Michael E. Peppel, Ira H. Stanley, Jr. and David J. White
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19685 / May 3, 2006
Accounting and Auditing Enforcement No. 2425 / May 3, 2006
Securities and Exchange Commission v. Michael E. Peppel, Ira H. Stanley, Jr. and David J. White, Civil Action No. 3:06-CV-00131 WHR (S.D. OH)
SEC Charges Former Executives and Customer of MCSi, Inc. With Fraud
On May 2, 2006, the United States Securities and Exchange Commission (Commission) filed a complaint in United States District Court for the Southern District of Ohio against Michael E. Peppel (Peppel), the former CEO of MCSi, Inc. (MCSi), Ira H. Stanley, Jr. (Stanley), its former CFO, and David J. White (White), a customer of MCSi, alleging violations of the antifraud, issuer reporting, and issuer books and records provisions of the federal securities laws.
The Commission alleges in its complaint that, in order to meet analysts' expectations, Peppel and Stanley falsified the company's financial statements from the first quarter of 2001 through the third quarter of 2002. The complaint alleges they did so by materially overstating revenues and income, and by making fictitious journal entries in the company's books. It is further alleged that Stanley concealed this conduct from MCSi's auditors by removing evidence of the false journal entries from the company's books. Finally, the complaint alleges that at the time MCSi was making false reports regarding its financial condition, Peppel sold approximately $6.8 million of his common stock in a registered offering.
The complaint alleges that Peppel and Stanley violated Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13a-14, 13b2-1 and 13b2-2, and also aided and abetted MCSi's violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13. The complaint alleges that, in addition, Stanley violated Section 13(b)(5) of the Exchange Act. The Commission is seeking injunctions from future violations of these provisions, officer/director bars, disgorgement, prejudgment interest, and civil money penalties from both Peppel and Stanley.
The Commission further alleges that David White, a British citizen and owner of a UK company, assisted Peppel and Stanley in carrying out MCSi's largest fraudulent transaction and that White signed a false audit confirmation regarding that transaction. The Commission alleges that, by this conduct, White violated Section 10(b) of the Exchange Act and Rule 10b-5, and aided and abetted MCSi's violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13. White has agreed to settle the Commission's action against him, and has consented to entry of an injunction against the antifraud and issuer reporting provisions of the federal securities laws. He has also agreed to pay a penalty of $50,000.
Last Reviewed or Updated: June 27, 2023