SEC NEWS DIGEST Issue 99-202 October 20, 1999 RULES AND RELATED MATTERS ADOPTION OF UPDATED EDGAR FILER MANUAL A revised EDGAR Filer Manual and Form ID became effective on October 18. This new version of EDGAR and the EDGAR Filer Manual (Release 6.60) incorporates changes resulting from the decision by CompuServe, a sub-contractor to TRW (the developer of the EDGAR system), to discontinue its EDGAR services. These services include the Public Data Network (PDN) for transmission of filings to EDGAR, private mailboxes for receiving EDGAR Acceptance/Suspense notifications and Return Copies, the EDGAR company database, and the bulletin board. TRW has contracted with UUNET to provide EDGAR Private Mail and PDN Services. Although The EDGAR bulletin board and the EDGAR company database will no longer be available, filers may obtain similar information from our Web Site at www.sec.gov and the TRW/UUNET Web Site at www.trw-edgar.com. The Form ID, the Uniform Application for Access Codes to File on EDGAR, was also changed to reflect the change in the EDGAR private mail service. The basic TRW/UUNET service will include five hours of access and a mailbox for messages. There will be additional charges for larger mailboxes and connect time over the basic limit. Those filers who want to use the public data network for transmission to EDGAR, who want a private system (instead of the Internet) for receipt of acceptance/suspense messages, or who want an electronic returned copy of their filings must sign up for this service. To access their new mailboxes, filers will use a standard POP3 mail client. Netscape Communicator, Microsoft Internet Explorer and several other Internet packages provide these clients. The www.trw-edgar.com Web Site contains additional information. Filers may continue to obtain paper copies of the updated Filer Manual from our Public Reference Room and Disclosure Incorporated (the paper and microfiche contractor for the Commission) in addition to electronic copies on the SEC's Web Site. The SEC's Web Site address for the Filer Manual is http://www.sec.gov/asec/ofis/ filerman.htm. (Rels. 33-7752; 34-41986; 35-27081; 39-2376; IC-24075) ENFORCEMENT PROCEEDINGS FORMER CEO OF UNISON HEALTHCARE CORPORATION BARRED FROM PRACTICING BEFORE THE COMMISSION AS AN ACCOUNTANT The Commission issued a Rule 102(e) Order barring Jerry M. Walker, the former CEO and president of Unison HealthCare Corporation, from practicing before the Commission as an accountant, with the right to apply for readmission after five years. Walker, a certified public accountant, consented to the issuance of the Rule 102(e) Order. The Order was based on the entry of a final judgment of the U.s. District Court for the District of Arizona that permanently enjoined Walker from violating Sections 10{b) and 13(b) (5) of the Exchange Act and Rules 10b-5, 13b2-1, and 13b2-2, and from aiding and abetting violations of Section 13(a) and Rule 13a-13, and ordered him to pay a civil penalty of $15,000 (see SEC v. Jerry M. Walker, Civ-99-1737-PHX-ROS, D. Ariz. September 30, 1999). The complaint alleged that Walker directed Unison's controller to make unsupported adjustments to Unison's accounting records, which enabled Unison to report materially false earnings for two consecutive quarters during 1996. The materially false earnings were included in two Forms 10-Q filed with the Commission during 1996. (ReI. 34-42022; AAE ReI. 1191; File No. 3-10078) COMMISSION ACCEPTS CERTIFICATION, REVERSES PARTIAL SUMMARY DISPOSITION, AND REMANDS FOR FDRTBER PROCEEDINGS WITH REGARD TO ALBERT YESNER On April 27, the Commission instituted proceedings against Albert Glenn Yesner to determine whether he violated various provisions of the securities laws and to determine whether the Commission should deny him the privilege of appearing or practicing as an accountant before it. Yesner moved for partial summary disposition to dismiss, among other allegations, Rule 102 (e) (1) (ii) charges contained in the Order Instituting Proceedings, based on Checkosky v. SEC, 139 F.3d 221 (D.C. Cir. 1998). The administrative law judge granted Yesner's motion for partial summary disposition based on Yesner's interpretation of Checkosky and thereafter certified his decision to dismiss the charge. The Commission held that Checkosky did not preclude the proceeding against Yesner. The Commission noted that Checkosky vacated the Commission's decision because the Commission failed in that case to articulate clearly the mental state required to find improper professional conduct. The court in Checkosky did not disavow earlier decisions that the Commission has the power to discipline accountants for intentional or reckless misconduct. Moreover, the Commission stated that its authority to discipline accountants for reckless misconduct had been confirmed since the Checkosky decision in Potts v. SEC, 151 F.3d 810, 812 (8th Cir. 1998). (ReI. 34-42030; 2 NEWS DIGEST, October 20, 1999 AAE ReI. 1193; File No. 3-9586) DAVID STEVENSON SETTLES ADMINISTRATIVE PROCEEDINGS On October 19, the Commission simultaneously instituted and settled administrative proceedings pursuant to Rule 102(e) of the Commission's Rules of Practice against David E. Stevenson, an accountant and the former president, CEO, chairman of the board of directors and founder of now defunct Photran Corp. Stevenson consented to the issuance of an Order Instituting Proceedings and Order and Opinion (Order) denying him the privilege of appearing or practicing before the Commission as an accountant, effective immediately. The Commission's order was based upon the entry of a Final Judgment, on October 7, in the United States District Court for the District of Minnesota, enjoining him from future violations of the antifraud, books and records, and internal accounting control provisions of the federal securities laws (SEC v. David E. Stevenson and Mark A. Stevenson, Civil Action No. 99-1490, DWF/AJB; LR-16308) . The Commission's complaint alleged that, beginning in December 1995, David Stevenson devised a fraudulent scheme to overstate Photran's revenues and earnings by recording fictitious sales and prematurely recognizing revenue. According to the Commission's complaint, this conduct caused Photran to report a profit in its initial registration statement and in subsequent quarters when, in fact, it suffered significant losses. Stevenscn signed Photran' s registration statement and the 1996 second and third quarter reports filed with the Commission when he knew or was reckless in not knowing that they contained false and misleading information. Stevenson consented to the entry of the Final Judgment without admitting or denying the allegations in the complaint. (ReI. 33-7755; 34-42031; AAE ReI. 1192; File No. 3-10079) CEASE AND DESIST ORDERS ISSUED AGAINST THREE FOR ILLEGALLY OFFERING SECURITIES OVER INTERNET The Commission today issued cease and desist orders against three people who illegally offered to sell securities on the Internet auction site run by eBay, Inc. (eBay). The Commission found that in auctions on eBay: * Respondent Richard L. Davis, of Duncanville, Texas, illegally misrepresented the prospects that a company he founded would go public and offered to sell unregistered stock. * J.R. Hoff, of Hudson, Wisconsin, illegally offered to sell unregistered stock in an unincorporated company he owns. * Louis P. Sitaras, of Jupiter, Florida, illegally offered to sell restricted securities, meaning securities that could not be sold publicly. The Commission approved settlements with all three respondents simultaneously with the institution of the actions. The Commission ordered each respondent to cease and desist from violating the NEWS DIGEST, October 20, 1999 3 relevant p'rovasi.onsof the securities laws. The respondents neither admitted nor denied the claims against them. In May 1999, Davis posted an offer to sell a 5% interest in Mindhunt.com, a company he founded, for $250,000. In his offer, Davis claimed that he had "purchased a public shell [company]" and that Mindhunt.com would be a public company "within 4 to 5 months." The Commission found that at the time of his offer, Davis had not incorporated Mindhunt. com, had not purchased a public shell company, and had no reasonable basis for the claim that Mindhunt.com would be public within 4 to 5 months. Moreover, Davis illegally offered to sell unregistered stock. No one bid in response to Davis' offer. In April 1999, Hoff posted an offer on eBay to sell 1,000 shares in AmeriGa. net, a company Hoff co-owns. Hoff illegally offered to sell unregistered stock and, in fact, at the time of his offer AmeriGa.net had not even been incorporated. Several people bid on the shares, but no sale was consummated. In May 1999, Sitaras posted an offer on eBay to sell 2,000 shares of Metropolitan Health Networks, Inc. (MHN), a health care services company. Although MHN stock trades on the OTC Bulletin Board, the shares Sitaras offered to sell were restricted and could not be offered for sale publicly until September 1999. In response to Sitaras' posting, several people placed bids, but no sale of the MHN shares was consummated. The Commission found that Davis had engaged in securities fraud, in violation of Sections 17(a) (1) and 17(a) (3) of the Securities Act of 1933 (Securities Act), and sold unregistered securities, in violation of Section 5 of the securities Act. The Commission found that Hoff and Sitaras also violated Section 5 of the Securities Act. Section 5 requires, among other things, that stock issued to the public be registered with the Commission, unless an exemption from registration applies. (Richard L. Davis - ReI. 33-7756, File No. 3- 10080; John R. Hoff - 33-7757, File No. 3-10081; Louis Sitaras - 33- 7758, File No. 10082); (Press ReI. 99-138) SEC SETTLES MICROCAP MANIPULATION CASE AGAINST JOEY DAVIS The Commission filed on October 19 with the u.S.