SECURITIES AND EXCHANGE COMMISSION

   Litigation Release No. 16728 / September 27, 2000

   Accounting and Auditing Enforcement Release No. 1312

   SECURITIES AND EXCHANGE COMMISSION v. JOHN DAWS, THOMAS BUTLER AND
   MARK FOLIT, United States District Court for the Northern District of
   California, Civil Action No. C00-20797 EAI

   The U.S. Securities and Exchange Commission today filed an action in
   federal district court in San Francisco against three former officers
   of Silicon Valley-based Cylink Corporation ("Cylink" or the "Company")
   for their roles in a financial reporting fraud that overstated
   Cylink's results by millions of dollars in 1997 and 1998. In a
   separate action, the Commission brought charges against Cylink for
   related violations. According to the filings, in order to meet
   Cylink's ambitious revenue goals, former Cylink officers led the
   Company to recognize revenue on numerous transactions that violated
   Cylink's own revenue recognition policy, generally accepted accounting
   principles or both. Cylink overstated its quarterly revenue by as much
   as 97.5% during the period of the fraud, according to the filings.

   Named in the Commission's federal court suit were former Chief
   Financial officer John Daws, age 56, of Orinda, California; former
   Vice President of Sales Thomas Butler, age 52, of Pebble Beach,
   California; and former head of North American Sales Mark Folit, age
   39, of New York, New York. The Commission's complaint charges each
   defendant with securities fraud (Section 10(b) of the Securities
   Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder);
   circumvention of Cylink's internal controls and falsification of
   records (Section 13(b)(5) of the Exchange Act and Rule 13b2-1
   thereunder); and aiding and abetting Cylink's violations of the
   periodic reporting and books and records provisions (Sections 13(a)
   and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13
   thereunder) of the federal securities laws. In addition, the complaint
   charges Daws with failing to devise and maintain adequate internal
   accounting controls (Section 13(b)(2)B) of the Exchange Act) and
   failing to provide material information to Cylink's outside auditors
   in connection with Cylink's 1997 audit (Exchange Act Rule 13b2-2).

   In a separate action, the Commission instituted, and simultaneously
   settled, administrative cease-and-desist proceedings against Cylink.
   The Commission's Order Instituting Proceedings ("Order") finds that
   Cylink materially misstated its financial results for the fourth
   quarter of fiscal 1997 and the first two quarters of fiscal 1998 and
   directs Cylink to cease and desist from violations of the periodic
   reporting, internal controls and books and records provisions. Cylink