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U.S. Securities and Exchange Commission

Securities and Exchange Commission

Litigation Release No. 17172 / October 4, 2001

Accounting and Auditing Enforcement Release No. 1465 / October 4, 2001

SEC Obtains Emergency Relief against Aremissoft Corporation and Two Former Officers for Financial Fraud, Insider Trading

Securities and Exchange Commission v. Roys Poyiadjis, Lycourgos Kyprianou and AremisSoft Corp., Civil Action No. 01-CV-8903 (S.D.N.Y.)

On October 4, 2001, the Commission filed a civil injunctive action against AremisSoft Corporation, an international software company with offices in New Jersey, London, Cyprus, and India, and two former officers, Roys Poyiadjis and Lycourgos Kyprianou, alleging that they overstated the value of the Company's contracts, revenues and recent acquisitions, and that the two former officers engaged in massive insider trading during the period of the reporting fraud. On the same day, the Honorable Charles S. Haight, Jr., United States District Judge for the Southern District of New York, granted the Commission's motion for emergency relief against AremisSoft, Poyiadjis and Kyprianou.

Based on evidence that all three defendants engaged in financial fraud and Poyiadjis and Kyprianou, both former chairmen and CEO's of the Company, also engaged in insider trading, the Court's Order restrains the defendants from violations of the anti-fraud, reporting and other provisions of the federal securities laws pending a hearing on the Commission's motion for a preliminary injunction. The Court's Order freezes the assets of Poyiadjis and Kyprianou, and directs them to repatriate to the United States the proceeds of their sales of AremisSoft stock. The Order also grants the Commission's request for expedited discovery.

According to the Commission's complaint:

  • On December 17, 1999, AremisSoft announced: "the signing of a $37.5 million agreement to automate the nationwide healthcare system of Bulgaria." Poyiadjis and Kyprianou publicly touted the Bulgarian contract as of major significance for the Company's business prospects. The Company recognized approximately $7.1 million in revenue from this contract during 2000 and $1 million more in the first quarter of 2001. In fact, the value of the Bulgarian contract is no more than $3.7 million, and the Company can presently substantiate only about $1.7 million of the revenue recognized on it.
  • AremisSoft's "Emerging Markets Group," headquartered in Cyprus, reported roughly $89 million out of a total of $120 million in sales revenue during 2000. Most of this amount, however, was based on purported sales to entities that either do not exist as operating businesses or did not purchase product from AremisSoft. AremisSoft falsified its books and records to conceal that it was obtaining no cash from these purported sales.
  • AremisSoft, through its Emerging Markets Group, acquired three private software companies during 2000: e-nnovations.com; e-ChaRM India Pvt Ltd.; and Denon International Ltd. The value of $32.7 million that AremisSoft reported for these acquisitions, however, was many times that actually paid by AremisSoft for the three companies. Further, AremisSoft reported falsified operating histories for the acquired companies.
  • Knowing or recklessly disregarding facts indicating that the Company's public disclosure was materially false, as described above, Poyiadjis and Kyprianou sold millions of shares of AremisSoft stock, acting through various offshore entities. Although they claimed in Commission filings to have "gifted" their AremisSoft securities to entities in which they had no interest, in fact both retained control over and a beneficial interest in the proceeds of the sales.
  • The Commission charges that, through the above conduct AremisSoft, Poyiadjis and Kyprianou violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint further alleges that AremisSoft violated Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder, and that Poyiadjis and Kyprianou aided and abetted the Company's violations of all of the foregoing provisions and are liable for AremisSoft's violations as controlling persons of AremisSoft. Finally, the complaint alleges that Poyiadjis and Kyprianou violated Section 16(a) of the Exchange Act.

A hearing on whether a preliminary injunction should be issued against the defendants is scheduled for October 18, 2001.

The Commission would like to acknowledge the Office of the U.S. Attorney for the Southern District of New York and the Federal Bureau of Investigation for the assistance they provided in this matter.



Modified: 10/30/2001