U.S. SECURITIES AND EXCHANGE COMMISSION
Litigaton Release No. 18540 / January 13, 2004
ACCOUNTING AND AUDITING
RELEASE NO. 1940 / January 13, 2004
SECURITIES AND EXCHANGE COMMISSION V. KEVIN J. MORRISON, ET AL. (United States District Court for the District of Massachusetts Civ. A. No. 02-11647-MLW)
FINAL JUDGMENT ENTERED AGAINST FORMER SENIOR OFFICER OF HPSC, INC. SUBSIDIARY
The Securities and Exchange Commission ("Commission") announced today that on December 26, 2003, the Honorable Mark L. Wolf of the United States District Court for the District of Massachusetts entered a final judgment by consent against Kevin J. Morrison, age 54, of West Hartford, Connecticut. Morrison was the executive vice-president of American Commercial Financial Corp., a wholly-owned subsidiary of Boston-based HPSC, Inc. Without admitting or denying the Commission's allegations, Morrison consented to the entry of a final judgment that bars him from serving as an officer or director of a public company and permanently enjoins him from future violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13b2-1 promulgated thereunder.
In its Complaint, the Commission alleged that from at least 1997 through May 2002, Morrison improperly diverted nearly $5 million of corporate assets to relief defendant Mildred K. Miller, a purported ACFC customer. According to the Complaint, Morrison covered up his embezzlement by regularly providing falsified financial reports to ACFC's president, HPSC, and HPSC's outside auditors. Information contained in those reports was incorporated in HPSC's financial statements for the periods ended December 31, 1997 through March 31, 2002, causing those financial statements to contain material misstatements. On August 14, 2002, after becoming aware of Morrison's conduct, HPSC filed amended Forms 10-K for the years ended December 31, 2000 and December 31, 2001, which restated the company's net income and earnings per share for the years ended December 31, 1997 through December 31, 2001 and for the quarters ended March 31, 2000 through December 31, 2001. The company also filed amended Forms 10-Q for the quarters ended September 30, 2001 and March 31, 2002. The restatements reflect that Morrison's fraud resulted in an overstatement of HPSC's net income and earnings per share of between 4% and 112% during these periods.
Previously in this same litigation, the Commission obtained a default judgment against Miller on December 22, 2002. That default judgment against Miller was vacated by the court. On February 13, 2003, the court re-entered a Final Judgment by Default against Miller. The court ordered Miller to pay disgorgement of $4,782,381.26, plus prejudgment interest thereon of $189,813.63.
On November 21, 2002, in related criminal proceedings filed by the United States Attorney for the District of Connecticut, Morrison pleaded guilty to one count of wire fraud in violation of 18 U.S.C. § 1343. On March 31, 2003, Morrison was sentenced to serve 16 months in prison and ordered to pay restitution of nearly $5 million by Judge Janet C. Hall of the United States District Court for the District of Connecticut. On March 7, 2003, Miller pleaded guilty before Judge Hall to one count of wire fraud in violation of 18 U.S.C. § 1343. On November 6, 2003, Miller was sentenced to 60 months imprisonment and ordered to pay restitution of nearly $5 million.
For more information, see Litigation Release Nos. 18463 (November 17, 2003), 17686 (August 16, 2002) and 17921 (January 8, 2003).