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SEC LITIGATION RELEASE
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EXTRACTED KEY WORDS
COMMISSION MIDGLEY SECURITIES EXCHANGE COMMISSION UTAH COMPLAINT AUDIT REPORTS CIVIL ACTION DISTRICT PUBLIC FUNDING BALANCE SHEETS INVESTMENT COMPANY ACT ACCOUNTING DUANE ASSETS STATES DISTRICT COURT COMPLAINT ALLEGES ACCEPTED AUDITING STANDARDS UNITED STATES DISTRICT SALT LAKE CITY PUBLIC FUNDING PORTFOLIOS AMERICAN VISION FUNDS PERMANENT INJUNCTION DEFENDANTS CIVIL MONETARY PENALTIES VIOLATIONS THEREUNDER SHARES MICHAEL |
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U.S. SECURITIES AND EXCHANGE COMMISSI0N
Litigation Release No. 15051 / September 17, 1996
Accounting and Auditing Enforcement
Release No. 815 / September 17, 1996
SECURITIES AND EXCHANGE COMMISSION v. DUANE V. MIDGLEY,
Civil Action No. 2:96CV-0783G (D. Utah).
The Securities and Exchange Commission ("Commission")
announced the filing of a Complaint on September 16, 1996 in the
United States District Court for the District of Utah against
Duane V. Midgley, a certified public accountant from Salt Lake
City, Utah.
The Complaint alleges, among other things, that in December
1991, Midgley issued materially false and misleading audit
reports on the initial balance sheets of two new mutual funds
known as Public Funding Portfolios, Inc. and American Vision
Funds, Inc. (collectively, the "Funds"). Midgley falsely
represented in his audit reports that (1) the Funds' balance
sheets were presented fairly in conformity with Generally
Accepted Accounting Principles; and (2) he had conducted his
audits in accordance with Generally Accepted Auditing Standards.
In fact, contrary to what was shown on the Funds' balance sheets,
the Funds had not been capitalized and did not own any tangible
assets. Midgley's false audit reports were filed with the
Commission in the Funds' Investment Company Act registration
statements. The Commission's Complaint seeks a permanent
injunction and civil monetary penalties against Midgley based on
his violations of Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 thereunder and Section 34(b) of the
Investment Company Act of 1940.
The Commission's action against Midgley is the second action
filed in Salt Lake City concerning the Funds. On September 29,
1995, the Commission brought an action in the United States
District Court for the District of Utah against seven defendants
who allegedly operated the Funds for fraudulent purposes. That
Complaint alleged that those defendants became shareholders of
the Funds by selling grossly overvalued securities with a
purported value of $165 million to the Funds. After infusing the
overvalued assets into the Funds, the seven defendants
misrepresented material facts to brokerage firms concerning,
among other things, the net asset values for the Funds' shares
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