Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, February 2, 2009

Former Lumenis CFO Consents to Fraud Judgment

The SEC announced that a final judgment by consent was entered on September 9, 2008 by the United States District Court for the Southern District of New York against Kevin Morano, the former Chief Financial Officer of Lumenis, Ltd., in a previously-filed action alleging that Morano participated in a series of fraudulent transactions that resulted in the publication of materially false financial statements by Lumenis in 2002 and 2003. The final judgment against Morano permanently enjoins Morano from violating the antifraud and other provisions of the federal securities laws and orders him to pay a $55,000 civil penalty. More recently, on January 15, 2009, the Court determined not to enter an order barring Morano from serving as an officer or director of a publicly traded company.

The Commission's complaint, filed on April 26, 2006, alleged that from at least late 2001 through early 2003, Morano and other defendants engaged in a fraudulent scheme to inflate revenue and misrepresent other important financial metrics so as to deceive investors as to the company's true financial condition. According to the complaint, the scheme involved the improper recognition of a series of sales transactions that resulted in Lumenis' publication of materially false and misleading financial statements in six consecutive financial reporting periods, starting with those for the year ended December 31, 2001. The complaint alleged that Morano allowed Lumenis to recognize revenue and profits from a number of the improper transactions while knowingly or recklessly disregarding the various conditions that should have precluded recognition.

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