SECURITIES ACT OF 1933
Release No. 7854 / April 21, 2000
SECURITIES EXCHANGE ACT OF 1934
Release No. 42709 / April 21, 2000
ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1251 / April 21, 2000
ADMINISTRATIVE PROCEEDING
File No. 3-9861
| In the Matter of CHARLES E. WESSMAN |
ORDER MAKING FINDINGS AND IMPOSING CEASE-AND-DESIST ORDER |
I.
The Securities and Exchange Commission issued an Order Instituting Public Cease-and-Desist Proceedings pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934 against Charles E. Wessman on April 12, 1999.
Mr. Wessman has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings herein, except the jurisdiction of the Commission over him and over the matters set forth herein, which he admits, Mr. Wessman has consented to the entry of this Order Making Findings and Imposing a Cease-and-Desist Order ("Order").
II.
On the basis of this Order and the Offer submitted by Mr. Wessman, the Commission finds that:
1. Charles E. Wessman, age 49 and a resident of California, is a certified public accountant and a partner at an accounting firm. Wessman compiled financial statements and reports for Intercontinental Resources, NA, Inc. ("IRC").
2. Intercontinental Resources, NA, Inc. ("IRC") is a Utah corporation headquartered in Highland, California. From at least 1996 through July 1998, IRC has offered to sell and/or sold securities in the form of common stock, preferred stock, notes, evidence of indebtedness, and investment contracts.
3. In connection with these solicitation activities, IRC sent to shareholders and potential investors certain financial statements and reports compiled by Wessman. Wessman also sent financial statements and reports to certain individuals at IRC's request. These financial statements and reports included financial statements with a compilation report for the period ended March 31, 1997 ("Compiled Statements"). Wessman's compilation report stated that the Compiled Statements were prepared in conformity with the Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants.
4. Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit a person from, directly or indirectly, in or in connection with the offer, purchase or sale of securities by use of the means or instrumentalities of transportation or communication in interstate commerce or by use of the mails, employing devices, schemes or artifices to defraud; making untrue statements of material facts or omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading, or obtaining money or property by means of such misstatements or omissions; or engaging in transactions, practices, or courses of business which would or do operate as a fraud or deceit upon the purchasers of securities.
5. From at least 1996 through July 1998, IRC violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
6. From at least 1996 through July 1998, Wessman violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder or was a cause of the violations referenced in subparagraph 5 above, due to acts or omissions he knew or should have known would contribute to such violations.
7. Wessman compiled financial statements and reports for IRC which included untrue statements of material facts and omissions to state material facts in that:
a. Assets were incorrectly reported in that:
1. Most of IRC's equipment, which was IRC's primary asset, was reported at a value taken from an unverifiable audit report from years before or at a replacement value provided by IRC.
2. Certain property and equipment were not depreciated.
3. Expenses relating to projects in Nigeria and the Ivory Coast were reported as other assets rather than expensed in the period in which they were incurred.
4. Furniture and Fixtures were reported using unverified values.
b. Liabilities were incorrectly reported in that:
1. Past due salaries of IRC's officers were not reported as liabilities on the balance sheet.
2. Notes payable were understated for each period presented.
c. If assets and liabilities had been properly presented, the statements would have disclosed that IRC had a negative net worth and negative shareholders' equity because IRC's liabilities exceeded its assets.
d. "Revenues" were incorrectly reported for each period presented. At a minimum, transfer fees received from shareholders should not have been presented as revenues. If revenues had been properly presented, IRC's financial statements would have disclosed that IRC did not have any revenues during the time periods referenced in the statements.
e. IRC was referenced as a "development stage company," but the statements did not disclose cumulative amounts of revenue, expenses, and financial resources since the company's inception.
f. The reports accompanying the Statements wrongly indicated that the Statements conformed with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants.
g. By the foregoing, from at least 1996 through July 1998, Wessman violated or caused violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
III.
In view of the foregoing, the Commission finds that it is appropriate to impose the sanctions against Mr. Wessman as agreed to in his offer.
Accordingly, IT IS ORDERED that, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act:
Mr. Wessman cease and desist from committing or causing violations or future violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
By the Commission.
Jonathan G. Katz
Secretary