==========================================START OF PAGE 1====== UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 38121 / January 6, 1997 ACCOUNTING AND AUDITING ENFORCEMENT Release No. 867 / January 6, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9213 ______________________________ : ORDER INSTITUTING PROCEEDINGS In the Matter of : AND OPINION AND ORDER IMPOSING : SANCTIONS PURSUANT TO RULE MATTHEW E. KLENOVIC, CPA : 102(e) OF THE COMMISSION'S : RULES OF PRACTICE Respondent. : : _______________________________ I. The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and they hereby are, instituted against Matthew E. Klenovic ("Klenovic") pursuant to Rule 102(e)(3) of the Commission's Rules of Practice [17 C.F.R.  201.102(e)(3)].-[1]- II. ---------FOOTNOTES---------- -[1]- Rule 102(e)(3) provides, in pertinent part, that: ...The Commission, with due regard to the public interest and without preliminary hearing, may, by order, temporarily suspend from appearing or practicing before it any...accountant...who has been by name (A) permanently enjoined by any court of competent jurisdiction, by reason of his...misconduct in an action brought by the Commission, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of the rules and regulations thereunder....A person who has consented to the entry of a permanent injunction as described in paragraph (e)(3)(i)(A) of this section without admitting the facts set forth in the complaint shall be presumed for all purposes under this paragraph (e)(3) to have been enjoined by reason of the misconduct alleged in the complaint. ==========================================START OF PAGE 2====== In anticipation of the institution of these proceedings, Klenovic has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the Commission's findings contained herein, except the Commission's findings that a Final Judgment of Permanent Injunction and Other Equitable Relief has been entered against him as set forth in Paragraph III C., which is admitted, Klenovic consents to the entry of this Order Instituting Proceedings and Opinion and Order Imposing Sanctions pursuant to Rule 102(e) of the Commission's Rules of Practice ("Order"). Accordingly, IT IS HEREBY ORDERED that proceedings pursuant to Rule 102(e) of the Commission's Rules of Practice be and hereby are instituted. III. On the basis of this Order and Klenovic's Offer, the Commission finds that: A. Klenovic, age 51, was associated with Standard Oil and Exploration of Delaware, Inc. ("STDO") from December 1987 through April 1991, including serving as President and Chief Financial Officer for a portion of this time. Klenovic is a certified public accountant ("CPA"). B. STDO was a Delaware corporation with its principal place of business in Sarasota, Florida. STDO's common stock became registered with the Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. 78l] in June 1988. From June 1988 through the time relevant to the findings herein, STDO was required to file reports with the Commission pursuant to Section 13(a) of the Exchange Act [15 U.S.C. 78m]. C. On December 27, 1996, the Honorable Steven D. Merryday in the United States District Court for the Middle District of Florida, Tampa Division, entered an order of Final Judgment of Permanent Injunction and Other Equitable Relief ("Final Judgment"), by consent, which permanently enjoins Klenovic from violating Sections 5(a), 5(c), 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act of 1933 ("Securities Act"), as amended [15 U.S.C. 77e(a), 77e(c), 77q(a)(1), 77q(a)(2) and 77q(a)(3)], Sections 10(b), 13(d) and 16(a) of the Exchange Act, as amended [15 U.S.C. 78j(b), 78m(d) and 78p(a)] and Rules 10b-5, 13b2-1, ==========================================START OF PAGE 3====== 13b2-2, 13d-1, 13d-2, 16a-2 and 16a-3-[2]- [17 C.F.R. 240.10b-5, 240.13b2-1, 240.13b2-2, 240.13d-1, 240.13d-2, 240.16a- 2, and 240.16a-3] promulgated thereunder, orders him to disgorge more than $1.4 million thereunder, and prohibits him for a period of five years from serving as an officer or director of any issuer that has a class of securities registered with the Commission pursuant to Section 12 of the Exchange Act [15 U.S.C. 78l] or that is required to file reports with the Commission pursuant to Section 15(d) of the Exchange Act [15 U.S.C. 78o]. The Final Judgment waives Klenovic's obligation to make any payment of disgorgement and does not impose any civil penalty, based on his demonstrated financial inability to pay. D. The Commission's complaint, filed on June 6, 1994, against Klenovic and two others in the United States District Court for the Middle District of Florida, Tampa Division, SEC v. Matthew E. Klenovic, et al., No.94-909-Civ-T-23E, alleges that Klenovic, along with two other individuals, engaged in a three year scheme to defraud the investing public through his management and operation of STDO. The complaint outlines a four- part scheme: (1) Klenovic sold unregistered STDO securities; (2) Klenovic failed to file certain required disclosure documents relating to his percentage ownership of STDO; (3) Klenovic distributed false and misleading material information in STDO's public periodic reports filed with the Commission regarding (a) the background and composition of STDO's Board of Directors, (b) the company's assets and liabilities and (c) the company's revenues; and (4) Klenovic and one of the other defendants misappropriated investor funds for their own use and the general operations of STDO instead of establishing partnerships between investors and STDO to own natural gas wells in Michigan. With respect to the false information included in STDO's public periodic filings, the complaint alleges that Klenovic made or caused to be made false accounting entries to STDO's books and records that caused STDO to overstate its revenues from oil and gas drilling and to overstate the value of its assets. Klenovic also provided those books and records containing false accounting entries to STDO's outside auditors. As a result, STDO reported materially inflated revenues and assets on its financial statements filed with the Commission between June 1988 and April 1991. ---------FOOTNOTES---------- -[2]- Until May 1, 1991, the statutory filing requirements under Section 16 of the Exchange Act were implemented by Rule 16a-1. On January 1, 1991, the Commission adopted a comprehensive revision of the rules under Section 16 which became effective on May 1, 1991. See Rel. 34-28869, 56 Fed.Reg. 7242 (Feb. 21, 1991). Among other things, these amendments place the implementation of the former Rule 16a-1 filing requirements in new Rules 16a-2 and 16a-3. ==========================================START OF PAGE 4====== IV. Based on the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer of Settlement submitted by Klenovic and accordingly, IT IS HEREBY ORDERED, effective immediately, that: A. Respondent is denied the privilege of appearing or practicing before the Commission as an accountant. B. After five years from the date of this Order, Respondent may apply to the Commission by submitting an application to the Office of the Chief Accountant which requests that he be permitted to resume appearing or practicing before the Commission as: 1. a preparer or reviewer, or a person responsible for the preparation or review, of financial statements of a public company to be filed with the Commission upon submission of an application satisfactory to the Commission in which Respondent undertakes that, in his practice before the Commission, his work will be reviewed by the independent audit committee of the company for which he works or in some other manner acceptable to the Commission; 2. an independent accountant upon submission of an application containing a showing satisfactory to the Commission that: (a) Respondent, or any firm with which he is or becomes associated in any capacity, is and will remain a member of the SEC Practice Section of the American Institute of Certified Public Accountants Division for CPA Firms ("SEC Practice Section") as long as he appears or practices before the Commission as an independent accountant; (b) Respondent or the firm has received an unqualified report relating to his or the firm's most recent peer review conducted in accordance with the guidelines adopted by the SEC Practice Section; and (c) Respondent will comply with all applicable SEC Practice Section requirements, including all requirements for periodic peer reviews, concurring partner reviews, and continuing professional education, as long as he appears or practices before the Commission as an independent accountant. 3. The Commission's review of any request or application by Respondent to resume appearing or practicing before the Commission may include consideration of, in addition to the matters referenced above, any other matters relating to ==========================================START OF PAGE 5====== Respondent's character, integrity, professional conduct or qualifications to appear or practice before the Commission. By the Commission. Jonathan G. Katz Secretary