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U.S. Securities and Exchange Commission

Litigation Release No. 18706 / May 12, 2004

Accounting and Auditing Enforcement Rel. 2013 / May 12 , 2004

SEC v. JAMES MURPHY, ROBERT LOCKWOOD AND GILBOA PERETZ, Civ. Action No. 00cv11981-PBS (D. Mass., filed September 26, 2000)


The Commission announced today that on April 28, 2004, following a four-day bench trial held in March 2004, the Honorable Patti B. Saris of the United States District Court for the District of Massachusetts entered judgment in favor of Gilboa Peretz on a finding that he did not have the requisite scienter to aid and abet Centennial Technologies, Inc.'s violations of Sections 10(b) and 13 (b)(2)(A) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder.

The Commission presented evidence that between April 1994 and December 31, 1996, Emanuel Pinez, Centennial's former chief executive officer, and James Murphy, Centennial's former chief financial officer, with the assistance of Peretz, Robert Lockwood, and others, orchestrated a massive fraud which made Centennial appear significantly more successful than it was. Among other things, they caused Centennial to recognize revenue from invalid or nonexistent sales, include fake items in inventory, and make false additions to fixed assets. As a result of these improper activities, Centennial overstated its earnings for this period by approximately $40 million. Based on this evidence, the Commission previously obtained civil judgments against Pinez, Lockwood and others, by consent, and against Murphy, by summary judgment, and in prior parallel criminal proceedings, Pinez, Murphy, Lockwood and other defendants were criminally convicted for perpetrating the Centennial financial fraud.

During trial, Peretz specifically admitted that, at Pinez's instruction, Peretz, the founder of PG Technologies, Inc., a Centennial customer, placed an order with Centennial to purchase 2,500 Flash PC cards at a cost of $500,000, on condition that Pinez provide the funds to pay for the purchase. Centennial shipped 1,000 blank PC cards to PG and thereafter billed PG $500,000, as if it had sent the company 2,500 real PC cards. Pinez subsequently provided Peretz $500,000, which Peretz used to pay Centennial for the fictitious sale to PG. The Commission sought judgment against Peretz for aiding and abetting Centennial's violations of 10(b) and 13 (b)(2)(A) of the Exchange Act and Rules 12b-5 and 13b2-1 thereunder.

The court found that, although Peretz was careless in his financial affairs and perhaps negligent regarding the $500,000 transaction, he did not have knowledge of the fraud at Centennial and did not knowingly provide assistance to Pinez in perpetrating the fraud. Previously, in a separate proceeding, Judge Saris held Peretz in contempt for lying to the court regarding the source of funds received from Pinez. 52 F.Supp.2d 205 (DMA 1999).

For further information, please see Litigation Release Nos. 17705 (8/30/02), 16725 (4/26/00), 16170 (6/2/99), 15818 (7/21/98), 15605 (12/23/97), 15548 (10/31/97), 15405 (7/7/97), 15399 (6/26/97), 15295 (3/14/97) and 15258 (2/14/97).



Modified: 03/28/2005