UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 45458 / February 20, 2002

ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1507 / February 20, 2002

ADMINISTRATIVE PROCEEDING
File No. 3-10704

In the Matter of JDN REALTY CORPORATION, Respondent.

: : : : : :

ORDER INSTITUTING PUBLIC PROCEEDINGS PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING A CEASE-AND-DESIST ORDER

I.

The Securities and Exchange Commission ("Commission") deems it appropriate that public cease-and-desist proceedings be, and they hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against JDN Realty Corporation ("JDN Realty").

II.

In anticipation of the institution of these administrative proceedings, JDN Realty has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, JDN Realty admits the jurisdiction of the Commission over it and the subject matter of these proceedings and consents to the issuance of this Order Instituting Public Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order ("the Order"), without admitting or denying the Commission's findings, except for those contained in Paragraph III.A below, which are admitted.

III.

The Commission finds the following:¹

RESPONDENT

A. JDN Realty Corporation is a Maryland corporation with its principal place of business in Atlanta, Georgia. JDN Realty is listed on the New York Stock Exchange and is a reporting company pursuant to Section 12(b) of the Exchange Act. JDN Realty is a real estate investment trust specializing in the development and management of retail shopping centers.

RELATED ENTITY

B. JDN Development Company, Inc. ("JDN Development"), a Delaware corporation, has been a subsidiary of JDN Realty since its formation in December 1994. From December 1994 until early 2001, JDN Realty owned 99% of the economic interest and 1% of the voting interest in JDN Development. JDN Realty's chief executive officer owned the remaining 1% economic interest and 99% voting interest from December 1994 through April 2000. JDN Realty conducts most of its development activities through JDN Development.

UNDISCLOSED COMPENSATION AND RELATED PARTY TRANSACTIONS

C. Beginning in December 1994, JDN Realty's then chief executive officer, who also served as the president of JDN Development (the "chief executive officer"), a consultant who joined JDN Development as an officer in June 1996 and later became senior vice president (the "senior vice president"), and a JDN Development vice president (the "vice president") engaged in a series of actions that concealed from JDN Realty's officers, board of directors, accounting department, and auditors certain compensation and payments to the senior vice president and the vice president. This conduct continued until its discovery by employees of JDN Realty in late 1999 as part of JDN Realty's project review process. The chief executive officer, the senior vice president, and the vice president resigned from their respective offices on February 14, 2000, at the request of JDN Realty and its board of directors. The chief executive officer resigned from all remaining positions with JDN Realty and JDN Development as of April 13, 2000.

D. The chief executive officer, the senior vice president, and the vice president concealed certain compensation by structuring real estate purchase transactions such that the third parties who sold land to JDN Development also disbursed cash or conveyed land to the senior vice president and the vice president through a Georgia corporation they owned (the "Recipient Company").

E. In nine JDN Development real estate purchase transactions, the sellers of the land made cash disbursements totaling $1,736,452 to the senior vice president and the vice president through the Recipient Company.

F. In ten JDN Development real estate purchase transactions, the sellers conveyed part of the real estate paid for by JDN Development to the senior vice president and the vice president through the Recipient Company. In another transaction, the real estate was conveyed from the seller to JDN Development, and then from JDN Development to the senior vice president and the vice president through the Recipient Company pursuant to a deed signed by the chief executive officer. These parcels had estimated fair market values totaling approximately $2,800,101.

G. JDN Realty's books and records did not accurately reflect the foregoing transactions because the chief executive officer, the senior vice president, and the vice president failed to disclose information concerning the transactions to JDN Realty's accounting department.

H. JDN Realty's annual reports filed on Form 10-K for the years 1994 and 1995 failed to disclose accurately all compensation paid to the vice president. JDN Realty's annual reports filed on Form 10-K for the years 1996 through 1998 failed to disclose accurately all compensation paid to the senior vice president and the vice president.

I. JDN Realty's proxy statements filed on Schedule 14A on April 4, 1995, and April 7, 1996, failed to disclose accurately all compensation paid to the vice president. JDN Realty's proxy statements filed on Schedule 14A on March 28, 1997, April 3, 1998, and April 22, 1999, failed to disclose accurately all compensation paid to the senior vice president and the vice president.

J. JDN Realty's 1994, 1995, 1996, and 1997 audited annual financial statements and its unaudited financial statements for the quarters ended March 31, 1998, and December 31, 1998, were not prepared in conformity with generally accepted accounting principles ("GAAP") because certain compensation to the senior vice president and the vice president was not accurately recorded on JDN Realty's books and records. The inaccurate financial statements were included in JDN Realty's filings on Form 10-K for the years 1994 through 1997 and on Form 10-Q for the quarters ended March 31, 1998, and December 31, 1998.

K. JDN Realty failed to disclose that the senior vice president and the vice president were related parties to certain of JDN Realty's transactions because these former officers failed to disclose their interests to JDN Realty. The senior vice president and the vice president each owned significant interests in a partnership that purchased real property from JDN Development for $2 million in April 1996. In addition, the senior vice president and the vice president each owned a 25% interest in a company that sold over $650,000 in surveying services to JDN Realty and JDN Development in a series of transactions during the period from 1995 through 1998. JDN Realty failed to disclose these transactions in proxy statements filed on Schedule 14A on April 7, 1996, March 28, 1997, April 3, 1998, and April 22, 1999, and in its annual reports filed on Form 10-K for the years 1995 through 1998.

L. JDN Realty failed to disclose that the chief executive officer was involved as a related party to a series of JDN Realty transactions because this former officer failed to disclose his interests to JDN Realty. The chief executive officer held a 99% interest in a company that owned an airplane, which JDN Realty and JDN Development occasionally used. JDN Realty and JDN Development paid that company $61,801 in 1996; $238,246 in 1997; and $285,522 in 1998. JDN Realty failed to disclose these transactions in proxy statements filed on Schedule 14A on March 28, 1997, April 3, 1998, and April 22, 1999, and in its annual reports filed on Form 10-K for the years 1996, 1997, and 1998.

M. During the years 1994 through 1999, JDN Realty failed to maintain internal accounting controls sufficient to ensure that its financial statements were prepared in conformity with GAAP.

VIOLATIONS

N. Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder require issuers of registered securities to file with the Commission annual and quarterly reports prepared in conformity with the requirements of the Commission's rules and regulations.

O. Section 13(b)(2)(A) of the Exchange Act requires issuers of securities to make and keep books, records, and accounts that accurately and fairly reflect their transactions and the dispositions of their assets. Exchange Act Rule 13b2-1 prohibits any person from, directly or indirectly, falsifying or causing to be falsified any book, record, or account subject to Section 13(b)(2)(A).

P. Section 13(b)(2)(B) of the Exchange Act requires issuers to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are executed in accordance with management's authorization and that transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP and to maintain accountability for assets.

Q. Section 14(a) of the Exchange Act and Rule 14a-9 proscribe the use of a proxy statement that contains false statements or omits to state any material fact necessary in order to make the statements therein not false or misleading.

R. By reason of the conduct described above, JDN Realty committed violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and Rules 13a-1, 13a-13, 13b2-1, and 14a-9.

S. JDN Realty violated Section 13(a) of the Exchange Act and Rule 13a-1 by filing Forms 10-K that contained, inter alia, financial statements for the years ended December 31, 1994, through December 31, 1998, that were not in compliance with GAAP. JDN Realty violated Section 13(a) of the Exchange Act and Rule 13a-13 by filing Forms 10-Q that contained financial statements for the quarters ended March 31, 1998, and December 31, 1998, that were not in compliance with GAAP. JDN Realty violated Section 13(b)(2)(A) of the Exchange Act by failing to keep books and records that accurately recorded its transactions and assets for the years ended December 31, 1994, through December 31, 1998. JDN Realty violated Rule 13b2-1 by causing its books, records, and accounts to reflect falsely its transactions and the dispositions of its assets over this same period. JDN Realty violated Section 13(b)(2)(B) of the Exchange Act by failing to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that its transactions were executed in accordance with management's authorization and that its transactions were recorded as necessary to permit the preparation of financial statements in conformity with GAAP. Finally, JDN Realty violated Section 14(a) and Rule 14a-9 by soliciting proxies by use of materially false and misleading proxy statements, which were filed on Schedule 14A on April 4, 1995, April 7, 1996, March 28, 1997, April 3, 1998, and April 22, 1999.

IV.

In view of the foregoing, the Commission deems it appropriate to accept JDN Realty's Offer. In determining to accept the Offer, the Commission considered remedial acts promptly undertaken by JDN Realty and cooperation afforded the Commission staff.

V.

ACCORDINGLY, IT IS HEREBY ORDERED, pursuant to Section 21C of the Exchange Act, that JDN Realty cease and desist from committing or causing any violation and any future violation of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and Rules 13a-1, 13a-13, 13b2-1, and 14a-9.

By the Commission.

Jonathan G. Katz
Secretary

Footnote

http://www.sec.gov/litigation/admin/34-45458.htm