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Univ. of Toledo College of Law

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Friday, March 7, 2008

SEC Charges Financial Fraud Involving Certified Services

The SEC filed a complaint against W. Anthony Huff, Danny L. Pixler, Anthony R. Russo, Otha Ray McCartha, and Charles J. Spinelli in the United States District Court for the Southern District of Florida charging them with a financial fraud arising from their involvement with Certified Services, Inc., ("Certified") a South Florida publicly traded company. Certified operated a professional employee leasing business providing, among other things, workers' compensation insurance services to small and medium size businesses. Since May 2006, Certified has been a Chapter 11 debtor under the control of a Chapter 11 trustee appointed by the bankruptcy court.

The SEC alleges that from approximately 2001 through 2004, the defendants siphoned approximately $30 million from Certified through an elaborate scheme. The Commission's complaint also alleges that during the same time period, the defendants participated in a scheme to inflate Certified's financial statements by reporting approximately $47 million in bogus letters of credit as assets while not recording liabilities which reached a high of about $65 million in the third quarter of 2004. In addition, the complaint alleges that Certified did not fully disclose related party relationships.

McCartha and Spinelli have consented to the entry of Final Judgments providing for full injunctive relief. In October 2007, the Honorable Adalberto Jordan, United States District Judge for the Southern District of Florida, sentenced Spinelli and McCartha to 21 and 24 months incarceration respectively, and ordered them to pay restitution.

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