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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. 46322 / August 8, 2002

ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1612 / August 8, 2002

ADMINISTRATIVE PROCEEDING
File No. 3-10859


In the Matter of

EDWARD T. CREEVY,

Respondent.


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ORDER INSTITUTING PUBLIC PROCEEDINGS, MAKING FINDINGS AND IMPOSING AN 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 administrative proceedings against Respondent Edward T. Creevy, pursuant to Rules 102(e)(1)(iii), 102(e)(2) and 102(e)(3)(i)(A) of the Commission's Rules of Practice [17 C.F.R. §§ 201.102(e)(1)(iii), 201.102(e)(2) and 201.102(e)(3)(i)(A)].1

II.

In anticipation of the institution of these proceedings, Creevy has submitted an Offer of Settlement ("Offer"), which the Commission has decided 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, Creevy consents to the issuance of this Order and to the entry of the findings and imposition of the remedial sanction set forth below, without admitting or denying the Commission's findings, except that he admits that the Commission has jurisdiction over him and over the subject matter of this proceeding and he admits the Commission's findings in paragraphs III.D and III.E herein relating to his felony conviction and his being permanently enjoined from future violations of the Federal securities laws.

III.

The Commission finds that:

A. Creevy, age 51, served as the vice president and chief financial officer of Donnkenny, Inc. ("Donnkenny"), from 1989 until his resignation in November 1996. He was an unlicensed certified public accountant in the State of Connecticut from 1975 until July 9, 2002, on which date the Connecticut Board of Accountancy revoked his certified public accountant certificate.

B. Donnkenny is a Delaware corporation headquartered in New York, New York which, during the relevant period, was engaged in the business of designing, manufacturing, importing and marketing women's clothing. During the relevant period, Donnkenny's securities were registered with the Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 ("Exchange Act"), and were quoted on the National Association of Securities Dealers Automated Quotation National Market System.

C. From early 1994 through at least August 1996, Creevy, among others, assisted Donnkenny's chairman and chief executive officer in falsifying Donnkenny's financial statements so as to meet or exceed projections and analysts' expectations. With Creevy's knowledge and occasional active participation, the scheme was effected by, among other things, holding open quarters to book out-of-period shipments; recording revenue on orders without shipping the goods to customers; recording fictitious sales from non-existent contract work and through false journal entries; and recording revenue on inventory hidden at an idle Donnkenny facility and a third-party warehouse. Creevy signed and/or caused to be disseminated materially false and misleading financial statements and other disclosures through press releases and filings with the Commission which Creevy knew contained materially false information regarding the company's financial condition. Creevy also signed management representation letters addressed to the company's auditors in connection with audits of Donnkenny's financial statements for fiscal years 1994 and 1995 which falsely represented, among other things, that the accounting records underlying Donnkenny's financial statements accurately and fairly reflected the company's transactions. Further, Creevy sold 14,000 shares of Donnkenny stock, profiting in the amount of approximately $148,000, while in possession of material, nonpublic information concerning Donnkenny's materially misstated financial results.

D. On February 2, 1999, the Commission filed a complaint in the United States District Court for the District of Columbia, captioned SEC v. Rubin, et al., 99 CV 239, alleging, among other things, that Creevy engaged in the conduct described above. On July 31, 2002, Creevy was permanently enjoined from violating Section 17(a) of the Securities Act of 1933 ("Securities Act"), and Exchange Act Sections 10(b) and 13(b)(5) and Rules 10b-5, 13b2-1, and 13b2-2, and from aiding and abetting violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 12b-20, 13a-1, and 13a-13. Creevy consented to entry of the final judgment in the civil action without admitting or denying the allegations of the Commission's complaint, except as to jurisdiction.

E. In a parallel criminal proceeding brought in the United States District Court for the Eastern District of New York, captioned U.S. v. Creevy, 99 CR 13, Creevy pled guilty to one count of violating 18 U.S.C. § 371, a felony, by knowingly and willfully conspiring to commit securities fraud. In the criminal judgment entered in that case in November 2000, and amended in June 2001, the court sentenced Creevy to five years probation and 1,000 hours of community service, and ordered him to pay restitution in the amount of $250,000 and a fine in the amount of $250,000.

IV.

FINDINGS

On the basis of this Order and the Respondent's Offer, the Commission finds that: (a) Creevy willfully violated Securities Act Section 17(a) and Exchange Act Sections 10(b) and 13(b)(5) and Rules 10b-5, 13b2-1, and 13b2-2 thereunder, and willfully aided and abetted violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 12b-20, 13a-1, and 13a-13 thereunder; (b) the United States District Court for the Eastern District of New York entered a final judgment in November 2000, as amended in June 2001, convicting Creevy, based on his pleading guilty, to one count of violating 18 U.S.C. § 371 for knowingly and willfully conspiring to commit securities fraud, a felony crime involving moral turpitude; and (c) on July 31, 2002, in an action brought by the Commission, the United States District Court for the District of Columbia entered a final judgment permanently enjoining Creevy from violating Securities Act Section 17(a) and Exchange Act Sections 10(b) and 13(b)(5) and Rules 10b-5, 13b2-1, and 13b2-2, and from aiding and abetting violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 12b-20, 13a-1, and 13a-13.

V.

ORDER

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

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

By the Commission.

Jonathan G. Katz
Secretary

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1 Rule 102(e) provides, in pertinent part:
(1) The Commission may . . . 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 . . . . (iii) to have willfully violated, or willfully aided and abetted the violation of any provision of the Federal securities laws or the rules and regulations thereunder.

(2) . . . . [A]ny person who has been convicted of a felony or a misdemeanor involving moral turpitude shall be forthwith suspended from appearing or practicing before the Commission . . . .

(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) [p]ermanently 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. . . .

(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 (e)(3) to have been enjoined by reason of the misconduct alleged in the complaint.


http://www.sec.gov/litigation/admin/34-46322.htm


Modified: 08/08/2002