SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16299 / September 28, 1999
ACCOUNTING AND AUDITING ENFORCEMENT
RELEASE NO. 1169
SECURITIES AND EXCHANGE COMMISSION v. C.E.C. INDUSTRIES CORPORATION, GERALD H. LEVINE, and MARIE A. LEVINE, Case No. 1:99CV02568 (D.D.C.)
On September 28, 1999, the Commission filed a securities fraud action in the United States District Court for the District of Columbia against C.E.C. Industries Corporation, a Nevada corporation, and Gerald H. Levine, and Marie A. Levine, the company's chief executive officer and principal financial officer during the relevant time period. The complaint alleges that C.E.C. fraudulently overstated it assets and revenues in public filings and statements concerning the company's fiscal years ended March 31, 1996 and March 31, 1997. These material overstatements, according to the complaint, all resulted from various asset exchange transactions in which C.E.C. acquired non-cash assets in exchange for either company stock or other non-cash assets previously acquired with company stock. The complaint also alleges that C.E.C. has been chronically delinquent in filing required reports with the Commission since June 1997, and has not filed any required reports since July 1998. The Commission contends that Gerald and Marie Levine, as C.E.C.'s controlling officers and directors during the relevant time period, were directly responsible for C.E.C.'s fraudulent overstatements of assets and revenues, as well as for C.E.C.'s filing delinquencies. According to the complaint, the Levines also published false and misleading information about C.E.C. on the Internet during the period in question.
The Commission's complaint charges all defendants with fraud violations under Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. It further charges C.E.C. with violating the reporting and bookkeeping provisions of Exchange Act Section 13 and the rules thereunder, and Gerald and Marie Levine with falsifying books and records and failing to implement internal accounting controls in violation of Exchange Act Section 13(b)(5) and Exchange Act Rule 13b2-1. The Commission is seeking permanent injunctions against all defendants, a restatement of past financial statements and the prompt filing of current information by C.E.C., civil penalties against Gerald and Marie Levine, and an order prohibiting the Levines from serving as directors or officers of any public companies.
The Commission's investigation in this matter is continuing.