UNITED STATES SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 15803 /July 9, 1998 Accounting and Auditing Enforcement Release No. 1053 / July 9, 1998 SECURITIES AND EXCHANGE COMMISSION v. PAUL C. JAIN, STEVEN J. ALLAN, ROBERT S. WILLIAMS and WAYNE NAKAMURA, United States District Court for the Northern District of California, Civil Action No. 98-2684 TEH; The Securities and Exchange Commission today sued the former top officers of Media Vision Technology, Inc. of Fremont, California for the fraudulent reporting of Media Visions's 1993 financial results and for insider trading. The Commission filed its civil action in the United States District Court for the Northern District of California against Paul C. Jain, former President, Chief Executive Officer and Director of Media Vision; Steven J. Allan, former Vice President, Finance and Administration, and Chief Financial Officer; Robert S. Williams, former Controller; and Wayne Nakamura, former Director of Manufacturing. The SEC complaint alleges that Media Vision materially overstated its financial results for the last three quarters of 1993, as well as the fiscal year as a whole. On July 15, 1993, Media Vision announced revenue of $45.1 million for the second quarter ended June 30, 1993, an amount that was overstated by at least $3.5 million, or eight percent. On October 19, 1993, Media Vision announced revenue of $64.3 million for the third quarter ended September 30, 1993, an amount overstated by at least $10.2 million, or 18.9 percent. On February 17, 1994, the Company released unaudited financial results for the year ended December 31, 1993, reporting revenue of $241.1 million, net income of $19.9 million, and fourth quarter revenue of $95 million. In a restatement in August 1994, Media Vision reported that its revenue for fiscal year 1993 was only $149.7 million, resulting in a net loss of $99.2 million. The previously announced results had overstated revenue for the fiscal year by $91.4 million (61 percent) and net income by $119.1 million. The SEC complaint alleges that Media Vision's false and misleading financial statements led the market to overvalue Media Vision's stock, which reached a high of 46 1/2 (and a market capitalization of $630 million) in January 1994. During the spring of 1994, the media reported declines in the Company's business, increasing competition in the multimedia market, and ultimately, allegations of fraud. On May 10, 1994, the stock reached an interim low of 2 5/8. The SEC complaint also alleges that Jain and Allan orchestrated, and Williams and Nakamura participated in, key aspects of the financial reporting fraud. During the third and fourth fiscal quarters of 1993, Jain and Allan directed subordinates to falsify documents in order to artificially inflate revenue and understate expenses in an extensive scheme to defraud investors. After the end of the fiscal year, all four helped hide the fraud from Media Vision's outside auditors by lying to the auditors and creating false accounting entries on company documents. The SEC complaint also charges that Jain, Allan and Nakamura sold Media Vision stock while in the possession of material nonpublic (or "inside") information. The complaint alleges that through these trades, Jain obtained gross proceeds of $1.49 million; Allan obtained gross proceeds of $825,000; and Nakamura obtained gross proceeds of $21,250. In its complaint, the Commission alleges that the defendants violated Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-13, 13b2-1 and 13b2-2 thereunder. The SEC complaint seeks against all four Defendants a permanent injunction, disgorgement of ill- gotten gains, civil penalties, and against Jain and Allan an order barring them from serving as an officer or director of any public company. Williams has pleaded guilty to one criminal count of lying to the Commission staff and to the FBI. The Commission and the United States Attorney's Office for the Northern District of California previously brought settled civil and criminal actions against Russell Faust, former Chief Operating Officer and a Director of Media Vision, and Michael Humphress, former Senior Vice President, Worldwide Sales.