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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 42753 / May 3, 2000

ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1255 / May 3, 2000

ADMINISTRATIVE PROCEEDING
File No. 3-10198

In the Matter of

CYNTHIA PFALTZGRAFF, CMA,

Respondent.


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ORDER INSTITUTING PUBLIC
PROCEEDING, MAKING FINDINGS AND
ORDER PURSUANT TO RULE 102(e)
OF THE COMMISSION'S
RULES OF PRACTICE

I.

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest to institute an administrative proceeding against Respondent Cynthia Pfaltzgraff pursuant to paragraph (3) of Rule 102(e) of the Commission's Rules of Practice [17 C.F.R. §201.102(e)].1

In anticipation of the institution of this proceeding, Pfaltzgraff 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 without admitting or denying the Commission's findings contained herein, except that she admits the jurisdiction of the Commission over her and over the matters set forth in this Order and admits the Commission's finding that a Final Judgment of Permanent Injunction has been entered against her as set forth in Section II, Pfaltzgraff consents to the entry of findings and the imposition of the remedial sanctions set forth below.

II.

The Commission finds the following:2

A. At all relevant times, Pfaltzgraff, a certified management accountant, was the controller of Itex Corporation.

B. Itex Corporation is a Portland, Oregon based barter exchange business whose stock was listed on the NASDAQ Small Cap market until its delisting in December 1998.

C. On September 27, 1999, the Commission filed a complaint against Pfaltzgraff and others in the United States District Court for the District of Oregon. SEC v. Itex Corporation, Terry L. Neal, Michael T. Baer, Graham H. Norris, Cynthia Pfaltzgraff and Joseph M. Morris, CIV. NO. 99-1361(HA) (D.Ore.). The Commission's complaint alleged, among other things, that: (1) from at least December 1993 through February 1998, Pfaltzgraff, as controller of Itex, knowingly or recklessly participated in material overstatement of Itex's assets, revenues and earnings in its financial statements, and failed to disclose numerous suspect and in many cases sham barter deals between Itex and various related party transactions; (2) Pfaltzgraff knowingly circumvented and failed to implement internal accounting controls; and (3) Pfaltzgraff made and caused others to make materially false and misleading statements and omissions to Itex's auditors in connection with audits for fiscal years ended July 31, 1994, 1995, 1996 and 1997.

D. On March 24, 2000, a final judgment was entered by the United States District Court for the District of Oregon permanently enjoining Pfaltzgraff from violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and 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 thereunder. Pfaltzgraff consented to entry of the judgment without admitting or denying the allegations of the Commission's complaint.

III.

Based on the foregoing, the Commission deems it appropriate and in the public interest to accept Pfaltzgraff's Offer of Settlement and accordingly,

IT IS HEREBY ORDERED, effective immediately, that Pfaltzgraff is denied the privilege of appearing or practicing before the Commission as an accountant.

IT IS FURTHER ORDERED, that five years from the date of this Order, Pfaltzgraff may apply to the Commission by submitting an application to the Office of the Chief Accountant which requests that she be permitted to resume appearing or practicing before the Commission as 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 Pfaltzgraff undertakes that, in her practice before the Commission, her work will be reviewed by the independent audit committee of the company for which she works or in some other manner acceptable to the Commission.

IT IS FURTHER ORDERED, that the Commission's review of any request or application by Pfaltzgraff to resume appearing or practicing before the Commission may include consideration of, in addition to the matters referenced above, any other matters relating to her character, integrity, professional conduct or qualifications to appear or practice before the Commission.

By the Commission.

Jonathan G. Katz
Secretary


Footnotes

1Rule 102(e) provides, in pertinent part:

(3)(i) The Commission, with due regard to the public interest and without preliminary hearing, may, by order . . . 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 violation or aiding and abetting the violation of any provision of the Federal securities laws (15 U.S.C. 77a--80b-20) or of the rules and regulations thereunder . . . . (iv) . . . A person who has consented to the entry of a permanent injunction . . . without admitting the facts set forth in the complaint shall be presumed for all purposes under this paragraph (3) to have been enjoined by reason of the misconduct alleged in the complaint.

1 The findings herein are made pursuant to the Respondent's Offer and are not binding on any other person or entity in this or any other proceeding.

http://www.sec.gov/litigation/admin/34-42753.htm


Modified:11/01/2000