Joseph Casuccio, CPA
Securities Exchange Act of 1934 Release No. 50185 / August 12, 2004
Accounting and Auditing Enforcement Release No. 2079 / August 12, 2004
Administrative Proceeding File No. 3-11586
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In the Matter of JOSEPH CASUCCIO, CPA, Respondent. |
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ORDER INSTITUTING ADMINISTRATIVE PROCEEDINGS PURSUANT TO RULE 102(e) OF THE COMMISSION'S RULES OF PRACTICE, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS |
I.
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted against Joseph Casuccio ("Casuccio") pursuant to Rule 102(e) of the Commission's Rules of Practice. 1
II.
In anticipation of the institution of this public administrative proceeding, Casuccio has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings, except that he admits the entry of the injunction set forth in paragraph III.2, and further admits the Commission's jurisdiction over him and over the subject matter of this proceeding, Casuccio consents to the entry of this Order Instituting Public Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions ("Order") as set forth below.
III.
On the basis of this Order and the Respondent's Offer, the Commission makes the following findings:2
1. Casuccio was a certified public accountant licensed in New York. From 1997 through June 2000, Casuccio was an audit partner at Werblin Casuccio & Moses, P.C. (the "Werblin Firm"), a public accounting firm located in Syosset, New York. Casuccio served as the engagement partner in connection with the Werblin Firm's audit of AppOnline.com, Inc. ("AppOnline"), then known as IMN Financial Corp., for 1997 and 1998.
2. On May 21, 2002, the United States District Court for the Eastern District of New York entered a partial final judgment permanently enjoining Casuccio from (i) violating Section 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5 and 13b2-1 thereunder, and (ii) aiding and abetting violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. SEC v. Paul Skulsky, et al., No. 02-CV-1524 (DRH).
3. In its complaint in SEC v. Paul Skulsky, et al., the Commission, among other things, alleged:
a. Beginning in 1997, AppOnline, a mortgage bank, suffered operating losses and a cash shortage. To address these problems, Paul Skulsky, a convicted felon and AppOnline's undisclosed control person, directed that AppOnline divert funds designated for specified mortgages to pay AppOnline's operating expenses. As of December 31, 1999, AppOnline had misappropriated approximately $47 million from its lenders. In order to conceal its misappropriation of funds (and the source of these funds), AppOnline created a sham liability to the Skulsky Trust, a related party controlled by Paul Skulsky. In fact, AppOnline did not owe the Skulsky Trust any funds. AppOnline then reduced the amount of its stated liabilities by offsetting related party receivables with the purported liability to the Skulsky Trust. Between 1997 and 2000, AppOnline also materially misstated results of operations in its annual filings with the Commission by (i) recording other fraudulent entries on its books, including removing money-losing subsidiaries through sham sale transactions; (ii) manipulating its reported income by improperly recognizing certain revenues and failing to recognize certain expenses; and (iii) failing to disclose Paul Skulsky's management role.
b. The Werblin Firm caused the issuance of an audit report containing an unqualified opinion stating that the audit was conducted in accordance with Generally Accepted Auditing Standards ("GAAS") and that the financial statements had been prepared in conformity with Generally Accepted Accounting Principles ("GAAP"). Casuccio knew, or was reckless in not knowing, that these representations were false. Specifically, Casuccio knew, or was reckless in not knowing, that AppOnline: (i) had mischaracterized its debt to the warehouse banks as a debt to the Skulsky Trust; (ii) improperly netted unrelated receivables against the sham liability to the Skulsky Trust to reduce the stated balance owed; (iii) improperly recorded ordinary operating expenses as nonrecurring expenses associated with the development of AppOnline's internet division; and (iv) failed to disclose the significant managerial role of Paul Skulsky, a convicted felon, in the operations of AppOnline.
4. Based on the foregoing, the Commission finds that: (i) Casuccio has been permanently enjoined within the meaning of Rule 102(e)(3)(i) of the Commission's Rules of Practice "by [a] court of competent jurisdiction, by reason of his or her misconduct in an action brought by the Commission, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of the rules and regulations thereunder" and (ii) that Casuccio engaged in improper professional conduct and willfully violated, or willfully aided and abetted the violation of, provisions of the Federal securities laws and rules, for purposes of Rule 102(e)(1)(ii) and (iii) respectively, of the Commission's Rules of Practice. Specifically, Casuccio violated Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5 and 13b2-1 thereunder, and aided and abetted violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder.
IV.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanction agreed to in Respondent's Offer.
Accordingly, IT IS HEREBY ORDERED, effective immediately, that:
Casuccio is suspended from appearing or practicing before the Commission as an accountant.
By the Commission.
Secretary
Endnotes
The Commission may deny, temporarily or permanently, the privilege of appearing or practicing before it any person who is found to have engaged in improper professional conduct.
Rule 102(e)(1)(iii) provides, in pertinent part, that:
The Commission may deny, temporarily or permanently, the privilege of appearing or practicing before it to any person who is found to have willfully violated, or willfully aided and abetted the violation of any provision of the Federal securities laws or the rules and regulations thereunder.
Rule 102(e)(3)(i) provides, in pertinent part, that:
The Commission, with due regard to the public interest and without preliminary hearing, may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his or her misconduct in an action brought by the Commission, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of the rules and regulations thereunder.
Last Reviewed or Updated: Sept. 6, 2023