Bruce Hill, et al.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19617 / March 21, 2006
Accounting and Auditing
Release No. 2396 / March 21, 2006
Securities and Exchange Commission v. Bruce Hill, et al., (United States District Court for the District of Massachusetts, Civil Action No. 02-11244 (EFH), filed June 21, 2002)
Court Enters Final Judgment by Consent Against Former General Counsel of Inso Corp. in Accounting Fraud Case
The Commission announced today that on March 2, 2006, a final judgment by consent was entered by the United States District Court for the District of Massachusetts against Bruce G. Hill, of Belmont, Massachusetts, in an accounting fraud case. Hill is the former general counsel of Inso Corporation, later known as eBT International, Inc., a now-defunct software company formerly located in Boston, Massachusetts and later headquartered in Providence, Rhode Island. The final judgment permanently enjoins Hill from violating various federal securities laws, orders him to pay approximately $97,000 in disgorgement and prejudgment interest, and permanently bars him from serving as an officer or director of public companies. Hill consented to the judgment, without admitting or denying the allegations in the Commission's complaint. In related administrative proceedings, Hill consented to an Order issued by the Commission on March 20, 2006, that suspends him from appearing or practicing before the Commission as an attorney.
The Commission's complaint, filed June 21, 2002, alleged that, when an anticipated sales transaction with a major customer failed to close prior to the end of Inso's third quarter on September 30, 1998, Hill and another Inso employee arranged for a Malaysian distributor, who had no prior involvement in the transaction, to place a $3 million purchase order for the transaction that evening. According to the complaint, because they promised the distributor that he would not have to pay Inso for the transaction, and that Inso, rather than the distributor, would resell the software to the intended end user, this transaction was a sham and should not have been included in Inso's reported financial results. The complaint alleged that Hill concealed the oral terms of the sale from Inso's finance department and, as a result, Inso improperly included the $3 million as revenue in its third quarter 1998 financial statements. Thereafter, the sale of the software to the intended end user was never consummated, and the complaint alleged that Hill took steps to cover up the fraudulent nature of the third quarter transaction. According to the complaint, Hill orchestrated the providing of $4 million in letters of credit to the Malaysian distributor to finance his payment of the $3 million third quarter receivable and caused a false board resolution to be provided to Inso's bank purporting to authorize the letters of credit. Among other things, the complaint sought disgorgement from Hill of losses avoided from his sale of Inso stock at inflated prices during the period of the fraud.
To settle the Commission's charges, Hill has consented, without admitting or denying the allegations in the Commission's complaint, to the entry of a final judgment permanently enjoining him from committing future violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 12b-20, 13a-13, 13b2-1 and 13b2-2 thereunder. The judgment orders disgorgement of $66,674, representing profits gained as a result of the conduct alleged in the Commission's complaint, plus prejudgment interest in the amount of $30,362, for a total of $97,036. Finally, the judgment prohibits Hill from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or is required to file reports pursuant to Section 15(d) of the Exchange Act.
Hill was indicted on May 5, 2004, on criminal charges brought by the United States Attorney for the District of Massachusetts concerning the same conduct alleged in the Commission's complaint. Hill was charged with securities fraud, wire fraud, false statements to accountants and perjury in connection with a Commission investigation. After a trial, a federal jury convicted Hill on June 6, 2005 of committing perjury in his investigative testimony before the Commission. The jury was deadlocked as to the remaining counts against Hill, and the Court declared a mistrial as to those counts. On January 24, 2006, Hill was sentenced to a prison term of one year and one day, followed by supervised release for two years. The court also ordered Hill to perform 400 hours of community service each year during the supervised release, and ordered him to pay a criminal fine of $75,000.
For further information see Litigation Release No.17578 (June 21, 2002)[Hill and others charged by the Commission]; Litigation Release No.18699 (May 7, 2004) [Hill indicted on criminal charges]; Litigation Release No.19253 (June 7, 2005)[Hill convicted of criminal charge]; and Securities Exchange Act Release No. 53517 (March 20, 2006)[Hill suspended from appearing or practicing before the Commission as an attorney].