UNITED STATES SECURITIES AND EXCHANGE COMMISSION LITIGATION RELEASE NO. 15784 / JUNE 17, 1998 ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 1045 / JUNE 17, 1998 SECURITIES AND EXCHANGE COMMISSION v. GUY MARCEL DE VREESE, Civil Action No. 98-4866RJK (MANs) (C.D. Cal.). The Securities and Exchange Commission filed a complaint today in the United States District Court for the Central District of California seeking a judgment of permanent injunction and other relief against defendant Guy Marcel De Vreese ("De Vreese"), 42, of Ghent, Belgium. The complaint charges De Vreese with violating the antifraud, reporting, recordkeeping, internal controls, and lying to an accountant provisions of the federal securities laws [Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-1 and 13b2-2 thereunder]. De Vreese consented to the entry of the injunction without admitting or denying the Commission's allegations. De Vreese was not ordered to pay civil penalties, based on his demonstrated financial inability to pay. In its complaint, the Commission alleged that De Vreese was the chief executive officer and chairman of the board of directors of Styles on Video, Inc. ("Styles"), formerly located in Newbury Park, California. De Vreese served in these roles during the period that Styles' common stock traded on the American Stock Exchange, from March 29, 1993 through December 27, 1994. Styles, now bankrupt, developed and marketed computer imaging systems, such as the Styles on Video System which allows the operator to produce a videotape showing what a salon customer would look like wearing different hairstyles. Under De Vreese's direction, Styles falsely reported to the public increasing profitability on growing revenue for its fiscal year ended December 31, 1993 and first three quarters of 1994. Styles had actually sustained losses in those periods. The Commission alleged that under De Vreese's direction, Styles materially overstated revenue and understated losses in press releases and in its 1993 Form 10-KSB and three 1994 Forms 10-QSB filed with the Commission. Specifically, under De Vreese's direction, Styles: for 1993, overstated revenue by 38% and understated losses by 294% when it recorded, in the last three days of the fiscal year, two transactions totaling $2.0 million concerning license agreements not consummated for software not yet developed; ùfor the first quarter of 1994, overstated revenue by 31% and understated losses by 38% when it recorded, on the last day of the quarter, a $500,000 license agreement not consummated for product not yet merchantable; ùfor the second quarter of 1994, overstated revenue by 137% and understated losses by 306% when it recorded, on the last day of the quarter, a $2.1 ======END OF PAGE 1====== million license agreement not consummated; and ùfor the third quarter of 1994, overstated revenue by 166% and understated losses by 273% when it recorded the purported $2.5 million sale of a segment of its business. Further, the Complaint alleges that De Vreese caused Styles to: falsely state in its second quarter 1994 Form 10-QSB that it had received $1.4 million of cash when it had not, which lent false credibility to the company's reported, overstated revenue; and materially overstate in its third quarter 1994 Form 10-QSB its September 30, 1994 cash balance by the purported $1.4 million cash collection. The Commission further alleged that De Vreese handled substantive communications with third parties to the subject unconsummated transactions. De Vreese participated in the preparation of Styles' 1993 Form 10-KSB and 1994 Forms 10-QSB filed with the Commission and the company's press releases. De Vreese gave final approval for Styles' release of such financial information. In late 1993, De Vreese supervised Styles' accounting activities. With respect to the second and third quarters 1994 revenue overstatements and loss understatements, De Vreese directed Styles' internal accountants to record the underlying unconsummated transactions. The Complaint also alleges that, in March 1996 and under new management, Styles amended its 1993 Form 10-KSB and its three 1994 Forms 10-QSB, restating its financial statements, materially reducing its reported revenue and reflecting losses for each period. ======END OF PAGE 2======