U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21119 / July 8, 2009
Accounting and Auditing Enforcement Release No. 3008 / July 8, 2009
Securities and Exchange Commission v. Jerry F. Wells, Jr., Civil Action No. 3:09-CV-01792-MJP (D. S.C. July 6, 2009)
The Securities and Exchange Commission ("Commission") announced that on July 6, 2009, it filed a Complaint in the United States District Court for the District of South Carolina against Jerry F. Wells, Jr. ("Wells"). The Complaint alleges that Wells, a resident of Columbia, South Carolina, served as the Executive Vice President and Chief Financial Officer of UCI Medical Affiliates, Inc. ("UCI" or the "Company"). UCI is a public issuer and a provider of nonmedical management and administrative services based in South Carolina.
The Complaint alleges that between 2003 and 2008, Wells embezzled approximately $2.97 million from UCI through a variety of measures including: (1) using UCI's corporate credit card to pay personal expenses: (2) preparing false expense reports and submitting them for reimbursement; and (3) submitting unsupported check requests for non-business expenses, including construction work on Wells' personal residences and personal credit card accounts. The Complaint further alleges that Wells capitalized the expenses as fixed assets on the Company's balance sheet, rather than expensing them in their entirety as they were incurred, causing UCI to overstate its net earnings in the affected periods. According to the Complaint, to justify capitalizing these expenses, Wells altered invoices from contractors performing work on his personal residences to suggest that the work was for one of UCI's facilities, and provided fraudulent work descriptions on the related check requests. The Complaint also alleges that Wells signed each of the Company's Forms 10-Q and 10-K and accompanying Sarbanes-Oxley certifications, thereby misrepresenting that they did not contain any untrue statements of material fact. The Complaint further alleges that, in connection with the audit of the Company's annual financial statements, Wells also signed multiple management representation letters to UCI's auditors, thereby misrepresenting that the Company's financial statements were prepared in conformity with GAAP.
The Complaint charges Wells with violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5, 13b2-1, 13b2-2 and 13a-14, promulgated thereunder. Further, the Complaint charges Wells with aiding and abetting the Company's violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1 and 13a-13, promulgated thereunder. Without admitting or denying the allegations in the complaint, Wells consented to the entry of an order (1) enjoining him from violating these statutes and rules and (2) barring him from serving as an officer and director of a public company.
The Commission thanks the United States Attorney's Office, District of South Carolina, and the Federal Bureau of Investigation in Columbia, South Carolina for their assistance in this matter.