In connection with the previous message the following consent agreement which appeared in today's SEC Digest may be of interest. As with most such consent agreements, Morris neither admitted nor denied the SEC allegations. Itex sued up to 100 John Doe message board defendants and was countersued in turn( see #reply-5675699 and #reply-11110478 ).
SEC OBTAINS PERMANENT FRAUD INJUNCTION, OFFICER AND DIRECTOR BAR, AND ACCOUNTING PRACTICE BAR AGAINST JOSEPH MORRIS
The Commission announced that on January 24, 2000, the United States District Court for the District of Oregon permanently enjoined Joseph M. Morris from committing securities fraud. In the complaint, the Commission alleged that, among other things, as chief financial officer of Itex Corporation, Morris knowingly or recklessly participated in the material overstatement of Itex's assets, revenues and earnings in its financial statements, and failed to disclose numerous suspect and in many cases sham barter deals between Itex and various related parties. The complaint also alleged that Morris also sold Itex stock at times when he knew orwas reckless in not knowing that Itex's publicly disclosed financial information was materially false or misleading. The complaint alleged that Morris's conduct was part of a larger scheme in which defendant Terry Neal, Itex's founder and control person,orchestrated and implemented a broad-ranging fraudulent scheme to make materially false and misleading disclosures about the company's business and to conceal numerous suspect and in many cases sham barter deals between Itex and various mysterious offshore entities related to and/or controlled by Neal.
Morris consented, without admitting or denying the Commission's allegations, to the entry of a final judgment permanently enjoining him from violating the antifraud, books and records, internal controls, and false statements to auditors provisions (Section 17(a)of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1 and 13b2-2thereunder). The final judgment further bars Morris for five years from acting as an officer or director of a public company. Thejudgment requires Morris to disgorge $45,380 and prejudgment interest thereon, but waives payment based on Morris's demonstrated inability to pay.
Based on the injunction, the Commission entered an administrative order barring Morris from practicing before the Commission as an accountant, with a right to reapply after five years.
Morris had previously been sued by the Commission in a securities fraud action in the District of Colorado relating to the issuer Scientific Software-Intercomp, Inc. (SSI). SEC v. Ronald Hottovy,Jimmy Duckworth, Joseph M. Morris and Eugene A. Breitenbach, Civil Action NO. 98-S-1636 (D. Col.), Litigation Release No. 15824 (July30, 1998). As part of Morris's settlement with the Commission, the pending SSI complaint against him was dismissed.
The Commission is continuing its litigation against the remaining defendants in the Itex litigation (see Litigation Release No.16305), and against the remaining defendant in the SSI litigation(see Litigation Release Nos. 15824, 16351). [SEC v. Itex Corporation, Terry L. Neal, Michael T. Baer, Graham H. Norris, Cynthia Pfaltzgraff and Joseph M. Morris, CV 99-1361 BR, D. Ore](LR-16430; AAE Rel. 1224); In the Matter of Joseph M. Morris, CPA -Rel. 34-42410; AAE Rel. 1223; File No. 3-10144)
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