Securities and Exchange Commission

   Litigation Release No. 16307 / September 28, 1999

Accounting and Auditing Enforcement
Release No. 1178

   SECURITIES AND EXCHANGE COMMISSION V. COMPUTONE CORPORATION, THOMAS J.
   ANDERSON, GREGORY A. ALBA, DONALD A. PEARCE, DUNCAN E. HUME AND BRIAN
   D. KRETSCHMAN, Civil Action No. 1 99-CV-2496 (N.D. Ga.)

   SEC SUES COMPUTONE CORPORATION AND CERTAIN OFFICERS FOR INFLATING
   EARNINGS

   The Commission announced that on September 28, 1999, it filed a
   complaint against Computone Corporation ("Computone") of Alpharetta,
   Georgia, which designs, manufactures and sells computer hardware and
   software products, Thomas J. Anderson ("Anderson") of Georgetown,
   South Carolina, its former president and chief executive officer,
   Gregory A. Alba ("Alba") of Norristown, Pennsylvania, its former
   controller and chief financial officer, Donald A. Pearce ("Pearce") of
   Reston, Virginia, its former vice president of finance and principal
   accounting officer, Duncan E. Hume ("Hume") of Greensboro, Georgia, a
   vice president of international sales, and Brian D. Kretschman
   ("Kretschman") of Alpharetta, Georgia, a vice president of sales.

   The complaint alleges a pervasive effort by these senior management
   employees to overstate Computone's income from October 1993 through
   October 1997. For example, the defendants recognized revenue in
   approximately 240 transactions where, among other things, customers
   had never placed orders, products were not shipped to customers,
   products were shipped before customers wanted delivery, or the
   risks/rewards of ownership had not passed to the customers.
   Computone's income was also overstated as a result of the deliberate
   refusal to timely record product returns and failure to properly
   account for various expenses. As a result, the defendants collectively
   violated the antifraud, reporting, books and records, and internal
   control provisions of the Securities Exchange Act of 1934 (Sections
   10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) and Rules 10b-5,
   12b-20, 13a-1, 13a-13, 13b2-1 and 13b2-2 thereunder).

   The complaint asks the Court to issue permanent injunctions against
   all the defendants and seeks civil money penalties against Anderson,
   Alba, Pearce, Hume and Kretschman, and disgorgement plus prejudgment
   interest against Anderson. The Commission also seeks a court order
   barring Anderson from serving as an officer and director in the
   future.