UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION Securities Exchange Act of 1934 Release No. 39077 / September 15, 1997 Accounting and Auditing Enforcement Release No. 960 / September 15, 1997 Administrative Proceeding File No. 3-9409 _______________________ : In the Matter of : ORDER INSTITUTING PROCEEDINGS : AND OPINION AND ORDER PURSUANT TO JAMES R. BRYAN, C.P.A. : RULE 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 pursuant to Rules 102(e)(1)(ii) and (iii) and 102(e)(3)(i)(A) of the Commission's Rules of Practice against James R. Bryan ("Bryan").<(1)> <(1)> Paragraphs (1)(ii), (1)(iii) and (3)(i)(A) of Rule 102(e) provide, in relevant part, that: (1) The Commission may censure a person or deny, temporarily or permanently, the privilege of appearing or practicing before it in any way to any person who is found by the Commission after notice and opportunity for hearing in the matter: . . . (ii) To be lacking in character or integrity or to have engaged in unethical or improper professional conduct; or (iii) To have willfully violated . . . any provision of the Federal securities laws or the rules and regulations thereunder. (3)(i) 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 or her misconduct in an action brought by the Commission, from violating . . . any provision of the Federal securities laws or of the rules and regulations thereunder . . . . II. In anticipation of the institution of this administrative proceeding Bryan has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, and prior to a hearing pursuant to the Commission's Rules of Practice, Bryan consents to the issuance of this Order Instituting Proceedings and Opinion and Order Pursuant to Rule 102(e) of the Commission's Rules of Practice ("Order") and to the entry of the findings and imposition of the remedial sanctions as set forth below, provided that Bryan neither admits nor denies the findings set forth herein, except as to the Commission's finding of jurisdiction and the findings set forth in Section III. paragraphs A., B., C., D., E. and H. below, which Bryan admits. III. FINDINGS On the basis of this Order and Bryan's Offer, the Commission finds that: A. Bryan is a certified public accountant licensed by the state of Utah. At all relevant times, Bryan was the chief financial officer of Digitran Systems, Incorporated ("Digitran"). B. Digitran is a Delaware corporation with its principal place of business in Logan, Utah. At all relevant times, Digitran was primarily engaged in the business of developing, manufacturing and marketing computer simulators. Digitran's common and preferred stock was registered with the Commission pursuant to Section 12 of the Securities Exchange Act of 1934 ("Exchange Act"). C. On December 29, 1994, the Commission filed a complaint (the "Complaint") in the United States District Court for the District of Utah against Bryan, Digitran and Donald G. Gallent, Digitran's president and chief executive officer, captioned Securities and Exchange Commission v. Digitran Systems, Inc., et al., 94C-NC-173C (Utah N.D.). The Complaint alleges, among other things, that Bryan violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Exchange Act, and Rules 10b-5, 13b2-1 and 13b2-2 thereunder. Through its complaint, the Commission sought a permanent injunction and other relief against Bryan. D. The Commission's Complaint alleges, among other things, that Bryan participated in a fraudulent scheme to overstate Digitran's sales, assets, shareholders' equity and earnings for its fiscal year 1992 and the first three quarters of its fiscal year 1993. The alleged scheme involved providing false financial statements, making other false statements and omitting to state material facts in Digitran's periodic reports and a registration statement filed with the Commission, and by issuing at least thirteen false press releases. The alleged misrepresentations contained in those filings and press releases include, among other things, misleading financial data concerning Digitran's revenues and earnings, ======END OF PAGE 2====== misrepresentations of the existence of agreements for the sale or lease of computer simulators by Digitran, failures to disclose the cancellation of agreements to purchase or lease computer simulators and improper recognition of revenue on several sale and lease transactions. It is alleged that the portion of Digitran's total revenue improperly recognized during the relevant reporting periods ranged from 46% of the revenue for fiscal year 1992 to 93% of the revenue in the third quarter of fiscal year 1993. Moreover, the Complaint alleges that the financial statements accompanying Digitran's filings with the Commission were not prepared in conformity with generally accepted accounting principles. It is alleged that as part of this conduct, Bryan falsified certain of Digitran's books, records and accounts which were examined by Digitran's auditors, and Bryan made materially false and misleading statements and omissions to Digitran's auditors in connection with their audit of Digitran's financial statements for fiscal year 1992. E. The Complaint also alleges that Bryan sold 6,000 shares of Digitran stock while in possession of material, nonpublic information that Digitran had overstated its sales, assets, shareholders' equity and earnings and had disseminated, through its filings and press releases, false and misleading information regarding Digitran's financial condition and operations. F. Based on the conduct described in paragraphs D. and E. above, Bryan willfully violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, in that he, directly or indirectly, in the offer or sale or in connection with the purchase or sale of securities, by the use of the means or instrumentalities of, or the means or instruments of transportation or communication in, interstate commerce or the mails, or the facilities of a national securities exchange: (1) employed devices, schemes and artifices to defraud; (2) made, or obtained money or property by means of, untrue statements of material fact or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (3) engaged in acts, transactions, practices or courses of business which operated as a fraud or deceit upon purchasers or other persons in connection with the purchase or sale of Digitran securities. G. Based on the conduct described in paragraph D. above, Bryan willfully violated Rules 13b2-1 and 13b2-2, promulgated pursuant to Section 13(b) of the Exchange Act, in that he, directly or indirectly: (1) falsified or caused to be falsified Digitran's books, records, and accounts subject to Section 13(b)(2)(A) of the Exchange Act; and (2) made or caused to be made materially false or misleading statements, and omitted to state, or caused another person to omit to state, any material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading to an accountant in connection with (a) the audit or examination of Digitran's financial statements and (b) the preparation or filing of documents or reports required to be filed with the Commission. ======END OF PAGE 3====== H. Without admitting or denying the allegations in the Complaint, except as to jurisdiction, Bryan consented to the entry of an order of permanent injunction and to the entry of final judgment thereon. On August 21, 1997, the Honorable Tena Campbell of the United States District Court for the District of Utah entered an order of Final Judgment against Bryan whereby he is permanently enjoined from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rules 10b-5, 13b2-1 and 13b2-2 thereunder. In addition, Bryan was ordered to pay $13,500 in disgorgement, with prejudgment interest of $6,359. Payment of the disgorgement was waived, however, based upon Bryan's demonstrated inability to pay. Further, the court did not impose a penalty pursuant to Section 20(d) of the Securities Act and Section 21(d)(3) of the Exchange Act based upon Bryan's demonstrated inability to pay. Finally, Bryan was barred from acting as an officer or director of any reporting company pursuant to Section 21(d)(2) of the Exchange Act for a period of ten years. I. By reason of the conduct set forth in the Order, the Commission finds that Bryan willfully violated certain provisions of the federal securities laws, engaged in improper professional conduct within the meaning of Rule 102(e) of the Commission's Rules of Practice, and was permanently enjoined by consent from further violations of certain provisions of the federal securities laws. IV. Based on the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer of Settlement submitted by Bryan, and accordingly, IT IS HEREBY ORDERED, effective immediately, that: A. Bryan be, and hereby is, denied the privilege of appearing or practicing before the Commission as an accountant. B. After five years from the date of this order, Bryan 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 Bryan 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. Bryan, 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 ======END OF PAGE 4====== 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. Bryan, 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. Bryan 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 Bryan to resume appearing or practicing before the Commission, may include consideration of, in addition to the matters referenced above, any other matters relating to Bryan's character, integrity, professional conduct, or qualifications to appear or practice before the Commission. By the Commission. Jonathan G. Katz Secretary ======END OF PAGE 5======