U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19548 / January 30, 2006
Accounting and Auditing Enforcement
Release No. 2368 / January 30, 2006
SEC v. Thomas P. Clark, , Civil Action No. CV 06-380 ADM/AJB (D. Minn.)
SEC Charges Former CFO of Health Risk Management, Inc. with Fraud
On January 27, 2006, the Securities and Exchange Commission (Commission) filed a civil action in the United States District Court for the District of Minnesota charging Thomas P. Clark, former Chief Financial Officer of Health Risk Management, Inc. (HMRI), with fraud and other securities violations.
The Commission's allegations arise from Clark's treatment of a $1.85 million settlement payment that he negotiated on behalf of HRMI and its wholly owned Medicaid HMO to settle an arbitration dispute with one of the HMO's healthcare providers. According to the complaint, in August 2000, Clark, a resident of Edina, Minnesota, sought to hide the full amount of the settlement expense by simultaneously executing two agreements with the provider: (1) a settlement agreement, which required the HMO subsidiary to pay the provider $500,000 in exchange for a release; and (2) a $1.35 million five-year consulting agreement. The complaint alleges that the consulting agreement required HRMI to pay a $1.35 million "retainer" for services that HRMI did not need and which were never provided. The complaint further alleges that Clark booked the $1.35 million payment as an asset rather than as a settlement expense, causing HMRI to file materially false financial statements with the Commission for the second and third quarters of 2000. The complaint also alleges that Clark failed to inform HRMI's outside auditors about the consulting agreement and the true dollar figure of the settlement.
The Commission seeks a Court order to permanently enjoin Clark from violating Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1, and 13b2-2, and from aiding and abetting HRMI's violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13. The Commission also seeks a civil monetary penalty and an order barring Clark from acting as an officer or director of securities issuers.