UNITED STATES SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 15069 / September 25, 1996 Accounting and Auditing Enforcement Release No. 824 / September 25, 1996 Securities and Exchange Commission v. Bernard F. Bradstreet, et al. (D. Mass., No. 95-11647-DPW) The Commission announced that, on September 24, 1996, Defendants Bernard F. Bradstreet ("Bradstreet"), Thomas E. Campbell ("Campbell") and Debra J. Murray ("Murray"), former members of senior management of Kurzweil Applied Intelligence, Inc. ("Kurzweil"), consented, without admitting or denying the allegations of the Commission's complaint ("Complaint"), to the entry of a final judgment. The final judgment enjoins each of them from future violations of the antifraud provisions of the federal securities laws and those provisions relating to the falsification of an issuer's books and records and the making of false statements to auditors. The judgment also bars each of them from serving as an officer or director of any public company, waives disgorgement by Bradstreet and Campbell, and does not assess penalties against Bradstreet, Campbell and Murray, based on their demonstrated inability to pay. The consents have been submitted to the court for approval. The Commission's litigation is continuing as to a fourth defendant, David R. Earl. The Complaint in this matter was filed on July 26, 1995, and alleged that, from at least January 1992 through May 1994, the defendants engaged in a fraudulent revenue recognition scheme which inflated Kurzweil's revenues and earnings as reported by the company in financial statements filed with the Commission and disseminated publicly. The Complaint further alleged that Bradstreet, Kurzweil's former President and Co-Chief Executive Officer, and Campbell, Kurzweil's former Vice President of Sales, each offered and sold equity securities in Kurzweil's initial public offering, knowing that the company's financial statements were materially false and that, in 1993, Bradstreet received an $80,000 bonus advance based on the then expected financial results of operations for the fiscal year ended January 31, 1994. The Complaint alleged that the scheme affected the registration statement and periodic reports filed by Kurzweil containing financial statements for its fiscal year ended January 31, 1993 and the first three quarters of fiscal year 1994. Simultaneous with the filing of the Complaint, the U.S. Attorney announced the criminal indictments of Bradstreet and Campbell. Bradstreet and Campbell were subsequently found guilty by a jury of five counts of conspiracy, securities fraud and falsification of corporate books and records. Bradstreet and Campbell are scheduled to be sentenced on October 22, 1996. In addition, on June 20, 1996, Murray was sentenced to three years ==========================================START OF PAGE 2====== probation and to perform 200 hours of community service based on her guilty plea to a two count information alleging conspiracy to commit securities fraud. Murray testified at the criminal trial pursuant to a cooperation agreement with the government. In a related administrative proceeding, the Commission, on July 25, 1995, instituted and simultaneously settled, by consent, a cease-and-desist proceeding against Kurzweil (Kurzweil Applied Intelligence, Inc., Exchange Act Rel. No. 36021). The Commission's Order found that, as a result of the scheme, Kurzweil filed a fraudulent registration statement and periodic reports with the Commission and issued false press releases which materially overstated its revenue and earnings during the fiscal year ended January 31, 1993 and the first three quarters of fiscal 1994. The order required Kurzweil to cease-and-desist from future violations of the antifraud, periodic reporting and issuer books and records and internal controls provisions of the federal securities laws. Also on July 25, 1995, the Commission announced the entry of a cease-and-desist order, by consent, against Tracy Spadaro Maynard, Norma A. Leger and Catherine A. Ackley, who at relevant times were employed in accounting positions at Kurzweil (Tracy S. Maynard, et al., Exchange Act Rel. No. 36022). For further information, see Litigation Release No. 14571 and 14992 and Exchange Act Release Nos. 36021 and 36022.