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U.S. Securities and Exchange CommissionLitigation Release No. 21809 / January 12, 2011Accounting and Auditing Release No. 3229 / January 12, 2011SEC v. NIC, Inc., Jeffrey S. Fraser, Harry H. Herington, and Eric J. Bur, Civil Action No. 2:11-CV-02016 (EFM) (D. Kansas Jan. 12, 2011)SEC v. Stephen M. Kovzan, Civil Action No. 2:11-CV-02017(JWL) (D. Kansas Jan. 12, 2011)SEC Charges NIC, Inc. and Four Current or Former Executives for Failing to Disclose CEO PerquisitesThe Securities and Exchange Commission ("Commission") charged Kansas-based NIC Inc. ("NIC") which manages government websites, its former CEO Jeffery Fraser, current CEO Harry Herington, former CFO Eric Bur, and current CFO Stephen Kovzan with failing to disclose more than $1.18 million in perquisites to Fraser from at least 2002 to 2007. The Commission alleges that NIC filed false and misleading proxy statements, annual reports and registration statements that failed to disclose Fraser's perquisites and falsely represented he worked virtually for free from 2002 until 2005, and continued to materially understate the perquisites Fraser received in 2006 and 2007. The Commission also alleges that NIC's related party transactions disclosures for 2002 through 2005 were misleading in failing to disclose its payment of $1 million to fly and operate planes for Fraser. NIC, Fraser, Herington and Bur agreed to settle the Commission's charges without admitting or denying the allegations against them. The Commission's litigation continues against Kovzan. The Commission's complaints, filed in federal court in the District of Kansas, contain the following additional allegations:
NIC agreed to settle the Commission's charges by paying a $500,000 civil penalty and hiring an independent consultant to recommend, if appropriate, improvements to policies, procedures, controls, and training relating to payment of expenses, handling of whistleblower complaints, and related party transactions. NIC consented to a final judgment enjoining it from violating Sections 17(a)(2) and (3) of the Securities Act of 1933 ("Securities Act"); Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Exchange Act Rules 12b-20, 13a-1, 13a-11, 14a-3, and 14a-9. Fraser agreed to pay $1,184,246 in disgorgement, $358,844 in prejudgment interest, and a $500,000 civil penalty, and consented to an order barring him from serving as an officer or director of a public company. Fraser consented to a final judgment enjoining him from violating Section 17(a) of the Securities Act, Sections 10(b), 13(b)(5), and 14(a) of the Exchange Act, and Exchange Act Rules 10b-5, 13a-14, 13b2-1, 13b2-2, 14a-3, and 14a-9, and from aiding and abetting NIC's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Exchange Act Rules 12b-20 and 13a-1. Herington agreed to pay a $200,000 civil penalty and consented to a final judgment enjoining him from violating Sections 17(a)(2) and (3) of the Securities Act and Section 13(b)(5) of the Exchange Act, and aiding and abetting NIC's violations of Sections 13(a) and 14(a) of the Exchange Act, and Exchange Act Rules 12b-20, 13a-1, 14a-3, and 14a-9. Bur agreed to pay a $75,000 civil penalty and consented to a final judgment enjoining him from violating Exchange Act Rules 13a-14 and 13b2-1, and aiding and abetting NIC's violations of Exchange Act Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a), and Exchange Act Rules 12b-20, 13a-1, 14a-3, and 14a-9. In addition, Bur agreed to resolve an anticipated administrative proceeding by consenting to a Commission order prohibiting him from appearing or practicing before the Commission as an accountant with a right to reapply after one year. Kovzan is charged with violating Section 17(a) of the Securities Act, Section 10(b) and 13(b)(5) of the Exchange Act and Exchange Act Rules 10b-5, 13b2-1, and 13b2-2; and aiding and abetting NIC's violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 14a-3, and 14a-9. The SEC's complaint seeks a permanent injunction, disgorgement, civil penalties, prejudgment interest, and an officer and director bar against Kovzan. The Commission's action against Kovzan is ongoing.
http://www.sec.gov/litigation/litreleases/2011/lr21809.htm
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