 1 through 50 above, Defendants Cumulus and Bonick, in the offer or sale of securities, by the use of means and instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly: obtained money or property by means of untrue statements of material facts or omissions to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or engaged in transactions, practices, or courses of business which operated or would operate as a fraud or deceit upon purchasers of securities.

54. As a result of the activities described in paragraphs 51 through 53 above, Cumulus and Bonick violated Sections 17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. 77q(a)(2) and 77q(a)(3)].

COUNT II

Violations of and Aiding and Abetting Violations of Section 13(a) of the Exchange Act [15 U.S.C. 78m(a)] and Rules 12b-20 and 13a-13 [17 CFR 240.12b-20 and 240.13a-13] Promulgated Thereunder

55. Plaintiff realleges paragraphs 1 through 50 and incorporates them by reference as if set forth fully herein.

56. The financial statements that Cumulus filed with the Commission in its Form 10-Qs for the first and third quarters of 1999 were not prepared in accordance with GAAP.

57. Cumulus, aided and abetted by Bonick, directly and indirectly, filed with the Commission quarterly reports on Form 10-Q for the first and third quarters of 1999 that were not in accordance with such rules and regulations that the Commission has prescribed as necessary and appropriate in the public interest and for the protection of investors and also failed to include in those reports such further material information as was necessary to make the required statements, in light of the circumstances under which they were made, not misleading.

58. Bonick knowingly provided substantial assistance to Cumulus in the activities alleged in paragraphs 55 through 57 above.

59. By reason of the activities alleged in paragraphs 55 through 57 above, Cumulus violated Section 13(a) of the Exchange Act [15 U.S.C. 78m(a)] and Rules 12b-20 and 13a-13 [17 CFR 240.12b-20 and 240.13a-13] promulgated thereunder.

60. As a result of the activities alleged in paragraphs 55 through 57 above, Bonick aided and abetted Cumulus' violations of Section 13(a) of the Exchange Act [15 U.S.C. 78m(a)] and Rules 12b-20 and 13a-13 [17 CFR 240.12b-20 and 240.13a-13] promulgated thereunder.

COUNT III

Violations of and Aiding and Abetting Violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. 78m(b)(2)(A) and 78m(b)(2)(B)]

61. Plaintiff realleges paragraphs 1 through 50 and incorporates them by reference as if set forth fully herein.

62. At various times between January 1999 and at least March 2000, as specifically alleged in paragraphs 1 through 50 above, Cumulus, aided and abetted by Bonick, O'Donnell and Weening, directly and indirectly, failed to make and keep books, records and accounts, which in reasonable detail accurately and fairly reflected the transactions and dispositions of Cumulus' assets.

63. At various times between January 1999 and at least March 2000, as specifically alleged in paragraphs 1 through 50 above, Cumulus, aided and abetted by Bonick, directly and indirectly, failed to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions were recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements.

64. Bonick, O'Donnell and Weening knowingly provided substantial assistance to Cumulus in the activities alleged in paragraphs 61 through 63 above.

65. By reason of the activities described in paragraphs 61 through 63 above, Cumulus violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. 78m(b)(2)(A) and 78m(b)(2)(B)].

66. As a result of the activities described in paragraphs 61 through 63 above, Bonick, O'Donnell and Weening aided and abetted Cumulus' violations of Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. 78m(b)(2)(A)] and Bonick aided and abetted Cumulus' violations of Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. 78m(b)(2)(B)].

COUNT IV

Violations of Exchange Act Rule 13b2-1 [17 CFR 240.13b2-1]

67. Plaintiff realleges paragraphs 1 through 50 and incorporates them by reference as if set forth fully herein.

68. At various times between January 1999 and at least March 2000, as specifically alleged in paragraphs 1 through 50 above, Cumulus, Bonick and O'Donnell, directly and indirectly, falsified or caused to be falsified and Weening, directly and indirectly, caused to be falsified books, records and accounts subject to Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. 78m(b)(2)(A)].

69. As a result of the activities described in paragraphs 67 and 68 above, Cumulus, Bonick, O'Donnell and Weening violated Rule 13b2-1 [17 CFR 240.13b2-1] promulgated under Section 13(b)(2) of the Exchange Act [15 U.S.C. 78m(b)(2)].

COUNT V

Violations of Exchange Act Rule 13b2-2 [17 CFR 240.13b2-2]

70. Plaintiff realleges paragraphs 1 through 50 and incorporates them by reference as if set forth fully herein.

71. At various times between January 2000 and at least March 2000, as specifically alleged in paragraphs 1 through 50 above, directly and indirectly, O'Donnell made or caused to be made and Weening caused to be made materially false and misleading statements, or O'Donnell omitted to state or caused another person to omit to state and Weening caused another person to omit to state material facts necessary in order to make statements made, in light of the circumstances under which such statements were made, not misleading to an accountant in connection with an audit and examination of the financial statements of Cumulus or the preparation and filing of a document or report required to be filed with the Commission.

72. As a result of the activities described in paragraphs 70 and 71 above, O'Donnell and Weening violated Rule 13b2-2 [17 CFR 240.13b2-2] promulgated under Section 13(b)(2) of the Exchange Act [15 U.S.C. 78m(b)(2)].

COUNT VI

Violations of Section 13(b)(5) of the Exchange Act [15 U.S.C. 78m(b)(5)]

73. Plaintiff realleges paragraphs 1 through 50 and incorporates them by reference as if set forth fully herein.

74. At various times between January 1999 and at least March 2000, as specifically alleged in paragraphs 1 through 50 above, Cumulus, Bonick, O'Donnell and Weening knowingly circumvented or knowingly failed to implement a system of internal accounting controls or knowingly falsified books, records and accounts described in Section 13(b)(2) of the Exchange Act [15 U.S.C. 78m(b)(2)].

75. As a result of the activities described in paragraphs 73 and 74 above, Cumulus, Bonick, O'Donnell and Weening violated Section 13(b)(5) of the Exchange Act [15 U.S.C. 78m(b)(5)].

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that the Court:

I.

Issue findings of fact and conclusions of law that the Defendants committed the violations charged and alleged herein.

II.

Issue an Order of Permanent Injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, permanently restraining and enjoining Defendant Cumulus, its officers, agents, servants, employees, attorneys, assigns and all persons in active concert or participation with them who receive actual notice of the Order, by personal service or otherwise, and each of them from, directly or indirectly, engaging in the transactions, acts, practices and courses of business described above, or in conduct of similar purport or object, in violation of Sections 17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. 77q(a)(2) and 77q(a)(3)], Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act [15 U.S.C. 78m(a), 78m(b)(2)(A), 78m(b)(2)(B) and 78m(b)(5)] and Rules 12b-20, 13a-13 and 13b2-1 [17 CFR 240.12b-20, 240.13a-13 and 240.13b2-1] promulgated thereunder.

III.

Issue an Order of Permanent Injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, permanently restraining and enjoining Defendant Bonick, his officers, agents, servants, employees, attorneys, assigns and all persons in active concert or participation with them who receive actual notice of the Order, by personal service or otherwise, and each of them from, directly or indirectly, engaging in the transactions, acts, practices and courses of business described above, or in conduct of similar purport or object, in violation of, or that aid and abet violations of, Sections 17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. 77q(a)(2) and 77q(a)(3)], Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act [15 U.S.C. 78m(a), 78m(b)(2)(A), 78m(b)(2)(B) and 78m(b)(5)] and Rules 12b-20, 13a-13 and 13b2-1 [17 CFR 240.12b-20, 240.13a-13 and 240.13b2-1] promulgated thereunder.

IV.

Issue an Order of Permanent Injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, permanently restraining and enjoining Defendant O'Donnell, his officers, agents, servants, employees, attorneys, assigns and all persons in active concert or participation with them who receive actual notice of the Order, by personal service or otherwise, and each of them from, directly or indirectly, engaging in the transactions, acts, practices and courses of business described above, or in conduct of similar purport or object, in violation of, or that aid and abet violations of, Sections 13(b)(2)(A) and 13(b)(5) of the Exchange Act [15 U.S.C. 78m(b)(2)(A) and 78m(b)(5)] and Rules 13b2-1 and 13b2-2 [17 CFR 240.13b2-1 and 240.13b2-2] promulgated thereunder.

V.

Issue an Order of Permanent Injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, permanently restraining and enjoining Defendant Weening, his officers, agents, servants, employees, attorneys, assigns and all persons in active concert or participation with them who receive actual notice of the Order, by personal service or otherwise, and each of them from, directly or indirectly, engaging in the transactions, acts, practices and courses of business described above, or in conduct of similar purport or object, in violation of, or that aid and abet violations of, Sections 13(b)(2)(A) and 13(b)(5) of the Exchange Act [15 U.S.C. 78m(b)(2)(A) and 78m(b)(5)] and Rules 13b2-1 and 13b2-2 [17 CFR 240.13b2-1 and 240.13b2-2] promulgated thereunder.

VI.

With regard to Defendants Bonick, O'Donnell and Weening's violative transactions, acts, practices and courses of business set forth herein, issue an Order imposing upon them appropriate civil penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. 77] and Section 21(d)(3) of the Exchange Act [15 U.S.C. 78u(d)(3)].

VII.

Retain jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that may be entered or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.

VIII.

Grant Orders for such further relief as the Court may deem appropriate.

Respectfully Submitted,

__________/s______________
Anne C. McKinley, IL Bar No. 6270252
Steven L. Klawans, IL Bar No. 6229593
Attorneys for Plaintiff
U.S. Securities and Exchange Commission
175 West Jackson Boulevard, Suite 900
Chicago, Illinois 60604
Telephone: (312) 353-7390

Dated: December 10, 2003


http://www.sec.gov/litigation/complaints/comp18504.htm


Modified: 12/12/2003