U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20064 /April 2, 2007
Accounting and Auditing Enforcement
Release No. 2589 /April 2, 2007
Securities and Exchange Commission v. Martin E. Kenney, Jr., Civil Action No. 05-Civ-7944 (S.D.N.Y. filed September 13, 2005, amended March 23, 2007) (SAS)
Former CEO of WRC Media, Inc. Settles SEC Action
The Securities and Exchange Commission ("Commission") announced today that, on March 30, 2007, the United States District Court for the Southern District of New York entered final judgment against Martin E. Kenney, Jr. in the federal civil enforcement action filed by the Commission in September 2005. Kenney was the former Chief Executive Officer and a former Director of WRC Media, Inc. ("WRC"), a provider of educational materials for the kindergarten through high school market.
The Judgment permanently enjoins Kenney from aiding and abetting violations of Section 15(d) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 12b-20, 15d-1, 15d-11, and 15d-13 promulgated thereunder. The Judgment also requires Kenney to pay a $60,000 civil penalty. Kenney consented to the Judgment without admitting or denying the allegations in the Commission's amended complaint.
The Commission's amended complaint alleged that Kenney aided and abetted WRC's improper recognition of $1.2 million in revenue from a purported sale of educational software to the Monroe City, Louisiana School District ("Monroe transaction"). Specifically, the amended complaint alleged that, in December 2002, Kenney and a sales team returned to Louisiana to obtain a replacement contract from the district superintendent after learning that a previous version of the contract could not be used to recognize revenue in 2002. While the replacement contract did not mention any requirement of Monroe City School Board approval, school board approval was still required. Because the replacement contract was contingent upon school board approval, the Commission alleged that the Monroe transaction did not meet the criteria under generally accepted accounting principles (GAAP) for revenue recognition. As a result, WRC filed financial reports with the Commission that materially misstated WRC's fourth quarter 2002 results. Kenney was substantially involved in the negotiation of the Monroe transaction and therefore aided and abetted WRC in violating Section 15(d) of the Exchange Act and Exchange Act Rules 12b-20, 15d-1, 15d-11, and 15d-13.
For additional information concerning this matter, see Litigation Release No. LR-19373 (September 13, 2005).
SEC Amended Complaint in this matter