U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20740 / September 25, 2008
Accounting and Auditing Enforcement Release No. 2888 / September 25, 2008
SEC v. Norman Stumacher, Civil Action No. 08-61518-CIV-SEITZ/O'SULLIVAN (S.D. Fla., filed September 24, 2008)
SEC Files Settled Fraud Case Against Norman Stumacher, CPA, in Connection With His Audits of Video Without Boundaries, Inc.
The Securities and Exchange Commission (Commission) today filed a settled civil action in the United States District Court for the Southern District of Florida, against Norman Stumacher (Stumacher), a New York-based accountant. The Commission's complaint charges Stumacher with violations of the antifraud provisions of the federal securities laws in connection with his audits of the financial statements for Video Without Boundaries, Inc. (Video), a consumer electronics company based in Fort Lauderdale, Florida.
The Commission's complaint alleges that Video recorded fictitious revenue and assets through a number of accounting schemes, including improper revenue recognition, in violation of generally accepted accounting principles (GAAP). The complaint further alleges that Stumacher audited Video's 2002 and 2003 annual financial statements and issued audit reports containing audit opinions representing that the financial statements were presented in conformity with GAAP and that he conducted his audits in accordance with generally accepted auditing standards (GAAS). According to the complaint, these representations were false because Video's financial statements contained numerous departures from GAAP that materially overstated Video's revenues and understated its net losses. Moreover, contrary to Stumacher's audit reports, his audits were not conducted in accordance with GAAS because he failed to comply with professional standards related to field work and general standards in the performance of his audits.
The Commission's complaint charges Stumacher with violating Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. Stumacher has consented to the entry of a final judgment, without admitting or denying the allegations in the complaint, ordering him to disgorge $25,000, with prejudgment interest of $8,749.11, and to pay a civil penalty in the amount of $20,000.
In a related administrative and cease-and-desist proceeding, on September 23, 2008 the Commission issued a settled order against Stumacher finding that he engaged in improper professional conduct and violated Section 10(b) of the Exchange Act and Rule 10b-5, suspending permanently his privilege of practicing before the Commission pursuant to Rule 102(e)(1) of the Commission's Rules of Practice, and requiring him to cease and desist from committing or causing any further violations of the provisions charged.
In a related civil action, the Commission charged Video and other individuals with violations of the registration and antifraud provisions of the federal securities laws.