U.S. Securities and Exchange Commission

Litigation Release No. 18547 / January 16, 2004

Accounting And Auditing Enforcement Release No. 1944 / January 16, 2004

SEC v. Corrpro Companies, Inc., 1:04CV0085 (N.D. Ohio)

The Commission announced today that it has filed an injunctive action against Corrpro Companies, Inc. (Corrpro), a U.S. public corporation based in Medina Ohio, alleging that Corrpro had inadequate internal controls during its fiscal years 2001 and the first three quarters of 2002. The complaint alleges that Corrpro engaged in reporting, record keeping and internal control violations. The Commission further announced that, simultaneously with the filing of the Complaint, Corrpro consented to the entry of an injunction from future violations of these provisions. Corrpro's offer of settlement will be submitted to the Court for its approval.

According to the complaint, Corrpro misstated its financial statements during 2001 and the first three quarters of 2002, due to fraud in Corrpro's Australian subsidiary, which took place during approximately October 2000 through February 2002. The complaint alleges that the Australian subsidiary's chief executive officer and chief financial officer were falsifying certain of the subsidiary's financial records, and submitting the falsified information to Corrpro for inclusion in Corrpro's financial statements. The complaint alleges that Corrpro discovered the fraud through its own investigation in February 2002. The complaint further alleges, however, that Corrpro failed to discover the falsification of Corrpro Australia's statements until February 2002 due to its inadequate internal controls. Finally, the complaint alleges that following its discovery of the fraud in its Australian subsidiary, Corrpro undertook remedial measures to strengthen its financial reporting policies and internal control structure.

The complaint alleges that, as a result of the foregoing, Corrpro violated Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 12b-20, 13a-1 and 13a-13 thereunder, by filing financial statements that contained false financial data. The complaint also alleges that Corrpro violated Section 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, by failing to devise and maintain an adequate system of internal accounting controls.

Corrpro has consented to the entry of a final judgment that permanently enjoins it from further violations of the provisions of the federal securities laws described above, and that requires it to comply with certain undertakings, without admitting or denying the allegations in the complaint. The undertakings require Corrpro to (i) continue to maintain the remedial measures it has adopted since Spring 2002 (after discovering the Australian fraud) in order to comply with the provisions of the federal securities laws alleged in the complaint; (ii) for at least its fiscal years ending March 2004, 2005 and 2006, continue to engage an outside firm with appropriate qualifications and expertise to perform the internal audit function, or should Corrpro decide to staff the internal audit function with its own employees, assist a designated employee director of internal audit in performing certain internal audit procedures, and to require the internal audit function to report directly to the Audit Committee; (iii) to require internal audit to prepare a confidential business report at the close of each of the above fiscal years, to the Audit Committee, and copied to the staff of the Commission and to Corrpro's independent auditors, which shall include (a) a description of the scope of the Audit Plan during the preceding year, (b) confirmation that the Audit Plan was carried out, (c) an overview of the significant control weaknesses identified which require improvement, and (d) a review of the steps taken to improve the system of internal controls; and (iv) for at least the fiscal years mentioned above, to maintain a hotline managed by an outside vendor pursuant to which employees, customers and vendors may report to the Audit Committee anonymously, without fear of retaliation, any suspicions of fraudulent or criminal activity, apparent weakness in control systems, misstatements or exaggerations of financial results, incorrect application of accounting policies, and any other activity that could lead to inaccuracies or distortions of Corrpro's financial results.

In determining to accept Corrpro's settlement offer, the Commission considered that Corrpro undertook remedial actions and substantial cooperation with Commission staff.

In 1998, Corrpro was previously sanctioned by the Commission for unrelated reporting and internal control violations.

The Commission has also brought separate charges against the two officers of Corrpro's Australian subsidiary in connection with this matter (Securities and Exchange Commission v. Waring and Treloar, Case No. 1:03-cv-2030, N. D. Ohio), which are still pending. See Litigation Release Number 18382, and Accounting and Auditing Enforcement Release Number 1883, both dated October 1, 2003. The Commission's complaint in that action seeks injunctive relief against Waring and Treloar as well as the imposition of an officer and director bar.

The Australian Commonwealth Director of Public Prosecution in Melbourne in the State of Victoria, Australia, has issued summons to Waring and Treloar for criminal violations of various sections of the Australian Corporations Act, and of the Crimes Act of the State of Victoria, in connection with the same conduct described in the Commission's complaint.

CONTACT: Cynthia Storer Baran
(312) 886-1456