U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20876 / January 30, 2009
Accounting And Auditing Release No. 2929 / January 30, 2009
Securities and Exchange Commission v. Lumenis Ltd., Sagi A. Genger and Kevin Morano, (United States District Court for the Southern District of New York, Civil Action No. 06-3225-LAK)
FINAL JUDGMENT ENTERED AGAINST FORMER OFFICER OF LUMENIS, LTD. CHARGED IN FRAUDULENT SCHEME TO INFLATE REVENUE
The Securities and Exchange Commission announced today that a final judgment by consent was entered on September 9, 2008 by the United States District Court for the Southern District of New York against Kevin Morano, the former Chief Financial Officer of Lumenis, Ltd., in a previously-filed action alleging that Morano participated in a series of fraudulent transactions that resulted in the publication of materially false financial statements by Lumenis in 2002 and 2003. The final judgment against Morano, of Pennington, New Jersey, permanently enjoins Morano from violating the antifraud and other provisions of the federal securities laws and orders him to pay a $55,000 civil penalty. More recently, on January 15, 2009, the Court determined not to enter an order barring Morano from serving as an officer or director of a publicly traded company.
The Commission's complaint, filed on April 26, 2006, alleged that from at least late 2001 through early 2003, Morano and other defendants engaged in a fraudulent scheme to inflate revenue and misrepresent other important financial metrics so as to deceive investors as to the company's true financial condition. According to the complaint, the scheme involved the improper recognition of a series of sales transactions that resulted in Lumenis' publication of materially false and misleading financial statements in six consecutive financial reporting periods, starting with those for the year ended December 31, 2001. The complaint alleged that Morano allowed Lumenis to recognize revenue and profits from a number of the improper transactions while knowingly or recklessly disregarding the various conditions that should have precluded recognition.
The final judgment enjoined Morano from violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13a-14, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting future violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. The final judgment also imposed a civil penalty against Morano in the amount of $55,000. Morano consented to the entry of the final judgment without admitting or denying the allegations of the complaint. In addition, on September 29, 2008, the Commission issued an Order suspending Morano from appearing or practicing before the Commission as an accountant for five years based on the Court's entry of an order enjoining Morano from violating federal securities laws.
Morano was the last remaining defendant in this matter, and the settlement with him concludes the Commission's case. Morano's two co-defendants (Lumenis and its former Chief Operating Officer, Sagi Genger) previously agreed to settle SEC charges against them. Judgments by consent were entered against them on May 2, 2006. In addition, the Commission previously issued an Order finding that an audit partner at Lumenis' former auditor engaged in improper professional conduct pursuant to Rule 102(e)(1)(ii) of the Commission's Rules of Practice and suspended him from appearing and practicing before the Commission as an accountant for three years. Finally, the Commission issued an order on April 26, 2006 revoking the registration of Lumenis' securities.