U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19120 / March 4, 2005

Accounting and Auditing Enforcement
Release No. 2199 / March 4, 2005

Securities and Exchange Commission v. TALX Corporation, Civil Action No. 4:05-CV-368 (HEA), U.S. District Court for the Eastern District of Missouri

TALX Corporation Settles Accounting Fraud Charges and Consents to $2.5 Million Penalty

The U.S. Securities and Exchange Commission (the "Commission") today announced settlement of an enforcement action against TALX Corporation in connection with financial misrepresentations made in TALX's Forms 8-K, 10-K and 10-Q for its fiscal years 2001 through the second quarter of 2004, and in its fiscal 2002 registration statement. TALX is a St. Louis-based provider of employment and income verification and other human resources services.

According to the Commission's complaint filed in the U.S. District Court for the Eastern District of Missouri, during fiscal 2001, and through a secondary offering of common stock completed on August 3, 2001, in which TALX raised approximately $82 million, TALX placed emphasis on meeting financial projections and highlighted its earnings growth to the market. TALX met its 2001 financial targets and increased its stock price, however, through intentional and unintentional accounting misstatements.

TALX's intentional misstatements involved an improper bill and hold transaction and other premature revenue recognition; capitalizing costs relating to a patent infringement claim that should have been expensed; and expensing executive bonuses in the wrong period. As a result of these intentional misstatements, TALX overstated its fiscal 2001 pre-tax income by approximately $2.1 million. In addition, TALX used the wrong method of accounting for certain service transactions prior to and in its 2001 fiscal year, and as a result overstated its 2001 pre-tax income by approximately $2 million. The combined misstatements resulted in TALX overstating its 2001 pre-tax income by approximately 122%, and inflated artificially TALX's 2001 stock price leading up to its August 3, 2001 secondary offering. Without the combined misstatements, TALX would have received less than the $82 million realized in the secondary offering.

TALX agreed to settle the Commission's charges by consenting to a cease-and-desist order finding violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), and 13(b)(2) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder, and by paying disgorgement of $1. In the related U.S. District Court action, TALX consented to pay a $2.5 million penalty. TALX settled without admitting or denying the Commission's substantive findings. The Commission's staff intends to distribute the penalty to injured investors pursuant to the Fair Funds provision of the Sarbanes-Oxley Act of 2002.

http://www.sec.gov/litigation/litreleases/lr19120.htm