Also here is something from the Philadelphia Inquirer daily newspaper:
Philadelphia Inquirer | 11/21/2002 | Deal-maker,... - [Cached Version] Published on: 11/21/2002 Last Visited: 11/21/2002
The Securities and Exchange Commission has filed a civil fraud suit against MERL Holdings Inc., based in Hopewell, N.J., and its chairman and chief executive officer, Ed Johnson, alleging Johnson issued "false and misleading" financial reports in an effort to raise money by deceiving investors.
The SEC also suspended two Philadelphia partners in the accounting firm Mitchell & Titus L.L.P., which prepared MERL's financial statements, from representing publicly traded companies.The SEC contends they accepted Johnson's "patently wrong" and "baseless and untested" financial statements and published them in reports to investors.
Johnson could not be reached for comment at his home or at MERL offices in Hopewell and in Newtown, Bucks County.His attorney, Peter Spirgel, said Johnson "denies all charges" pending a review of the complaint. ... While MERL "had neither cash nor the ability to generate it" even before it was delisted two years ago by the Nasdaq Stock Market, Johnson published a series of "egregious falsehoods" in an effort to attract investors "so that he could rescue his near-bankrupt company" and recoup his own investment.
MERL also "materially inflated" the value of assets acquired from New Jersey-based Hanold School Stores Inc. in 1998, using an "arbitrary" value of $10 per share for its own stock, which traded at well under $1, while estimating the value of Hanold's customer list at an "arbitrary" $15 per name.
The SEC wants Johnson to return $44,500 in "illegal profits" he collected by selling MERL stock during that period - plus interest and three times that amount in punitive damages.
Last winter, Johnson, who served two years in federal prison for misappropriating money from a small Tennessee savings bank he ran in the 1980s, said he would try to buy Philadelphia's United Bank and Berean Federal Savings.At the time, United confirmed negotiations were under way; Berean said it had received an inquiry, but had not entered talks.
In May and June, Johnson said he had agreed to buy two divisions of Wilmington's Heritage Capital Financial Corp., which is trying to start another black-run bank.A Heritage official did not return a call seeking comment yesterday.
The SEC also suspended two Mitchell & Titus partners and a former partner from representing public companies because they "failed to exercise due professional care and maintain an attitude of professional skepticism" while preparing MERL's financial reports to the SEC for 1997 and 1998.New York-based Mitchell & Titus says it is the nation's 45th-largest accounting firm and the biggest controlled by members of minority groups.
The accountants settled the SEC's accusations against them without admitting they did anything wrong. ... According to their attorney, Ira Sorkin, the three accountants say Johnson "totally misled them."
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