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U.S. Securities and Exchange Commission

Kenneth J. Guido, Cal. Bar No. 40020
Plaintiff's Trial Counsel
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0911
Telephone: (202) 942-7933
Facsimile: (202) 942-9581

UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA


SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

vs.

AURA SYSTEMS, INC.,
NEWCOM, INC.,
ZVI (HARRY) KURTZMAN,
STEVEN C. VEEN,
SULTAN W. KHAN,
ASIF M. KHAN, and
KOREA DATA SYSTEMS USA, INC.,

Defendants.


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Case No.

COMPLAINT

JUDGMENT

Plaintiff Securities and Exchange Commission ("SEC") alleges:

NATURE OF THE ACTION

1. This is an accounting fraud case. During its 1997 and 1998 fiscal years, Aura Systems, Inc., ("Aura"), currently a seller of an induction power system for mobile power applications, and formerly a seller of sound related and multi-media products, overstated its revenue by at least $26.5 million by fictitiously inserting itself into the distribution chain for Korea Data Systems Co., Ltd. ("KDS Korea") computer monitors that were sold to a major U.S. personal computer retailer and by recognizing revenue from nonexistent sales of computer monitors to two shell entities. During its 1998 and 1999 fiscal years, Aura's majority-owned subsidiary, NewCom, Inc., also recorded balance sheet overstatements of at least $43.2 million by booking fictitious sales, prematurely recognizing revenue, overstating receivables, and overstating inventory. Aura also recorded a portion of these overstatements in its consolidated annual and quarterly reports. Furthermore, in two quarterly reports filed in its 1997 fiscal year, Aura improperly recognized another $2.54 million in contract revenue that it had earned and booked in prior periods.

JURISDICTION

2. The SEC brings this action pursuant to the authority conferred on it under Sections 20(b) of the Securities Act of 1933 [15 U.S.C. § 77t(b)] and Sections 21(d) and 21(e) of the Securities Exchange Act of 1934 [15 U.S.C. §§ 78u(d) and 78u(e)] to enjoin defendants Aura, NewCom, Kurtzman, Veen, Sultan Khan and Asif Khan from engaging in the acts, practices and courses of business alleged herein, to obtain a civil penalty from each defendant, and to obtain further relief as is necessary and appropriate. This Court has jurisdiction over this action pursuant to Section 22(a) of the Securities Act [15 U.S.C. §77v(a)] and Section 27 of the Exchange Act [15 U.S.C. §78aa].

3. Each of the defendants, directly or indirectly, made use of the means or instrumentalities of interstate commerce, or of the mails, in connection with the transactions, acts, practices, and courses of business alleged herein.

4. Each defendant violated the antifraud provisions of the Exchange Act and other provisions of the federal securities laws. Defendants Aura, Kurtzman, Veen and KDS each violated the antifraud provisions of the Securities Act. Aura also violated an SEC cease-and-desist order. The SEC seeks awards of civil penalties pursuant to Section 20(d) of the Securities Act and/or Section 21(d)(3) of the Exchange Act from each defendant. Unless enjoined by order of this Court, defendants Aura, NewCom, Kurtzman, Veen, Sultan Khan and Asif Khan are likely to commit future violations, and the SEC seeks a judgment permanently enjoining these defendants from future violations. The SEC also seeks with respect to Kurtzman an order pursuant to Section 21(d)(2) of the Exchange Act permanently and unconditionally barring him from serving as an officer or director of a public company, and with respect to Veen an order pursuant to Section 21(d)(2) of the Exchange Act barring him from serving as an officer or director of a public company for a period of five years.

DEFENDANTS

5. Aura Systems, Inc. ("Aura"), a Delaware corporation headquartered in El Segundo, California, formerly sold sound related and multi-media products, and now sells an induction power system for mobile power applications. Aura's common stock is registered with the SEC pursuant to Section 12(g) of the Exchange Act and was quoted on the NASDAQ national market system until July 1999, when its stock was delisted. Aura's stock currently trades on the over-the-counter bulletin board under the symbol "AURA." Aura's fiscal year ends February 28. On October 2, 1996, the SEC entered a Cease-and-Desist Order by consent against Aura and others for violations of Section 17(a) of the Securities Act and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13 promulgated thereunder. In the Matter of Aura Systems, Inc., et al., Admin. Proc. File No. 3-9138 (October 2, 1996).

6. NewCom, Inc. ("NewCom"), now known as Ncom, Inc., formerly headquartered in Westlake Village, California, was incorporated under the laws of Delaware in June 1994 as a wholly owned subsidiary of Aura and was in the business of selling computer communication and multimedia products. In September 1997, NewCom completed an initial public offering. As of the end of its 1998 fiscal year, Aura owned approximately 69% of NewCom's stock. NewCom's common stock was registered with the SEC pursuant to Section 12(g) of the Exchange Act and was quoted on the NASDAQ national market system. NewCom ceased operations and its stock was delisted in May 1999.

7. Zvi Kurtzman, age 54, also known as Harry Kurtzman, was until February 28, 2002 Aura's Chief Executive Officer and Chairman of the Board of Directors. Although not an officer or director of NewCom, as a control person of Aura, Kurtzman participated in decision making at NewCom at various times relevant to this Complaint. Kurtzman resides in Los Angeles, California. On October 2, 1996, the SEC entered a Cease-and-Desist Order by consent against Kurtzman and others for violations of Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and for causing Aura's violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1 and 13a-13 thereunder. Id.

8. Steven C. Veen, age 46, a certified public accountant, was until February 28, 2002 Aura's Chief Financial Officer. He also served as NewCom's Chief Financial Officer and a member of its Board of Directors. Veen resides in Los Angeles County, California.

9. Sultan W. Khan, age 57, was NewCom's President and Chairman of the Board of Directors. Khan resides in Calabasas, California.

10. Asif M. Khan, age 57, was NewCom's Executive Vice President and a member of its Board of Directors. Khan resides in Westlake Village, California.

11. Korea Data Systems USA, Inc. ("KDS"), a California corporation located in Garden Grove, California, was a U.S. affiliate of Korea Data Systems Co. Ltd. ("KDS Korea"), a Korean manufacturer of computer monitors. During its 1997 and 1998 fiscal years, Aura claims to have purchased and resold KDS computer monitors.

FACTS

Aura's Purported Monitor Resale Transactions
The Fiscal 1997 Resale Transactions to Mag Innovision

12. From at least 1996 to 1998, KDS Korea manufactured and sold two brands of computer monitors to a California computer monitor distributor then called Mag Innovision. Mag Innovision sold one brand to its own customers; the other brand belonged to a major U.S. personal computer retailer that had a contract with Mag Innovision.

13. Mag Innovision placed its monitor orders directly with KDS Korea, and KDS Korea shipped the monitors directly to Mag Innovision and/or the U.S. personal computer retailer. KDS, in Garden Grove, initially received some of Mag Innovision's payments for the monitors. Aura had nothing whatsoever to do with these monitor sales.

14. Nonetheless, Kurtzman arranged for Aura to insert itself into the monitor-sale transactions on paper so that it could record nonexistent revenue. To accomplish this, Veen booked sales and created and carried open accounts receivable from Aura's alleged monitor customers. Aura personnel also created or caused the creation of false documents to make it appear that Aura was a party to these computer monitor sales from KDS Korea to Mag Innovision and the U.S. retailer. These false documents included false Mag Innovision purchase orders, false Aura invoices to Mag Innovision, and false invoices from KDS to Aura.

15. In its fiscal 1997 annual report on Form 10-K filed with the SEC on June 13, 1997, Aura improperly reported $16.5 million in sales of KDS computer monitors to Mag Innovision.

16. KDS agreed to this purported insertion of Aura into the transactions for business reasons of its own.

17. Aura provided false documents to its independent auditors during its fiscal 1997 audit to support the sales.

18. To convince its auditors that the receivable from Mag Innovision was legitimate and to avoid a write-off at year-end, Aura made arrangements with KDS to record false "payments" from Mag Innovision. On at least six occasions in fiscal 1997 and 1998, KDS instructed Mag Innovision to pay a combined total of $13.4 million in funds Mag Innovision owed KDS directly to Aura. Aura booked these transfers as payments for computer monitors. KDS then credited Mag Innovision on its books for the payments.

19. After recording the payments from Mag Innovision, in several transfers from June 27, 1996 to November 3, 1997, Aura paid KDS back virtually all of the funds it had received from Mag Innovision.

20. In July, 1996, Aura falsely booked as payments from Mag Innovision another $1.9 million of funds Aura had received from a defunct shell company affiliated with KDS called Orchestra MultiSystems ("Orchestra"). Aura paid all $1.9 million back to KDS within several days of receiving the payments from Orchestra.

21. In connection with the fiscal 1997 year end audit, Aura's independent auditors were provided a false "balance due" audit confirmation letter concerning the collectibility of the Mag Innovision receivable. This confirmation letter asked Mag Innovision to confirm that it owed Aura approximately $9 million as of February 28, 1997. The confirmation letter was purportedly signed by a Mag Innovision employee. However, the person who purportedly signed the letter was not a Mag Innovision employee, and the signature was not authentic.

22. By recording the fictitious sales, in its fiscal 1997 annual report on Form 10-K, Aura materially overstated revenue by $16.5 million and accounts receivable by approximately $9 million, or approximately 15% of gross receivables. Aura also falsely described itself as a computer monitor reseller in the text of its annual report.

The Fiscal 1998 Resale Transactions to MCDP

23. In Aura's 1998 fiscal year, Aura booked revenue from wholly fictitious monitor resales to MCDP. By 1998, MCDP was out of business and existed only as a defunct shell entity affiliated with KDS.

24. Aura used false purchase orders to Aura from MCDP and corresponding false invoices from Aura to MCDP and from KDS to Aura to make it appear that Aura was reselling KDS monitors to MCDP.

25. Between April 1997 and February 1998, Aura booked $5.9 million in nonexistent sales to MCDP. As with the Mag Innovision fraud, Kurtzman and Veen made or caused entries in Aura's internal accounting system to reflect the fictitious sales, and provided false documents to Aura's independent auditors during the year-end audit.

26. A full year after the first purported sale to MCDP, Aura and KDS made circular wire transfers to MCDP to allow Aura to record "payments" from the fictitious sales and avoid a receivable write-off at year-end. In mid-1998, KDS wired approximately $2.4 million to MCDP in five separate transfers. Next, MCDP made five payments totaling $2.4 million to Aura. Aura falsely booked those transfers as payments for the computer monitors. Between April 30 and July 29, 1998, Aura repaid KDS all $2.4 million.

27. In connection with the fiscal 1998 year-end audit, Aura's independent auditors were provided a false accounts receivable confirmation letter. That confirmation letter purported to confirm that MCDP owed Aura a balance of $5.9 million as of February 28, 1998. However, the signature on the letter was not authentic. Several months later, on the last day of fiscal 1999, Kurtzman and Veen caused Aura to write off over $5 million in receivables attributable to the MCDP sales.

28. During the fiscal 1999 year-end audit, Aura's auditors discovered the write-off and asked for further information about Aura's sales to MCDP and purchases from KDS. At that time, Kurtzman falsely described the relationship between KDS and MCDP to the independent auditors.

29. As a result of this scheme, in its 1998 annual report on Form 10-K, Aura materially overstated revenue by $5.9 million attributable to the fictitious sales to MCDP. It also overstated accounts receivable by $5.9 million, or approximately 9% of gross receivables. Aura also falsely described itself as a computer monitor reseller in the text of its 1998 annual report.

The Fiscal 1998 Resale Transactions to FYE

30. Also in its 1998 fiscal year, Aura falsely reported revenue from fictitious computer monitor sales to FYE Trading ("FYE"), another defunct shell company affiliated with KDS. Aura recorded this revenue between March 1997 and February 1998.

31. As with the purported sales to Mag Innovision and MCDP, Aura used false documents, including false purchase orders from FYE to Aura, to support Aura's alleged sales to FYE. Kurtzman and Veen also made or caused accounting entries to reflect the purported sales in Aura's internal accounting system.

32. After the last of these sales was booked, Aura and KDS made circular wire transfers to create the appearance that FYE was paying Aura for the monitors. On five occasions between March 11 and August 25, 1998, FYE transferred a total of $2.25 million to Aura, which Aura recorded as payments for monitors. Within days of its payments to Aura, KDS transferred the $2.25 million to FYE. Between March and July 1998, Aura repaid KDS the $2.25 million it had received from FYE.

33. In June 1998, in connection with the fiscal 1998 year-end audit, Aura's independent auditors were provided a false accounts receivable confirmation letter, confirming that FYE Trading owed Aura approximately $4.1 million as of February 28, 1998. The signature on the letter was not authentic.

34. On the last day of the next fiscal year, Aura's fiscal year 1999, Veen and Kurtzman caused Aura to write off over $3.5 million in receivables attributable to the FYE sales. When the independent auditors discovered the write-off and asked Aura for additional information, Kurtzman made false representations about Aura's relationship with FYE.

35. In its fiscal 1998 annual report on Form 10-K, Aura materially overstated revenue by $4.1 million attributable to the fictitious sales to FYE Trading. It also overstated accounts receivable by $4.1 million, or approximately 6% of gross receivables for the year. The false sales to MCDP and FYE, totaling $10 million, accounted for 15% of Aura's total accounts receivable.

36. Kurtzman, Veen and others knew or were reckless in not knowing that Aura should not have recorded the alleged monitor sales to Mag Innovision, MCDP and FYE, and that recording and carrying them on Aura's books rendered materially false and misleading Aura's financial statements contained in its 1997 and 1998 annual reports on Form 10-K. Kurtzman, Veen and others each signed these annual reports that they knew or were reckless in not knowing contained the materially false monitor resale transactions.

37. In fiscal years 1997 and 1998, Kurtzman, Veen and others signed management representation letters that they knew or were reckless in not knowing contained false representations that Aura's sales were legitimate. Kurtzman, Veen and others caused those representation letters to be provided to Aura's independent auditors.

The NewCom Violations

38. During its 1998 and 1999 fiscal years, Aura's subsidiary, NewCom, inflated pre-tax net income by at least $43.2 million, as described below. At various times relevant to this Complaint, Kurtzman participated in decision making at NewCom. Aura's CFO, Veen, a director of both companies, also became NewCom's first CFO, and signed all of NewCom's quarterly and annual reports.

NewCom Records Millions of Dollars in Fake Shipments in Fiscal 1999

39. Throughout fiscal years 1998 and 1999, Kurtzman periodically provided sales quotas for NewCom.

40. At the end of each quarter during NewCom's 1999 fiscal year, NewCom booked nonexistent sales of product as if they had shipped, thereby materially overstating earnings and revenue and creating fictitious open account receivable balances on NewCom's books.

41. In order to accomplish the false sales, NewCom personnel created and signed false shipping documents to make it appear that Kurtzman's sales quotas for NewCom had been met.

42. Several former NewCom employees, including NewCom's interim CFO, discovered false sales booked in fiscal 1999. Beginning in or about August 1998, on several occasions, the interim CFO informed Kurtzman and Veen, among others, of false sales. Another employee also participated in at least one of these conversations.

43. Another employee also created a document listing false sales in fiscal 1999. The document was provided to Kurtzman.

44. NewCom reported at least $15.3 million in false sales in its fiscal 1999 third quarter report on Form 10-Q, making that filing materially false.

(a) Approximately $3.7 million of the false sales represented shipments that were allegedly made on September 16, 1998, all of which NewCom claimed were thereafter "refused" or "cancelled" by the customer. Three months later, two weeks after the close of the third quarter, NewCom issued credit memos for those sales, effectively taking them off the books as of December 15.

(b) The additional $11.6 million of these false sales represented shipments allegedly made on November 30, the last day of the third quarter. NewCom issued credit memos for each of those sales two weeks after the close of the third quarter, effectively removing them from NewCom's books.

45. Because NewCom's interim CFO refused to sign a false report, Veen signed the third quarter Form 10-Q as CFO of NewCom. That report for the period ended November 30, 1998, was filed with the SEC on January 19, 1999. When he signed, Veen knew or was reckless in not knowing that the report contained materially false sales numbers.

NewCom Overstates Inventory and Net Income by
Approximately $23 Million In its Fiscal 1999 Third Quarter

46. In its fiscal 1999 third quarter report on Form 10-Q, NewCom overstated inventory, and therefore net income, by $23 million.

47. In September 1998, two months before the close of the third quarter, an independent consultant appraised NewCom's inventory at $6 million. That appraisal assigned NewCom's WebPal products a value of "SCRAP," or $0, at September 16, 1998.

48. Despite the independent inventory appraisal done earlier in the quarter, NewCom reported its inventory at book value of $29 million, and reserved only $885,000, in its November 30, 1998 quarterly report on Form 10-Q, filed with the Commission on January 19, 1999. After filing that quarterly report, NewCom increased its inventory reserve by almost $14 million.

49. By this conduct, NewCom materially overstated inventory, understated cost of goods sold, and therefore overstated net income before tax in its November 30, 1998 quarterly report on Form 10-Q by approximately $23 million. Veen signed that report, and knew or was reckless in not knowing that it contained materially overstated inventory values.

NewCom Fails to Timely Post Credits and Rebates Throughout Fiscal 1999

50. NewCom purposefully delayed recording into its accounting system customer credits taken from invoices for certain sales and marketing programs. These credits due to NewCom customers reduced the true value of NewCom's accounts receivable. As a result of the delay in recording these customer credits, NewCom's accounts receivable balances remained artificially inflated throughout fiscal 1999. By the close of NewCom's fiscal 1999 third quarter, the valid, but unposted, credits totaled at least $8.6 million.

51. Veen and Sultan Khan knew of the unposted credits. In fact, one of NewCom's bookkeepers created a spreadsheet listing the discrepancies between booked receivables and actual collectible receivables. For one territory, the discrepancy between booked and collectible receivables as of July 1998 was approximately $10 million, thus reflecting a $10 million overstatement of NewCom's accounts receivable on its books.

52. NewCom's bookkeeper discussed the accounts receivable overstatements with Veen and others. Veen and others refused to post the full backlog of delayed customer credits to NewCom's accounting system to make NewCom's books accurate.

53. NewCom also did not timely input into its accounting system customer rebates in fiscal 1999. Customer rebates were an account payable that NewCom owed to its customers. As a result, this non-posting of customer rebates had the effect of artificially inflating NewCom's receivables by more than $6 million by the fall of 1998.

54. In its quarterly report for the period ending November 30, 1998, NewCom accrued a grossly inadequate $12 million reserve for rebates, returns, and price protection. Thereafter, NewCom wrote down its receivable balance from approximately $35 million in the third quarter to approximately $2 million at year end. By delaying the posting of the credits and rebates until the fourth quarter, NewCom was able to report inflated receivables and income in the earlier interim filings. Veen signed these fiscal 1999 quarterly reports on Forms 10-Q while knowing or being reckless in not knowing that they contained materially inflated receivable numbers due to the non-posting of customer credits and rebates.

NewCom Fraudulently Records $4.9 Million in Consignment
and Other Sales to Orbis Industries During its 2nd Quarter of Fiscal 1999

55. During the quarter ending August 31, 1998, NewCom overstated revenue and receivables by $4,907,118 by recording consignment sales and other sales where the earnings process had not been completed as "final sales." The sales were all made to a contract manufacturing company called Orbis Industries ("Orbis").

56. On July 31, 1998, NewCom entered into a Distribution Agreement with Orbis, pursuant to which Orbis would attempt to sell certain obsolete NewCom products in South America, but NewCom would accept for return any product that Orbis did not sell. That contract was not to go into effect until Orbis established a market for NewCom's products in South America.

57. On August 3, Orbis and NewCom entered into a "Best Efforts Agreement." The Best Efforts Agreement describes "consignment material" that Orbis would attempt to sell on a "best efforts basis." Both the Distribution Agreement and the Best Efforts Agreements dictate the terms for consignment sales which, pursuant to GAAP, may only be recorded when the actual sale occurs.

58. Simultaneously with the Best Efforts Agreement, also on August 3, Orbis and NewCom executed a third agreement titled "NewCom, Inc. Authorized Retailer/Distributor Sales Agreement." The agreement designates Orbis as a distributor of NewCom products, and provides that Orbis shall issue purchase orders for the products it wishes to purchase and resell. Although the agreement does not mention any right of return, it is not a final sales contract because it was contingent on Orbis obtaining contracts for the products in South America.

59. In September 1998, NewCom shipped product to Orbis's headquarters in California that NewCom valued at $4.9 million (even though most of it was obsolete in the U.S.). Of this amount, approximately $1.4 million was consignment material to be sold first under the Best Efforts Agreement, and approximately $3.5 million would be sold thereafter under the contingent Distribution Agreement when and if Orbis obtained contracts in South America for the product. The Distribution Agreement had not yet been, and would not be, implemented until after Orbis sold the $1.4 million in consignment material. Orbis's obligation to pay for the product under both agreements would arise only after Orbis sold or had contracts to sell the product.

60. Nevertheless, NewCom booked all $4.9 million as final sales in the second quarter of fiscal 1999 and invoiced Orbis for that amount in September and October 1998. Orbis returned the invoices to NewCom without paying them.

61. In late 1998 and early 1999, Orbis sold the consignment material that NewCom valued at approximately $1.4 million for $600,000 in Argentina. By early 1999, NewCom was out of business and its lender began seizing its assets. At that time, at NewCom's request, Orbis returned to NewCom the remaining product, which NewCom had allegedly sold to Orbis for approximately $3.5 million. Orbis had never obtained contracts for that material nor shipped it out of California.

62. Despite the fact that NewCom provided its products to Orbis on a consignment basis, NewCom recorded an account receivable due from Orbis of $4.9 million in its accounting system and continued to carry that receivable on its books.

63. Therefore, during its second quarter of fiscal 1999, NewCom fraudulently booked approximately $1.4 million in consignment sales as final sales, and booked another $3.5 million in sales that had not yet occurred. As a result, NewCom overstated gross revenues and profit before tax by $4.9 million in its fiscal 1999 second quarter report on Form 10-Q.

64. Sultan Khan knowingly or recklessly allowed these sales to be falsely included in NewCom's fiscal 1999 second quarter report on Form 10-Q and to be reported to NewCom's lender.

65. Veen signed the Form 10-Q while knowing or being reckless in not knowing that it contained consignment sales booked as final sales and sales that had not yet occurred.

66. These sales and resulting accounts receivable were material to NewCom's financial statements. They represented 12% of NewCom's total receivables as of August 31, 1998, and NewCom's before tax net income at August 31, 1998 was only $1.1 million, including the sales to Orbis. At year end, NewCom made an adjusting journal entry to write off the entire $4.9 million Orbis receivable.

Defendants' Knowledge

67. Sultan Khan, Asif Khan, Kurtzman, and Veen knew or were reckless in not knowing of NewCom's false sales, overstated inventory, unposted customer credits and rebates, and overstated net income due to the Orbis entries. NewCom's interim CFO informed each of them about these problems in a written document dated November 12, 1998. Each of them nevertheless allowed NewCom to file the false reports described above, and Veen signed each of those reports as NewCom's CFO. In those reports, NewCom made no mention of, and did not correct, any of the accounting improprieties the interim CFO and at least two others had brought to the attention of Kurtzman, Veen, Sultan Khan, Asif Khan and others.

68. Sultan Khan, Asif Khan, Kurtzman, and Veen knowingly or recklessly allowed NewCom to report these false numbers on its books and in its public filings in order to deceive the company's investors.

69. In its fiscal year 1998 annual report on Form 10-K, Aura reported its proportionate interest in the results of operations and financial position of NewCom. In its fiscal year 1999 interim filings on Form 10-Q, Aura reported its proportionate interest in the results of operations and financial position of NewCom. As a result, Aura's 1998 Form 10-K, May 31, 1998 Form 10-Q, August 31, 1998 Form 10-Q, and November 30, 1998 Form 10-Q are materially false.

Aura Fraudulently Recognized an Additional $2.54 Million
in Contract Revenue in Fiscal 1997

70. In Aura's second and third quarterly reports filed during its 1997 fiscal year, Veen and others caused Aura to make two incorrect revenue recognition entries relating to contracts Aura had to install its electric valve actuators in engines, while knowing or being reckless in not knowing that the revenue had not been earned during those quarters. The entries resulted in material revenue overstatements of $1.04 million in the second quarter and $1.5 million in the third quarter.

71. By virtue of these entries, Aura's fiscal 1997 second and third quarter reports on Form 10-Q were false and misleading. The entries were material to Aura's financial results: The second quarter entry had the effect of overstating revenue by $1.04 million. Without that entry, Aura would have reported a loss of approximately ($515,000), rather than net income of $525,000. Similarly, the third quarter entry had the effect of overstating revenue by $1.5 million. Without that entry, Aura would have reported a loss of approximately ($631,000), rather than net income of $868,246.

72. At its 1997 year-end, Veen made or caused Aura to make entries to reverse the $1.04 and $1.5 million Aura had recognized in the second and third quarters. Veen reversed the $1.5 million entry by netting it against an unrelated $3.5 million license fee receivable, and directly reversed the $1.04 million entry at year end.

FIRST CLAIM

Violations of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]

73. Paragraphs 1 through 72 are realleged and incorporated by reference.

74. On December 4, 1997, Aura filed a registration statement on Form S-3 with the SEC. That registration statement incorporated by reference Aura's materially false annual report for fiscal year 1997. Kurtzman and Veen signed the registration statement while knowing or being reckless in not knowing that the 1997 annual report incorporated therein by reference contained materially false financial statements due to the purported computer monitor transactions. Based on its conduct alleged herein, KDS was a cause of Aura's inclusion of the fiscal 1997 purported monitor sales in annual reports and registration statements filed with the SEC and made available to investors.

75. On June 25, 1998, Aura filed a registration statement on Form S-3 with the SEC. That registration statement incorporated by reference Aura's materially false annual report for fiscal year 1998. Kurtzman and Veen signed the registration statement while knowing or being reckless in not knowing that the 1998 annual report incorporated therein by reference contained materially false financial statements due to the purported monitor transactions. Based on its conduct alleged herein, KDS was a cause of Aura's inclusion of the fiscal 1998 purported monitor sales in annual reports and registration statements filed with the SEC and made available to investors.

76. By reason of the foregoing, Aura, Kurtzman, Veen, and KDS each violated Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].

SECOND CLAIM

Violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)]
and Rule 10b-5 [17 C.F.R. § 240.10b-5]

77. Paragraphs 1 through 76 are realleged and incorporated by reference.

78. By reason of the foregoing, Aura, NewCom, Kurtzman, Veen, KDS, Sultan Khan, and Asif Khan each violated 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].

THIRD CLAIM

Violations of Section 13(a) of the Exchange Act
[15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1 and 13a-13
[17 C.F.R. §§ 240.12b-20, 13a-1, and 13a-13]

79. Paragraphs 1 through 78 are realleged and incorporated by reference.

80. Aura and NewCom filed with the SEC the annual reports on Form 10-K and quarterly reports on Form 10-Q described herein that contained untrue statements of material fact or omitted to state material facts required to be stated therein or necessary to make the statements made not misleading, concerning, among other things, Aura's and NewCom's sales, revenues, and/or net income.

81. By reason of the foregoing, Aura and NewCom violated Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1 and 13a-13 thereunder [17 C.F.R §§ 240.12b-20, 240.13a-1, and 240.13a-13].

FOURTH CLAIM

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

82. Paragraphs 1 through 81 are realleged and incorporated by reference.

83. By reason of the foregoing, Kurtzman, Veen, Sultan Khan and Asif Khan each violated Section 13(b)(5) of the Exchange Act [15 U.S.C. §78m(b)(5)].

FIFTH CLAIM

Violations of Section 13(b)(2)(A) and (B)
of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)&(B)]

84. Paragraphs 1 through 83 are realleged and incorporated by reference.

85. Aura violated Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)] by maintaining false and misleading books and records that, among other things, materially overstated sales and contract revenue in fiscal years 1997 and 1998.

86. Aura violated Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)] by failing to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that its transactions were recorded as necessary to permit preparation of financial statements in conformity with GAAP.

87. NewCom violated Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)] by maintaining false and misleading books and records that, among other things, materially overstated sales, other receivable, and inventory in fiscal years 1998 and 1999.

88. NewCom violated Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)] by failing to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that its transactions were recorded as necessary to permit preparation of financial statements in conformity with GAAP.

SIXTH CLAIM

Violations of Exchange Act Rule 13b2-1 [17 C.F.R. § 240.13b2-1]

89. Paragraphs 1 through 88 are realleged and incorporated by reference.

90. Kurtzman and Veen, directly or indirectly, falsified or caused to be falsified, Aura's books, records or accounts subject to Section 13(b)(2)(A) of the Exchange Act. By reason of the foregoing, Kurtzman and Veen each violated Exchange Act Rule 13b2-1 [17 C.F.R. §240.13b2-1].

91. By virtue of the conduct alleged above, Kurtzman, Veen, Sultan Khan and Asif Khan, directly or indirectly, falsified or caused to be falsified, NewCom's books, records or accounts subject to Section 13(b)(2)(A) of the Exchange Act. By reason of the foregoing, Kurtzman, Veen, Sultan Khan and Asif Khan each violated Exchange Act Rule 13b2-1 [17 C.F.R. §240.13b2-1].

SEVENTH CLAIM

Violations of Exchange Act Rule 13b2-2 [17 C.F.R. § 240.13b2-2]

92. Paragraphs 1 through 91 are realleged and incorporated by reference.

93. Kurtzman and Veen, as officers and directors of Aura, directly or indirectly, made materially false or misleading statements, or omitted to state, or caused another person to omit to state material facts necessary in order to make statements made, in light of the circumstances under which they were made, not misleading to Aura's accountants in connection with their audits of Aura's financial statements for fiscal years 1997 and 1998. By reason of the foregoing, Kurtzman and Veen each violated Exchange Act Rule 13b2-2 [17 C.F.R. §240.13b2-2].

SEVENTH CLAIM

Aura's Violation of SEC Cease-and-Desist Order

94. Paragraphs 1 through 93 are realleged and incorporated by reference.

95. On October 2, 1996, the SEC ordered Aura to cease and desist from committing or causing violations of Section 17(a) of the Securities Act and Sections 10(b), 13(a), 13(b)(2)(A) and (B), of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder. Aura received a copy of that order.

96. By virtue of the conduct alleged herein, Aura violated that order.

PRAYER FOR RELIEF

WHEREFORE, the SEC respectfully requests that this Court enter a judgment:

    (a) permanently enjoining Aura, NewCom (now known as Ncom, Inc.), Kurtzman, and Veen from violating Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)];

    (b) permanently enjoining Aura, NewCom (now known as Ncom, Inc.), Kurtzman, Veen, Sultan Khan, and Asif Khan from violating Section 10(b) of the Exchange Act [15 U.S.C. §§ 78j(b)] and Exchange Act Rule 10b-5 [17 C.F.R. §§ 240.10b-5];

    (c) permanently enjoining Aura and NewCom (now known as Ncom, Inc.) from violating Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 78m(a), 78m(b)(2)(A), and 78m(b)(2)(B),] and Exchange Act Rules 12b-20, 13a-1, and 13a-13 [17 C.F.R. §§ 240.12b-20, 13a-1, and 13a-13];

    (d) permanently enjoining Kurtzman and Veen from violating Section 13(b)(5) of the Exchange Act [15 U.S.C. §§ 78m(b)(5)] and Exchange Act Rules 13b2-1 and 13b2-2 [17 C.F.R. §§ 240.13b2-1 and 13b2-2];

    (e) permanently enjoining Sultan Khan and Asif Khan from violating Section 13(b)(5) of the Exchange Act [15 U.S.C. §§ 78m(b)(5)] and Exchange Act Rule 13b2-1 [17 C.F.R. §§ 240.13b2-1];

    (f) ordering Aura, NewCom (now known as Ncom, Inc.), Kurtzman, Veen, Sultan Khan, Asif Khan, and KDS to pay civil monetary penalties pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. §78u(d)(3)] in respect of their violations;

    (g) permanently and unconditionally barring Kurtzman from serving as an officer or director of a public company pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)];

    (h) barring Veen from serving as an officer or director of a public company pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)] for a period of five years; and

    (i) granting such other relief as this Court may deem just and appropriate.

Dated: June 10, 2002
Washington, D.C.

Respectfully submitted,

_________________________
Thomas C. Newkirk
Cheryl J. Scarboro
Kenneth J. Guido* Cal. Bar No. 40020
C. Joshua Felker
Stacy A. Dowling
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0911
(202) 942-7933 [Guido]
(202) 942-9581 [Trial Unit FAX]

* Plaintiff's Trial Attorney


http://www.sec.gov/litigation/complaints/complr17557b.htm

Modified: 06/11/2002