SECURITIES AND EXCHANGE COMMISSION Washington, D.C. Litigation Release No. 15460 / August 27, 1997 Accounting and Auditing Enforcement Release No. 945 / August 27, 1997 SECURITIES AND EXCHANGE COMMISSION v. TIMOTHY ROSS, DOUGLAS COATES AND JOHN D. PECKSKAMP, JR. (C-1-97-770) The Securities and Exchange Commission ("Commission") today filed and simultaneously settled a financial fraud action in the United States District Court for the Southern District of Ohio against three former senior officers of Future Healthcare, Inc., a Cincinnati company previously in the business of conducting clinical trials for new drugs used by pharmaceutical companies in the drug approval process. The complaint alleges that from 1992 through 1994 Timothy Ross, Future Healthcare's former president and chief financial officer, fraudulently overstated the company's revenues and earnings and concealed the fraud by creating counterfeit documents, making false entries to Future Healthcare's books and records and lying to the company's auditors. The complaint further alleges that John D. Peckskamp, Jr., the company's former chief executive officer and chairman of the board of directors, knowingly failed to devise and maintain a system of internal accounting controls and aided and abetted the company's reporting and books and records violations. The complaint also alleges that Douglas Coates, the company's former controller, made false accounting entries designed to conceal the fraud. In addition, it alleges that Ross and Coates each sold large blocks of Future Healthcare stock at artificially high prices, shortly before the fraud was discovered, thereby avoiding losses of $838,661 and $155,000, respectively. Simultaneous with the filing of the Commission's complaint, Ross, Coates and Peckskamp, without admitting or denying the allegations of the complaint, consented to the entry of Final Judgments permanently enjoining them from violating the relevant provisions of the federal securities laws, ordering Ross and Coates to disgorge $200,000 and $25,000 in losses avoided plus prejudgment interest, respectively, contingent on their inability to pay more, and ordering Peckskamp to pay civil money penalties of $25,000. Ross also consented to a provision in the Final Judgment permanently barring him from serving as an officer or director of any public reporting company. In addition, Ross and Coates have agreed to the institution of administrative proceedings pursuant to Rule 102(e) of the Commission's Rules of Practice, upon entry of the injunctions, that will bar Ross permanently and Coates for a period of at least five years from appearing or practicing before the Commission as an accountant. In a related action, the United States Attorney for the Southern District of Ohio announced that Ross pleaded guilty today before U.S. District Judge Herman J. Weber to one count of making a false statement in filings with the Commission. Ross faces a maximum of five years in prison, a fine of the greater of $250,000 or twice the loss or gain and up to three years of supervised release. According to the complaint, Peckskamp took Future Healthcare public in 1992 despite Ross's warnings that the company's internal controls were inadequate and also failed to respond adequately to warnings from the company's independent auditors that the internal accounting controls were deficient and could result in, among other things, financial statements that were unreliable. The complaint further alleges that Peckskamp adopted unrealistic and excessively optimistic revenue projections and budgets and pressured Ross to meet those projections. Ross met Peckskamp's expectations by fraudulently recognizing non-existent revenue in Future Healthcare's financial statements. The complaint alleges that Ross and Coates violated the antifraud and certain other provisions of the federal securities laws, specifically, Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b- 5 thereunder. The complaint further alleges that Ross violated Rule 13b2-2 under the Exchange Act by making false statements to the company's independent auditors and that he and Coates violated Rule 13b2-1 by falsifying the company's books and records. The complaint alleges that Peckskamp violated Section 13(b)(5) by knowingly circumventing or knowingly failing to implement a system of internal accounting controls and aided and abetted Future Healthcare's violations of the reporting and books and records provisions, specifically, Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. ======END OF PAGE 2======