U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20566 / May 12, 2008
Accounting and Auditing Enforcement Release No. 2824 / May 12, 2008
Securities and Exchange Commission v. David M. Hurley, Civil Action No. 1:05CV01306 (JR) (D.D.C.)
Former aaiPharma Inc. Executive David Hurley Agrees to Pay $50,000 Civil Penalty in Settlement of SEC Litigation
The Securities and Exchange Commission today announced a final resolution of the Commission's civil action against David M. Hurley (Hurley), former chief operating officer of aaiPharma, Inc. (aaiPharma). Pursuant to a final judgment entered by the Court on May 5, 2008, Hurley was ordered to pay a civil penalty of $50,000. In June 2005, without admitting or denying the allegations in the complaint, Hurley consented to a partial resolution of the case, agreeing to entry of a judgment enjoining him from violating or aiding and abetting violations of the antifraud, recordkeeping, internal controls, and other provisions of the federal securities laws (Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5, 12b-20, 13a-11, 13a-13, and 13b2-1) and to be permanently barred from acting as an officer or director of any public company.
In the Commission's complaint filed against Hurley in June 2005, the Commission alleged that prior to aaiPharma's 2003 fiscal third quarter end, Hurley arranged fraudulent sales transactions with customers to create the illusion that aaiPharma had met or exceeded its sales goals for the quarter. The complaint alleged that these fraudulent sales were reflected in aaiPharma's financial statements included in filings publicly disseminated in November 2003 and February 2004. The complaint further alleged that in the fourth quarter of 2003, Hurley arranged a fraudulent sales transaction with an aaiPharma customer. According to the complaint, although the transaction gave the customer the right to return the product, aaiPharma falsely recorded it as a final sale. The complaint alleged that as a result, aaiPharma reflected fraudulent sales of approximately $8 million in a Form 8-K filed with the Commission in February 2004 that announced the company's financial results for its fiscal fourth quarter and fiscal year ended 2003.
The Commission acknowledges the assistance of the United States Attorney's Office for the Western District of North Carolina and the Federal Bureau of Investigation's Charlotte, North Carolina Field Office in this matter.
For additional information, see Litigation Release No. 19290 / June 30, 2005