John F. Mortell, Thomas F. Wraback, William S. Edwards, Gregory D. Norton, Glenn P. Duffy, Jerry W. Ross and Gerald T. Barry; John K. Bradley

Litigation Release No. 17542 / June 5, 2002

Accounting and Auditing Enforcement Release No. 1569 / June 5, 2002

SEC v. John F. Mortell, Thomas F. Wraback, William S. Edwards, Gregory D. Norton, Glenn P. Duffy, Jerry W. Ross and Gerald T. Barry, U.S. District Court for the District of Columbia, Civil Action No. 1:02CV01090 (RW)

In the Matter of John K. Bradley, Administrative Proceeding No. 3-10792

SEC SETTLES ACCOUNTING FRAUD CHARGES AGAINST SIX FORMER SENIOR OFFICERS AND MANAGERS OF PHYSICIAN COMPUTER NETWORK, INC. AND ONE FORMER CUSTOMER OF THE COMPANY; FORMER MANAGER CONSENTS TO CEASE-AND-DESIST ORDER

The Securities and Exchange Commission filed a complaint in the United States District Court for the District of Columbia today charging six former officers and managers of Physician Computer Network, Inc. ("PCN") and one former PCN customer with engaging in a broad-ranging accounting fraud. The Commission's complaint alleges that the defendants violated or aided and abetted violations of the antifraud, periodic reporting, record-keeping, internal controls and lying to the auditors provisions of the federal securities laws. In a related action today, the Commission instituted and simultaneously settled cease-and-desist proceedings against a former manager for his role in falsifying certain PCN accounting records.

In its civil action, the Commission alleges that the defendants engaged in a scheme to manipulate PCN's reported financial results by materially understating its operating expenses and inflating its revenues and net income in fiscal year 1996 and the first three quarters of fiscal year 1997. According to the Commission's complaint, the defendants carried out the scheme by, among other things, recognizing revenue from fictitious sales to the company's resellers, improperly capitalizing software development costs and operating expenses, manipulating depreciation expense, prematurely recognizing revenue for customer support and maintenance contracts, and recognizing revenue for out-of-period sales. To avoid detection of their scheme, the defendants provided false documents and information to PCN's independent auditors.

Prior to its assets being acquired by another company in March 2000, PCN was headquartered in Morris Plains, New Jersey and was a leading provider of practice management software for physicians. The complaint alleges that the defendants engaged in the following conduct: John F. Mortell, of Pleasantville, New York, PCN's former President and Chief Operating Officer, devised and orchestrated the fraudulent scheme. Thomas F. Wraback, of Manalapan, New Jersey, PCN's former Senior Vice President and Chief Financial Officer and Gregory D. Norton, of New Providence, New Jersey, PCN's former Manager of Accounting and Reporting, assisted Mortell or acted at his direction. To achieve the company's internal financial projections, each of these individuals either made, or directed others to make, improper accounting adjustments or false accounting entries that were not in conformity with generally accepted accounting principals. Glenn P. Duffy, of Needham, Massachusetts, PCN's former Director of Accounting, knew of the fraudulent scheme, falsified certain accounting documents, and made false and misleading statements to PCN's auditors. William S. Edwards, of Wrentham, Massachusetts, PCN's former Vice President of Operations, and Jerry W. Ross, of Huntington Beach, California, PCN's former Vice President for Systems Integration, directed improper shipping activities that resulted in PCN recognizing revenue from out-of-period shipments. Gerald T. Barry, of Jamestown, Rhode Island, President of G. Barry & Associates, Inc., a privately-held Rhode Island corporation that was a PCN customer, provided a false audit confirmation letter to PCN's auditors. In the related administrative proceeding, the Commission found that John K. Bradley, of Shrewsbury, Massachusetts, PCN's former Manager of Credit and Collections, falsified two year-end deferred revenue reports that were provided by Wraback to PCN's auditors.

As a result of the fraudulent accounting scheme, PCN overstated its 1996 net income by $31.2 million (205%), and overstated its quarterly 1997 net income by an estimated $7.8 million (173%) in the first quarter, $8.6 million (195%) in the second quarter, and $9.7 million (150%) in the third quarter. According to the complaint, PCN included these materially false financial results in its 1996 annual report on Form 10-K and its 1997 quarterly reports on Form 10-Q that it filed with the Commission.

Without admitting or denying the allegations in the Commission's complaint, the defendants consented to the following sanctions:

John F. Mortell

Mortell consented to the entry of a permanent injunction enjoining him from violating or aiding and abetting violations of the antifraud, periodic reporting, record-keeping, internal controls and lying to the auditors provisions of the federal securities laws, Sections 10(b), 13(a), 13(b)(2) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 12b-20, 10b-5, 13a-1, 13a-13, 13b2-1 and 13b2-2 thereunder. Mortell also agreed to pay a $75,000 civil penalty and to be permanently barred from acting as an officer or director of a public company.

Thomas F. Wraback

Wraback consented to the entry of a permanent injunction enjoining him from violating or aiding and abetting violations of the antifraud, periodic reporting, record-keeping, internal controls and lying to the auditors provisions of the federal securities laws, Sections 10(b), 13(a), 13(b)(2) and 13(b)(5) of the Exchange Act and Rules 12b-20, 10b-5, 13a-1, 13a-13, 13b2-1 and 13b2-2 thereunder. Wraback also agreed to pay a $60,000 civil penalty and to be barred from acting as an officer or director of a public company for a period of ten years. In addition, Wraback has consented to the entry an order pursuant to Rule 102(e)(3)(i)(A) of the Commission's Rules of Practice suspending him from appearing or practicing before the Commission as an accountant, with the right to apply for reinstatement after five years.

Gregory D. Norton

Norton consented to the entry of a permanent injunction enjoining him from violating or aiding and abetting violations of the antifraud, periodic reporting, record-keeping, internal controls and lying to the auditors provisions of the federal securities laws, Sections 10(b), 13(a), 13(b)(2) and 13(b)(5) of the Exchange Act and Rules 12b-20, 10b-5, 13a-1, 13a-13, 13b2-1 and 13b2-2 thereunder. Norton also agreed to pay a $30,000 civil penalty. In addition, Norton has consented to the entry an order pursuant to Rule 102(e)(3)(i)(A) of the Commission's Rules of Practice suspending him from appearing or practicing before the Commission as an accountant, with the right to apply for reinstatement after five years.

Glen P. Duffy

Duffy consented to the entry of a permanent injunction enjoining him from violating or aiding and abetting violations of the antifraud, periodic reporting, record-keeping, internal controls and lying to the auditors provisions of the federal securities laws, Sections 10(b), 13(a), 13(b)(2) and 13(b)(5) of the Exchange Act and Rules 12b-20, 10b-5, 13a-1, 13a-13, 13b2-1, and 13b2-2 thereunder. Duffy also agreed to pay a $10,000 civil penalty. In addition, Duffy has consented to the entry an order pursuant to Rule 102(e)(3)(i)(A) of the Commission's Rules of Practice suspending him from appearing or practicing before the Commission as an accountant, with the right to apply for reinstatement after five years.

William S. Edwards

Edwards consented to the entry of a permanent injunction enjoining him from violating or aiding and abetting violations of the antifraud, periodic reporting, record-keeping and internal controls provisions of the federal securities laws, Sections 10(b), 13(a), 13(b)(2) and 13(b)(5) of the Exchange Act and Rules 12b-20, 10b-5, 13a-1, 13a-13 and 13b2-1 thereunder. Edwards also agreed to pay a $30,000 civil penalty.

Jerry W. Ross

Ross consented to the entry of a permanent injunction enjoining him from violating or aiding and abetting violations of the antifraud, periodic reporting, record-keeping and internal controls provisions of the federal securities laws, Sections 10(b), 13(a), 13(b)(2) and 13(b)(5) of the Exchange Act and Rules 12b-20, 10b-5, 13a-1, 13a-13 and 13b2-1 thereunder. Ross also agreed to pay a $20,000 civil penalty.

Gerald T. Barry

Barry consented to the entry of a permanent injunction enjoining him from aiding and abetting violations of the antifraud, periodic reporting, record-keeping, internal controls and lying to the auditors provisions of the federal securities laws, Sections 10(b), 13(a), 13(b)(2) and 13(b)(5) of the Exchange Act and Rules 12b-20, 10b-5, 13a-1, 13b2-1 and 13b2-2 thereunder. Barry also agreed to pay a $15,000 civil penalty.

In the related administrative proceeding, John K. Bradley consented to a Commission order requiring him to cease and desist from committing or causing violations of the periodic reporting, record-keeping, internal controls and lying to the auditors provisions of the federal securities laws, Sections 13(a), 13(b)(2) and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1, 13b2-1 and 13b2-2 thereunder. Bradley consented to the order without admitting or denying the Commission's findings.

SEC Complaint in this matter.