U.S. Securities and Exchange Commission
Litigation Release No. 18345 / September 11, 2003
Accounting and Auditing Enforcement Release No. 1862
Securities and Exchange Commission v. Stephen D. Price, United States District Court for the District of Columbia, Civil Action No. 1:03cv01905
SEC BRINGS SETTLED ACCOUNTING FRAUD CASE AGAINST STEPHEN D. PRICE
The Commission announced today that it has instituted a settled cease-and-desist proceeding against Stephen D. Price, of Bronxville, New York, a former Vice-President for Business Development at CAIS Internet, Inc., now known as Ardent Communications, Inc. The Commission also filed a complaint in federal court seeking a civil penalty against Price. Without admitting or denying the Commissionís findings, or the allegations in the complaint, Price consented to the issuance of a cease-and-desist order, and a judgment ordering him to pay a $20,000 penalty. The Commissionís Order finds that Price violated the federal securities laws by concealing information about a significant sale from CAISís management and accountants, which led CAIS to file materially false and misleading financial statements with the Commission.
The Order finds that in September 2000, Price agreed to sell more than $1 million of Internet kiosks to a private company, subject to an oral side agreement requiring CAIS to make a multi-million dollar investment in the private company. According to the Order, Price knew that the customer would return the kiosks to CAIS if the promised investment was not made. The Order finds that Price concealed details about the investment from CAISís management and accountants, and that his conduct led CAIS to file materially false financial statements for the quarter ended September 30, 2000. The Order finds that Price violated the antifraud provisions of the federal securities laws because he knew that CAIS would record the sale as revenue in the third quarter and overstate its results. The Order also finds that, due to his misconduct, Price was a cause of CAISís violations of the reporting and recordkeeping provisions of the federal securities laws.
The Commission found that Price violated Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and was a cause of CAISís violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. The Commission also ordered Price to cease and desist from committing or causing any violations and any future violations of Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and from causing any violations and any future violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. (Rel. No. 34-48485; AAE Rel. 1861; File No. 3-11257).