SECURITIES AND EXCHANGE COMMISSION

LITIGATION RELEASE NO. 17139 / September 19, 2001

ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 1448

SEC SETTLES FRAUD ACTION AGAINST CEC INDUSTRIES

SECURITIES AND EXCHANGE COMMISSION v. C.E.C. INDUSTRIES CORPORATION, GERALD H. LEVINE, and MARIE A. LEVINE, Case No. 1:99CV02568 (D.D.C.)

On September 10, 2001, the United States District Court for the District of Columbia permanently enjoined C.E.C. Industries Corporation from violating the anti-fraud and certain record-keeping and internal controls provisions of the federal securities laws. C.E.C. was further ordered by the Court to, within 90 days of the entry of the judgment, file amended quarterly and annual reports with the Commission restating the financial results for its fiscal years ended March 31, 1996 and March 31, 1997, and its fiscal quarters ended June 30, September 30, and December 31, 1997. C.E.C. also was enjoined from failing to file timely and accurate quarterly and annual reports in the future and ordered to file all of its delinquent quarterly and annual reports for its fiscal year ended March 31, 1998 and all subsequent periods.

The Commission's complaint, filed September 28, 1999, alleged that C.E.C. fraudulently overstated its assets and revenues in public filings and other public statements during the company's fiscal years ended March 31, 1996 and March 31, 1997. According to the complaint, these material overstatements all resulted from various asset exchange transactions in which C.E.C. acquired non-cash assets in exchange for either company stock or other non-cash assets previously acquired with company stock. The complaint also alleges that C.E.C. has been chronically delinquent in filing required reports with the Commission since June 1997, and has not filed any required reports since July 1998. The Commission contends that Gerald and Marie Levine, as C.E.C.'s controlling officers and directors during the relevant time period, were directly responsible for C.E.C.'s fraudulent overstatements of assets and revenues, as well as for C.E.C.'s filing delinquencies. According to the complaint, the Levines also published false and misleading information about C.E.C. on the Internet during the period in question.

Without admitting or denying the charges against it, CEC consented to the entry of an injunction permanently enjoining it from violating Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934, and Exchange Act Rules 10b-5, 13a-1, 13a-13 and 12b-20. C.E.C. was further ordered to file amended quarterly and annual filings with restated financial statements, and to bring itself current in its periodic filings, as specific above. The Commission continues to litigate this matter against Gerald and Marie Levine. In a related administrative proceeding, C.E.C.'s auditor during the relevant period, William L. Clancy, was suspended from practicing before the Commission for a period of three years pursuant to Rule 102(e)(1)(ii) of the Commission's Rules of Practice.

Related Commission Releases

http://www.sec.gov/litigation/litreleases/lr16299.htm (Complaint)
http://www.sec.gov/litigation/admin/34-42392.htm (Clancy administrative proceeding).