SECURITIES AND EXCHANGE COMMISSION LITIGATION RELEASE NO. 15043 / September 12, 1996 Accounting and Auditing Enforcement Release No. 813 / September 12, 1996 U.S. v. Autuori, No. 3:96CR161-ALL (D. Conn. September 10, 1996). FORMER ARTHUR ANDERSEN PARTNER INDICTED IN CONNECTION WITH FRAUDULENT LIMITED PARTNERSHIP OFFERING The Commission and the United States Attorney's Office for the District of Connecticut announced that, on September 10, Edmund M. Autuori ("Autuori"), a CPA and former partner of Arthur Andersen & Co. ("Andersen"), was indicted by a federal grand jury on fraud-related charges arising from his work for Colonial Realty Company ("Colonial"), a former real estate syndicator. According to the indictment, Autuori knowingly assisted Colonial's principals in marketing investments, including the offering of 1200 limited partnership units in the Colonial Constitution Limited Partnership ("CCLP"). The indictment alleged that Autuori, while engaged in these marketing efforts, knew that the investments offered by Colonial could not realize the promised returns. Autuori was charged with six counts of wire fraud, 10 counts of mail fraud and four counts of inducing people to travel in interstate commerce as part of a scheme to defraud. Autuori, if indicted, faces up to 120 years in prison and the possibility of a multi-million dollar fine. On March 9, 1995, the Commission filed a complaint against Autuori, Jonathan N. Googel, Benjamin J. Sisti, William Candelori, Kevin P. Sisti, Peter J. Curley and Kenneth A. Zak (collectively, the "Defendants"), alleging violations of several antifraud and securities registration provisions of the federal securities laws in connection with Colonial's offering of CCLP units. During the offering period, CCLP interests totaling more than $30 million were purchased by over 700 investors residing in 28 states and the District of Columbia. Colonial, located in West Hartford, Connecticut, was a syndicator of real estate limited partnerships. According to the complaint, Colonial salespeople, with the knowledge, approval and/or participation of the Defendants, solicited investors with numerous false and misleading statements, and utilized high- pressure sales tactics, to encourage them to invest. The Defendants knew, or were reckless in not knowing, that Colonial's offering materials contained material misstatements and omissions regarding the revenues, operations, financial reserves, rental income, and cash flow of Constitution Plaza, the asset underlying CCLP. Although the CCLP offering purportedly was a private placement to accredited investors, Colonial sold limited partnership units to far more than the 35 nonaccredited investors permitted by Commission regulations. ==========================================START OF PAGE 2====== The complaint also alleged that, with the knowledge, approval and/or participation of various Defendants: Colonial concealed its financial problems from investors as the CCLP offering progressed; Googel, B. Sisti and Candelori signed false certifications in connection with the sale of investor notes to financial institutions; and Colonial failed to disclose that distributions to investors in its partnerships were funded frequently by "loans" from other Colonial partnerships. According to the Complaint, Autuori participated in sales seminars and other meetings with prospective investors, assuring them that Constitution Plaza would generate the revenues projected in CCLP's offering memorandum, and assisted in the preparation of materially misleading sales literature. In September 1990, shortly after the CCLP offering was suspended, Colonial was forced into bankruptcy and CCLP limited partners subsequently lost their entire investment. Autuori is the sole remaining defendant in the Commission's civil action. (For further information, See Litigation Release Nos. 14432, 14448, 14612, 14723 and 14916)