SECURITIESAND EXCHANGE COMMISSION
Washington, DC
Litigation Release No. 17123 / September 10, 2001
AAER Release No. 1443
SECURITIES AND EXCHANGE COMMISSION v. PATRICK SWISHER AND SWISHER
INTERNATIONAL, United States District Court for the Western District
of North Carolina, Civil Action No. 3 01 CV 521-MU, filed September
10, 2001.
SEC CHARGES SWISHER INTERNATIONAL, INC. AND CEO WITH ACCOUNTING FRAUD;
THREE OTHERS NAMED IN ADMINISTRATIVE PROCEEDINGS
The U.S. Securities and Exchange Commission today filed a settled
civil enforcement action in U.S. District Court in Charlotte, North
Carolina, against Swisher International, Inc. (SII), a franchiser of
commercial hygiene services, and its founder and CEO, Patrick Lee
Swisher, alleging that SII overstated its earnings in its Form 10-Q
for the quarter ended July 31, 1996, by prematurely recording a
$450,000 franchise sale to an entity Patrick Swisher set up and
controlled. The Commission also named SII's director and VP Walter
Thompson Reeder, and its former director and consultant George Kelly
Moore in administrative cease-and-desist proceedings. The Commission
also brought settled administrative proceedings against Louis Philips
Reames Sr. for violations of the anti-touting provisions of the
Securities Act of 1933 (Securities Act).
The complaint alleges that in early September 1996, just days before
SII filed its third quarter Form 10-Q, SII's accounting staff provided
Swisher with preliminary financial statements that showed a
significant loss for the quarter. Thereafter, Swisher directed the
accounting staff to recognize SII's sale of the Houston franchise to
Lone Star Hygiene, LLC (Lone Star) in the third quarter, even though
the transaction had not been completed. Further, the complaint alleges
that SII improperly described two-thirds of the revenue as "other
income" instead of revenue from a nonrecurring item. This enabled SII
to report quarterly net income of $163,886 instead of a loss of
$120,131.
According to the complaint, Patrick Swisher, who owned 51% of Lone
Star, had directed SII's sales department to omit his name from the
sale documents, and failed to disclose his interest in Lone Star to
the company's auditors during the company's 1996 audit.
The complaint also alleges that, on October 3,1996, Swisher
transferred 480,000 shares of his personal restricted stock, then
SNIPPETS:
SECURITIESAND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION v. PATRICK SWISHER AND SWISHER INTERNATIONAL, United
The U.S. Securities and Exchange Commission today filed a settled civil enforcement action in
The Commission also named SII's director and VP Walter Thompson Reeder, and its former
The Commission also brought settled administrative proceedings against Louis Philips Reames
for violations of the anti-touting provisions of the Securities Act of 1933.
The complaint alleges that in early September 1996, just days before SII filed its third
Thereafter, Swisher directed the accounting staff to recognize SII's sale of the Houston
According to the complaint, Patrick Swisher, who owned 51% of Lone Star, had directed SII's
The complaint also alleges that, on October 3,1996, Swisher transferred 480,000 shares of his
Without admitting or denying the allegations in the complaint, Swisher consented to the entry
In settled administrative proceedings also instituted today, without admitting or denying the
A third settled Commission administrative order found that Reames, then a registered
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