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U.S. Securities and Exchange Commission

SECURITIES AND EXCHANGE COMMISSION

LITIGATION RELEASE NO. 16430 / February 10, 2000

ACCOUNTING AND AUDITING
ENFORCEMENT RELEASE NO. 1224 / February 10, 2000

SEC V. ITEX CORPORATION, TERRY L. NEAL, MICHAEL T. BAER, GRAHAM H. NORRIS, CYNTHIA PFALTZGRAFF AND JOSEPH M. MORRIS, CV 99-1361 BR (D. Ore. September 27, 1999)

SEC OBTAINS PERMANENT FRAUD INJUNCTION, OFFICER AND DIRECTOR BAR, AND ACCOUNTING PRACTICE BAR AGAINST JOSEPH M. MORRIS

The Securities and Exchange Commission today announced that on January 24, 2000, the United States District Court for the District of Oregon permanently enjoined Joseph M. Morris from committing securities fraud. In the complaint, the Commission alleged that, among other things, as chief financial officer of Itex Corporation, Morris knowingly or recklessly participated in the material overstatement of Itex's assets, revenues and earnings in its financial statements, and failed to disclose numerous suspect and in many cases sham barter deals between Itex and various related parties. The complaint also alleged that Morris also sold Itex stock at times when he knew or was reckless in not knowing that Itex's publicly disclosed financial information was materially false or misleading. The complaint alleged that Morris's conduct was part of a larger scheme in which defendant Terry Neal, Itex's founder and control person, orchestrated and implemented a broad-ranging fraudulent scheme to make materially false and misleading disclosures about the company's business and to conceal numerous suspect and in many cases sham barter deals between Itex and various mysterious offshore entities related to and/or controlled by Neal.

Morris consented, without admitting or denying the Commission's allegations, to the entry of a final judgment permanently enjoining him from violating the antifraud, books and records, internal controls, and false statements to auditors provisions (Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1 and 13b2-2 thereunder). The final judgment further bars Morris for five years from acting as an officer or director of a public company. The judgment requires Morris to disgorge $45,380 and prejudgment interest thereon, but waives payment based on Morris's demonstrated inability to pay.

Based on the injunction, the Commission entered an administrative order barring Morris from practicing before the Commission as an accountant, with a right to reapply after five years. In the Matter of Joseph Morris, Admin. Proc. No. 3-10144 (February 10, 2000).

Morris had previously been sued by the Commission in a securities fraud action in the District of Colorado relating to the issuer Scientific Software-Intercomp, Inc. ("SSI"). SEC v. Ronald Hottovy, Jimmy Duckworth, Joseph M. Morris and Eugene A. Breitenbach, Civil Action NO. 98-S-1636 (D. Col.), Litigation Release No. 15824 (July 30, 1998). As part of Morris's settlement with the Commission, the pending SSI complaint against him was dismissed.

The Commission is continuing its litigation against the remaining defendants in the Itex litigation (see Litigation Release No. 16305), and against the remaining defendant in the SSI litigation (see Litigation Release Nos. 15824, 16351).

http://www.sec.gov/litigation/litreleases/lr16430.htm


Modified:02/10/2000