IN THE UNITED STATES DISTRICT COURT
1. David C. Guenthner, the chief financial officer of InaCom Corp., and Jay M. Samuelson, InaCom's assistant controller, engaged in a scheme to manage earnings in InaCom's 10-Qs filed with the Securities and Exhange Commission on or about May 11, 1999, August 10, 1999 and November 9, 1999.
2. During the first three quarters of 1999, Guenthner and Samuelson improperly accrued unallocated, general reserves, then reversed $7.1 million of these reserves into income in the third quarter of 1999. These unjustified reversal of reserves in the third quarter of 1999 lacked any credible basis.
3. Also in the third quarter of 1999, Guenthner and Samuelson knowingly posted $10.8 million of inventory cost reductions that related to prior quarters, thereby further artificially inflating income in the third quarter of 1999. Because of these inappropriate accounting practices in the third quarter of 1999, the company reported a profit when in reality the company had suffered a loss.
4. In addition, throughout the first three quarters of 1999, Guenthner caused InaCom to recognize manufacturer rebates to which it was not entitled, thereby understating its cost of goods sold and overstating net income. This inclusion of these improper manufacturer rebates overstated InaCom's income by more than $13 million in its 1999 10-Qs.
5. Defendants Guenthner and Samuelson have engaged in, and unless restrained and enjoined by this Court will engage in, transactions, acts, practices, and courses of business that violate Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78j(b) and 78m(b)(5)] and Rules 10b-5, 13b2-1, and 13b2-2 thereunder [17 C.F.R. §§ 240.10b-5, 240.13b2-1, and 240.13b2-2]. Further, Defendants Guenthner and Samuelson aided and abetted InaCom's violations of Sections 13(a) and 13(b)(2) of the Exchange Act [15 U.S.C. §§ 78m(a) and 78(b)(2)] and Rules 12b-20 and 13a-13 thereunder [17 C.F.R. §§ 240.12b-20, and 240.13a-13].
6. The Commission brings this action pursuant to the authority conferred upon it by Section 21(d) and (e) of the Exchange Act [15 U.S.C. §§ 78u(d) and (e)] for an order permanently restraining and enjoining each of the defendants and granting other relief.
7. The Commission seeks an order requiring Defendants Guenthner and Samuelson to pay civil penalties pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].
JURISDICTION AND VENUE
8. This Court has jurisdiction over this action pursuant to Sections 21(e) and 27 of the Exchange Act [15 U.S.C. §§ 78u(e) and 78aa]. Venue lies in this Court pursuant to Section 27 of the Exchange Act.
9. In connection with the transactions, acts, practices, and courses of business described in this Complaint, each of the defendants, directly and indirectly, has made use of the means or instrumentalities of interstate commerce, of the mails, and/or of the means and instruments of transportation or communication in interstate commerce.
10. Defendants Guenther and Samuelson each reside in this judicial district. In addition, all of the transactions, acts, practices and courses of business constituting the violations of law alleged herein occurred within this judicial district.
11. David C. Guenthner is a resident of Omaha, Nebraska. Guenthner was InaCom's CFO from 1987 when the company went public through November 1999, when he was asked to resign as part of the company's restructuring. Guenthner held a license as a Nebraska CPA from 1974 through 1980 which he allowed to lapse when he entered private accounting.
12. Jay M. Samuelson, a resident of Gretna, Nebraska, was InaCom's assistant corporate controller from September 1990 through February 2000. Because InaCom had no corporate controller from mid-1998 through February 2000, Samuelson essentially performed that job and worked directly with Guenthner to prepare InaCom's consolidated financial statements. Samuelson has held a Nebraska CPA license since 1988.
13. InaCom Corp., a Delaware corporation headquartered in Omaha, Nebraska, was primarily a value-added computer reseller, specializing in purchasing computers from major manufacturers and customizing them for corporate end-users. InaCom merged with Vanstar, Inc., another computer reseller and service provider, in February 1999.
14. InaCom had $4.2 billion in revenue, $1.1 billion in assets and $72.3 million in pre-tax earnings for the year ended December 1998. For the first three quarters of 1999, on a consolidated basis after its merger with Vanstar, InaCom had $1.9 billion in assets and $4.3 billion in revenue.
15. On June 16, 2000, InaCom filed for Chapter 11 bankruptcy protection, ceased its operations and terminated all personnel except those responsible for assisting the bankruptcy trustee in the liquidation of the remaining assets.
16. InaCom's common stock was registered with the Commission pursuant to Section 12(b) of the Exchange Act, and InaCom reported on Form 10-K from 1987 through 1998 and on Form 10-Q through the third quarter of 1999. InaCom's common stock was traded on the New York Stock Exchange until trading was suspended on May 18, 2000, as a result of the company's failure to file its 1999 Form 10-K.
I. InaCom's Q3 1999 Earnings Were Inflated by Improperly Releasing $7.1 Million from Unallocated Reserves
A. Guenthner and Samuelson Established a "Cookie Jar" Through Excessive Accrual of Unallocated Reserves Throughout 1999
17. During the first and second quarters of 1999, Guenthner and Samuelson accrued excessive amounts in InaCom's accounts payable reserves, which effectively created a "cookie jar" reserve.
18. Through the first two quarters of 1999, Guenthner and Samuelson caused the balance of "Accrued Misc. - Basket," a sub account of the Accounts Payable Reserve, to substantially increase from $214,440 at the end of the first quarter to $2,784,686 at the beginning of the third quarter of 1999. Throughout the third quarter of 1999, additional accruals of more than $3 million were made to the "Accrued Misc. - Basket" so that the reserve totaled $6,086,524 by the end of the third quarter.
19. There was no identifiable basis for the dramatic rise in reserves. The accrual of these reserves was not based on a liability that was probable and reasonably estimable. The accrual and the reporting of the accrual in the 1999 10-Qs was an error under GAAP.
20. Although end of quarter adjustments to reserves were normally less than $1 million, Guenthner and Samuelson released $7.1 million from the "Accrued Misc. - Basket" into income after the close of the third quarter of 1999.
21. Because these reserves were accrued in error under GAAP the proper accounting treatment would be to disclose the error in the current period and restate the financials for the prior periods where the erroneous accruals were made.
22. The $7.1 million release of reserves overstated InaCom's pre-tax earnings for the third quarter by 88 percent as reported on Form 10-Q. As a result of that reversal, InaCom had an earnings per share of $ 0.15.
B. Guenthner Attempted to Hide the Release of Reserves from the Board
23. The initial draft of the third quarter 1999 financials prepared by Guenthner and Samuelson and provided to InaCom's board, included an undisclosed release of reserves totaling $14 million. Guenthner and Samuelson applied the $14 million to the cost of goods sold which had the effect of artificially increasing the net operating income from $19.8 million to $33.8 million.
24. Guenthner gave a presentation of the draft financials to the audit committee on October 20, 1999, and failed to inform the audit committee that his draft financials included a $14 million release of reserves.
25. This net operating income was incongruent with the sales for the period. The audit committee asked Guenthner how InaCom was able to achieve the operating income in relation to sales.
26. Guenthner's responses to the committee members' questions were vague and incomplete. Guenthner never disclosed the release of reserves.
27. The following day, Guenthner gave a presentation on the draft financials to the full board. Guenthner's summary to the board indicated that revenues were down, expenses were up, margins were down, and the turnover for receivables was slowing.
28. Despite further questioning from board members on how InaCom achieved its operating income for the period, Guenthner still failed to reveal that his draft financials included a $14 million release of reserves. The audit committee member who raised the issue the night before again questioned Guenthner about InaCom's net operating income figure.
29. On October 22, 1999, the day after the board meeting, Guenthner attended a meeting with the new CEO, in which the managers from each of InaCom's divisions discussed the performance for the third quarter and the projections for the fourth quarter. Each division reported poor results for the third quarter, and projected worsening results for the fourth quarter.
30. Immediately after the management meeting, the CEO pulled Guenthner aside and confronted him on the contradictions between the dismal reports from management and the comparatively rosy financial results presented at the board meeting.
31. At that point, Guenthner admitted that the third quarter 1999 financial results had been achieved in part, through a reversal of reserves. Guenthner claimed that KPMG Peat Marwick, L.L.P., InaCom's auditors, had approved the use of the reserves.
32. In fact, KPMG was still in the process of reviewing InaCom's financials and was unaware of Guenthner's proposed use of reserves.
33. The CEO informed Guenthner that he was uncomfortable with the fact that this information was not disclosed to the board and directed Guenthner to prepare a detailed explanation of what adjustments were made to the reserve accounts.
34. Guenthner, with assistance from Samuelson, prepared a two-page memorandum entitled "Earnings Analysis," in response to the CEO's concerns. The memorandum, dated October 26, 1999, shows an operating loss of $45.8 million dollars prior to any end of quarter adjustments to the consolidated financials. This loss was then offset by a list of what Guenthner labeled as "Normal Adjustments" and two one-time adjustments. The largest entry under "Normal Adjustments," in the amount of $23.4 million, had the title "Inventory A/R Misc. A/P Record Receivable for purchase cost variance/ bid arbitrage in $45,851."
35. Guenthner used this category to conceal the $7.1 million release of reserves.
36. Guenthner supported the adjustments in the memorandum by including the assurance that "The financials for Q3 are in GAAP compliance and have been reviewed and approved by KPMG."
37. In fact, KPMG's review of InaCom's third quarter financials was still ongoing as of October 26, 1999. KPMG was still waiting for supporting documents from InaCom in order to complete their review, which they did not receive until after the date of Guenthner's memo. KPMG was neither aware of Guenthner's release of reserves nor had they given their approval of the financials.
38. In the memorandum, Guenthner did not include any further explanations for the adjustments. Instead, the memorandum focused on how the financial community and the public would negatively perceive any changes in the financial statements that would result in lower earnings per share. The memorandum argued that if the board did not accept Guenthner's earnings per share figure of $0.25, that any different numbers would raise issues of earnings management because Guenthner had already shared $0.25 earnings per share with InaCom's lenders.
39. A conference call with all available board members was arranged for October 26, 1999, and Guenthner's memorandum was faxed to those board members scheduled to participate.
40. A member of the audit committee specifically requested that KPMG be included in the conference call; but Guenthner falsely stated that he had KPMG's approval on the financials, and their attendance was therefore not necessary.
41. On the conference call Guenthner disclosed to the board for the first time that InaCom was able to show a $0.25 earnings per share through what he termed normal adjustments to reserve accounts.
42. Guenthner then falsely stated to the board that KPMG had given InaCom the option of reporting earnings per share at a conservative $0.15 or a less conservative $0.25, depending on how much InaCom retained in the reserve accounts. Guenthner cautioned the board members that if InaCom reported earnings at less than $0.15 per share, the company would be in violation of the covenants that governed their credit lines with lenders. Guenthner argued for maintaining the $0.25 figure, claiming again that KPMG had given its approval.
43. The board overruled Guenthner and concluded that InaCom should report earnings at $0.15 per share. Therefore, following the conference call, Guenthner and Samuelson made changes to InaCom's third quarter financials to report net earnings of $7.1 million and earnings per share of $0.15, which were then reported on InaCom's Form 10-Q filed with the Commission on November 9, 1999.
C. Guenthner and Samuelson Deceived KPMG About the Release of Reserves
44. While the CEO was confronting Guenthner on the undisclosed release of reserves and the InaCom board was being reconvened to discuss the third quarter financials, KPMG was reviewing Guenthner's initial draft financials. KPMG was unaware of the controversy that arose surrounding Guenthner and Samuelson's release of reserves and believed that it was reviewing InaCom's final draft of the financials.
45. After making the changes to the third quarter 1999 financials as ordered by the board, Guenthner and Samuelson needed to explain the last-minute changes to KPMG without disclosing the company's reversal of reserves.
46. On or about October 26, 1999, before InaCom's scheduled press release on the third quarter results, Guenthner contacted the engagement partner from KPMG to notify him of the change to the financials. Guenthner told the engagement partner that one of InaCom's accountants discovered a routine entry, one that was made every quarter, which had been overlooked for the third quarter.
47. Guenthner lied to KPMG's engagement partner concerning the nature of the changes to the financials because he was changing GAAP numbers one day before InaCom was going to issue the press release.
48. In order to follow up on the last minute change, KPMG staff contacted Samuelson for additional information. Samuelson likewise falsely assured KPMG that the change was the result of a regularly recurring entry that had been overlooked.
II. Guenthner and Samuelson Inflated Third Quarter Earnings With a One-Time Adjustment to Inventory and Inventory Accounts Payable
49. Guenthner and Samuelson improperly accounted for errors uncovered during an inventory reconciliation conducted at the end of the third quarter of 1999, thereby boosting quarterly earnings reported in InaCom's November 1999 10-Q by $10.8 million.
50. During the third quarter InaCom conducted an inventory reconciliation to resolve discrepancies going back to January 1999. The reconciliation uncovered 1) actual inventory that was not listed on InaCom's books, and 2) inventory accounts payable items still on InaCom's books that had already been paid. The total reconciliation of these errors required an adjustment of $15.6 million in InaCom's favor over three quarters; $3.9 million from the first quarter, $6.9 million from the second quarter, and $4.8 million from the third quarter.
51. Guenthner and Samuelson knew that the errors were not isolated to the third quarter. Yet they elected not to restate the prior quarters and instead recognized the entire correction in the third quarter.
52. The adjustments posted to correct the errors resulted from debits to inventory (increasing the balance), debits to accounts payable (decreasing the balance), with corresponding credits to cost of goods sold. These adjustments resulted in a $15.6 million decrease in cost of goods sold with a corresponding increase in net income.
53. In making these adjustments, Guenther and Samuelson artificially inflated the amount reported as third quarter net earnings by $10.8 million, the amount that represents the total dollar amount of the errors from the two prior quarters.
54. By failing to restate, Guenthner and Samuelson materially misstated InaCom's financial statements in its 1999 10-Qs. They should have disclosed the error in the third quarter and restated the financials for the prior periods where the erroneous entries were made.
55. Neither Guenthner nor Samuelson consulted any accounting literature or contacted KPMG for advice regarding the correct accounting treatment for the inventory errors. Guenthner and Samuelson also made no inquiry as to the materiality of these accounting errors.
III. InaCom's Improper Recognition of Bid Price Arbitrage as a Vendor Receivable Overstated Income
A. Background on Bid Price Arbitrage
56. During the late 1990s, traditional computer manufacturers who distributed their product through resellers such as InaCom, were experiencing significant price competition from direct sale manufacturers. As a result, manufacturers used price protection and special bid rebate programs to compensate resellers such as InaCom for frequent decreases in wholesale prices of personal computers.
57. Under price protection programs, if a manufacturer decreased the wholesale price of a computer within a certain time period after InaCom's purchase, the manufacturer would rebate the difference in price for each computer that InaCom still held in its inventory as of the date of the price change. If the manufacturer dropped its wholesale price outside of the established time frame, no price protection rebate was available. The terms and conditions governing price protection were set forth in supplements to InaCom's annual contracts with each respective manufacturer.
58. Manufacturers used special bid transactions to provide competitive volume discounts to large customers. In a special bid transaction, a manufacturer issued a letter authorizing a reduction in the wholesale price to InaCom regarding a certain number of computers for resale to a specific customer. As with price protection, the terms and conditions governing special bid rebate programs such as the documentation required for resellers to submit a rebate claim were set forth in supplements to annual contracts.
59. Bid price arbitrage ("BPA") was a term created by InaCom to explain the company's recording of a vendor rebate receivable for any price drop outside of a price protection window that occurred while InaCom was holding product for a customer to fill a special bid transaction. BPA was not a rebate program developed or even recognized by the manufacturers.
60. None of InaCom's contracts with manufacturers acknowledged any commitment by the manufacturers to pay BPA. To the contrary, the special bid program terms and conditions expressly disavowed that special bid pricing could be used to extend price protection windows. Since BPA was not a rebate program recognized by the manufacturers, there were no processes or procedures by which InaCom could file BPA rebate claims.
61. Although InaCom carried BPA vendor receivables on its books at various times for more than two years, InaCom never filed a single claim to collect a BPA rebate from any manufacturer.
62. Guenthner approved and directed the recording of BPA receivables on InaCom's books. Guenthner directed accounting personnel at InaCom's direct division to automatically enter a BPA receivable whenever InaCom suffered a price drop outside the applicable price protection window while holding product for a special bid transaction.
63. At the end of each month, direct division accounting personnel transferred BPA receivables from the direct division's books to the corporate group's books in order for the corporate group purportedly to pursue collection from the manufacturers.
64. When manufacturers reduced prices outside of price protection window, InaCom should have reduced the value of its inventory instead of reducing cost of goods sold and recording the reduction as a BPA vendor receivable. By making the proper accounting entries for BPA, InaCom would have accurately reflected lower profit margins and less net income from its resale of product that had suffered a wholesale price drop outside of price protection windows.
65. Neither Guenthner nor anyone else from the corporate group pursued collection of specific BPA claims with the manufacturers and InaCom never collected BPA rebates from manufacturers.
66. As early as fall of 1998 and at various times during 1999, accounting personnel at InaCom met with Guenthner to discuss the growth of BPA receivables and the fact that nobody had pursued payment from the manufacturers.
B. Guenthner's Inclusion of BPA Receivables Overstated InaCom's Reported Income Throughout 1999
67. InaCom booked $49,483 of BPA in 1997, $3.4 million of BPA in 1998, and $17.2 million of BPA in 1999.
68. At the year-end for 1997 and 1998, at Guenthner's direction, BPA amounts on InaCom's books were written off in their entirety against reserves set up for doubtful collection of price protection and special bid rebate claims.
69. In auditing InaCom's year-end financial statements for 1997 and 1998, KPMG tested vendor receivables by reviewing the legitimacy of written backup for special bid and price protection rebate claims and analyzing subsequent payment history. During this audit testing, KPMG was not alerted to the lack of documentation for BPA claims because InaCom's corporate accounting group wrote off the BPA receivables prior to KPMG's analysis.
70. Notwithstanding the fact that the company wrote off 100 percent of past BPA receivables, InaCom still recorded more than $13 million of BPA on its books during the first three quarters of 1999.
71. If BPA were in fact a legitimate receivable, Guenthner should have established a reserve for doubtful collection of BPA because he knew that InaCom did not collect any of the BPA receivables that were recorded in 1997 and 1998.
72. Because BPA receivables reduced InaCom's cost of goods sold, each dollar of BPA recorded falsely increased InaCom's reported net income for the period by the same amount. At Guenthner's direction, in the first quarter of 1999, InaCom improperly booked more than $1.8 million in BPA receivables, thereby understating the loss from operations reported in InaCom's May 1999 10-Q by 17 percent. By the second quarter of 1999, InaCom improperly included $4.3 million in BPA receivables, thus overstating the pre-tax earnings of $13.7 million reported in InaCom's August 1999 10-Q by more than 31 percent. Similarly, for the third quarter of 1999, InaCom improperly included $7 million in BPA receivables and overstated pre-tax earnings reported in its November 1999 10-Q by more than 47 percent.
73. Guenthner signed all of the management representation letters that InaCom gave KPMG in connection with KPMG's review of InaCom's financial statements for each of the first three quarters of 1999. In those letters, Guenthner stated that all material transactions were properly recorded and InaCom's financial statements were in conformity with GAAP.
C. InaCom's New Management & KPMG Examine BPA Receivables And Recommend Restatement
74. In the fourth quarter of 1999 and the first quarter of 2000, the incoming CEO and CFO ordered company accounting personnel and KPMG to conduct a detailed review of, among other things, InaCom's vendor receivables, utilization of reserves and other unusual charges.
75. During the detailed testing of InaCom's vendor receivables conducted during the course of the audit of the 1999 financials, KPMG discovered that BPA receivable claims carried on InaCom's books had never been submitted to the manufacturers and were based upon pricing actions outside contractual price protection windows.
76. In response to KPMG's inquiries, Guenthner falsely assured auditors that InaCom had collected a high percentage of BPA claims from manufacturers throughout 1998 and 1999, but claimed that the sale of InaCom's product business to Compaq in February 2000 had robbed InaCom of its past leverage to collect remaining BPA claims. However, when KPMG asked him in early 2000 for documentation to substantiate InaCom's past collection of BPA, Guenthner produced documentation for only a single special bid transaction in which the manufacturer's documentation did not reference BPA or any commitment to pay BPA.
77. Guenthner's inability to provide KPMG with any meaningful justification for recognizing BPA as a vendor receivable was one of the factors that caused KPMG to recommend that InaCom's audit committee retain special counsel to conduct an internal investigation.
78. The special counsel for the audit committee concluded that Guenthner had directed the improper booking of BPA receivables.
79. While continuing work on its audit of InaCom's 1999 financial statements, KPMG concluded that due to the inclusion of BPA and other accounting improprieties, InaCom needed to prepare restated financials for all of 1998 and the first three quarters of 1999. However, KPMG was unable to complete the 1999 audit or the proposed restatements before InaCom declared bankruptcy in June 2000.
First Claim for Relief
(Violations by Guenthner and Samuelson of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder)
80. Plaintiff repeats and realleges paragraphs 1 through 79 above.
81. Guenthner and Samuelson, directly or indirectly, with scienter, in connection with the purchase or sale of securities, by use of the means or instrumentalities of interstate commerce or by use of the mails, have employed devices, schemes, or artifices to defraud; have made untrue statements of material fact or omitted 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 have engaged in acts, practices, or courses of business which operated or would operate as a fraud or deceit upon the purchasers or sellers of such securities.
82. By reason of the foregoing, Guenthner and Samuelson violated, are violating, and unless restrained and enjoined will violate Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b) and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
Second Claim for Relief
(Violations by Guenthner and Samuelson of Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder)
83. Plaintiff repeats and realleges paragraphs 1 through 79 above.
84. Guenthner and Samuelson knowingly circumvented or knowingly failed to implement a system of internal accounting controls, knowingly falsified books, records, or accounts and directly or indirectly falsified or caused to be falsified books, records or accounts described in Section 13(b)(2) of the Exchange Act.
85. By reason of the foregoing, Guenthner and Samuelson violated, are violating, and unless restrained and enjoined will violate Section 13(b)(5) of the Exchange Act [15 U.S.C. § 78m(b)(5)] and Rule 13b2-1 thereunder [17 C.F.R. § 240.13b2-1].
Third Claim for Relief
(Violations by Guenthner and Samuelson of Rule 13b2-2 under the Exchange Act)
86. Plaintiff repeats and realleges paragraphs 1 through 79 above.
87. Guenthner and Samuelson directly or indirectly made or caused to be made materially false or misleading statements, or omitted to state or caused other persons 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: (1) an audit or examination of the financial statements of an issuer required to be made pursuant to the Exchange Act; or (2) the preparation or filing of any document or report required to be filed with the Commission pursuant to the Exchange Act or otherwise.
88. By reason of the foregoing, Guenthner and Samuelson violated, and unless restrained and enjoined will violate Rule 13b2-2 under the Exchange Act [17 C.F.R. § 240.13b2-2].
Fourth Claim for Relief
(Aiding and Abetting by Guenther and Samuelson of InaCom's Violations of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-13)
89. Plaintiff repeats and realleges paragraphs 1 through 79 above.
90. InaCom, an issuer of a security registered pursuant to Section 12(b) of the Exchange Act, filed materially misleading annual and quarterly reports with the Commission.
91. By reason of the foregoing, InaCom violated Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20 and 13a-13 thereunder [17 C.F.R. §§ 240.12b-20 and 240.13a-13].
92. Guenthner and Samuelson knew of InaCom's violations of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder and substantially assisted InaCom in committing these violations.
93. By reason of the foregoing, Guenthner and Samuelson aided and abetted InaCom's violations of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder, and unless restrained and enjoined will continue to aid and abet violations of these provisions.
Fifth Claim for Relief
(Aiding and Abetting by Guenther and Samuelson of InaCom's Violations of Section 13(b)(2) of the Exchange Act)
94. Plaintiff repeats and realleges paragraphs 1 through 79 above.
95. InaCom failed to make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflected the company's transactions and dispositions of its assets and 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.
96. By reason of the foregoing, InaCom violated Section 13(b)(2) of the Exchange Act [15 U.S.C. § 78m(b)(2)].
97. Guenthner and Samuelson knew of InaCom's violations of Section 13(b)(2) of the Exchange Act and substantially assisted InaCom in committing these violations.
98. By reason of the foregoing, Guenther and Samuelson aided and abetted InaCom's violations of Section 13(b)(2) of the Exchange Act, and unless restrained and enjoined will continue to aid and abet violations of these provisions.
Prayer for Relief
Wherefore, the Commission respectfully requests that the Court:
Find that the defendants, and each of them, committed the violations alleged.
Enter an injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, permanently restraining and enjoining each defendant from violating, directly or indirectly, the provisions of law and rules alleged in this Complaint.
Order Guenthner and Samuelson to pay third tier civil money penalties pursuant to Section 21(d)(3) of the Exchange Act.
Grant such other relief as this Court may deem just or appropriate.