UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 RELEASE NO. 40952 / JANUARY 15, 1999 ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 1100 / JANUARY 15, 1999 ADMINISTRATIVE PROCEEDING FILE NO. 3-9004 ________________________________ : In the Matter of : ORDER GRANTING APPLICATION : FOR REINSTATEMENT TO PRACTICE Frank E. Stephan, C.P.A. : AS AN ACCOUNTANT BEFORE THE : THE COMMISSION : ________________________________: On May 16, 1996, Frank E. Stephan ("Stephan"), a certified public accountant, was suspended by the Commission from practicing as an accountant before the Commission in public administrative proceedings instituted by the Commission against Stephan pursuant to Rule 2(e) of the Commission’s Rules of Practice[1]. This order is issued in response to his application for reinstatement to practice before the Commission.[2] Stephan worked as a temporary employee of the audit firm Glasser & Mermelstein ("G&M"). G&M, under the direction of Milton Mermelstein, conducted an audit and issued an unqualified audit report on the 1990 financial statements of Everlast Filtration Corp. ("Everlast"). Stephan served as the on-site auditor for the 1990 Everlast audit. The Commission found that Everlast’s 1990 financial statements were not presented in conformity with generally accepted accounting principles and that G&M’s 1990 audit was not conducted in accordance with generally accepted auditing standards. Certain members of the management of Everlast consented to cease and desist orders in connection with these false financial statements. Mermelstein, the partner in charge of the 1990 audit of Everlast, consented to an anti-fraud cease and desist order and a Rule 2 (e) order denying him the privilege of appearing or practicing before the Commission, with the right to apply for reinstatement after five years. Stephan consented to the settlement of Rule 2(e) proceedings and to a suspension from practice as an accountant before the Commission, with the right to apply for reinstatement after two years upon meeting certain specified conditions. In connection with his request for reinstatement to practice before the Commission, Stephan has represented as his undertaking that if he is reinstated to practice before the Commission as a preparer or reviewer, or a person responsible for the preparation or review, of financial statements of a public company to be filed with the Commission, such financial statements will be reviewed by the independent audit committee of any company with which he is or will be associated, or in some other manner acceptable to the Commission. On the basis of information supplied by Stephan, it appearing that Stephan has complied with the terms of his suspension from practice before the Commission, that no information has come to the attention of the Commission relating to his character, integrity, professional conduct or qualifications to practice before the Commission that would be a basis for adverse action against Stephan pursuant to Rule 102(e) of the Commission’s Rules of Practice, and that Mr. Stephan’s offer to condition his reinstatement is fair and in the public interest, it is accordingly, ORDERED pursuant to Rule 102(e) (5) (i) of the Commission’s Rules of Practice that Frank E. Stephan is reinstated to appear and practice before the Commission as an accountant responsible for preparing or reviewing the financial statements of a public company to be filed with the Commission subject to the undertaking set forth above; provided, however, that if it should subsequently appear to the Commission that any information that has been provided by Stephan in connection with this application or any other Commission proceeding was false or misleading, then the Commission shall have the right to reopen this matter and reconsider whether reinstatement should be granted. By the Commission. Jonathan G. Katz Secretary **FOOTNOTES** [1]: The institution of public administrative proceedings and the settlement and suspension of Stephan were announced in AAER 783. [2]: Rule 2(e) has been recodified in its entirety as Rule 102(e). Rule 102(e) (5) (i) provides: An application for reinstatement of a person permanently suspended or disqualified under paragraph (e) (1) or (e) (3) of this section may be made at any time, and the applicant may, in the Commission’s discretion, be afforded a hearing; however, the suspension or disqualification shall continue unless and until the applicant has been reinstated by the Commission for goodcause shown. 17 C.F.R. Section 201.102(e) (5) (i).