Ronald J. Hottovy

Litigation Release No. 18417 / October 17, 2003

Accounting and Auditing Enforcement Release No. 1901 / October 17, 2003

SEC v. Ronald J. Hottovy et al., Civ. Action No. 98-RB-1636 (MJW) (D. Colorado)(filed July 30, 1998)

Ronald J. Hottovy Permanently Enjoined

On January 10, 2003, following a 10-day jury trial and a remedies hearing on September 6, 2002, Judge Robert Blackburn of the United States District Court for the District of Colorado entered a Final Judgment of Permanent Injunction and Prohibition against Ronald J. Hottovy. The judgment (a) permanently enjoins Hottovy from future violations of Sections 17(a)(1) and (3) of the Securities Act and Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5, 13b2-1, 13b2-2 thereunder, and (b) prohibits Hottovy for a period of two years from acting as an officer or director of any issuer that has a class of securities registered pursuant to 15 U.S.C. §781 or that is required to file reports pursuant to 15 U.S.C. §87o(d).

The complaint alleged that in 1992 through 1995, SSI materially overstated its revenue and earnings by backdating or misdating contracts, booking revenue without contracts, overaccruing project revenues, and providing confidential side letters modifying payment obligations, and that Hottovy willfully violated the federal securities laws by causing SSI to materially overstate its revenue and earnings. The complaint further alleged that, as a result of these practices, SSI reported false and misleading information in its Annual Reports for fiscal years 1992, 1993, and 1994, its Quarterly Reports for the first three quarters of fiscal year 1994 and the first quarter of fiscal year 1995. The complaint further alleged, and the jury found, that Hottovy participated in SSI's material misstatements and concealed them from SSI's independent auditors by manipulating SSI's accounting records, withholding documents, and making false statements to the auditors. The jury found that by engaging in such conduct, Hottovy violated Section 17(a) of the Securities Act, and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1, and 13b2-2 thereunder.