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U.S. Securities and Exchange Commission

Before the

Release No. 44500 / July 2, 2001

Release No. 1417 / July 2, 2001

File No. 3-10528

In the Matter of

Scott K. Barton, CPA





The Securities and Exchange Commission ("Commission") deems it appropriate to institute public administrative proceedings pursuant to Rule 102(e)1 of the Commission's Rules of Practice against Scott K. Barton, CPA ("Respondent" or "Barton").


In anticipation of the institution of these administrative proceedings, Respondent has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings, and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings set forth below, except that he admits the Commission's finding that a Final Judgment of Permanent Injunction and Other Relief has been entered against him as set forth in Paragraph III.C below and admits the Commission's jurisdiction over him and over the subject matter of these proceedings, Respondent consents to the entry of this Order Instituting Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions ("Order").



The Commission makes the following findings:2

A. Barton, 47, of Spring, Texas, became the controller of Paracelsus Healthcare Corporation ("Paraclesus") in 1981, a position he held through August 1996. Barton has been a licensed Certified Public Accountant with the State of California since 1981.

B. Paracelsus is a California corporation which registered a bond offering and began filing periodic reports with the Commission pursuant to Section 15(d) of the Securities Exchange Act of 1934 ("Exchange Act") in 1993. In August 1996, Paracelsus registered offerings of common stock and notes and an exchange offer for the outstanding common stock of Champion Healthcare Corporation ("Champion"). Paracelsus raised $365 million in the offerings, merged with Champion, and became a publicly held, Section 12(b) reporting company, listed on the New York Stock Exchange.

C. On June 18, 2001, the Commission filed a complaint against Barton and others in the United States District Court for the Southern District of Texas, Houston Division, SEC v. Ron Messenger, et al, CIV. NO. H-01-2022 (S.D. TX, Houston Div.). Solely for the purpose of settling these proceedings, Barton consented to the entry of a Final Judgment of Permanent Injunction and Other Relief ("Final Judgment") against him, without admitting or denying the allegations of the complaint, except as to subject matter jurisdiction, which he admitted. On June 20, 2001, the United States District Court for the Southern District of Texas, Houston Division, entered the Final Judgment, which (1) permanently enjoins Barton from (i) violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13; and (ii) orders Barton to pay a civil penalty of $25,000.

D. The Commission's complaint alleges that while Barton was Paracelsus' controller, he participated in misconduct by which Paracelsus inflated its quarterly and annual earnings in filings with the Commission from at least 1993 through August 1996. Specifically, the complaint alleges that Barton and others created and used "cookie jar" reserves which were inappropriate under Generally Accepted Accounting Principles, because no probable and reasonably estimable exposures justified their creation, and because their later decrease artificially boosted Paracelsus' earnings and concealed a decline in earnings. Additionally, the complaint alleges that Barton and others failed to disclose all material facts regarding the misconduct to Paracelsus' auditors.


In view of the foregoing, the Commission deems it appropriate to accept Barton's Offer and to impose the sanctions agreed to therein.

Accordingly, IT IS HEREBY ORDERED, effective immediately, that:

A. Barton is denied the privilege of appearing or practicing before the Commission as an accountant.

B. After three years from the date of this Order, Barton may request that the Commission consider his reinstatement by submitting an application (attention: Office of the Chief Accountant) to resume appearing or practicing before the Commission as:

1. a preparer or reviewer, or a person responsible for the preparation or review, of any public company's financial statements that are filed with the Commission. Such an application must satisfy the Commission that Barton's work in his practice before the Commission will be reviewed either by the independent audit committee of the public company for which he works or in some other acceptable manner, as long as he practices before the Commission in this capacity; and/or

2. an independent accountant. Such an application must satisfy the Commission that: (a) Barton, or the firm with which he is associated, is a member of the SEC Practice Section of the American Institute of Certified Public Accountants Division for CPA Firms ("SEC Practice Section"); (b) Barton, 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) as long as Barton appears or practices before the Commission as an independent accountant he will remain either a member of the SEC Practice Section or associated with a member firm of the SEC Practice Section, and will comply with all applicable SEC Practice Section requirements, including all requirements for periodic peer reviews, concurring partner reviews, and continuing professional education.

C. The Commission's review of an application by Barton to resume appearing

or practicing before the Commission may include consideration of, in addition to the matters referenced above, any other matters relating to Barton's character, integrity, professional conduct, or qualifications to appear or practice before the Commission.

By the Commission.

Jonathan G. Katz


1 Rule 102(e)(3)(i), in relevant part, provides that the Commission may suspend from appearing or practicing before it any accountant who by name has been permanently enjoined, by a court of competent jurisdiction in an action brought by the Commission, from violating any provision of the federal securities laws or the rules and regulations thereunder [17 C.F.R. 201.102(e)(3)(i)].
2 The findings herein are made pursuant to Barton's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.


Modified: 07/02/2001