SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16480 / March 22, 2000
Accounting and Auditing Enforcement
Former Chief Accounting Officer of Micro Warehouse Enjoined and Barred for Central Role in Financial Reporting Fraud; Former Senior Accounting Manager Enjoined and Penalized
Securities and Exchange Commission v. Eric P. Furman and Stephen M. Hieber, U.S. District Court for the D. of Connecticut, Civil Action No 3:00CV520 (DJS).
The SEC today announced the filing of a settled complaint for financial reporting fraud against Eric P. Furman, age 37, of Cooper City, Florida, and Stephen M. Hieber, age 34, of Danbury, Connecticut. Under the settlement, Furman, the former chief accounting officer of Micro Warehouse, Inc., consented to a permanent injunction against violating the securities laws, a bar from acting as an officer or director of a public company, and a bar from appearing as an accountant before the SEC. Hieber, a former senior accounting manager, consented to a permanent injunction against violating the securities laws, and payment of a penalty of $20,000. Micro Warehouse is a catalog seller of personal computers and related software and accessories, headquartered in Norwalk, Connecticut.
According to the complaint, which was filed in the U.S. District Court for the District of Connecticut, Furman and Hieber created the illusion that each quarter the company´s financial results met or exceeded projections and analysts´ expectations. While the fraudulent scheme lasted, from January 1994 to June 1996, Furman and Hieber caused Micro Warehouse to over-state the profits that it reported to the public by $45 million. Furman and Hieber falsified the company´s books and records, primarily those relating to expenses and liabilities for accounts payable, and misled Micro Warehouse´s auditors and senior officers regarding the falsified books and records. As a result of the scheme, Micro Warehouse made at least thirteen false filings with the SEC on Forms 10-K, 10-Q and S-3, each of which materially misstated the company´s results of operations and financial condition. In 1994 Micro Warehouse over-stated income from operations by $12.2 million, or approximately 27 percent. In 1995 Micro Warehouse over-stated income from operations by $21.5 million, or approximately 29 percent. For the six months ended June 30, 1996, Micro Warehouse over-stated income from operations by $11.5 million, or approximately 100 percent.
Under the settlements, which must be approved by the Court, Furman and Hieber each consent, without admitting or denying the complaint´s allegations, to final judgments which restrain and enjoin them from violating or aiding and abetting violations of the anti-fraud, reporting, books and records, and internal controls provisions of the federal securities laws [Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(b)(2) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-1 and/or 13b2-2 promulgated thereunder.] Furman also consented to a bar from acting as an officer or director of a public company. No civil penalty was imposed against Furman based upon his demonstrated financial inability to pay. Hieber also consented to payment of a civil monetary penalty of $20,000.
As part of his settlement, Furman also consented to a Commission Order which denies him the privilege of practicing before the Commission as an accountant. Pending approval of the settled injunctive action by the Court, the Commission will institute an administrative proceeding against Furman pursuant to the Commission's Rule of Practice 102(e). Furman is a certified public accountant licensed to practice in New York, and Furman will neither admit nor deny the findings in the Commission's Order.
Micro Warehouse previously consented to the issuance of a Commission Order requiring that it cease and desist from committing or causing any violation and any future violations of the anti-fraud, reporting, books and records, and internal controls provisions of the federal securities laws. [See, Securities Act Release No. 33-7707; Exchange Act Release No. 34-41665; Accounting and Auditing Enforcement Release No. 1144; Administrative Proceeding File No. 3-9940, dated July 28, 1999].http://www.sec.gov/litigation/litreleases/lr16480.htm