UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20495 / March 13, 2008

Accounting and Auditing Enforcement Release No. 2799 / March 13, 2008

SECURITIES AND EXCHANGE COMMISSION v. GARY L. MONROE, WILLIAM J. RAUWERDINK, JOHN R. MESSINGER and ROBERT T. BASSMAN, Civil Action No. 03-71840 (E.D. Mich.)

SEC Settles Financial Fraud Charges Against Former Officers Of Lason, Inc.

The Securities and Exchange Commission announced that on March 7, 2008, the Honorable Arthur J. Tarnow of the U.S. District Court for the Eastern District of Michigan, entered Final Judgments against Gary L. Monroe, William J. Rauwerdink, John R. Messinger, and Robert T. Bassman, the former CEO, CFO, COO and Controller, respectively, of Lason, Inc., a document management company based in Troy, Michigan. The Final Judgments permanently enjoin the defendants from violating the anti-fraud and record-keeping provisions of the federal securities laws and bar the defendants from serving as officers or directors of public companies. In addition, the Final Judgment against Bassman orders him to pay disgorgement and prejudgment interest of $240,761.70, payment of all but $35,000 of which is waived on the basis of his financial condition. The defendants consented to the entry of the Final Judgments without admitting or denying the Commission’s allegations against them.

The Commission’s complaint alleged that during 1998 and 1999, the defendants engaged in a fraudulent scheme to overstate Lason’s earnings in order to meet or exceed Wall Street expectations. The scheme culminated in the third quarter of 1999, when Lason’s earnings were overstated by approximately 65%.

According to the complaint:

• In a scheme called “tailwind,” Monroe and Rauwerdink instructed companies that were acquired by Lason to delay recognizing revenue until after the acquisition was completed and to pre-pay certain expenses before the acquisition, thereby artificially increasing Lason’s earnings during the first, third and fourth quarters of 1998.
   
• Monroe, Rauwerdink and Bassman improperly booked a forgiven loan as revenue for Lason in the fourth quarter of 1998.
   
• Lason improperly claimed an invalid invoice as a legitimate receivable in the fourth quarter of 1998. When Lason’s auditors questioned the legitimacy of the receivable, Monroe, Messinger and Bassman developed a scheme to obtain a check that improperly appeared to make payment on the receivable.
   
• Lason made numerous fraudulent accounting entries in 1999, culminating in fraudulent Work in Process entries in the third quarter of 1999 that artificially boosted Lason’s earnings by 65%.
   
• The defendants profited from the scheme through their salaries as well as bonuses, stock options and executive loans that were affected by Lason’s artificially inflated stock price.

In 2007, in a related criminal action, Monroe and Messinger pled guilty to making false statements to a federal agency (the Commission) and Rauwerdink pled guilty to conspiracy and making false statements to a federal agency. Monroe, Messinger and Rauwerdink were sentenced to 15 months, 12 months, and 45 months imprisonment respectively. In addition, Monroe and Messinger were ordered to pay restitution of $20 million, and Rauwerdink was ordered to pay restitution of $285 million.

In related administrative proceedings, Bassman consented to an order under Rule 102(e) of the Commission’s Rules of Practice suspending him from appearing or practicing before the Commission as an accountant for three years based on the entry of an injunction against him, and the Commission suspended Rauwerdink forthwith based on his criminal conviction, pursuant to Rule 102(e)(2).

The Commission wishes to thank the U.S. Attorney’s Office for the Eastern District of Michigan and the Federal Bureau of Investigation for their assistance in this matter.

http://www.sec.gov/litigation/litreleases/2008/lr20495.htm