SEC News Digest

COMMISSION ANNOUNCEMENTS

James L. Kroeker Named Acting Chief Accountant

Securities and Exchange Commission Chairman Christopher Cox today announced the appointment of James L. Kroeker as the Acting Chief Accountant in the SEC's Office of Chief Accountant. In this capacity, Mr. Kroeker will oversee accounting interpretations, international accounting matters, and professional practice issues. Mr. Kroeker replaces Conrad W. Hewitt, who retired from government service on Monday.

Since joining the Commission as Deputy Chief Accountant in February 2007, Mr. Kroeker has played a key role in efforts to improve financial reporting and reduce the complexity of financial disclosure. For example, he recently served as staff director of the SEC's Congressionally-mandated study of fair value accounting standards, and he has led the efforts of the Office of the Chief Accountant to address the current economic turmoil, including steps to improve off-balance sheet accounting guidelines. Mr. Kroeker also served as the Designated Federal Officer responsible for the staff oversight of the SEC's Advisory Committee on Improvements to Financial Reporting. He also has been responsible for the day-to-day operations of the office's accounting group, including resolution of accounting practice issues, rulemaking, and oversight of private sector standard-setting efforts.

"Jim Kroeker has consistently set high standards for achievement and excellence within the Office of the Chief Accountant," said Chairman Cox. "His leadership, expertise, and judgment have been extraordinarily valuable assets for investors, our capital markets, and the agency."

Mr. Hewitt said, "I have worked closely with Jim on many challenging matters and he has provided investors a valuable service on several issues. Jim is well-respected by many different parties and I am confident that he will continue to perform in an outstanding manner for the Commission."

Mr. Kroeker came to the SEC from Deloitte and Touche LLP where he had been a partner in the firm's National Office Accounting Services Group and was responsible for providing consultation and support regarding the implementation, application, communication and development of accounting standards, including disclosure and reporting matters. Mr. Kroeker also served as a Practice Fellow at the Financial Accounting Standards Board, where he assisted in the development of accounting guidance related to evolving accounting issues.

Prior to joining Deloitte's national office, Mr. Kroeker was responsible for the audits of financial statements of several large national and multinational public companies and consulted with clients on technical accounting issues, coordinated the firm's work related to clients' mergers and acquisitions, and conducted special projects for the firm.

Mr. Kroeker, 39, received a Bachelor of Science degree with an emphasis in accounting from the University of Nebraska in May 1992. (Press Rel. 2009-4)

ENFORCEMENT PROCEEDINGS

South Florida Investment Adviser Indicted for Multi-Million Dollar Misappropriation and Ponzi Scheme

On Dec. 23, 2003, the United States Attorney for the Eastern District of Michigan filed criminal charges against Anthony A. James, a South Florida investment adviser. The indictment charges James with two counts of mail fraud in connection with a multi-million dollar misappropriation and Ponzi scheme. According to the indictment, between April 2001 and January 2008, James used his position as owner of James Asset Advisory, LLC (James Asset) to receive over $5.3 million from over 40 clients. Those funds were supposed to be invested in various securities, bonds, and funds. Instead of investing those funds, James used approximately $2.4 million of investor money for his own personal use and approximately $2.8 million of investor money to pay back other prior investors.

In September 2008, the Commission filed a civil injunctive action in the United States District Court for the Southern District of Florida against James and James Asset, for misappropriating client funds and operating a Ponzi scheme. The Commission's complaint alleged that the Defendants received at least $5.2 million from 44 clients who were told by the Defendants that client monies would be invested in stocks, bonds, and mutual funds. According to the complaint, the Defendants never invested any client funds in the stock market or other investments. Instead, James misappropriated at least $2.4 million in client monies to fund his lavish lifestyle, including the purchase of a six-bedroom, 5,000 square foot home, a luxury condominium, a Porsche sports car, and season tickets to the Miami Heat games. Moreover, like a classic Ponzi scheme, the Defendants transferred approximately $2.8 million from new clients to existing clients to repay principal or to create the illusion of profitable trading. In addition, to facilitate and otherwise conceal their fraud, the complaint alleged that the Defendants provided clients with false account statements reflecting securities holdings and returns that did not exist. On Sept. 25, 2008, the Court entered an order, by consent, permanently enjoining James and James Asset from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The judgment also ordered the Defendants to pay disgorgement and civil money penalties, the amounts of which will be determined at a later date. [U.S. v. Anthony A. James¸ (United States District Court for the Eastern District of Michigan, Case No. 2:08-CR-20674)] (LR-20842)

Final Default Judgments Entered Against Pavlos Meletiou, R.K. Dhawan and Co., and R.K. Dhawan in Connection with their Audits of AremisSoft Corporation; Each Suspended from Practicing or Appearing before the Commission as Accountants in Related Administrative Proceedings

On Sept. 23, 2008, final default judgments were entered against Pavlos Meletiou (Meletiou) R.K. Dhawan and Co. (Dhawan and Co.), and R.K. Dhawan (Dhawan) in connection with their audits of AremisSoft Corporation (AremisSoft), a software company that went bankrupt in March 2002. In addition to permanent injunctions entered against each of the three defendants, Meletiou and Dhawan were each ordered to pay a civil penalty of $120,000, and Dhawan and Co. and Dhawan were held jointly liable for disgorgement of $24,488.96 plus prejudgment interest of $14,781.76.

The Commission's complaint, filed March 21, 2006, alleged, among other things, that Meletiou signed unqualified audit reports on behalf of PKF Cyprus, a Cyprus-based accounting firm, for AremisSoft subsidiaries in 1999 and 2000 that falsely stated that the audits were conducted in accordance with U.S. Generally Accepted Auditing Standards (GAAS) and that the AremisSoft subsidiaries' financial statements were fairly presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP).

The complaint further alleged that Dhawan and Co., an Indian-based accounting firm, issued audit reports on nine AremisSoft subsidiaries in 2000 signed by its partner R.K. Dhawan that falsely stated that the audits were conducted in accordance with U.S. GAAS and the financial statements were presented in accordance with U.S. GAAP and that the companies' false financial statements were included as part of AremisSoft's consolidated financial statements filed with AremisSoft's year 2000 Form 10-K.

The final judgments permanently enjoin Meletiou, Dhawan and Co., and Dhawan from future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rule 10b-5 and from aiding and abetting future violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Exchange Act Rules 12b-20, 13a-1 and 13b2-1. On Jan. 6, 2009, based on the entry of the final default judgments entered against Meletiou, Dhawan and Co., and Dhawan, the Commission instituted administrative proceedings against Meletiou, Dhawan and Co., and Dhawan, temporarily suspending each from practicing or appearing before the Commission as accountants pursuant to Rule 102(e)(3) of the Commission's Rules of Practice. [SEC v. Savvides & Partners/PKF Cyprus, Pavlos Meletiou, R.K. Dhawan and Co., and R.K. Dhawan, Civil Action No. 06 CV 2223 (S.D.N.Y.)] (LR-20843; AAE Rel. 2917); In the Matter of R.K. Dhawan, Chartered Accountant - (Rel. 34-59204; AAE Rel. 2914; File No. 3-13325); In the Matter of Pavlos Meletiou, Certified Accountant - (Rel. 34-59205; AAE Rel. 2915; File No. 3-13326); In the Matter of R.K. Dhawan & Co. - (Rel. 34-59206; AAE Rel. 2916; File No. 3-13327)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change (SR-CBOE-2008-128), filed by the Chicago Board Options Exchange relating to exchange fees for fiscal year 2009 has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of January 5. (Rel. 34-59193)

A proposed rule change (SR-ISE-2008-100) filed by the International Securities Exchange that makes technical changes to the certificate of incorporation of ISE's parent, International Securities Exchange Holdings, Inc., has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of January 5. (Rel. 34-59196)

A proposed rule change filed by the Boston Stock Exchange to amend BOX rules relating to obvious error provisions to address catastrophic errors, erroneous quotes or prints in the underlying security, and some additional modifications (SR-BSE-2008-52) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of January 5. (Rel. 34-59197)

Accelerated Approval of Proposed Rule Change

The Commission granted accelerated approval to a proposed rule change submitted by NYSE Arca (SR-NYSEArca-2008-135) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 amending Rule 6.47A to reduce the order exposure period from three seconds to one second. Publication is expected in the Federal Register during the week of January 5. (Rel. 34-59194)

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http://www.sec.gov/news/digest/2009/dig010609.htm