Securities and Exchange Commission
Litigation Release No. 16298 / September 28, 1999
Accounting and Auditing Enforcement
SECURITIES AND EXCHANGE COMMISSION v. MAR-JEANNE TENDLER, ARTHUR TENDLER, AND BILLIE M. JOLSON, United States District Court for the Central District of California, Civil Action No. SA CV 99-1200 DOC (Anx).
The Securities and Exchange Commission announced today that it has sued the three top officers of WIZ Technology, Inc. ("WIZ"), headquartered in San Juan Capistrano, California, for financial fraud and insider trading. The Complaint alleges that the three used accounting gimmicks, sham sales, and backdated agreements artificially to inflate WIZ's publicly reported sales, income, and assets in four reports filed with Commission and in three press releases during 1995, 1996, and 1997.
The Commission sued Mar-Jeanne Tendler, WIZ's chief executive officer and chair of its board of directors, Arthur Tendler, WIZ's President and the husband of Mar-Jeanne Tendler, and Billie Jolson, WIZ's former chief financial officer. All three defendants reside in Orange County, California.
The Commission's complaint alleges that Mar-Jeanne Tendler, Arthur Tendler, and Jolson overstated WIZ's revenue, assets, and income during WIZ's 1996 fiscal year, and that Mar-Jeanne Tendler and Arthur Tendler engaged in similar misconduct during the second quarter of WIZ's 1997 fiscal year. The defendants caused WIZ to record non-existent sales revenue by counting as sales barter transactions involving obsolete products, "selling" a non-existent distributorship, backdating agreements, and reporting expenses as assets. The defendants took advantage of the resulting inflated WIZ stock price by selling thousands of shares of WIZ common stock. In these sales, defendants engaged in illegal insider trading.
The complaint alleges that the some or all of the defendants caused WIZ to overstate income by $154,214, or 63%, for the first fiscal quarter of 1996; overstate revenue by $379,855, or 31%, for the second fiscal quarter of 1996; overstate revenue and net income by $596,190, resulting in 26% overstatement of revenue and a 193% understatement of losses, for the third fiscal quarter of 1996; and overstate revenue by $450,000 or 45% for the second quarter of fiscal year 1997. As a result, WIZ filed false financial statements in its Form 10-QSB reports during for its first, second, and third fiscal quarters of 1996, (ended October 31, 1995, January 31, 1996, and April 30, 1996, respectively) and for its second fiscal quarter of 1997 (ended January 31, 1997).
The complaint also alleges that, from their illegal insider trading, Mar-Jeanne and Arthur Tendler earned illicit profits of approximately $218,705, and Jolson earned approximately $63,183.
The Commission seeks an order permanently enjoining Mar-Jeanne Tendler, Arthur Tendler, and Jolson from violating Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5) and 16(a) of the Securities and Exchange Act of 1934, and Rules 10b-5, 12b-20, 13a-13, 13b2-1 and 16a-3 thereunder. In addition, the Commission seeks disgorgement of the losses Mar-Jeanne Tendler, Arthur Tendler, and Jolson avoided by their insider trading, civil penalties from each defendant, and an order barring each of the defendants from serving as an officer or director of a public company.