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U.S. Securities and Exchange Commission

SEC Open Meeting Agenda
Tuesday, March 29, 2005, 10:00 a.m.

Agenda as of March 28, 2005. Note that Open Meeting agendas are subject to last-minute changes.

Item 1: Robert W. Armstrong, III
Office:  Office of the General Counsel

Item 1: Robert W. Armstrong, III

The Commission will hear oral argument on appeals by Robert W. Armstrong, III and the Division of Enforcement of an initial decision of an administrative law judge. Armstrong was formerly controller of National Medical Care, Inc. (“NMC”), a subsidiary of W.R. Grace & Co. (“Grace”). The law judge found that Armstrong participated in a scheme to manipulate Grace’s reported earnings to achieve predetermined targets. The alleged scheme involved improperly recording excess earnings as reserves and later using the excess reserves to bolster earnings, thereby achieving the impression that Grace had steady, consistent growth in income over a period of several years.

The law judge found that Armstrong willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5 and that he was a cause of Grace’s violation of those provisions. The law judge also concluded that, as a result of the scheme to manipulate Grace’s earnings, Grace’s periodic reports during the relevant period included financial statements that were not in accordance with Generally Accepted Accounting Principles (“GAAP”) and that were materially misleading in violation of the periodic reporting requirements contained in Exchange Act Section 13(a) and Exchange Act Rules 12b-20, 13a-1, and 13a-13. The law judge found that Armstrong was a cause of these violations. The law judge further found that Armstrong violated the recordkeeping requirements of Exchange Act Section 13(b)(5) and Exchange Act Rule 13b2-1, and was a cause of Grace’s violation of these provisions and of Exchange Act Section 13(b)(2). The law judge imposed a cease-and-desist order against Armstrong.

The law judge dismissed the charges brought pursuant to Commission Rule of Practice 102(e). The law judge held that Armstrong had not been appearing or practicing before the Commission, and dismissed the Rule 102(e)(1)(iii) charges on this basis.

Armstrong appeals the law judge’s conclusion that he violated and caused Grace's violations of the federal securities laws and the Commission's rules. He also maintains that there is no basis in the public interest for the imposition of a cease-and-desist order. The Division appeals the law judge's dismissal of the Rule 102(e) charges. The Division seeks to deny permanently to Armstrong the privilege of appearing or practicing before the Commission.

Among the issues likely to be considered are:

  • whether respondent committed the alleged violations; and
  • if so, whether sanctions should be imposed in the public interest.

For further information, please contact the Office of the Secretary at (202) 942-7070.



Modified: 03/29/2005