Source: http://www.sec.gov/litigation/complaints/complr17140.htm
Timestamp: 2016-02-07 02:12:52
Document Index: 5040447

Matched Legal Cases: ['§ 78', '§ 78', '§ 78', '§ 240', '§ 78', '§ 240', '§ 78', '§ 240', '§ 78', '§ 240', '§78', '§ 240', '§ 78', '§78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 240', '§240', '§240', '§ 78', '§ 240', '§ 78', '§ 240', '§ 78', '§ 240', '§78', '§ 78']

Complaint: SEC v. Madera International, Inc., Ramiro Fernandez-Moris and Daniel S. Lezak
SECURITIES AND EXCHANGE COMMISSION, 450 Fifth Street, N.W. Washington, D.C. 20549, Plaintiff,
v. MADERA INTERNATIONAL, INC., RAMIRO M. FERNANDEZ-MORIS and DANIEL S. LEZAK, Defendants.
Civil Action No. 01-1985 (JR)
1. This case involves fraudulent accounting and reporting practices by Madera International, Inc. ("Madera"), a timber distributor, and certain of its former executive officers. During the period since its inception in February 1994 until 2000, Madera has recorded as assets various purported timber producing properties for which it cannot establish clear title; assigned and recorded arbitrary values for those timber producing properties; recorded revenues from phony sales transactions; failed to disclose significant related party transactions; and caused false sales invoices, shipping documents, cash receipts records and audit confirmations to be furnished to Madera's independent auditors. Madera also issued false press releases concerning, among other things, the company's operations and profit forecasts. 2. These practices were carried out by, or at the direction of, defendants Daniel S. Lezak ("Lezak") and Ramiro M. Fernandez-Moris ("Fernandez-Moris"). Lezak was Madera's Chief Executive Officer and Chairman of its Board of Directors from February 1994 until March 1996, and thereafter was a consultant to the company. Fernandez-Moris was a Director of Madera and its President from August 1994 until March 1996. In March 1996 Fernandez-Moris replaced Lezak as Chief Executive Officer and Chairman of Madera's Board of Directors. Fernandez-Moris resigned as CEO of Madera on November 7, 2000, but remains a Director.
JURISDICTION 3. The SEC brings this action pursuant to Section 21(d ) and (e) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78u(d) and (e)]. This Court has jurisdiction over this action pursuant Sections 21(e) and 27 of the Exchange Act [15 U.S.C. §§ 78u(e) and 78aa].
4. Each of the defendants, directly or indirectly, made use of the means or instrumentalities of interstate commerce, or of the mails, in connection with the transactions, acts, practices, and courses of business alleged herein.
5. By their conduct, each of the defendants violated the antifraud, reporting, books and records, and internal controls provisions of the Exchange Act. Unless enjoined by order of this Court, defendants Madera, Lezak and Fernandez-Moris are likely to commit such violations in the future. The SEC seeks a judgment permanently enjoining defendants from future violations, and, with respect to Lezak and Fernandez-Moris, disgorgement of illegally derived funds together with prejudgment interest, an award of civil penalties pursuant to Section 21(d)(3) of the Exchange Act, and an order pursuant to Section 21(d)(2) of the Exchange Act permanently and unconditionally barring them from serving as officers or directors of a public company.
DEFENDANTS 6. Madera is a Nevada corporation headquartered in Coral Gables, Florida. Its common stock is registered with the SEC pursuant to Section 12(g) of the Exchange Act. During most of the relevant period, Madera's stock traded in the over-the-counter market on the Bulletin Board using the symbol "WOOD." Madera stock currently trades in the "pink sheets," an Internet-based, real-time quotation service for over-the-counter equities provided by The Pink Sheets LLC. 7. Fernandez-Moris, age 72, resides in Miami, Florida. He became President of Madera and a Director in August 1994. In March 1996, he became Chairman of the Board of Directors and Chief Executive Officer of Madera. On November 7, 2000, he resigned his position as Madera's CEO, but he remains a Director.
8. Lezak, age 67, resides in Incline Village, Nevada. He was Chairman of the Board of Directors and Chief Executive Officer of Madera from its inception in February 1994 until March 1996. Lezak additionally served as Madera's President from February 1994 until August 1994. Lezak remained a Director of Madera from March 1996 until May 1996, and thereafter was a consultant to Madera. Lezak, a certified public accountant, was responsible for preparing Madera's financial statements throughout the relevant period. FACTS
The Nicaraguan Property Transaction
9. On or about January 16, 1994, Madera, through Lezak, entered into a "contract of sale" with Importaciones Y Exportaciones, Sociedad Anonima ("Imexsa"), a Nicaragua corporation, for the purchase of 988,400 acres of timberland in Nicaragua ("Nicaraguan Property") for a purchase price of $5 million in the form of a convertible note issued by Madera to Imexsa. On or about January 20, 1994, the note was converted into 10,200,000 shares of Madera common stock. 10. On or about January 16, 1994, the Nicaraguan Property was recorded on Madera's books as an investment in timber producing property at the contract price of $5 million. 11. In connection with the preparation of Madera's March 31, 1994 financial statements, Lezak increased the value of the Nicaraguan Property on Madera's books to $12 million purportedly based upon "a study made of the property by an authority in Nicaragua" and "the trading value of the Company's stock." However, Madera's stock did not start trading until May 12, 1994, and there was no available trading value for Madera's stock on January 16, 1994, the date of the transaction. 12. Generally Accepted Accounting Principles ("GAAP") do not permit a long-lived asset to be written-up in value above its original cost. Even if it were proper to increase the carrying value of the Nicaraguan Property above its cost, the trading value of Madera's stock after the transaction would be irrelevant to such a revaluation.
13. Madera had no reasonable basis for recording this transaction as a $12 million investment in timber producing property. At the time Madera recorded the Nicaraguan Property as an asset, Madera was unable to show that the seller of the Nicaraguan Property, Imexsa, possessed clear title to the property. In fact, the Nicaraguan government had at most conveyed to Imexsa a permit for exploration and development of the property. On or about July 29, 1994, the Nicaraguan government withdrew the extraction rights to the property.
14. On or about October 10, 1994, Madera cancelled the stock that had been issued to Imexsa because the Nicaraguan Property had "now proven of questionable value as a result of government action in Nicaragua." Nevertheless, Lezak continued to include the Nicaraguan Property at a value of $12 million in Madera's September 30, 1994 quarterly report, filed on November 14, 1994, and Madera's December 31, 1994 quarterly report. Madera did not write-off its purported $12 million investment in the Nicaraguan Property until February 1995.
15. Lezak knew, or was reckless in not knowing, that Madera should not have recorded or continued to carry the Nicaraguan Property as an asset under GAAP. Lezak also knew, or was reckless in not knowing, that recording and carrying the Nicaraguan Property as an asset rendered materially false and misleading Madera's financial statements contained in its March 31, 1994 annual report on Form 10-K and its June 30, 1994, September 30, 1994, and December 31, 1994 quarterly reports on Form 10-Q filed with the SEC. Lezak signed this annual report on Form 10-K and these quarterly reports on Form 10-Q. The Venezuelan Timber Concession
16. In or about February 1994, Lezak arranged for Madera to purchase a 50% ownership interest in a Venezuelan timber concession purportedly owned by Inselinca, a Venezuelan company. Madera purchased the 50% interest for one million shares of convertible preferred stock with a face value of $3 per share that it issued to Iselinca. 17. In or about February 1994, these Madera shares had no market value.
18. Madera's purported interest in the Venezuelan concession was recorded in Madera's books as a $3 million asset. This valuation was based solely on Inselinca's unsupported representations concerning the value of the concession.
19. Madera included its 50% interest in the concession at a value of $3 million in its March 31, 1994 annual report on Form 10-K and its June 30, 1994 quarterly report on Form 10-Q filed with the SEC.
20. At the time of recording the Venezuelan concession as an asset, Madera had no reasonable basis for recording it as a $3 million asset and could not establish whether Inselinca owned the concession or that the concession had the value ascribed to it. 21. Madera wrote-off its $3 million interest in the concession at its quarter ended September 30, 1994 because, according to Lezak, "[t]he Inselinca group could not demonstrate the value previously warranted to [Madera]." 22. Lezak knew, or was reckless in not knowing, that Madera should not have recorded or continued to carry the Venezuelan concession as an asset in its financial statements. Lezak also knew, or was reckless in not knowing, that recording and carrying the Venezuelan concession as an asset rendered materially false and misleading Madera's financial statements contained in its annual report on Form 10-K for its fiscal year ended March 31, 1994, and its June 30, 1994 quarterly report on Form 10-Q filed with the SEC. Lezak signed this annual report on Form 10-K and this quarterly report on Form 10-Q. 23. Lezak falsely represented to Madera's auditors in connection with their audit of the company's fiscal year 1994 financial statements that Madera owned a 50% interest in the Venezuelan concession valued at $3 million.
The First Brazilian Rain Forest Property Transaction
24. In July 1994, Madera entered into an agreement to acquire certain assets that it valued at $30,230,000 in exchange for ten million shares of Madera convertible preferred stock. The seller was Forest & Environmental Resources of the Amazon, Inc. ("FEROA"), a Florida corporation controlled by Fernandez-Moris. The primary asset purportedly acquired consisted of 478,000 acres of timber producing property located in the Brazilian rain forest that Madera valued at $27 million. In addition, Madera purportedly acquired a sawmill valued at $2.6 million and an inventory of cut timber that it valued at $630,000. Collectively, these purported assets are hereinafter referred to as the "Brazilian Properties." 25. Madera recorded the total transaction in its books at $30,230,000 based primarily upon representations by Fernandez-Moris concerning the value of the Brazilian Properties and FEROA's ownership rights in the assets. 26. Madera included the Brazilian Properties at a value of $30,230,000 in its financial statements contained in Madera's quarterly and annual reports filed with the SEC on Forms 10-Q and 10-K beginning with the quarter ended September 30, 1994 through its filing for the quarter ended December 31, 1999.
27. Madera had no reasonable basis for recording the Brazilian Properties as assets valued at over $30 million. Lezak did not ascertain when the Brazilian Properties were originally acquired by FEROA or Fernandez-Moris, nor did he determine their original cost. Lezak also failed to take adequate steps to determine whether Fernandez-Moris and FEROA had clear title to the Brazilian Properties, and whether the $30 million valuation of the properties represented by Fernandez-Moris was valid.
28. By 1995, Lezak knew that no significant amounts of timber had been harvested from the property because it was uneconomical to do so. Lezak knew that Fernandez-Moris was instead purchasing timber for resale from third parties. Despite knowing that it was not economical to harvest timber from the Brazilian Properties, Lezak and Fernandez-Moris nevertheless continued to value the 478,000 acres of timber producing property in the Brazilian rain forest at $27 million in Madera's financial statements filed with the SEC.
29. In 1997, an appraisal prepared for Madera on the basis of the amount of future potential income that would be earned if all the timber on the 478,000 acres of Brazilian rain forest property was harvested and sold did not support the $27 million valuation placed on the unexploited land by Madera. 30. Lezak and Fernandez-Moris took no steps to write down the value of the Brazilian Properties even though they knew that little or no potential income would be derived from them.
31. Lezak and Fernandez-Moris caused Madera's news releases and filings with the SEC to falsely state that Madera was harvesting timber from its Brazilian Properties.
32. Fernandez-Moris and Lezak knew, or were reckless in not knowing, that Madera should not have recorded or reported the Brazilian Properties as assets because Madera lacked clear title to the properties and the valuations for the properties were arbitrarily established. Fernandez-Moris and Lezak also knew, or were reckless in not knowing, that recording and reporting the Brazilian Properties as assets rendered materially false and misleading Madera's financial statements contained in its quarterly and annual reports filed with the SEC on Forms 10-Q and 10-K beginning with the quarter ended September 30, 1994 through its filing for the quarter ended December 31, 1999. Lezak signed Madera's quarterly and annual reports on Forms 10-Q and 10-K beginning with the quarter ended September 30, 1994 through its Form 10-K filing for its fiscal year ended March 31, 1996. Fernandez-Moris signed Madera's annual reports on Form 10-K for its fiscal year ended March 31, 1995 through its fiscal year ended March 31, 1999, and quarterly reports on Form 10-Q beginning with the quarters ended June 30, 1996 through the quarter ended December 31, 1999. 33. Fernandez-Moris and Lezak falsely represented to Madera's auditors in connection with their audits of the company's financial statements for its fiscal years 1995, 1996, 1997, 1998 and 1999 that Madera owned the Brazilian Properties and that the value of the 478,000 acres was $27 million.
The Second Brazilian Rain Forest Property Transaction
34. On or about January 10, 1995, Madera entered into a transaction with Ralph Financial Corporation ("Ralph Financial"), a company controlled by Roy Skluth ("Skluth"), whereby Madera purportedly acquired 400,000 hectares (988,400 acres) of timber producing property in Brazil ("Second Brazilian Property"). Lezak negotiated the transaction with Skluth while Skluth was in prison for securities fraud.
35. Madera issued 12 million shares of convertible preferred stock with a stated value of $1.00 per share but no ascertainable market value to Skluth in exchange for the Second Brazilian Property, which was recorded in Madera's books as a $12 million asset. This valuation was based upon the arbitrarily stated value of the preferred stock.
36. Madera included the Second Brazilian Property at a value of $12 million in its financial statements contained in its March 31, 1995 annual report on Form 10-K and its quarterly reports on Form 10-Q for the quarters ended June 30, 1995 and September 30, 1995.
37. Madera had no evidence that Ralph Financial had ever owned the Second Brazilian Property or that legal title to the property had been conveyed to Madera. The Second Brazilian Property was written off as an asset by Madera at the quarter ended December 31, 1995 because, according to Lezak, Skluth was unable to demonstrate that he had actually owned the property and could not transfer proper title to Madera.
38. Lezak and Fernandez-Moris knew, or were reckless in not knowing, that Madera should not have recorded or reported the Second Brazilian Property as an asset because Madera lacked clear title to the property and the valuation for the property was arbitrarily established. Lezak and Fernandez-Moris also knew, or were reckless in not knowing, that recording and reporting the Second Brazilian Property as an asset rendered materially false and misleading Madera's financial statements contained in its annual report for its fiscal year ended March 31, 1995 as filed with the SEC on Form 10-K, and its quarterly reports for the fiscal quarters ended June 30, 1995 and September 30, 1995, as filed with the SEC on Form 10-Q. Lezak and Fernandez-Moris each signed Madera's annual report on Form 10-K for its fiscal year ended March 31, 1995, and Lezak signed Madera's quarterly reports on Form 10-Q for the quarters ended June 30, 1995 and September 30, 1995.
39. Lezak and Fernandez-Moris falsely represented to Madera's auditors in connection with their audit of the company's fiscal 1995 financial statements that Madera owned the Second Brazilian Property valued at $12 million.
The Fiscal Year 1998 Phony Sales
40. During Madera's fiscal year ended March 31, 1998, Madera reported in its financial statements filed with the SEC on Form 10-K phony sales totaling $2,654,934. These sales purportedly were made to Great American Lumber Company ("Great American"), Investco, Ltd. ("Investco"), and Signal Resources, Inc. ("Signal Resources"). Fernandez-Moris caused phony sales invoices to be prepared and recorded in Madera's books and furnished to Madera's auditors. In addition, phony confirmations of the resultant accounts receivable were sent to Madera's auditors.
41. On March 31, 1998, the last day of its fiscal year, Madera booked an invoice to Great American for $1,419,579 for a purported shipment of lumber. In connection with its fiscal year 1998 audit, Madera's auditors received a confirmation, purportedly signed by the president of Great American, confirming a $1,419,579 balance due to Madera. However, the purported president of Great American had never actually received nor signed the confirmation. 42. On or about March 23, 1998, Madera booked an invoice to Investco at 3130 Harmony Place, La Crescenta, California for a purported sale of lumber in the amount of $861,773. In addition, Madera prepared an auditor's confirmation request to be sent to Investco at that address. But the sale of lumber to Investco never actually took place.
43. Investco never was located at 3130 Harmony Place, La Crescenta, California. Nobody at that address ever received the invoice or the confirmation request. Nobody at that address has ever been affiliated with Investco or has any knowledge of Investco.
44. On or about June 15, 1997, Madera invoiced Signal Resources for a timber shipment on June 15, 1997 in the amount of $282,518. On or about September 12, 1997, Madera invoiced Signal Resources for a timber shipment in the amount of $91,064. Both of the invoices and an auditor's confirmation request that Madera prepared to confirm the invoices were addressed to Signal Resources at 2222 Foothill Blvd., La Canada, California.
45. Signal Resources is not, however, located at that address. That address is for a post office box belonging to a petroleum engineer who has done consulting work for Signal Resources. The petroleum engineer never received the invoices or the confirmation request addressed to his post office box. He did not sign the confirmation reply, although Madera's auditors received the confirmation reply form with a signature purporting to be that of the secretary of Signal Resources. Signal Resources never actually did business with Madera.
46. As a result of recording these phony sales, Madera's reported sales of $4,494,803 for fiscal year 1998 in its financial statements filed with the SEC on Form 10-K were overstated by $2,654,934. Had it not been for the phony sales, Madera would have reported a pre-tax loss of $1,489,264 for fiscal 1998 rather than the $1,165,670 pre-tax profit that was reported.
47. Fernandez-Moris knew, or was reckless in not knowing, that Madera's recognition of revenue from fictitious transactions rendered materially false and misleading its fiscal year 1998 quarterly reports on Form 10-Q and fiscal year 1998 annual report on Form 10-K filed with the SEC. Fernandez-Moris signed each of these quarterly and annual reports.
48. Fernandez-Moris made misrepresentations and caused phony sales invoices to be furnished to Madera's auditors concerning Madera's recognition of revenue from these fictitious transactions in connection with their audit of the company's fiscal year 1998 financial statements.
The Fiscal Year 1999 Phony Sales
49. During its fiscal year 1999, Madera recorded and reported phony sales to Great American and Signal Resources totaling $1,759,947. For the first quarter of fiscal year 1999, Madera reported in its quarterly report on Form 10-Q filed with the SEC, timber sales of $1,819,350 that included a phony sale to Great American in the amount of $401,030.
50. Had it not been for these phony sales, Madera would have reported a pre-tax loss of $185,336 rather than the pre-tax profit of $215,694 that was reported for its quarter ended June 30, 1998.
51. For the fourth quarter of fiscal year 1999, Fernandez-Moris caused Madera to book and report phony sales totaling $1,358,917 to Great American and Signal Resources. These phony sales were reported in a Madera press release dated May 4, 1999 that announced record revenues and profits for the year and "the complete turnaround afforded the company at the hands of present management."
52. Fernandez-Moris caused the booking and reporting of the phony sales. He was responsible for attempting to deceive Madera's auditors by causing them to be furnished with phony invoices, shipping documents and cash receipts records. 53. Fernandez-Moris knew, or was reckless in not knowing, that Madera's recognition of revenue from fictitious transactions rendered materially false and misleading its May 4, 1999 press release and it June 30, 1998 quarterly report on Form 10-Q filed with the SEC. Fernandez-Moris signed Madera's quarterly report on Form 10-Q for the quarter ended June 30, 1998.
54. Fernandez-Moris made misrepresentations concerning Madera's recognition of revenue from these fictitious transactions to Madera's auditors in connection with their audit of the company's fiscal year 1999 financial statements. Undisclosed Related Party Transactions
55. Beginning in February 1994, Lezak and Fernandez-Moris caused Madera to enter into various "consulting agreements" with themselves, companies controlled by them, and companies controlled by other Fernandez-Moris family members who served as officers and directors of Madera. Madera paid compensation for the consulting services purportedly rendered pursuant to these agreements with its common stock and cash.
56. Three entities controlled by Lezak -- CD Management Inc., CD Financial, Inc., and Gateway Industries, Inc. -- entered into "consulting agreements" with Madera dated February 15, 1994 for unspecified "management services." The agreements each described the pertinent entities as "independent contractor[s]" despite the fact that Lezak controlled them at a time when he was also the Chairman of the Board, President and Chief Executive Officer of Madera. The agreements provided for compensation by the issuance of Madera common stock registered on Form S-8 under the Securities Act of 1933. Lezak received compensation pursuant to the consulting agreements from the issuance of (i) one million shares of Madera common stock to CD Financial, Inc. on February 6, 1996, (ii) 200,000 shares of Madera common stock to CD Management Inc. on March 19, 1996, and (iii) one million shares of Madera common stock to Gateway Industries, Inc. on or about May 15, 1996. 57. None of these Lezak-related transactions was disclosed in Madera's periodic reports filed with the SEC.
58. During the period March 1996 to September 1999 Madera issued approximately 7.8 million shares of its common stock to Timber Management, Inc., a company controlled by Fernandez-Moris, who was also the Chairman of the Board, President and Chief Executive Officer of Madera at that time. According to the minutes of Madera's board of directors' meetings, the stock was issued pursuant to "Regulation S-8" for "fee and expenses," but no registration statement on Form S-8 under the Securities Act of 1933 was ever filed with the SEC.
59. These Fernandez-Moris-related transactions were not disclosed in Madera's periodic reports filed with the SEC.
60. On or about January 1, 1997, Madera entered into a "consulting agreement" with Amazon Timber Consultants, Inc. ("Amazon"). The consulting agreement was signed for Amazon by its President, Ramiro ("Ray") Fernandez-Moris, Jr., a son of Fernandez-Moris. At the time he executed the consulting agreement, Ray Fernandez-Moris was Executive Vice-President for Sales of Madera. Pursuant to the consulting agreement, Amazon was to provide marketing and sales services to Madera for a fee of $8,655 per month, payable in cash or common stock. During the period February 1997 to September 1999, approximately 3.2 million shares of Madera common stock were issued to Amazon under the consulting agreement.
61. This related party transaction was not disclosed in Madera's periodic reports filed with the SEC at any time prior to the year 2000. 62. Regina Fernandez, a daughter of Fernandez-Moris, was Secretary and Treasurer of Madera from March 1996 to March 1999. On or about January 1, 1997, Madera entered into a consulting agreement with Friends of the Rainforest, Inc., an entity controlled by Regina Fernandez. The agreement called for Friends of the Rainforest to provide financial and administrative services to Madera for a fee of $5,000 per month, payable in cash or Madera common stock. During the period February 1997 to September 1999, Madera issued approximately 1.9 million shares of common stock to Friends of the Rainforest.
63. This related party transaction was not disclosed in Madera's periodic reports filed with the SEC at any time prior to the year 2000. 64. Fernandez-Moris and Lezak knew, or were reckless in not knowing, that Madera's public disclosures were rendered materially false and misleading by its failure to disclose these related party transactions.
Lezak and Fernandez-Moris Enrich Themselves Through Sales of Madera Stock
65. During the period they inflated the share price of Madera common stock through fraudulent public disclosures about Madera's assets and revenues, Lezak and Fernandez-Moris sold personal holdings of Madera common stock.
66. Lezak and entities controlled by him sold at least 2.9 million shares of Madera stock between November 1994 and January 1999 and obtained proceeds of at least $663,000.
67. Fernandez-Moris and entities controlled by him sold at least 7.1 million shares of Madera stock between June 1998 and October 1999 and realized profits of at least $696,000.
Violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5]
68. Paragraphs 1 through 67 are realleged and incorporated by reference.
69. By reason of the foregoing, Madera, Fernandez-Moris and Lezak each violated Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
Violations of and Aiding and Abetting Violations of Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1 and 13a-13 [17 C.F.R. §§ 240.12b-20, 13a-1, and 13a-13]
70. Paragraphs 1 through 67 are realleged and incorporated by reference.
71. Madera filed with the SEC annual reports on Form 10-K for its fiscal years ended March 31, 1994 through March 31, 1999 and quarterly reports on Form 10-Q for the period June 30, 1994 through December 31, 1999 that contained untrue statements of material fact or omitted to state material facts required to be stated therein or necessary to make the statements made not misleading, concerning, among other things, Madera's revenues and net income.
72. By reason of the foregoing, Madera violated Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1 and 13a-13 thereunder [17 C.F.R §§ 240.12b-20, 240.13a-1, and 240.13a-13].
73. By causing Madera to file with the SEC the foregoing false and misleading reports, Lezak and Fernandez-Moris each aided and abetted Madera's violations of Section 13(a) Exchange Act [15 U.S.C. §78m(a)] and Rules 12b-20, 13a-1 and 13a-13 thereunder [17 C.F.R §§ 240.12b-20, 240.13a-1, and 240.13a-13].
THIRD CLAIM Violations of Section 13(b)(5) of the Exchange Act [15 U.S.C. § 78m(b)(5)]
72. Paragraphs 1 through 67 are realleged and incorporated by reference.
73. By reason of the foregoing, Madera, Fernandez-Moris and Lezak each violated Section 13(b)(5) of the Exchange Act [15 U.S.C. §78m(b)(5)].
Violations of and Aiding and Abetting Violations of Section 13(b)(2)(A) and (B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)&(B)]
74. Paragraphs 1 through 67 are realleged and incorporated by reference.
75. Madera violated Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)] by maintaining false and misleading books and records that, among other things, materially overstated Madera's assets during its fiscal years 1994 through 1999, and materially overstated Madera's revenue and net income during the its fiscal years 1998 and 1999.
76. Madera violated Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)] by failing to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that its transactions were recorded as necessary to permit preparation of financial statements in conformity with GAAP.
77. By causing Madera to maintain false and misleading books and records and to fail to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurance that its transactions were recorded as necessary to permit preparation of financial statements in conformity with GAAP, Lezak and Fernandez-Moris each aided and abetted Madera's violations of Section 13(b)(2)(A) and (B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)&(B)].
FIFTH CLAIM Violations of Exchange Act Rule 13b2-1 [17 C.F.R. § 240.13b2-1]
78. Paragraphs 1 through 67 are realleged and incorporated by reference.
79. Fernandez-Moris and Lezak, directly or indirectly, falsified or caused to be falsified, Madera's books, records or accounts subject to Section 13(b)(2)(A) of the Exchange Act.
80. By reason of the foregoing, Fernandez-Moris and Lezak each violated Exchange Act Rule 13b2-1 [17 C.F.R. §240.13b2-1].
81. Paragraphs 1 through 67 are realleged and incorporated by reference.
82. Fernandez-Moris and Lezak as officers and directors of Madera, and Lezak as someone who routinely performed functions corresponding with those of an officer, directly or indirectly, made materially false or misleading statements, or omitted to state, or caused another person to omit to state material facts necessary in order to make statements made, in light of the circumstances under which they were made, not misleading to Madera's accountants in connection with their audits of Madera's financial statements for fiscal years 1994 through 1999.
83. By reason of the foregoing, Fernandez-Moris and Lezak each violated Exchange Act Rule 13b2-2 [17 C.F.R. §240.13b2-2]. PRAYER FOR RELIEF
(a) permanently enjoining Fernandez-Moris and Lezak from violating Sections 10(b), and 13(b)(5) of the Exchange Act [15 U.S.C. §§ 78j(b), and 78m(b) (5)] and Exchange Act Rules 10b-5, 13b2-1, and 13b2-2 [17 C.F.R. §§ 240.10b-5, 13b2-1, and 13b2-2] and aiding and abetting violations of Section 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 78m(a), 78m(b)(2)(A), and 78m(b)(2)(B),] and Exchange Act Rules 12b-20, 13a-1, and 13a-13 [17 C.F.R. §§ 240.12b-20, 13a-1, and 13a-13];
(b) permanently enjoining Madera from violating Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 78j(b), 78m(a) 78m(b)(2)(A), 78m(b)(2)(B), and 78m(b) (5)] and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-13 [17 C.F.R. §§ 240.10b-5, 12b-20, 13a-1, and 13a-13];
(c) ordering Fernandez-Moris and Lezak to disgorge all ill-gotten gains from the conduct alleged herein, together with prejudgment interest;
(d) ordering Fernandez-Moris and Lezak to pay civil monetary penalties pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. §78u(d)(3)] in respect of their violations committed after September 1996;
(e) permanently and unconditionally barring Fernandez-Moris and Lezak from serving as an officer or director of a public company pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)]; and
(f) granting such other relief as this Court may deem just and appropriate.
s/ Kenneth L. Miller __________________________
Kenneth L. Miller (D.C. Bar #421765)
Robert E. Anderson (D.C. Bar #208983)
(202) 942-4603 [Miller]
Michael P. Moore Securities and Exchange Commission
Washington, D.C. 20549-0803
(202) 942-4550 [Newkirk]
(202) 942-4777 [Sauer]
http://www.sec.gov/litigation/complaints/complr17140.htm