SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16657 / August 17, 2000
ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 1294
SECURITIES AND EXCHANGE COMMISSION v. STEPHEN R.B. BINGHAM, et al. (United States District Court for the District of Massachusetts, C.A. No. 96-10793-EFH)
FORMER OFFICERS OF ALIAS RESEARCH, INC. ENJOINED
The Commission announced today that, on July 24, 2000, the Honorable Edward F. Harrington, United States District Judge for the District of Massachusetts, issued a final judgment permanently enjoining William J. McClintock of Mississauga, Ontario from violating the antifraud and internal controls provisions of the federal securities laws. Previously, on March 28, 2000, Judge Harrington issued final judgments permanently enjoining Stephen R.B. Bingham of Toronto and Susan McKenna Grant of Bermuda, Alias's former chief executive officer and executive vice president, respectively, with violating the antifraud and reporting provisions of the federal securities laws. Based on the injunction against McClintock, a chartered accountant, the Commission today instituted administrative proceedings against him and issued an order denying McClintock the privilege of appearing or practicing before the Commission as an accountant. The order allows McClintock to apply for reinstatement after two years. McClintock is the former chief financial officer of Alias Research, Inc., a Toronto-based software company whose stock was traded on the NASDAQ National Market System. In anticipation of the institution of administrative proceedings, McClintock submitted an offer of settlement consenting to the issuance of the order.
According to the Commission's order, on March 20, 1997, the Institute of Chartered Accountants of Ontario agreed to postpone its investigation of McClintock pending the outcome of the Commission's proceedings against him, based upon McClintock's undertaking not to seek reinstatement of his public accountant's license until the professional conduct committee concluded its investigation of him.
On April 16, 1996, the Commission filed a complaint against Bingham, Grant and McClintock. According to the complaint, the three former corporate officers caused Alias to fraudulently recognize revenue on four sales transactions occurring during two successive fiscal quarters, which resulted in material misrepresentations in quarterly reports filed with the Commission. As a result of three of the transactions, Alias improperly recognized revenue of $1,909,000 in the quarter ended April 30, 1991. The reported first quarter total revenue of $6,705,000 was overstated by 40% and, without the three fraudulent transactions, Alias would have reported a pretax loss of $906,000 rather than pretax income of $888,000. As a result of the fourth transaction, Alias improperly recognized revenue of $1,000,000 in the quarter ended July 31, 1991. Alias had actual pretax income of $164,000 for the second quarter, but reported pretax income of $1,164,000, an overstatement of 600%. Recognition of revenues on the four transactions was improper because the revenues were not reasonably collectible in light of the fact that the purported purchasers did not have either the intent or ability to pay for the goods and had, in at least some cases, entered into oral agreements that they did not have to pay. The Commission also alleged that Bingham, Grant and McClintock engaged in unlawful insider trading by selling significant amounts of their Alias common stock while in possession of material non-public information concerning the true nature of the four improper transactions.
The final judgment against Bingham permanently enjoins him from violating Section 17(a) of the Securities Act and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act and Rules 10b-5, 12b-20, 13a-13, 13b2-1 and 13b2-2 thereunder. It also prohibits Bingham for a period of five years from acting as an officer or director of a public company and ordered him to pay disgorgement of $1,713,000 but waived disgorgement and did not impose a civil penalty based upon Bingham's demonstrated financial inability to pay. Bingham consented to the entry of the final judgment without admitting or denying any of the substantive charges against him.
The final judgment against Grant permanently enjoins her from violating Section 17(a) of the Securities Act and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-13 and 13b2-2 thereunder. Pursuant to the judgment, Grant paid disgorgement of $135,204 plus prejudgment interest of $129,592 and a civil penalty of $135,204. Grant consented to the entry of the final judgment without admitting or denying any of the substantive charges against her.
The final judgment against McClintock permanently enjoins him from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1 and 13b2-2 thereunder. The final judgment also prohibits McClintock for a period of five years from acting as an officer or director of a public company and orders him to pay disgorgement of $285,825 plus prejudgment interest, but waives disgorgement and does not impose a civil penalty based upon McClintock's demonstrated financial inability to pay. McClintock consented to the entry of the final judgment without admitting or denying any of the substantive charges against him.
For further information, see Litigation Release No. 14882 (April 17, 1996).