SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

LITIGATION RELEASE NO. 17074 / July 23, 2001

ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 1427 /JULY 23, 2001

SECURITIES AND EXCHANGE COMMISSION v. EDWARD J. KILEY and RICHARD N. ORZECHOWSKI, Case No. S-01-CV-2146 (U.S.D.C., District of Maryland)

SEC FILES ACCOUNTING FRAUD CHARGES AGAINST
TWO FORMER OFFICERS OF ALCORE, INC.

On July 23, 2001, the Commission filed a civil injunctive action in the United States District Court for the District of Maryland, charging Edward J. Kiley and Richard N. Orzechowski with securities fraud and related charges. Kiley is the former chief executive officer, and Orzechowski the former chief financial officer, of Alcore, Inc., a Maryland-based subsidiary of Advanced Technical Products, Inc. ("ATP"), a publicly-traded aerospace equipment manufacturer headquartered in Roswell, Georgia. The Commission's complaint alleges that Kiley and Orzechowski directed and actively participated in a financial fraud at Alcore throughout Alcore's 1998 and 1999 fiscal years. The fraud they directed at Alcore, according to the complaint, involved the systematic understatement of expenses and overstatement of assets and revenues, and was achieved primarily by improperly capitalizing expenses, improperly and prematurely recognizing revenue, overvaluing inventory, and understating cost of goods sold. The complaint further charges that Kiley and Orzechowski artificially altered Alcore's financial statements to achieve pre-determined results, and misled ATP's auditors to conceal their fraud. It also alleges that, while the fraud was ongoing, Kiley sold a total of 3,000 shares of ATP stock at prices artificially inflated by Alcore's fraudulent financial results, which were consolidated into the financial statements ATP included in its public filings with the Commission and its quarterly earnings releases.

In May 2000, as a direct result of the fraud at Alcore, ATP restated its financial statements for the 1998 fiscal year (including each fiscal quarter of the year) and for the first three quarters of its 1999 fiscal year. The cumulative impact of the restatement was to reduce ATP's net income for its 1998 fiscal year from $5,687,000 (as originally reported) to $3,999,000 (as restated), and its net income for the first three quarters of its 1999 fiscal year from $4,906,000 (as originally reported) to a net loss of $229,000 (as restated). Thus, because of the fraud at Alcore, approximately 30% of ATP's reported earnings for fiscal year 1998 were overstated, and approximately 105% of its reported earnings for fiscal year 1999 were overstated. After ATP gradually disclosed the accounting problems at Alcore in early 2000, and ultimately quantified the necessary restatements in May 2000, ATP's stock price steadily plummeted from $14 per share in early January to less than $2 per share in August 2000.

The Commission charged both Kiley and Orzechowski with securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereunder. Kiley and Orzechowski were also charged with knowingly falsifying the books, records, and accounts of Alcore and ATP in violation of Exchange Act Section 13(b)(5) and Exchange Act Rule 13b2-1, and with misleading ATP's auditors in violation of Exchange Act Rule 13b2-2. The Commission also charged Kiley with fraud in violation of Section 17(a) of the Securities Act based on his sales of ATP stock before the fraud at Alcore was publicly disclosed. The Commission is seeking injunctions, civil penalties, and officer-and-director bars against both Kiley and Orzechowski, and is also seeking disgorgement, with interest, of Kiley's profits from his unlawful sales of ATP stock.

In related proceedings, the United States Attorney's Office for the District of Maryland simultaneously announced the filing of criminal charges against Kiley and Orzechowski. Kiley was charged with securities fraud, conspiracy to file a false report with the Commission, and causing false quarterly financial statements to be filed with the Commission; while Orzechowski was charged with conspiracy to file false financial statements with the Commission.

The Commission's investigation of this matter is continuing.