U.S. SECURITIES & EXCHANGE COMMISSION
Litigation Release No. 17898 / December 17, 2002
Accounting and Auditing Enforcement Release No. 1694 / December 17, 2002
SEC Files Action Against Former CFO and Former Controller of Mercator Software Inc. in Financial Fraud Case
Securities and Exchange Commission v. Ira A. Gerard and Karen S. Harris (United States District Court for the District of Massachusetts C.A. No. 02-12421 (NG))
The Securities and Exchange Commission ("Commission") announced today that it filed a civil action in a financial fraud case involving Mercator Software, Inc. ("Mercator"), a Wilton, Connecticut-based software company. The Commission's complaint alleges that Ira A. Gerard ("Gerard") of Ridgefield, Connecticut, the former Chief Financial Officer of Mercator Software, Inc., and Karen S. Harris ("Harris"), of Riverside, Connecticut, Mercator's former Controller, engaged in improper accounting practices in the first two quarters of 2000 by intentionally failing to record known expenses in an attempt to meet analysts' earnings expectations during those two quarters. The Complaint alleges that because of Gerard and Harris' conduct, Mercator materially understated its expenses in publicly released financial statements for the first two quarters of 2000. Gerard agreed, without admitting or denying the Commission's allegations, to pay a civil penalty of $35,000. Harris agreed, without admitting or denying the Commission's allegations, to pay a civil penalty of $25,000.
The Commission also instituted and simultaneously settled administrative cease-and-desist proceedings against Mercator, Gerard, and Harris. The Commission found that Gerard and Harris violated the antifraud provisions and caused Mercator's violations of the periodic reporting, record-keeping and internal controls provisions of the federal securities laws. Without admitting or denying the Commission's findings, Gerard and Harris consented to an order requiring them to cease and desist from committing or causing any violation and any future violation of those federal securities laws, including 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 and 13b2-1 thereunder. Without admitting or denying the Commission's findings, Mercator consented to an order requiring it to cease and desist from committing or causing any violation, and any future violation, of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. In assessing the appropriate remedy, the Commission took into account remedial acts promptly undertaken by Mercator and its extensive cooperation with the Commission's investigation.
Contact: Kate Poverman, Assistant District Administrator, (617) 424-5936