SEC Institutes Fraud Action Against Accounting Firms Grant Thornton and Doeren Mayhew and Certain of the Firms' Personnel in Connection with Their Audit of MCA Financial Corporation

FOR IMMEDIATE RELEASE
2004-9

Washington, D.C., Jan. 20, 2004 -- The Securities and Exchange Commission announced today that it has instituted public administrative proceedings pursuant to Commission Rule 102(e) and cease-and-desist proceedings against Grant Thornton LLP, Doeren Mayhew & Co. P.C., Peter M. Behrens, Marvin J. Morris and Benedict P. Rybicki for misconduct in connection with their audit of MCA Financial Corporation's financial statements for the fiscal year ended January 31, 1998.

At the time, MCA was a mortgage banking company based in Southfield, Mich.. Grant Thornton is a national accounting firm headquartered in Chicago, Ill. Doeren Mayhew is an accounting firm based in Troy, Mich.. Grant Thornton and Doeren Mayhew jointly audited MCA's 1998 annual financial statements. Behrens, a 46-year-old resident of Troy, Mich., is a partner in the Detroit office of Grant Thornton. Morris, a 60-year-old resident of Grosse Pointe Park, Mich., and Rybicki, a 40-year-old resident of Grosse Pointe Park, Mich., are directors of Doeren Mayhew.

In the Order Instituting Proceedings the Commission's Division of Enforcement alleges that in connection with the 1998 MCA audit, the respondents caused and aided and abetted MCA's violations of the antifraud and reporting provisions of the federal securities laws, violated or caused and aided and abetted violations of Section 10A of the Exchange Act and engaged in improper professional conduct.

Stephen M. Cutler, Director of the Commission's Division of Enforcement said: "Today we sue not only the audit partners of Grant Thornton and Doeren Mayhew who contributed to MCA's accounting fraud, but the audit firms themselves. That is because the failures set forth in the administrative complaint are not just personal failures — they are institutional failures. In Grant Thornton's case, the firm "rented" out its name and prestige to the audit work of a smaller firm without taking adequate care to ensure that the audit was properly staffed and performed. In Doeren Mayhew's case, the firm failed to ensure that the personnel assigned to the audit had the requisite expertise and acted with requisite care and skepticism in conducting the audit."

Timothy L. Warren, Associate Regional Director of the Commission's Midwest Regional Office, said, "The abysmal failure by the Grant Thornton and Doeren Mayhew auditors in this matter contributed to the loss of millions of dollars by public investors. The auditors were staring at related party transactions that were not disclosed by MCA and failed to take appropriate action. This proceeding demonstrates that the Division of Enforcement will act vigorously to seek sanctions for such conduct."

Specifically, the Division alleges:

• MCA violated the antifraud and reporting provisions of the federal securities laws by filing materially false and misleading 1998 annual financial statements with the Commission and using those financial statements in connection with a public offering of debentures;
   
• MCA's 1998 annual financial statements were materially false and misleading because MCA utilized related party transactions to inflate and mischaracterize its income, assets and equity;
   
• Behrens and Morris were the engagement partners for the 1998 MCA audit and Rybicki was the engagement manager for that audit;
   
• during the audit, the respondents knew that MCA failed to disclose several million dollars of material, related party transactions in its 1998 annual financial statements;
   
• despite this knowledge, Grant Thornton and Doeren Mayhew jointly issued a report containing an unqualified opinion on MCA's 1998 annual financial statements and consented to the inclusion of their report in MCA's debenture offering materials;
   
• the respondents failed to inform MCA's Board of Directors that MCA's 1998 annual financial statements did not disclose millions of dollars of material, related party transactions; and
   
• the respondents did not adequately plan the 1998 MCA audit, did not act with sufficient skepticism in conducting the audit, and did not obtain enough evidence to support their conclusions and, thus, engaged in improper professional conduct.

A hearing will be scheduled before an administrative law judge to determine whether the Division's allegations are true and to provide the respondents an opportunity to present defenses. Included in the relief the Division may seek are suspensions from practice before the Commission, restrictions on the respondents' professional practice, censures and disgorgement of ill-gotten gains.

Contacts:

Timothy L. Warren, Associate Regional Director
Midwest Regional Office
(312) 353-7394

Peter K.M. Chan, Assistant Regional Director
Midwest Regional Office
(312) 353-7410