SEC v. Jack J. Egan, Jr., Case No. 13-CV-236 (S.D.N.Y.); SEC v. Volt Information Sciences, Inc. and Debra L. Hobbs, Case No. 13-CV-237 (S.D.N.Y.).  On January 10, 2013, the SEC filed enforcement actions alleging securities fraud against Volt Information Sciences, its former CFO, Jack Egan, Jr., and Debra Hobbs, the CFO at the Volt subsidiary where the fraud allegedly originated.  According to the SEC, Egan was involved in a scheme to overstate revenue.  He signed and filed financial statements reporting $7.55 million of revenue that had not been earned and was not recognizable under Generally Accepted Accounting Principles, thus causing Volt’s net income to be materially overstated.  The SEC alleges that the scheme relied on falsified paperwork reflecting software sales that Egan knew were not possible because Volt planned to lease the same software to the same customer the following year.

The SEC charged Egan with violations of Section 17(a) of the Securities Act; Sections 10(b) and 13(b)(5) of the Exchange Act; and Exchange Act Rules 10b-5, 13b2-1, 13b2-2, and 13a-14.  The SEC’s complaint also charges Egan with aiding and abetting violations by the Company. The SEC seeks injunctive relief, civil monetary penalties and an officer and director bar against Egan.

Hobbs and Volt settled with the SEC without admitting or denying the charges.  Volt agreed to be enjoined from violating Section 17(a) of the Securities Act , and Sections 10(b),13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 10b-5, 12b-20, 13a-1, and 13a-11. The Company cooperated during the Commission’s investigation and undertook significant remediation efforts.  Hobbs agreed to be enjoined from violating Exchange Act Section 10(b) and Exchange Act Rule 10b-5, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B), and Exchange Act Rules 12b-20, 13a-1, and 13a-11. The judgment further provides that the Court later will determine issues relating to civil money penalty and other remedies.