SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16753 / October 5, 2000
SEC V. MICHAEL J. JABLO, U.S.D.C. for the District of Columbia, Civ. Action No. 1:00CV02401
SEC SETTLES FINANCIAL FRAUD CASE AGAINST MICHAEL J. JABLO
The Commission today announced the filing of a Complaint in the U.S. District Court for the District of Columbia against Michael J. Jablo seeking a civil money penalty relating to his role in improper recognition of revenue at Engineering Animation, Inc. ("EAI") during EAI's second fiscal quarter ended June 30, 1999. Jablo, without admitting or denying the allegations in the Commission Complaint, consented to the entry of a judgment by the U.S. District Court for the District of Columbia against him ordering him to pay a $15,000 civil money penalty in this matter.
The Commission's Complaint alleged that, in its second quarter of 1999, EAI reported $27,227,000 in revenues that included a June 30, 1999 contract for $7.5 million with a reseller. The Complaint alleged that in connection with this contract, EAI's vice president of software sales, Jablo, entered into a side letter with the reseller, whereby the reseller was not obligated to pay EAI unless an end-user agreed to purchase the software from it. The Complaint further alleged that Jablo concealed this side letter from others at EAI until late September 1999. According to the Complaint, EAI thereafter restated its second quarter results with EAI then reporting a loss of $4.4 million, instead of its previously stated profit of $2.2 million.
In a related matter, the Commission entered a cease-and-desist order instituting proceedings pursuant to Section 21C of the Securities Exchange Act of 1934, making findings, and imposing a cease-and-desist order against EAI and Michael J. Jablo. In that proceeding, the Commission simultaneously accepted Offers of Settlement from EAI and Jablo. EAI, without admitting or denying the Commission's findings, consented to the entry of the Order which required it to cease and desist from committing or causing violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 13a-13 and 12b-20 thereunder. Jablo, without admitting or denying the Commission's findings, consented to the entry of the Order which required him to cease and desist from committing or causing violations of Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder.