U.S. Securities & Exchange Commission
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U.S. Securities and Exchange Commission


Securities and Exchange Commission,






Case No.


Plaintiff Securities and Exchange Commission (the "SEC") alleges:


1. This Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), and 27 [15 U.S.C. 78u(d), 78u(e), and 78aa]. The defendant directly or indirectly used the means or instrumentalities of interstate commerce, or of the mails, or of the facilities of a national securities exchange, in connection with the transactions, acts, omissions, practices, and courses of business described herein.


2. Scott H. Miller, age 44, resides in Las Vegas, Nevada and was Senior Vice President of Finance and Chief Accounting Officer of PurchasePro, Inc. during the period relevant to the conduct described herein and continuing until August 2001. Miller is a certified public accountant.


3. During the relevant period, PurchasePro was a Nevada corporation, headquartered in Las Vegas, that provided Internet business-to-business electronic-commerce software and services. PurchasePro's common stock was registered with the Commission pursuant to Exchange Act Section 12(g) and traded on the Nasdaq National Market. The company filed a voluntary Chapter 11 bankruptcy petition in September 2002, and has operated as a debtor-in-possession since then. In January 2003, the company changed its name to Pro-After, Inc. and, with the bankruptcy court's approval, sold substantially all of its assets to a privately held company called Perfect Commerce, Inc.

4. On April 26, 2001, PurchasePro issued a press release announcing its financial results for the first quarter of its 2001 fiscal year, which ended March 31, 2001 (hereinafter "Q1 2001"). The press release announced, among other things, that the company's revenues for Q1 2001 totaled $29.8 million. Later that day, PurchasePro hosted a conference call with analysts and investors in which the company, among other things, repeated that PurchasePro's revenues for the quarter totaled $29.8 million. As Senior Vice President of Finance and Chief Accounting Officer, Miller participated in the preparation of PurchasePro's financial statements and was among those responsible for ensuring the accuracy of the financial information that was disclosed in the press release and during the conference call.

5. The $29.8 million in revenue announced by PurchasePro on April 26, 2001 was materially overstated. Among other things, it included $3.7 million in revenue improperly recognized from an ostensible agreement by which America Online, Inc. ("AOL") would pay PurchasePro for certain technology services that PurchasePro purportedly provided to AOL. As a CPA and as PurchasePro's principal accounting officer, Miller knew or was reckless in not knowing that recognizing the revenue from this agreement was improper under generally accepted accounting principles (GAAP) because, among other things, the parties never reached an agreement with respect to the services at issue, and because the services were not performed as stated in the agreement.

6. In addition, in the period preceding PurchasePro's April 26, 2001 earnings release, Miller misled the company's outside accountants in connection with their review of PurchasePro's financial statements for Q1 2001. Miller failed to provide PurchasePro's outside accountants with material facts that called into question the authenticity and performance of the above-described $3.7 million agreement with AOL. In particular, Miller failed to inform the outside accountants about information suggesting that at least one signature on the agreement might not be genuine, and that the services described in the agreement were not performed by the close of the quarter. Because Miller failed to provide this material information, the outside accountants did not detect that PurchasePro's recognition of revenue from this transaction was improper. On an unrelated issue, Miller also misrepresented to PurchasePro's auditors that the commission rate PurchasePro had agreed to pay to AOL for certain software license referrals was only 20%, when in fact the rate was 50%. Had the auditors not later confirmed from other sources that the commission rate was actually 50%, PurchasePro's announced Q1 2001 revenues would have been inflated by an additional $5.2 million.

7. Miller also knowingly circumvented PurchasePro's internal accounting controls. Among other things, he recorded the revenue from the above-described $3.7 million agreement with AOL in PurchasePro's books without adequate documentary support. In another instance, contrary to a PurchasePro accounting policy requiring that checks be signed only after a payee name and payment amount were entered, Miller signed two blank checks and provided them to PurchasePro's chief executive officer, who later filled in the payee and amount for each check without Miller's further involvement or authorization. In a third instance, in April 2001 Miller caused PurchasePro to pay a $200,000 bonus to the company's then senior vice-president of sales, despite knowing or recklessly disregarding that the compensation committee of PurchasePro's board of directors had only authorized a $100,000 bonus. During the same month, Miller himself received a compensation committee-authorized $100,000 bonus from PurchasePro.

8. In February 2003, after being served with an SEC subpoena requiring that he produce documents relevant to the matters described above, Miller withheld, destroyed, and attempted to destroy several documents and electronic files that were subject to the subpoena.


(Exchange Act Section 10(b) and Rule 10b-5)

9. Paragraphs 1 through 8 are realleged and incorporated by reference.

10. By engaging in the foregoing conduct, defendant Miller violated Exchange Act Section 10(b) [15 U.S.C. 78j(b)] and Exchange Act Rule 10b-5 [17 C.F.R. 240.10b-5].


(Exchange Act Section 13(b)(5))

11. Paragraphs 1 through 10 are realleged and incorporated by reference.

12. By engaging in the foregoing conduct, Miller violated Exchange Act Section 13(b)(5) [15 U.S.C. 78m(b)(5)].


(Exchange Act Rule 13b2-2)

13. Paragraphs 1 through 12 are realleged and incorporated by reference.

14. By engaging in the foregoing conduct, Miller violated Exchange Act Rule 13b2-2 [17 C.F.R. 240.13b2-2].


WHEREFORE, plaintiff SEC respectfully requests that this Court enter a judgment that:

(i) permanently enjoins Miller from violating Exchange Act Sections 10(b) and 13(b)(5) [15 U.S.C. 78j(b) and 78m(b)(5)] and Exchange Act Rules 10b-5 and 13b2-2 [17 C.F.R. 240.10b-5 and 240.13b2-2];

(ii) permanently bars Miller from acting as an officer or director of any public company pursuant to Exchange Act Section 21(d)(2) [15 U.S.C. 78u(d)(2)];

(iii) orders Miller to disgorge, with prejudgment interest, any and all bonuses and other illicit benefits he received as a result of the conduct described herein;

(iv) orders Miller to pay civil penalties pursuant to Exchange Act Section 21(d)(3) [15 U.S.C. 78u(d)(3)]; and

(v) grants such other relief as the Court deems just or appropriate.

Respectfully submitted,

Andrew B. Stevens
(202) 942-4844
(202) 942-9630 (fax)
Paul R. Berger
Russell G. Ryan
C. Hunter Wiggins

450 5th Street, N.W.
Washington, D.C. 20549-0911

Attorneys for Plaintiff

Paul J. McNulty
United States Attorney

Paula P. Newett
VSB# 14701
Assistant U.S. Attorney

Dated: September 23, 2003


Modified: 10/10/2003