Jeffrey L. Fuller, Rebecca L. Schultz, and C. Eric Baumann

LITIGATION RELEASE NO. 16887 / February 5, 2001
ACCOUNTING AND AUDITING ENFORCEMENT
RELEASE NO. 1367 / February 5, 2001

SECURITIES AND EXCHANGE COMMISSION v. Jeffrey L. Fuller, Rebecca L. Schultz, and C. Eric Baumann, Case No. 4:01CV3021 (D. Neb.)

The Securities and Exchange Commission ("Commission") announced today that it filed a Complaint against Jeffrey L. Fuller, Rebecca L. Schultz, and C. Eric Baumann, all of whom are former officers of Transcrypt International, Inc. ("Transcrypt"), for their involvement in Transcrypt's dissemination of false financial information in press releases and Commission filings in 1996 and 1997. The Commission alleges that Fuller (Transcrypt's former CEO and president) and Schultz (Transcrypt's former treasurer) improperly approved Transcrypt's recognition of revenue for certain transactions and failed to respond to "red flags" signaling Transcrypt's improper accounting. These "red flags" included ballooning accounts receivable, contingent payment terms for various transactions, and concerns raised by Transcrypt's accounting department about possible side agreements and uncollectible receivables. The Commission also claims that Fuller, Schultz, and Baumann (Transcrypt's former vice president of sales) misrepresented or omitted important information in their communications with Transcrypt's auditors or internal accountants. Fuller and Schultz sold stock in Transcrypt's October 1997 second offering under a registration statement which included false financial information.

Without admitting or denying any of the allegations, Fuller and Schultz each consented to the entry of a permanent injunction prohibiting them from future violations of certain antifraud and recordkeeping provisions of the securities laws. Each of the defendants consented to a permanent injunction prohibiting them from future violations of Rule 13b2-2 under the Securities Exchange Act of 1934. Fuller and Schultz also agreed to pay disgorgement of $100,000 and $49,120, respectively. The Commission waived collection of additional amounts based on their financial inability to pay. Baumann agreed to pay a civil penalty of $25,000 for his unlawful acts.

The Commission filed its complaint in the United States District Court for the District of Nebraska in Lincoln, where Transcrypt is headquartered and Schultz resides. Fuller resides in Fresno, California, and Baumann in Columbus, Ohio. Previously, on January 5, 2001, the Commission ordered Transcrypt to cease and desist from violations of various antifraud and recordkeeping provisions it claimed Transcrypt violated.

SUMMARY FOR NEWS DIGEST

INJUNCTIVE ACTION FILED AGAINST THREE FORMER OFFICERS OF TRANSCRYPT INTERNATIONAL, INC.

The Commission filed an injunctive action today against Jeffrey L. Fuller, Rebecca L. Schultz, and C. Eric Baumann, all of whom are former officers of Transcrypt International, Inc. ("Transcrypt"), a company headquartered in Lincoln, Nebraska, for their involvement in Transcrypt's dissemination of false financial information in press releases and Commission filings in 1996 and 1997. As a part of this financial fraud, it alleges that Fuller (Transcrypt's former CEO and president) and Schultz (Transcrypt's former treasurer) wrongfully approved recognition of revenue on various transactions and disregarded "red flags" signaling Transcrypt's improper accounting. The Commission also claims that Fuller, Schultz, and Baumann (Transcrypt's former vice president of sales) misrepresented or omitted important information in their communications with Transcrypt's auditors or internal accountants.

Fuller and Schultz consented to the entry of a permanent injunction prohibiting them from future violations of various antifraud and recordkeeping provisions of the securities laws. Each of the defendants consented to a permanent injunction prohibiting them from future violations of Rule 13b2-2 under the Securities Exchange Act of 1934. Fuller and Schultz also agreed to pay disgorgement of $100,000 and $49,120, respectively, based on their sales of stock in Transcrypt's October 1997 second offering and bonuses related to Transcrypt's performance. The Commission waived collection of additional amounts because of their financial inability to pay. Baumann consented to pay a civil penalty of $25,000 for his unlawful acts. Transcrypt previously consented to a cease-and-desist order prohibiting it from future violations of various antifraud and recordkeeping provisions of the securities laws which the Commission claimed it violated. [SEC v. Jeffrey L. Fuller, Rebecca L. Schultz, and C. Eric Baumann, No. 4:01CV3021, D. Neb.]

Contact Persons: Randall J. Fons

Donald M. Hoerl
Amy J. Norwood
Telephone 303-844-1000

File No. D-2095