SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 17151 / September 26, 2001

Accounting and Auditing Enforcement Release No. 1455

SEC Settles Charges against Thomas Butler for His Invovlement in Financial
Reporting Fraud at Cylink Corporation

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. C 01-3362 VRW

   The Securities and Exchange Commission announced that on July 23,
   2001, the Honorable Ronald M. Whyte, United States District Judge for
   the Northern District of California, issued a Final Judgment of
   Permanent Injunction and Other Relief against Thomas Butler, the
   former Vice President of Sales of Cylink Corporation. Without
   admitting or denying the Commission's allegations, Butler consented to
   the entry of a final judgment that permanently enjoins him from
   violating the antifraud provisions (Section 10(b) of the Securities
   Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder); from
   circumvention of Cylink's internal controls and falsification of
   records (Section 13(b)(5) of the Exchange Act and Rule 13b2-1
   thereunder); and from 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) In addition, the final judgment orders him to disgorge
   ill-gotten gains of $50,000 to pay prejudgment interest and to pay a
   civil penalty of $100,000.

   The Commission's complaint, filed on September 27, 2000, alleged that
   in order to meet Cylink's ambitious revenue goals, Butler, in
   conjunction with other 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 for the first two quarters of fiscal 1998. For example, the
   complaint alleges that in the second quarter of fiscal 1998, Cylink
   recognized over $900,000 in revenue on a transaction that was not
   final because the customer still had up to 90 days to cancel the
   order. In another instance alleged in the complaint, Cylink recognized
   revenue on orders from a distributor even though the defendants had
   reason to believe the distributor could not pay for the product. The
   complaint also alleges that Cylink recognized revenue on software
   product orders that were contingent on the customers' rights to
   exchange the software for Cylink hardware products. Cylink overstated
   its quarterly revenue by as much as 97.5% during the period of the
   fraud, according to the Complaint.