Litigation Release No. 21048 / May 19, 2009

Accounting and Auditing Enforcement Release No. 2972 / May 19, 2009

Securities and Exchange Commission v. Apogee Technology, Inc., David B. Meyers and Annette Jaynes, Civil Action No. 09 cv 10286 (D. Mass.)

SEC Charges Massachusetts Company, Former Chief Operating Officer, and Controller in Scheme to Inflate Reported Revenue

The Securities and Exchange Commission ("Commission") today filed a settled enforcement action against Apogee Technology, Inc., a publicly traded company based in Norwood, Massachusetts, David B. Meyers of Walpole, Massachusetts, Apogee's former Chief Operating Officer, and Annette Jaynes of Sharon, Massachusetts, Apogee's controller, in connection with a scheme to inflate Apogee's earnings in 2003 and 2004.

The Commission's complaint, filed in federal district court in Massachusetts, alleges that in connection with the scheme, Apogee filed materially misleading financial statements with the Commission that misstated its revenue by including sales transactions that contained terms making revenue recognition improper. According to the complaint, Meyers, as Apogee's COO, entered into arrangements with purchasers of Apogee's products containing terms hidden from the company's outside auditors that made it improper for Apogee to recognize revenue from the transactions at the time that it did, such as agreements allowing customers to return goods or pay nothing to Apogee unless they sold the products to end users. For example, the complaint alleges that when Apogee could not finalize a sale to one customer at the end of a quarter, Meyers approved a sham sale of the same product to a second customer. This second customer was simply holding the product until the sale to the first customer could be finalized later, and the second customer could return the product to Apogee and had no obligation to pay for the product until it was actually resold to the first customer. According to the complaint, Jaynes recorded transactions as revenue despite receiving documents containing the sales terms that precluded revenue recognition. As a result, Apogee materially overstated its quarterly and annual earnings by between 7% and 45% in its financial statements in the second and fourth quarters of 2003 and the first three quarters of 2004. Apogee restated these results in 2005.

Each of the defendants has agreed to settle this matter, without admitting or denying the allegations of the Commission's complaint. Apogee, Meyers and Jaynes agreed to the entry of a final judgment permanently enjoining them from variously violating or aiding and abetting violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder. Meyers and Jaynes will also be enjoined from violating Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder. The final judgment as to Meyers will hold him liable for disgorgement of $9,365 plus prejudgment interest of $3,701.91, representing his ill gotten gains from the sale of Apogee stock during the period of the fraud. However, under the terms of the judgment, disgorgement and prejudgment interest will be waived, and no penalty will be imposed as to Meyers, based on his financial condition. The final judgment as to Meyers will bar him from serving as an officer or director of a public company for five years. The final judgment as to Jaynes orders her to pay a penalty of $30,000.

SEC Complaint