25. Bordynuik did not follow the advice of the business consultant about either the valuation of the media credits or the hiring of a new accountant and/or auditor. Instead, Bordynuik continued to use the consultant for accounting services, including the preparation of pro formas and financial statements and kept the auditor at the Gately firm as his independent auditor. In fact, notwithstanding the concerns raised both by the consultant and the business consultant, in Skype messaging to the consultant on September 2, 2009, Bordynuik stated to her:
[The business consultant’s] group is ultra conservative and are very very good at what they do. They were concerned about our pro forma because they said the [m]edia
should have been booked at cost and the big 4 accounting firms would
probably penalize us. I advised that the media credits could stand on
their own and the auditor said so (this was from [Domark’s CEO]). I hope so….
We need a chemc company bad…jezz (sic).
26. By mid-September 2009, and prior to the filing of the third quarter Form 10-Q, additional information came to Bordynuik that raised questions about the valuation, and even the validity at all, of the media credits. Bordynuik learned that misleading statements had been made by Domark’s CEO to induce JBI’s acquisition of Javaco, including whether Javaco even maintained operations in Mexico as previously claimed by the CEO. In addition, Bordynuik learned that the CEO of NewsUSA, the parent company of Media4Equity (the original source of the media credits in a purported arms length transaction with Domark), was previously on the Board of Directors of Domark. On September 21, 2009, the consultant informed Bordynuik of the suspect relationship via Skype message, “BTW, I just discovered that the CEO of NewsUSA is a prior director of Domark.” Bordynuik responded, also via Skype, “I saw that. Yuck.” Despite having renewed doubts about the source of the media credits, the credibility of Domark’s CEO, and being warned about the proper GAAP treatment of the media credits by JBI’s own consultant and business consultant, Bordynuik directed that the media credits on JBI’s financial statements contained in its Form 10-Q, filed on November 16, 2009, for the quarter ended September 30, 2009, be listed at the purported face value of $9.997 million.
SEC Complaint
sec.gov |
