-------------------- BEGINNING OF PAGE #1 ------------------- UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 36672 / January 3, 1996 ACCOUNTING AND AUDITING ENFORCEMENT Release No. 748 / January 3, 1996 ADMINISTRATIVE PROCEEDING File No. 3-8913 ------------------------- In the Matter of: : ORDER INSTITUTING PUBLIC : PROCEEDINGS PURSUANT TO SECTION 21C : OF THE SECURITIES EXCHANGE ACT OF WILLIAM W. KRUEGER, CPA : 1934, AND RULE 102(e) OF THE : COMMISSION'S RULES OF PRACTICE, : MAKING FINDINGS AND IMPOSING Respondent. : SANCTIONS : ------------------------- I. The Commission deems it appropriate and in the public interest to institute public proceedings against William W. Krueger (Krueger), CPA, pursuant to Section 21C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission's Rules of Practice.-[1]- Accordingly, IT IS HEREBY ORDERED that these proceedings be, and hereby are, instituted. II. In anticipation of the institution of these proceedings, Krueger has submitted an Offer of Settlement 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 in which the Commission is a party, and prior to a hearing pursuant to the Commission's Rules of Practice, 17 C.F.R. Section 201.1 et seq., Krueger consents, without admitting or dening any findings set forth herein, except the findings contained in paragraphs III.1. through III.4., which are admitted, to the issuance of this Order Instituting Public Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, and Rule 102(e) of the Commission's Rules of Practice, Making Findings and Imposing Sanctions, and to the entry of the findings and imposition of the remedial sanctions set forth below. III. --------- FOOTNOTES --------- -[1]- Rule 102(e)(1) of the Commission's Rules of Practice, 17 C.F.R. Section 201.102(e), provides in pertinent part: 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. -------------------- BEGINNING OF PAGE #2 ------------------- On the basis of this Order and Krueger's Offer of Settlement, the Commission finds that:-[2]- 1. Datronic Equipment Income Fund XVI, L.P. (Fund XVI), Datronic Equipment Income Fund XVII, L.P. (Fund XVII), Datronic Equipment Income Fund XVIII, L.P. (Fund XVIII), Datronic Equipment Fund XIX, L.P. (Fund XIX), Datronic Equipment Income Fund XX, L.P. (Fund XX) and Datronic Finance Income Fund I, L.P. (FIFI) (collectively referred to as "the limited partnerships"), are Delaware limited partnerships formed for the purpose of investing in equipment leases. 2. Datronic Rental Corporation (Datronic), an Illinois corporation, was the general partner of the limited partnerships, raised funds for them and managed and controlled their day-to- day operations. 3. Edmund Lopinski (Lopinski), age 44, was the president, chief executive officer and chairman of the board of directors of Datronic from 1985 until May 1992. At all relevant times, Lopinski was the majority shareholder of Datronic. 4. Krueger, age 47, was first associated with Datronic from September 1987 to February 1988. During this time, he served as its vice-president of finance and chief financial officer. He rejoined Datronic in May 1989 as an operational specialist, and in December 1989 became treasurer of Datronic. Krueger also acted as temporary chief financial officer of Datronic from May 1990 to January 1991. At all relevant times Krueger was licensed as a certified public accountant. 5. At all relevant times, Capitol Lease Investment Corporation (CLIC) was an Illinois corporation incorporated on October 2, 1990. Lopinski was a director of CLIC. 6. The Partnership Agreements (Agreements) for the limited partnerships stated that Datronic and its affiliates did not have the authority to cause the limited partnerships to enter into any transactions with Datronic or its affiliates. 7. An "affiliate" of a person is defined in the Agreements to include any other person under direct or indirect common control with the person, and, for an entity, 10% shareholders or officers or directors. CLIC and Datronic were "affiliates" within the meaning of the Agreements in that Datronic and CLIC were under the common control of Lopinski and Lopinski was a director of both Datronic and CLIC. 8. From October 1990 to May 1992, Lopinski misappropriated approximately $15 million of limited partnership funds for his direct or indirect benefit. The funds were diverted from the limited partnerships in connection with two major transactions which Lopinski caused the limited partnerships to enter into with CLIC, an affiliated entity. 9. Lopinski also misrepresented the relationship between Datronic and CLIC to the attorneys for Datronic and the limited partnerships, resulting in the issuance of an opinion letter by --------- FOOTNOTES --------- -[2]- The findings herein are made pursuant to William Krueger's Offer of Settlement and are not binding on any other person or entity named as a respondent in this or any other proceeding. -------------------- BEGINNING OF PAGE #3 ------------------- the attorneys which erroneously stated that Datronic and CLIC were not affiliated entities. 10. In connection with the two major transactions, Krueger, at Lopinski's direction, wire transferred funds belonging to the limited partnerships or for which limited partnership assets were pledged as security, to bank accounts in the name of CLIC which were under Lopinski's control. 11. Krueger, at Lopinski's direction, wire transferred funds from the CLIC bank accounts containing limited partnership funds for use towards the acquisition of various personal assets by Lopinski. 12. Krueger, at Lopinski's direction, monitored the daily transactions in the CLIC bank accounts containing limited partnership funds, prepared daily activity sheets for Lopinski to review and placed the daily activity sheets in a locked file cabinet. The daily activity sheets, which were not given to Datronic's accounting department nor to Datronic's auditors, reflect that the transferred funds were used towards the acquisition of personal assets by Lopinski. 13. The limited partnerships and Lopinski violated Section 17(a) of the Securities Act of 1933 (Securities Act), Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by issuing false and misleading prospectuses. Specifically, Lopinski caused the prospectuses of Funds XIX, XX and FIFI to falsely state that the proceeds from the sale of the limited partnership units would be used to acquire equipment for lease to unaffiliated third parties, equipment subject to exising leases, or to finance leases, when, in fact, Lopinski's practice was to use substantial amounts of limited partnership funds to purchase items such as luxury condominiums, an apartment building, an office building, yachts, a yacht membership in the Bahamas, boat docks, a jet, Datronic stock and towards the construction of a house, all for his personal benefit. 14. The limited partnerships, through Lopinski, also failed to disclose to investors that the limited partnerships had entered into transactions with an affiliated party. Specifically, the limited partnerships, through Lopinski, failed to disclose that Lopinski was a director of both CLIC and Datronic and that Lopinski controlled CLIC bank accounts containing limited partnership funds. 15. From October 1990 to May 1992, Krueger caused Lopinski's and the limited partnerships' violations of the antifraud provisions of the securities laws. Krueger was aware that the limited partnerships, through Lopinski, issued these false and misleading prospectuses. Despite his knowledge, Krueger not only failed to reveal the facts contained in paragraphs 13 and 14 above, but also substantially assisted Lopinski by making improper transfers of limited partnership funds and keeping secret daily activity sheets of CLIC bank accounts containing limited partnership funds. 16. The limited partnerships violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. Specifically, Funds XVII, XVIII and XIX filed Forms 10-K for the year ended December 31, 1990 which failed to disclose, among other things, that the limited partnerships had entered into transactions with an affiliate of Datronic, that as a result of the transactions, CLIC was retaining millions of dollars of -------------------- BEGINNING OF PAGE #4 ------------------- limited partnership funds in CLIC's bank accounts and that Lopinski used substantial amounts of these limited partnership funds to purchase items such as a luxury condominium, an apartment building, an office building, and shares of Datronic stock, all for his personal benefit. Funds XVII, XVIII and XIX also filed Forms 10-Q for the quarters ended March 31, 1991, June 30, 1991 and September 30, 1991 which failed to disclose the above facts. 17. Krueger caused the limited partnerships' violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder by failing to ensure that the periodic reports filed by the limited partnerships were complete, true and correct. 18. From October 1990 to May 1992, Krueger violated the provisions of Section 13(b)(5) of the Exchange Act and Rule 13b2- 1 thereunder by failing to implement a system of adequate internal accounting controls for making and recording wire transfers of limited partnership funds, by knowingly circumventing existing controls and by knowingly falsifying the limited partnerships' books and records to improperly characterize the purpose of these transfers. 19. From October 1990 to May 1992, Krueger violated Section 13b2-2 of the Exchange Act by failing to disclose to Datronic's auditors that Datronic and CLIC were affiliated parties, that Lopinski had control over CLIC's bank accounts which contained limited partnership funds, that at Lopinski's direction, Krueger was keeping track of the daily transactions in these accounts, and that Lopinski used these funds for personal benefit. 20. For the reasons set forth above, Krueger violated and caused violations of the federal securities laws and engaged in improper professional conduct, within the meaning of Rule 102(e)(1)(ii) of the Commission's Rules of Practice. In view of the foregoing, it is in the public interest to impose the sanctions agreed to in the Offer of Settlement. Accordingly, IT IS HEREBY ORDERED that: 1. Krueger, pursuant to Section 21C of the Exchange Act, cease and desist from committing or causing any violation, and any future violation, of Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and from causing any violation, and any future violation, of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. 2. Krueger, pursuant to Rule 102(e) of the Commission's Rules of Practice, be and hereby is, denied the privilege of appearing or practicing before the Commission as an accountant, provided that: 3. Five years after the date of this Order, Krueger may apply to the Commission and request that he be permitted to resume appearing or practicing before the Commission as: a. A preparer or reviewer of financial statements required to be filed with the Commission or a person responsible for the preparation or review of financial statements required to be filed with the Commission provided that, in Krueger's practice before the Commission, his work will be reviewed by the -------------------- BEGINNING OF PAGE #5 ------------------- independent audit committee of the company or in some other manner acceptable to the staff of the Commission; b. A certified public accountant upon submission of an application to the Office of the Chief Accountant of the Commission containing a showing satisfactory to the Commission that: i). Krueger, 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 the American Institute of Certified Public Accountants Division for CPA Firms (SEC Practice Section); ii). Krueger, or any firm with which he is or becomes associated, has received an unqualified report relating to his or its most recent peer review conducted in accordance with the guidelines adopted by the SEC Practice Section; and iii). Krueger 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 a certified public accountant. c. The Commission's review of any request or application by Krueger to resume appearing or practicing before the Commission may include consideration of, in addition to the matters referred to above, any other matters relating to Krueger's character, integrity, professional conduct, or qualifications to appear or practice before the Commission. By the Commission. Jonathan G. Katz Secretary