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U.S. Securities and Exchange Commission


Litigation Release No. 18497 / December 10, 2003

SEC v. CLEARONE COMMUNICATIONS, INC, et al., Docket No. 2:03 CV-0055 DAK (U.S.D.C., D.Ut.).

On December 4, 2003, the Honorable Dale A. Kimball, U.S. District Court, District of Utah ordered a permanent injunction against ClearOne Communications ("ClearOne").

The Commission's complaint was filed on January 15, 2003 and alleged that since the quarter and fiscal year ended June 30, 2001, ClearOne Communications, Inc.'s management engaged in a program of inflating the company's revenues and net income by engaging in improper revenue recognition. It was further alleged that this course of conduct, covering two annual reporting periods and four separate quarterly reporting periods, was effected primarily through a program of channel stuffing conceived and directed by Frances M. Flood, then ClearOne's Chairman, CEO and President. In addition, on December 11, 2001, while this conduct was ongoing, ClearOne closed a $25.5 million private placement of common stock. The complaint alleged that through this conduct ClearOne violated Section 17(a) of the Securities Act of 1933, and Sections 10(b), 13(a) and 13(b) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-13, and 13b2-1 thereunder.

ClearOne consented to the entry of final judgment without admitting or denying any of the allegations of the complaint. Litigation continues with respect Frances M. Flood and Susie Strohm.

Attorney to contact:
Karen L. Martinez: (801) 524-5796


Modified: 12/10/2003