Richard Rambahal, et al.

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19316 / July 28, 2005

Accounting and Auditing Enforcement
Release No. 2284 / July 28, 2005

Securities and Exchange Commission v. Richard Rambahal, et al., Case Number 04-3086-cv-RED (U.S.D.C. W.D. MO., filed March 4, 2004)

SEC OBTAINS FINAL JUDGMENT AGAINST MICHAEL LESNIEWSKI FOR FINANCIAL FRAUD AT DT INDUSTRIES, INC.

The Securities and Exchange Commission announced that on July 26, 2005, the Honorable Richard E. Dorr, Judge in the United States District Court for the Western District of Missouri, entered a final judgment against Defendant Michael Lesniewski which (1) permanently enjoins Lesniewski from violating 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 for aiding and abetting DT Industries Inc.'s (DTI) violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder; (2) orders Rambahal to pay disgorgement of $26,700 plus pre-judgment interest thereon in the amount of $5,678 and also pay a $25,000 civil penalty, for a total payment of $57,378. Lesniewski consented to the entry of the final judgment without admitting or denying the allegations contained in the Commission's complaint.

The Commission's Complaint alleged that Lesniewski, the controller and general manager at DTI subsidiary Assembly Machines, Inc. (AMI), manipulated AMI's books and records, enabling AMI to reach projected earnings targets based on guidelines established by DTI management. Specifically, the Commission's Complaint alleged that Lesniewski understated AMI's costs of sales by failing to recognize all of AMI's actual costs for certain projects. By not recognizing the actual costs for these projects, Lesniewski artificially increased AMI's profit margin. The incorrect profit margins were then consolidated into DTI's financial statements. According to the Commission's Complaint, as a result of AMI's misstatements, in August 2002 DTI restated its financial statements for fiscal years 1999 through the first three quarters of 2002. The Commission's Complaint alleged that Lesniewski's fraud caused DTI to understate its net losses by 1% to 29% in its annual reports for fiscal years 1999, 2000 and 2001 and its first three quarterly reports for 2002.

For additional information, see Litigation Release No. 18608 (March 5, 2004).