SEC Charges Florida-Based CPA with Fraud for Issuing Bogus Audit Opinions

The Securities and Exchange Commission today imposed sanctions against a Florida-based certified public accountant for performing deficient and fraudulent audits and quarterly reviews for eight publicly traded companies, and issuing false and misleading audit opinions on the companies’ annual financial statements.

Terry L. Johnson, of Casselberry, Florida, agreed to settle the SEC’s fraud charges and will be suspended from practicing as an accountant on behalf of any publicly traded company or other entity regulated by the SEC. 

While conducting its investigation, the SEC discovered that following his release from prison, convicted felon and former certified public accountant Stephen P. Corso served as the chief financial officer of several publicly-traded companies, including Primco Management, Inc., one of Johnson’s audit clients.  Corso signed Primco’s  annual and quarterly financial reports and certifications filed with the SEC using alias names of “Steven J. Corso” or “Steven John Corso”, despite a 2009 bar from appearing or practicing before the Commission as an accountant, which was based on Corso’s felony conviction for wire fraud and attempted tax evasion.  Corso, of Encinitas, California, also is alleged to have solicited business on the false pretense that he was an “SEC Consultant and Attorney.” Corso reaped more than $460,000 in illegal profits generated from his violation of the prior SEC order.

According to the SEC’s order instituting a settled administrative proceeding, Johnson’s numerous audit deficiencies included the failure to properly plan audits, obtain sufficient appropriate audit evidence, and maintain audit documentation.  Moreover, Johnson allegedly falsely stated in audit reports that he conducted his audits in accordance with the standards of the Public Company Accounting Oversight Board even though his conduct of the audits violated numerous PCAOB auditing standards.  As alleged in the order, Johnson also created back-dated, phony work papers to create the false appearance of having proper work papers once he learned he was the subject of an SEC investigation. 

“Johnson’s audits provided investors with the false impression that his audits of multiple issuers comported with professional auditing standards, when in fact they were so deficient that they amounted to no audits at all,” said Michael Maloney, Chief Accountant of the SEC’s Enforcement Division. “Today’s order reinforces that we will continue to root out and hold accountable auditors who put investors at risk by their failure to comply with professional auditing standards.”

The SEC’s order finds that Johnson engaged in improper professional conduct, willfully violated federal antifraud laws and related SEC rules, and that he violated and willfully aided and abetted and caused violations of the financial reporting requirements of his public company audit clients.  Without admitting or denying the SEC’s findings, Johnson consented to an order suspending him from appearing or practicing before the Commission and was ordered to disgorge his audit fees of $96,000, plus prejudgment interest, and pay a civil money penalty of $50,000.

In a separate proceeding filed in federal court in California on August 17, 2015, the SEC filed an application seeking a court order directing Corso to comply with the prior SEC order and disgorge his earnings resulting from violating the prior order.  As part of these proceedings, Corso, without admitting or denying the SEC’s allegations, agreed to an entry of a court order compelling him to comply with the SEC’s prior suspension order by immediately ceasing to appear or practice before the Commission, pay $465,525 in disgorgement, plus $29,938 in prejudgment interest and remove from the Internet all references to himself as an “SEC consultant and attorney.”  The terms of Corso’s agreement are subject to court approval.      

The SEC’s investigation, which is continuing, is being conducted by Eric Hubbs and Ernesto Amparo and supervised by Anita Bandy.