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SEC Suspends Accountant, Censures Firm for Audit

November 12, 1991 GMT

WASHINGTON (AP) _ A New York accounting firm was censured and a partner was suspended for six months Tuesday by federal regulators alleging numerous problems in the audit of the defunct government securities dealer Bevill, Bressler & Schulman.

Without admitting or denying wrongdoing, Frederick S. Todman & Co. and a partner, Victor M. Marchioni, agreed to sanctions imposed by the Securities and Exchange Commission.

The SEC also began an administrative proceeding against Andrew L. Epstein, a former partner in Todman & Co. who conducted the 1984 Bevill, Bressler audit.


He was accused of either missing or not disclosing a $29 million shortfall in collateral in Bevill, Bressler’s trading accounts with an affiliate. The SEC maintained the shortfall was evident from documents included in the audit work papers.

Epstein, who was not in his office when called for comment Tuesday evening, has not settled the administrative action, said Susan Ferris Wyderko, a senior litigator with the SEC’s general counsel’s Office.

Ms. Wyderko said the SEC was not offering an opinion on whether the auditing results had any impact on the firm’s collapse.

Bevill, Bressler, a government and municipal securities trader, is in the final stages of liquidation, according to the SEC.

The Livingston, N.J., brokerage house collapsed in April 1985. Four executives who pleaded guilty and cooperated with federal prosecutors were subsequently sent to prison for charges stemming from the collapse. A fifth, who also was sent to prison, testified at the trial of a former New York Federal Reserve Bank official convicted of leaking market-sensitive interest rate data to Bevill, Bressler.

The SEC alleged that Epstein, in addition to missing the $29 million undercollateralization, allegedly did not discover or disclose that Bevill, Bressler’s net capital was $6 million below SEC requirements. Net capital is the cash cushion all brokerages are required to have in case of losses.

The action against the firm and Marchioni essentially said they had inadequately supervised the audit and ″inappropriately and unprofessionally expressed an unqualified opinion″ on Bevill, Bressler’s 1984 financial statement.

In March, an SEC accounting committee said Todman’s practices now complied with accounting rules.

″This results from something that happened in 1984. It’s old news,″ said Joel Wolosky, an attorney for the firm and Marchioni.

″The firm, as the SEC acknowledges, made strides in curing any defects in its audit practices in past periods,″ he added.