U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20945 / March 11, 2009
Accounting and Auditing Enforcement Release No. 2948 / March 11, 2009
Securities and Exchange Commission v. PowerCold Corporation, Francis L. Simola, Joseph C. Cahill, and Grayling R. Hofer, Civil Action No. SA-09-CV-185-FB, U.S.D.C./Western District of Texas (San Antonio Division)
PowerCold Corporation and Its Executives Francis L. Simola, Joseph C. Cahill and Grayling R. Hofer Agree To Settle SEC Actions Charging Them With Fraudulent Revenue Recognition; Relief Includes Deregistration, Officer-and-Director Bars, Penalties, and a Bar From Practicing Before the Commission
On March 11, 2009, the United States Securities and Exchange Commission filed a civil action against PowerCold Corporation, Francis L. Simola (chairman and CEO), Joseph C. Cahill (former CFO), and Grayling R. Hofer (controller and chief accounting officer). In its complaint, the Commission alleged that PowerCold materially overstated its financial results from 2003 through the third quarter of 2005 by recognizing revenue from fictitious contracts, and inflating and prematurely recognizing revenue from actual contracts. The Commission also alleged that Simola, Cahill and Hofer participated in the scheme to misstate PowerCold's revenue. To conceal the scheme, the Commission alleged, Simola, Hofer, and Cahill made materially false or misleading statements to PowerCold's auditor.
The Commission also announced that all defendants, without admitting or denying the Commission's allegations, have agreed to settle. PowerCold has consented to a permanent injunction prohibiting violations of Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. Simola, Cahill, and Hofer have consented to permanent injunctions prohibiting violations of Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and aiding and abetting 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. Simola and Cahill are also enjoined from violating Exchange Act Rule 13a-14, and Simola is enjoined from aiding and abetting violations of Exchange Act Rule 13a-11.
Simola, Cahill, and Hofer also consented to five-year officer-and-director bars. Simola consented to the entry of an order to pay a $75,000 civil money penalty. The Commission determined not to seek civil penalties against PowerCold, Cahill, or Hofer based on their financial condition.
In addition, PowerCold consented to the entry of an order, under Section 12(j) of the Exchange Act, revoking the registration of its securities. Hofer also consented to entry of an order under Commission Rule of Practice 102(e)(3), barring him from practicing or appearing before the Commission as an accountant.