U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17794 / October 21, 2002
Accounting and Auditing Enforcement Release No. 1653 / October 21, 2002
Securities and Exchange Commission v. Paul Skulsky, et al., No. 02-CV-1524 (DRH) (E.D.N.Y. Oct. 18, 2002)
SEC SETTLES CIVIL FRAUD CASE AGAINST AARON CHAITOVSKY
AND ROBERT GLASS, FORMER AUDITORS FOR APPONLINE.COM, INC.
The Commission today announced that on October 18, 2002, the Honorable Denis R. Hurley, United States District Judge, Eastern District of New York, entered final judgments of permanent injunction and other relief against defendants Aaron Chaitovsky and Robert Glass.
Without admitting or denying the allegations of the complaint, defendants consented to the entry of final judgments permanently enjoining them from violating Sections 10(b) and 10A of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and from aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder. The Court also ordered Chaitovsky to pay a civil penalty of $35,000, and Glass to pay a civil penalty of $25,000.
In its complaint filed on March 12, 2002, the Commission alleged that defendants Chaitovsky and Glass served as the engagement partner and SEC review partner, respectively, on the audit of AppOnline.com, Inc.'s ("AppOnline") December 31, 1999 financial statements, which were filed with the Commission. The complaint alleged that Chaitovsky and Glass violated Sections 10(b) and 10A of the Exchange Act and Rule 10b-5 thereunder, and from aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder, by causing the issuance of an audit report, which contained an unqualified opinion stating that the audit had been conducted in accordance with Generally Accepted Auditing Standards ("GAAS") and that the financial statements had been prepared in conformity with Generally Accepted Accounting Principles ("GAAP"). Chaitovsky and Glass knew, or were reckless in not knowing, that the audit had not been performed in accordance with GAAS and that the financial statements had not been prepared in conformity with GAAP. Chaitovsky and Glass also knew that AppOnline had filed false financial statements with the Commission, but took no steps to notify AppOnline's board of directors, or any committee thereof, that an illegal act had or might have occurred.
The Commission acknowledges the assistance of the United States Attorney's Office for the Eastern District of New York and the Federal Bureau of Investigation for their assistance in this matter. For additional information, see Litigation Release No. 17407 (March 12, 2002)