Delinquent Filers' Stock Registrations Revoked
The registrations of the stock of Respondents ABS Group, Inc., Accrue Software, Inc., iAsiaworks, Inc., Premier Laser Systems, Inc., Siskon Gold Corp., and Syquest Technology, Inc. (n/k/a SYQT, Inc.), have been revoked. None had filed any annual or quarterly reports with the Securities and Exchange Commission for five or more years. Thus, each violated a crucial provision of the federal securities laws that requires public corporations to publicly disclose current, accurate financial information so that investors may make informed decisions. The revocations were ordered in an administrative proceeding before an administrative law judge. (Rel. 34-57885; File No. 3-13037)
Delinquent Filers' Stock Registrations Revoked
The registrations of the stock of Respondents American Motorcycle Corp. (f/k/a Scope Industries, Inc.), Austin's International, Inc., BusinessMall.Com, Inc., CCM Manufacturing Technologies, Inc., and Emerging Markets Corp. have been revoked. None had filed any annual or quarterly reports with the Securities and Exchange Commission for five or more years. Thus, each violated a crucial provision of the federal securities laws that requires public corporations to publicly disclose current, accurate financial information so that investors may make informed decisions. The revocations were ordered in an administrative proceeding before an administrative law judge. (Rel. 34-57886; File No. 3-13038)
In the Matter of Dennis L. Hynson, CPA; In the Matter of Christopher W. Kelford; In the Matter of Paula J. Norbom, CPA
On May 30, the Commission issued Orders Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order against each of Dennis L. Hynson, CPA, Christopher W. Kelford and Paula J. Norbom, CPA (Orders), who were vice presidents of finance for the three U.S. divisions of Centerpulse Ltd. The Orders find that Hynson, Kelford and Norbom each made an improper accounting decision in the third quarter of 2002; specifically, Hynson failed to write down costs associated with an impaired asset, and Kelford and Norbom each made an unsupported reserve release. The Orders find that these accounting decisions did not conform with Generally Accepted Accounting Principles and caused a material overstatement of Centerpulse's fiscal third quarter 2002 pretax income.
Based on the above, the Orders find that Hynson, Kelford and Norbom each violated Exchange Act Rule 13b2-1 and caused violations of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B), and they order that Hynson, Kelford and Norbom each cease and desist from committing or causing any violations and any future violations of these provisions. Kelford's order also finds that he violated Exchange Act Section 13(b)(5) and orders him to cease and desist from committing or causing violations and future violations of that provision. Each of the Respondents consented to the issuance of their respective orders without admitting or denying any of the findings. (Norbom - Rel. 34-57889, AAE Rel. 2832, File No. 3-13047; Kelford - Rel. 34-57890, AAE Rel. 2833, File No. 3-13048; Hynson - Rel. 34-57891, AAE Rel. 2834, File No. 3-13049)
Analog Devices and Its CEO Settle Stock Option Backdating Charges
On May 30, the Securities and Exchange Commission charged Massachusetts high tech company Analog Devices, Inc. and its CEO Jerald Fishman for reporting false compensation and related financial information to investors by backdating stock option grants to officers, directors and employees. Without admitting or denying the allegations in the SEC's complaint filed today in U.S. District Court for the District of Columbia, Analog and Fishman agreed to settle charges against them by consenting to the entry of final judgments against them ordering Analog to pay a $3 million civil penalty and Fishman to pay a $1 million civil penalty. Fishman also consented to pay disgorgement of $450,000, plus prejudgment interest of $42,110, which represents the in-the-money benefit that Fishman obtained from selling stock obtained from the exercise of the 1998 backdated option grant that he exercised.
The SEC's complaint alleges that during at least 1998 through 2002, Analog and CEO Fishman engaged in an improper course of conduct involving backdating three stock option grants that operated as a fraud on Analog's shareholders and resulted in Fishman and other executives, directors and employees of Analog receiving undisclosed compensation.
According to the complaint, in 1998, 1999 and 2001, Fishman caused the company to backdate stock option grants to price them below the market price of the stock on the date they were actually approved by Analog's Compensation Committee and caused the company to grant options at lower exercise prices than were allowed by the company's option plan.
The complaint alleges that these in-the-money option grants were made to Analog's officers and employees (and one grant to its directors in 2001) and resulted in $30.7 million in compensation costs ($21.8 million net of tax) that the company failed to properly expense in its financial statements. The complaint also alleges that the company and Fishman failed to disclose this practice in Analog's 1999–2002 proxy statements and related annual reports, and instead made false and misleading statements and omissions concerning the option grants and the benefits they provided to Analog's top officers, directors and employees.
The SEC's complaint also describes Analog's and Fishman's undisclosed practice of granting executive and employee stock options in advance of the announcement of favorable nonpublic financial information about the company. As stated in the complaint, this practice was not a basis for the charges alleged in the complaint. The complaint states that this non-disclosure predated the changes to the Commission's proxy disclosure rules, adopted in 2006, that expressly require disclosure concerning an issuer's practice of timing option grants in coordination with the public release of material nonpublic information.
In related administrative proceedings, without admitting or denying the SEC's findings, Analog and Fishman consented to the entry of an administrative cease-and-desist order. The SEC's order finds that Analog violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The order also finds that Fishman violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, which does not require a showing of scienter. Analog and Fishman agreed to cease and desist from committing or causing the violations. Analog also agreed to re-price two of the three option grants awarded to Fishman that he has not yet exercised in order to eliminate the benefit of the lower exercise prices that resulted from backdating the options. (Rel. 33-8923; File No. 3-13050) [SEC v. Analog Devices, Inc. and Jerald Fishman, Civ. Action No. 1:08-cv-00920, RBW, D.D.C., filed May 30, 2008] (LR-20604; Press Rel. 2008-102)
Proposed Rule Changes
The Commission issued notice of proposed rule changes submitted by the American Stock Exchange, The NASDAQ Stock Market, New York Stock Exchange, and NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, Inc. (SR-Amex-2008-40; SR-NASDAQ-2008-046; SR-NYSE-2008-39; and SR-NYSEArca-2008-50), to adopt a trading halt rule in connection with the dissemination of net asset value and disclosed portfolio for certain derivative securities products. Publication is expected in the Federal Register during the week of June 2, 2008. (Rel. 34-57881)
JOINT INDUSTRY PLAN RELEASES
Order Approving Proposed Amendment to the Plan for Reporting of Consolidated Options Last Sale Reports and Quotation Information
The Commission granted approval to an amendment to the Plan for Reporting of Consolidated Options Last Sale Reports and Quotation Information submitted pursuant to Section 11A of the Securities Exchange Act of 1934 and Rule 608 thereunder by the Options Price Reporting Authority (SR-OPRA-2008-01) to adopt a new form of "Vendor Affiliate Agreement." Publication is expected in the Federal Register during the week of June 2, 2008. (Rel. 34-57878)
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