Itex Corporation, Terry L. Neal, Michael T. Baer, Graham H. Norris, Cynthia Pfaltzgraff and Joseph M. Morris

SECURITIES AND EXCHANGE COMMISSION
Washington, DC

LITIGATION RELEASE NO. 16841 / December 26, 2000

ACCOUNTING AND AUDITING ENFORCEMENT
RELEASE NO. 1357

SEC V. ITEX CORPORATION, TERRY L. NEAL, MICHAEL T. BAER, GRAHAM H. NORRIS, CYNTHIA PFALTZGRAFF AND JOSEPH M. MORRIS, CV 99-1361 BR (D. Ore. September 27, 1999)

SEC SETTLES FRAUD CASE AGAINST MICHAEL T. BAER

The Securities and Exchange Commission today announced that on December 15, 2000 the United States District Court for the District of Oregon permanently enjoined Michael T. Baer from committing securities fraud, barred him from serving as an officer or director of a public company, and ordered him to disgorge $1.4 million in ill-gotten gains, including prejudgment interest, but waived payment of all such disgorgement and prejudgment interest, and did not impose a civil penalty, based on his demonstrated financial condition.

In its complaint, filed September 27, 1999, the Commission alleged, among other things, that Baer, as president, chief executive officer and chairman of Itex from July 1990 until his resignation in August 1996, knowingly or recklessly participated in the material overstatement of Itex's assets, revenues and earnings in its financial statements, and failed to disclose numerous barter deals between Itex and various related parties. The complaint also alleged that Baer knowingly circumvented and failed to implement internal accounting controls and made materially false and misleading statements and omissions to Itex's auditors. In addition, the complaint alleged that Baer failed to properly report his beneficial ownership of more than 5% of Itex's common stock. The complaint alleged that Baer's conduct was part of a larger scheme in which defendant Terry Neal, Itex's founder and control person, orchestrated and implemented a broad-ranging fraudulent scheme to make materially false and misleading disclosures about the company's business and to conceal numerous suspect and in many cases sham barter deals between Itex and various mysterious offshore entities related to or controlled by Neal.

Baer consented, without admitting or denying the Commission's allegations, to the entry of a final judgment permanently enjoining him from violating the antifraud, internal accounting controls, recordkeeping, and securities reporting provisions of the federal securities laws (Section 17(a) of the Securities Act, Sections 10(b), 13(b)(5), and 13(d) of the Exchange Act and Rules 10b-5, 13b2-1, 13b2-2, 13d-1, and 13d-3 thereunder) and barring him from serving as an officer or director of a public company. The judgment also orders Baer to pay $1.4 million in disgorgement and prejudgment interest, but waives payment of such disgorgement and prejudgment interest, and does not assess a civil penalty, based on his financial condition.

With the entry of this judgment, all six defendants in this proceeding have settled with the Commission.

For further information, see LR-16305 (announcing complaint), LR-16430 (settlement with Joseph Morris), LR-16437 (settlement with Itex), LR-16536 (settlements with Graham Norris and Cynthia Pfaltzgraff); and LR-16708 (settlement with Terry Neal). All of these releases are available at the Commission's website at http://www.sec.gov/enforce/litig.htm.