U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21804 / January 11, 2011
Accounting and Auditing Enforcement Release No. 3228 / January 11, 2011
SEC v. Michael R. Drogin, CPA, Civ. Action No. 11-0063 (RJL) (D.D.C.)
SEC Charges Michael R. Drogin, CPA With Fraud and Violating 2003 SEC Order Barring Him from Appearing or Practicing Before SEC; Relief Sought Includes Injunction, Civil Penalty and Disgorgement
The U.S. Securities & Exchange Commission announced today that it has filed a settled enforcement action against Michael R. Drogin, a certified public accountant licensed in New York and New Jersey. The Commission’s complaint charges that, between 2005 and 2008, while he was a partner with the accounting firm Liebman Goldberg & Drogin, LLP in Garden City, New York, Drogin performed audit, review, and other accounting work for three companies in violation of a Commission order issued on May 6, 2003. That order barred Drogin from appearing or practicing before the Commission as an accountant based on his failure to exercise due professional care in his audit of the financial statements of a small telecommunication company. In the Matter of Michael R. Drogin, CPA, Admin. Proc. No. 3-10762 (May 6, 2003).
The Commission’s complaint alleges that Drogin began violating the 2003 Order as early as the fall of 2005, when he participated in auditing the financial statements of a small company that then filed a registration statement with the Commission to become a public company. The financial statements, and the firm’s audit report, were included in the registration statement and subsequent amendments. Thereafter, Drogin violated the 2003 Order by:
In addition to performing audit and review work, Drogin also violated the 2003 Order by assisting two of the companies in responding to comments from the staff of the Commission’s Division of Corporation Finance on the registration statements described above.
The Commission’s complaint also alleges that Drogin issued audit reports in 2008 for the three companies without having completed the audits. The audit reports issued by Drogin falsely stated that an audit had been performed in accordance with applicable auditing standards and provided a reasonable basis for an unqualified report. The complaint alleges that Drogin knew the companies would include the fraudulent audit reports in annual reports and a registration statement filed with the Commission.
The complaint charges Drogin with violating the antifraud provisions of the federal securities laws by issuing the fraudulent audit reports, and with aiding and abetting violations of the reporting requirements of the securities laws. The complaint also charges Drogin with violating the 2003 Order by repeatedly engaging in conduct between the fall of 2005 and 2008 that constituted appearing and practicing before the Commission as an accountant.
Without admitting or denying the allegations in the complaint, Drogin has consented to the entry of a final judgment that: permanently enjoins Drogin from violating, directly or indirectly, Section 17(a) of the Securities Act of 1933 (the “Securities Act”), Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rules 10b-5, 12b-20 and 13a-1 thereunder; restrains and enjoins him from violating the Commission’s 2003 Order, as amended on January 11, 2011 (Release No. 34-63690); and orders him to pay disgorgement and prejudgment interest of $43,612.04, and a civil penalty in the amount of $38,953.17. The settlement is subject to the court’s approval.
In a related proceeding, on January 11, 2011, the Commission entered an Order amending the 2003 Order to remove the time limit on Drogin’s prior suspension. Drogin consented to the entry of the amended Order without admitting or denying any of the findings.
For additional information, see below: