U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19230 / May 19, 2005
Accounting and Auditing Enforcement
Release No. 2247 / May 19, 2005
SEC v. Dennis O'Connor, Civil Action No. 05 C 2980 (N.D. Ill.) (Grady, J.)
SEC Charges Former CFO of National Equipment Services, Inc. with Fraud and other Violations of the Federal Securities Laws
The Securities and Exchange Commission today filed a complaint in the Northern District of Illinois charging Dennis O'Connor, a resident of Lake Bluff, Illinois, with fraud and other violations of the federal securities laws based on his failure to take appropriate actions to correct significant unsubstantiated account balances when he was the CFO of National Equipment Services, Inc. As a result, National Equipment Services, Inc. overstated its assets and net income in its periodic filings with the Commission for 1999, 2000 and the first three quarters of 2001.
According to the Commission's complaint, O'Connor learned that significant balances for accounts receivable, rental equipment and inventory at two subsidiaries could not be substantiated at the end of 2000. O'Connor also learned that those two subsidiaries carried old and uncollectible accounts receivable. Although local financial employees recommended writing-off the unsubstantiated and uncollectible account balances at the end of 2000, O'Connor did not authorize the proposed write-offs until the fourth quarter of 2001. O'Connor also failed to fully disclose the amount of the proposed write-offs to National Equipment Services, Inc.'s independent auditors. National Equipment Services, Inc. subsequently determined that the unsubstantiated and uncollectible balances should have been written off earlier and restated its previously reported results for 1999, 2000 and the first three quarters of 2001. The restatement materially reduced National Equipment Services, Inc.'s net income for 2000 from $11.009 million to $6.053 million. The complaint alleges that, as a result of the foregoing, O'Connor violated the antifraud provisions and aided and abetted the reporting, record keeping and internal controls provisions of the federal securities laws.
O'Connor agreed to a resolution of this matter, subject to the Court's approval. Without admitting or denying the allegations of the complaint, O'Connor consented to a permanent injunction from future violations of Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1 and 13b2-2 thereunder and from aiding and abetting future violations of 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. O'Connor also agreed to pay a civil penalty of $25,000.
For further information, contact: Thomas J. Meier (312) 353-7426.
SEC Complaint in this matter