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U.S. Securities and Exchange Commission


Litigation Release No. 19740 / June 27, 2006

Accounting and Auditing Enforcement Release No. 2446 / June 27, 2006

SEC v. PowerLinx, Inc. (f/k/a SeaView Video Technology, Inc.), George S. Bernardich III, and James R. Cox, Civil Action No. 06-Civ-1172 (D.D.C. filed June 27, 2006)

SEC Charges PowerLinx, Inc. and Two Former Officers with Fraud

The Securities and Exchange Commission today filed a civil action in the United States District Court for the District of Columbia against PowerLinx, Inc. ("PowerLinx," formerly known as SeaView Video Technology, Inc.), a manufacturer of security products and underwater cameras that is based in St. Petersburg, Florida, its former chief executive officer, George S. Bernardich III, and its former secretary and treasurer, James R. Cox, for issuing false and misleading press releases and making false and misleading filings with the SEC at various times between 2000 and 2004. PowerLinx consented to the entry of a judgment permanently enjoining it from violating Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 ("Exchange Act"), which are general antifraud provisions of the federal securities laws. PowerLinx also consented to being enjoined from violating the periodic reporting, books and records, and internal controls provisions contained in Exchange Act Sections 13(b)(2)(A), 13(b)(2)(B), and 15(d) and Rules 15d-1, 15d-11, 15d-13, and 12b-20 thereunder. Bernardich and Cox consented to the entry of judgments permanently enjoining them from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and aiding and abetting PowerLinx's reporting violations, and barring them from serving as officers and directors of public companies for a period of ten years. PowerLinx, Bernardich, and Cox consented to the entry of the judgments without admitting or denying the allegations in the SEC's complaint. The requested relief is subject to court approval.

The complaint alleges that in September 2004, PowerLinx violated the antifraud provisions of the federal securities laws by issuing materially misleading press releases and filing materially misleading reports with the SEC concerning a purported $23 million sales contract with a defense contractor known as Universal General Corporation ("UGC"), which, in fact, had no revenues, no assets, and no means to satisfy any portion of its $23 million contractual obligation to PowerLinx. According to the complaint, PowerLinx performed virtually no due diligence to determine whether UGC was legitimate and could meet its contractual obligations. Bernardich was responsible for PowerLinx's due diligence failures and for drafting PowerLinx's materially misleading press releases and SEC filings.

The complaint also alleges that during the first three quarters of fiscal year 2000, PowerLinx fraudulently recognized nearly ninety percent of its reported revenues based on fictitious camera sales by initiating consignment arrangements with numerous dealers and recording the consignment order amounts as revenue before any cameras were manufactured, shipped to the dealers, or sold to customers. During this same period, PowerLinx also issued numerous deceptive press releases that materially misrepresented the company's operations and offered glowing, but unsubstantiated, revenue and earnings forecasts. In April 2001, following a management change, PowerLinx filed with the SEC an annual report for 2000 containing a misleading restatement of revenues and other materially misleading disclosures and accounting errors. According to the complaint, the principal architect of PowerLinx's fraudulent activities during 2000 was its now-deceased former chief executive officer, Richard L. McBride. However, as further alleged, Cox was responsible for certain of PowerLinx's fraud and reporting violations and Bernardich, who had replaced McBride as chief executive officer in February 2001, aided and abetted PowerLinx's reporting violations with respect to the company's 2000 annual report.

In related SEC proceedings, PowerLinx's former independent auditors, Accounting Consultants, Inc. ("Accounting Consultants") and Carol L. McAtee, CPA, have consented to the issuance of cease-and-desist orders for causing certain of the company's reporting violations, and to orders pursuant to Rule 102(e) of the SEC's Rules of Practice denying them the privilege of appearing or practicing as accountants before the SEC with the right to reapply after two years. The SEC found that Accounting Consultants and McAtee had failed, in repeated instances, to comply with Generally Accepted Auditing Standards in performing their quarterly reviews and year-end audit of PowerLinx's 2000 financial statements. Accounting Consultants and McAtee consented to the issuance of the order without admitting or denying the findings in the Order. For further information, see Securities Exchange Act Release No. 34-54048 (June 27, 2006).

In addition, PowerLinx's current chief financial officer, Douglas Bauer, has consented to the issuance of a cease-and-desist order for his role in causing PowerLinx's reporting violation in connection with its April 2002 restatement of a deferred tax asset. Bauer consented to the issuance of the order without admitting or denying the findings in the Order. For further information, see Securities Exchange Act Release No. 34-54049 (June 27, 2006).

SEC Complaint in this matter
Administrative Proceeding No. 34-54048
Administrative Proceeding No. 34-54049



Modified: 06/27/2006