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SEC Accuses Accounting Firm Of Fraud Over Microcap Audits

SEC Accuses Accounting Firm Of Fraud Over Microcap Audits

By Jon Hill of Law360.com

The U.S. Securities and Exchange Commission on Monday accused a California-based public accounting firm and a number of its current and former partners of doing flawed audit work for an energy services holding company and two other penny-stock company clients that have themselves been accused of fraud by the agency.

The SEC said it has initiated proceedings against Anton & Chia LLP, alleging that some of its conduct in connection with audits and reviews for Premier Holding Corp., Accelera Innovations Inc. and CannaVEST Corp. was fraudulent.

Anton & Chia co-owners Gregory A. Wahl and Georgia Chung, its former audit partner Michael Deutchman and its former audit manager Tommy Shek were also named as respondents in the SEC’s order for their alleged roles in the firm’s audit work.

“As alleged in the order, Anton & Chia and its accountants left investors with false assurances that financial information for three microcap companies had been properly audited or reviewed,” SEC Division of Enforcement Co-Director Steven Peikin said in a statement. “They had the opportunity to stop multiple frauds in their tracks but failed to do so.”

The announcement came the same day that Premier, a California-based company that bills itself as a provider of energy services, was slapped with its own SEC complaint in New York federal court over allegations that the company and its CEO, Randall Letcavage, “wove an illusory web of economic activity” to create the appearance of a healthy, dynamic business.

Accelera and CannaVEST were each hit with SEC suits earlier this year alleging that they misled investors.

The SEC said Monday in its order instituting proceedings that Anton & Chia and its accountants “egregiously deviated” from standards established by the Public Company Accounting Oversight Board and “ignored numerous red flags” suggesting there were material misstatements in financial filings made by Premier, Accelera and CannaVEST.

Accelera, for example, was said by the SEC to have cooked its books by incorporating into its public filings revenue from a separate company that Accelera didn’t control or own, allowing Accelera to inflate its reported revenue by as much as 90 percent over a two-year period.

But, according to the SEC’s order on Monday, Anton & Chia audited Accelera’s financial statements and nevertheless signed off on them as fairly presenting Accelera’s financial position and conforming with generally accepted accounting principles.

“A&C did not stand in the way of Accelera’s fraud,” the SEC said. “Instead, A&C facilitated it.”

The SEC also said Monday that two other accountants have reached settlements with the agency regarding their roles in the allegedly problematic Anton & Chia audits and reviews. Partner Richard J. Koch and former partner Rahuldev Gandhi each agreed to pay $15,000 fines without admitting or denying the agency’s allegations. They also agreed to be suspended from practicing as accountant before the SEC but can apply for reinstatement after two years for Koch and three years for Gandhi.

Anton & Chia and Premier did not immediately return requests for comment late Monday. Contact information for the other respondents was not immediately available.

The SEC does not comment on pending litigation.

The SEC’s Division of Enforcement is represented in the administrative proceedings by Alyssa A. Qualls, Steven C. Seeger, David J. VanHavermaat, Leslie Kazon, Ariella O. Guardi and John E. Birkenheier.

The SEC is represented in the Premier case by Sanjay Wadhwa, Michael Paley, Howard Fischer and Bennett Ellenbogen.

Counsel information for Anton & Chia and the other respondents wasn’t immediately available.

Counsel information for Premier and Letcavage was also not immediately available.

The cases are In the Matter of Anton & Chia LLP et al., file number 3-18292; In the Matter of Rahuldev Gandhi CPA, file number 3-18294; and In the Matter of Richard J. Koch CPA, file number 3-18293, before the U.S. Securities and Exchange Commission, and SEC v. Premier Holding Corp. et al., case number 1:17-cv-09485, in the U.S. District Court for the Southern District of New York.

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Starr Austen & Miller has sued numerous accountants for aiding and abetting securities fraud. Scott Starr has a background in accounting, having himself passed the CPA exam. Scott has handled many cases against accountants in past years and is very familiar with G.A.A.P. (generally accepted accounting principles) and understands the complex standards that govern the profession. If you have a potential case of fraud against a broker or investment advisor, contact Scott for a free no obligation consultation.