UNITED STATES SECURITIES AND EXCHANGE COMMISSION

          Litigation Release No. 15884 / September 17, 1998

          Accounting and Auditing Enforcement
          Release No. 1077 / September 17, 1998

          Securities and Exchange Commission v. Thomas F. Casey,
          1:98CV02214(TFH) (D.D.C.) (September 17, 1998)

                                SEC SUES CHAIRMAN AND CEO
                            OF AUDRE RECOGNITION SYSTEMS, INC.

          Civil Injunctive Action Alleges That Thomas F. Casey
          Ordered Fraudulent Nondisclosures, Directed False Recordkeeping,   
          and Made False Statements to Auditors

          The Securities and Exchange Commission filed a civil injunctive
          action in the federal district court for the District of Columbia
          alleging that Thomas F. Casey, the chairman and CEO of Audre
          Recognition Systems, Inc., ordered fraudulent nondisclosures in
          Audre's filings with the Commission, directed the falsification
          of corporate records, and made materially false statements to
          Audre's auditors in 1993 and 1994.  Audre, based in San Diego,
          California, develops and markets document-conversion software.

          Fraudulent Nondisclosures

          In August 1993, according to the complaint, Casey took an
          undisclosed $908,000 personal loan from Audre to pay off a margin
          call on his personal holdings of Audre stock.  The complaint
          alleges that, despite the materially large size of the loan,
          Casey directed Audre's executive vice president and its senior
          accountant to withhold disclosure of the loan from Audre's
          internal records and periodic reports with the Commission.
          Accordingly, Audre's Form 10-Q filings for the quarters ended
          October 1993 and January 1994 and its Form 10-K filing for the
          year ended April 1994 failed to disclose the loan, the complaint
          alleges.

          According to the complaint, Casey reviewed and signed the Forms
          10-Q and the Form 10-K knowing that those filings failed properly
          to disclose the loan as a related-party transaction and that they
          contained financial statements that were not prepared in
          conformity with generally accepted accounting principles (GAAP).
          The complaint also alleges that in 1994 Casey caused Audre to
          file with the Commission a Form S-1 registration statement that
          included the false and misleading quarterly and year-end
          financial statements.


          False Recordkeeping

          According to the complaint, Audre's financial statements, which
          were included in the Forms 10-K, 10-Q, and S-1 filings,
          improperly accounted for the loan in Audre's cash and cash
          equivalents account.  The complaint also alleges that Casey
          deliberately caused the loan to be improperly recorded as an
          "investment" on Audre's books and records.

          False Statements to Auditors

          According to the complaint, Casey directed his staff not to
          disclose the loan to Audre's auditors during the 1994 year-end
          audit.  The complaint alleges that Casey, along with the
          executive vice president and the senior accountant, signed a
          representation letter in 1994 that falsely stated that all loans
          had been properly recorded or disclosed in Audre's financial
          statements.

          The complaint states that Casey repaid the loan in April 1994,
          before Audre's April 30 fiscal year-end.  The complaint also
          states that Audre eventually disclosed the loan and its repayment
          in a June 1995 amendment to the 1994 Form 10-K.

          After the 1995 disclosure of the loan, according to the
          complaint, Casey directed the vice president and senior
          accountant to conceal from the auditors the true circumstances
          surrounding Audre's earlier failures to make disclosure.  Indeed,
          the complaint alleges that Casey directed the executive vice
          president and the senior accountant to assert that a
          "miscommunication" had caused the transaction to be improperly
          recorded as an investment on Audre's books and records.

          Pending Settlement

          The Commission's complaint seeks an order enjoining Casey from
          further violations of Section 17(a) of the Securities Act,
          Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5,
          13b2-1, and 13b2-2, as well as the imposition of civil monetary
          penalties.  Without admitting or denying the allegations in the
          Commission's complaint, Casey has agreed to a settlement whereby
          he would be fully enjoined by an order of the court but would not
          pay civil monetary penalties in view of his demonstrated
          financial inability to pay.

          Related Administrative Proceeding

          The Commission has also instituted an administrative proceeding
          against Beverly E. Johnston, Audre's former executive vice
          president, Nick R. Avila, Audre's former senior accountant, and
          Audre in connection with this matter.  Without admitting or
          denying the Commission's findings, Johnston, Avila, and Audre
          have consented to an order compelling them to cease and desist
          from committing or causing violations of the antifraud,
          recordkeeping, and other provisions of the federal securities
          laws.  In the Matter of Audre Recognition Systems, Inc., Beverly
          E. Johnston, and Nick R. Avila, Admin. Proc. No. 3- 9707
          (September 17, 1998); SEA Rel. No. 40446; AAE Rel. No. 1076.