"SUMMARY 1. This is an accounting fraud case arising from schemes by UHP's then-Chief Executive Officer, Beplate, and then-Chief Operating Officer, Schiliro, to fraudulently report inflated revenues and receivables in the Forms 10-Q and 10-K for 2017 and 2018 UHP filed with the Commission. 2. UHP is a manufacturer of hemostatic gauze for the healthcare and wound care sectors. During 2017, UHP recorded two fraudulent sales that materially overstated its reported revenue and accounts receivable balances in its publicly-filed financial statements. The first fraudulent transaction involved a purported March 31, 2017 sale of product to a customer based on Beplate's and Schiliro's procurement in early May 2017 of a sham, back-dated purchase order. The customer formally cancelled the order the following day, UHP never shipped the product to the customer, and no payment was sought or received from the customer. Nevertheless, UHP reported the transaction as first quarter 2017 revenue from the "sale" and the full amount in its accounts receivable balance in its Forms I0-Q for the first three quarters of 2017. 3. The second fraudulent transaction involved Beplate and Schiliro orchestrating the recognition of a purported December 20, 2017 sale of product to UHP's largest customer that was delivered in February 2018. However, the customer never agreed to purchase the product. Despite the fact that there was no legitimate sale, UHP reported it as revenue and included the full amount in its accounts receivable balance in its 2017 Form 10-K annual financial statements, and continued to report it as part of its total accounts receivable balances in its 2018 Forms I0-Q. 4. To conceal their fraud and justify the revenues and receivables being recognized, Beplate and Schiliro repeatedly gave UHP's auditors false explanations about the purported sales and concealed the true facts and circumstances surrounding them. They also directly or indirectly provided the auditors with false documents, including bogus sales invoices and incorrect shipping documentation and falsified accounting records, and Beplate lied to UHP's auditors in quarterly and annual management representation letters. 5. As a result of Beplate's and Schiliro's fraud, UHP reported materially overstated total revenues and accounts receivable balances in its Forms 10-Q and 10-K for 2017 and 2018, each of which Beplate signed and falsely certified. VIOLATIONS 6. By virtue of the foregoing conduct and the conduct alleged further herein, Defendant UHP violated Section l 7(a) of the Securities Act of 1933 ("Securities Act) [ 15 U.S.C. § 77q(a)]; Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act") [ 15 U.S.C. §§ 78j(b), 78m(a), 78m(b)2)A) and 78m(b)(2)(B)] and Rules 10b-5, 12b-20, 13a-1, and 13a-13 [17 CF.R. §§240.10b-5, 240.12b-20, 240.13a-1 and 240. 13a-13] thereunder; 7. Defendant Beplate violated Section 17(a) of the Securities Act [15 U.S.C.$ 77q(a)]; Sections l0(b), 13(b)(5) and 16(a) of the Exchange Act [15 U.S.C. §§ 78j(b), 78m(b)(5) and 78p(a)] and Rules 10b-5, 13a-14, 13b2-1, 13b2-2 and 16a-3 [17 C.F.R. §§ 240.10b-5, 240.13a-14, 240.13b2-1, 240.13b2-2 and 240.16a-3] thereunder; Section 304(a) of the Sarbanes Oxley Act of2002 [15 U.S.C. § 7243(a)]; and aided and abetted UHP's violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 78m(a), 78m(b)(2)(A) and 78m(b)(2)(B)] and Rules 12b-20, 13a-1, and 13a-13 [17 CF.R. §§ 240.12b-20, 240.13a-1 and 240. 13a-13] thereunder; and 8. Defendant Schiliro violated Section l 7(a) of the Securities Act [15 U.S.C. § 77q(a)]; Sections 10(b) and 13(b)(5) of the Exchange Act [15 U.S.C. §§78jb) and 78m(b)(5)] and Rules 10b-5(a), 10b-5(c), 13b2-1 and 13b2-2 [17 CF.R. §§ 240.10b-5(a), 240.10b-5(c), 240. 13b2-1 and 240. 13b2-2] thereunder; and aided and abetted UHP's violations of Sections 10(b), 13(a), 13(b)2)A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 78jb), 78m(a), 78m(b)(2)(A) and 78m(b)(2)(B)] and Rules 10b-5(b), 12b-20, 13a-1 and 13a-13 [17 C.F.R. §§ 240.10b-5(b), 240.12b-20, 240.13a-1 and 240.13a-13] thereunder. 9. Unless Defendants are restrained and enjoined, they will continue to engage in the acts, practices, transactions, and courses of business set forth in this Complaint or in acts, practices, transactions, and courses of business of similar type and object. NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT 10. The Commission brings this action pursuant to the authority conferred upon it by Exchange Act Section 2l(d) [15 U.S.C. § 78ud)] and Sections 20(b), 20(d) and 20(e) of the Securities Act [15 U.S.C. §§ 77t(b), 77t(d) and 77t(e)]. 11. The Commission seeks a final judgment: (a) restraining and permanently enjoining Defendants from violating the federal securities laws and rules this Complaint alleges they have violated; (b) ordering Defendants to pay civil money penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 2l(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]; (c) permanently prohibiting Beplate and Schiliro from serving as an officer or director of any company that has a class of securities registered under Exchange Act Section 12 [ 15 U.S.C. § 781], or that is required to file reports under Exchange Act Section 15(d) [15 U.S.C. § 78o(d)], pursuant to Exchange Act Section 21(d)2) [15 U.S.C. § 78u(d)(2)] and Securities Act Section 20(e) [15 U.S.C. U.S.C. § 77t(e)]; (d) ordering that Beplate reimburse UHP for all bonuses, incentive-based and equity-based compensation, and/or profits realized from his sale of UHP stock pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 [15 U.S.C. § 7243(a)]; and (c) ordering any other and further relief the Court may deem just and proper."
AI
