SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16489 / March 29, 2000
Accounting and Auditing Enforcement
Securities and Exchange Commission v. Donald Ferrarini, Bruno Rumignani, Howard Miller, Mark Bailine, Frank Palumbo, Civil Action File No. 98 Civ. 0629 (SWK) (S.D.N.Y. January 29, 1998)
The Securities and Exchange Commission announced today that it accepted settlement offers made by the last two defendants in the civil injunctive action that the Commission filed on January 29, 1998 in federal court in New York, New York against five former executives of Underwriters Financial Group, Inc. ("UFG"), a bankrupt insurance brokerage company. The Commission's complaint alleges that the defendants carried out a multi-million dollar financial fraud scheme whereby they falsely portrayed UFG's financial condition for the years ended December 31, 1993 and December 31, 1994 and the quarters ended March 31, 1994, June 30, 1994, September 30, 1994 and March 31, 1995. In a related administrative proceeding instituted by the Commission, the Commission also accepted a settlement offer made by the certified public accountant who issued an audit report on UFG's financial statements for 1994.
Two of the defendants settled the Commission's charges when the federal court action was filed, and the other remaining defendant, Howard Miller, is now deceased. The Commission has filed a notice of dismissal of the complaint as to Howard Miller.
The two remaining defendants in the federal court action were:
Donald Ferrarini ("Ferrarini"), age 71, was chief executive officer, president and chairman of the board of directors of UFG.
Bruno Rumignani ("Rumignani"), age 57, was executive vice president and a director of UFG .
The accountant named in the administrative proceeding is:
Nanette Miller, age 42, was a partner in Chadbourne & Miller, formerly a public accounting firm and UFG's outside auditor for 1994.
The Commission's complaint alleges that from 1993 to 1995, Ferrarini, Rumignani and the other federal court defendants engaged in a fraudulent scheme whereby UFG fraudulently obtained money from companies with which UFG did business and, by making fictitious and other improper entries on UFG's books and records, improperly included those fraudulently obtained funds as legitimate income. Ferrarini directed the fraudulent scheme, and Rumignani implemented the scheme by, among other things, forging signatures on documents used to perpetrate the fraud. In 1999, Ferrarini and Rumignani were tried and convicted on federal criminal charges stemming from this scheme. As a result of the convictions, Ferrarini and Rumignani are now serving federal prison sentences of 12 years and 10 years, respectively. As part of their criminal sentences, Ferrarini and Rumignani were also ordered to pay restitution in the amount of $6,521,018.
In their settlement offers in the Commission's civil action, Ferrarini and Rumignani consented, without admitting or denying the allegations in the complaint, to the issuance of final judgments permanently enjoining them from: (i) committing securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5; (ii) falsifying corporate books and records, misleading auditors or engaging in other conduct in violation of Section 13(b)(5) of the Exchange Act, Rule 13b2-1 or Rule 13b2-2; and (iii) engaging in conduct as controlling persons that would render them liable pursuant to Section 20(a) of the Exchange Act for violations of corporate reporting, recordkeeping and internal control provisions of the Exchange Act (Sections 13(a) and 13(b)(2) and Rules 12b-20, 13a-1, 13a-11 and 13a-13). Ferrarini and Rumignani also consented to orders barring them from serving as officers or directors of a public company. Due to the lengthy prison sentences and the amount of restitution ordered by the criminal court, Ferrarini and Rumignani were not required to pay civil penalties.
Pursuant to Nanette Miller's settlement offer, the Commission issued an administrative order under Rule 102(e) of the Commission's Rules of Practice: (i) finding that Nanette Miller engaged in improper professional conduct in connection with the audit of UFG's financial statements for 1994 by disregarding Generally Accepted Auditing Standards in several respects during the audit; and (ii) denying Nanette Miller the privilege of appearing or practicing before the Commission as an accountant. Nanette Miller consented to the issuance of this order without admitting or denying the Commission's findings.http://www.sec.gov/litigation/litreleases/lr16489.htm