SECURITIES AND EXCHANGE COMMISSION
                                   WASHINGTON, D.C.


             Securities Exchange Act of 1934
             Release No.  41146 / March 8, 1999

             Accounting and Auditing Enforcement
             Release No.    1116 / March 8, 1999

             Administrative Proceeding File No. 3-9846

             In the Matter of Jeffrey L. Harfst, CPA, William R. Hebel
             and Joseph E. Muehl

                  On March 8, 1999 the Securities and Exchange Commission
             ("Commission") issued an Order Instituting Proceedings
             Pursuant to Sections 15(b)(6) and 21C of the Securities
             Exchange Act of 1934 and Rule 102(e) of the Commission’s
             Rules of Practice as to Jeffrey L. Harfst, CPA, William R.
             Hebel and Joseph E. Muehl.  The Division of Enforcement
             alleges that each of the respondents, all former employees
             of the Nikko Securities Co. International, Inc. ("Nikko"),
             in connection with certain sales of its mortgage-backed
             securities ("MBS") portfolio, violated the broker-dealer
             recordkeeping and reporting provisions of the federal
             securities laws.  The Enforcement Division also alleges that
             Respondents Hebel and Muehl violated the antifraud
             provisions of the securities laws.[1]

                  The Enforcement Division alleges that from August to
             November 1994, Nikko, with Respondent Harfst’s knowledge,
             overstated the fair value of its MBS portfolio in its books
             and records and FOCUS reports.  During the summer of 1994,
             MBS market prices declined following an increase in long-
             term interest rates and a drop in demand for MBS derivative
             securities like those held in Nikko’s portfolio.
             Consequently, the fair value of Nikko’s MBS portfolio
             declined.  The Enforcement Division alleges that Nikko New
             York carried the MBS portfolio at values exceeding fair
             value by $9.6 million at the end of August 1994 and by $17.5
             million by the end of October 1994.   Respondent Harfst, as
             Nikko’s co-Chief Financial, knew that Nikko was overstating
             the fair value of its MBS portfolio and yet permitted Nikko
             to continue to overstate the MBS portfolio.

                  The Enforcement Division alleges that in November 1994,
             Nikko sold the majority of the MBS portfolio to its London-
             based affiliate, Nikko Europe Plc ("Nikko Europe"), for $134
             million, at least $17 million above fair value.  Nikko then
             improperly booked the transaction as trading proceeds and
             failed to report the $17 million loss that would have been
             recognized had the securities purchased by Nikko Europe been
             properly valued.  The Enforcement Division alleges that
             Respondent Harfst knew that the sale to Nikko Europe was
             improperly booked.

                  The Enforcement Division alleges that several months
             later, in February 1995, Nikko, acting as broker for Nikko
             Europe, sold a portion of the MBS portfolio.  In connection
             with those sales, Respondent Hebel, a Nikko Senior Vice
             President and Deputy Head of the Fixed Income Division, and
             Respondent Muehl, a Nikko First Vice President, violated the
             antifraud provisions, Section 10(b) of the Exchange Act and
             Rule 10b-5 thereunder, by misappropriating approximately
             $842,000 from Nikko Europe.  Respondents Hebel and Muehl
             arranged to sell the MBS portfolio securities in four swap
             transactions with an unaffiliated broker in which the prices
             were deliberately marked down to allow Nikko to profit at
             the expense of Nikko Europe.  In order to conceal the
             scheme, Hebel and Muehl falsified Nikko’s books and records
             to hide the illicit profits.  As part of this scheme, Hebel
             and Muehl told Harfst that Muehl had certain profits he
             wanted to recognize over time, instead of on the day made.
             Harfst agreed to the profit-recognition scheme so long as
             all the profits were recorded by month-end.  Harfst learned
             in early March that the profits had not been recorded as
             instructed, yet took no further action.  As a result of
             these activities, Nikko’s books and records and FOCUS
             reports were inaccurate in violation of the Exchange Act’s
             books and records provisions for broker-dealers, Sections
             17(a) and 17(e) of the Exchange Act and Rules 17a-3 and 17a-
             5 thereunder.  The Division alleges that Harfst, Hebel and
             Muehl willfully aided and abetted and caused these
             violations and that Harfst engaged in improper professional
             conduct.

                  A hearing will be held before an administrative law
             judge to determine whether the staff’s allegations are true,
             and if so, what if any remedial relief is appropriate and in
             the public interest.


             **FOOTNOTES**

                [1]:  In related settled civil and administrative proceedings, the
                Commission previously sanctioned Nikko and three individuals for conduct
                related to these facts.   Securities and Exchange Commission v. The
                Nikko Securities Co. International, Inc., 98 CV 2058 (D.D.C. August 27,
                1998), Lit. Rel. No. 15861, AAER No. 1070;  In the Matter of The Nikko
                Securities Co. International, Inc., Masao Ebina, Tadao Osada and
                Toshiyuki Sagiuchi, Admin. Proc. File No. 3-9687.



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