U.S. Securities & Exchange Commission

Litigation Release No. 18177 / June 6, 2003

Accounting and Auditing Enforcement Release No. 1797 / June 6, 2003

Securities and Exchange Commission v. Paul A. Frame and Seitel, Inc., No: 93 CV 1980 (S.D. Tex.)

SEC Sues Former CEO of Seitel, Inc. Over Undisclosed and Improper Executive Payments; Company also Sued but Agrees to Settle; Former CFO Agrees to Cease-and Desist Order

Today, the Securities and Exchange Commission filed suit in the United States District Court for the Southern District of Texas against Houston-based seismic data purveyor Seitel, Inc. (whose common stock formerly traded on the New York Stock Exchange and now trades on the OTC Bulletin Board) and Paul A. Frame, the company's former chief executive officer. The Commission's Complaint alleges that Frame, essentially, treated Seitel as a "personal piggy bank" by improperly using corporate funds for a variety of personal expense, which he intentionally misrepresented to Seitel's accounting department as company costs. Further, Seitel's lax controls over payments to or on behalf of top executives directly facilitated Frame's wrongdoing

Specifically, the Commission's Complaint alleges:

• During 2001, Frame, then Seitel's CEO, deceived the company into paying $750,000 to resolve personal litigation brought by his former girlfriend; $179,000 to buy a Ferrari that he drove in a private racing club; and $256,000 in racing-related expenses. Frame intentionally misrepresented these expenses as company costs. Investors did not learn of these improper payments until after Frame resigned from the company.

• Seitel's lax controls facilitated Frame's wrongdoing, and led the company to pay $148,000 for a security system for Frame's mansion and $2 million of advances to Frame for as-yet unearned bonuses, none of which Frame's employment contract permitted. Debra D. Valice, Seitel's then-CFO, also received unauthorized bonus advances of $375,000.

• In early 2002, Seitel's Board declined to award Frame and Valice bonuses, but agreed to accept promissory notes for advances previously paid. The notes exceeded what Frame and Valice actually had received as advances, so Seitel's accounting department, at Valice's direction, paid them the difference, totaling approximately $335,000. Frame and Valice left Seitel soon thereafter.

The Commission charges Frame with violating or aiding-and-abetting the anti-fraud, reporting, books and records, internal controls and proxy statement provisions of the federal securities laws: Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5) and 14(a) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13b2-1, 13b2-2 and 14a-9 promulgated thereunder. The Commission seeks as relief against Frame permanent injunctive relief, civil money penalties, disgorgement of ill-gotten gains with prejudgment interest, and a permanent officer and director bar.

The Commission charges Seitel with violating the reporting, books and records, internal controls and proxy statement provisions of the federal securities laws: Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 12b-20, 13a-1 and 14a-9 promulgated thereunder. Without admitting or denying the Commission's allegations, Seitel has agreed to settle this matter by consenting to a final judgment permanently enjoining it from violating these provisions. In determining to accept Seitel's settlement offer, the Commission considered that Seitel promptly undertook remedial actions and cooperated with Commission staff.

In related administrative proceedings, Valice consented, without admitting or denying the underlying allegations, to the entry of an Order directing her to cease and desist from violating or causing violations of the reporting, books and records, internal controls and proxy statement provisions of the federal securities laws: Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5) and 14(a) of the Exchange Act and Rules 12b-20, 13a-1 and 14a-9 promulgated thereunder. In addition, Valice has undertaken not to contest in her private litigation with Seitel that she owes $621,293 under the terms of her promissory note.

The Commission acknowledges the assistance to its investigation of the United States Attorney for the Southern District of Texas, the Federal Bureau of Investigation, the United States Postal Inspection Service and the Internal Revenue Service.

http://www.sec.gov/litigation/litreleases/lr18177.htm