Merge Healthcare Incorporated, Richard Linden, and Scott Veech

U. S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21282 / November 4, 2009

Accounting and Auditing Enforcement Release No. 3067 / November 4, 2009

SEC v. Merge Healthcare Incorporated, Richard Linden, and Scott Veech, Civil Case No. 1:09-cv-1036, USDC, E.D.Wis.

SEC CHARGES MERGE HEALTHCARE INCORPORATED, RICHARD LINDEN, AND SCOTT VEECH IN CONNECTION WITH ACCOUNTING FRAUD

The Securities and Exchange Commission ("Commission") announced that on November 4, 2009, it charged Richard Linden of Barrington, Illinois, Scott Veech of Whitefish Bay, Wisconsin, and Merge Healthcare Incorporated, based in Milwaukee, Wisconsin, in connection with an accounting fraud that occurred from 2002 through 2005. Linden was the former Chief Executive Officer of Merge, a company which provides medical imaging software, hardware, and services, and Veech was its Chief Financial Officer.

The SEC's complaint, filed in federal court in Milwaukee, alleges that Linden and Veech helped cause fraudulent accounting practices at Merge which involved the improper recognition of revenue from sales on transactions: (1) which included promises of specified future software enhancements; (2) which included sale contingencies; and (3) in which Merge failed to properly execute contracts and/or failed to properly deliver products in the same fiscal period in which Merge recorded revenue from those transactions. The SEC's complaint also alleges that Linden interfered with the audit confirmation process between certain of Merge's customers and Merge's outside auditor by instructing, or causing others to instruct, some of Merge's customers not to disclose side agreements between Merge and the customer. The SEC also alleges that Merge failed to devise and maintain a system of internal accounting controls that could have prevented the fraud. The SEC also alleges that during the period February through August 2006, during which Merge disclosed its accounting misstatements to the public, Merge's stock price dropped from $24.50 to $7.30 per share, reflecting a $500 million loss in market capitalization.

Merge, Linden, and Veech settled the charges without admitting or denying the allegations of the SEC's complaint. Under the settlement, Linden and Veech are permanently enjoined from committing future violations of the antifraud provisions of the federal securities laws and are barred from serving as an officer and director of a public company for five years. Additionally, Linden will pay $382,193 in disgorgement, $117,807 in prejudgment interest, and a penalty of $90,000, and Veech will pay $180,000 in disgorgement, $50,000 in prejudgment interest, and a $50,000 penalty. Veech also consented to the entry of an administrative order which suspends him from appearing or practicing before the Commission as an accountant, with a right to reapply after three years. Merge is permanently enjoined from future violations of the internal controls, books and records, and reporting provisions of the federal securities laws.