SECURITIESAND EXCHANGE COMMISSION
Washington, DC

Litigation Release No. 17123 / September 10, 2001

AAER Release No. 1443

SECURITIES AND EXCHANGE COMMISSION v. PATRICK SWISHER AND SWISHER INTERNATIONAL, United States District Court for the Western District of North Carolina, Civil Action No. 3: 01 CV 521-MU, filed September 10, 2001.

SEC CHARGES SWISHER INTERNATIONAL, INC. AND CEO WITH ACCOUNTING FRAUD; THREE OTHERS NAMED IN ADMINISTRATIVE PROCEEDINGS

The U.S. Securities and Exchange Commission today filed a settled civil enforcement action in U.S. District Court in Charlotte, North Carolina, against Swisher International, Inc. (SII), a franchiser of commercial hygiene services, and its founder and CEO, Patrick Lee Swisher, alleging that SII overstated its earnings in its Form 10-Q for the quarter ended July 31, 1996, by prematurely recording a $450,000 franchise sale to an entity Patrick Swisher set up and controlled. The Commission also named SII's director and VP Walter Thompson Reeder, and its former director and consultant George Kelly Moore in administrative cease-and-desist proceedings. The Commission also brought settled administrative proceedings against Louis Philips Reames Sr. for violations of the anti-touting provisions of the Securities Act of 1933 (Securities Act).

The complaint alleges that in early September 1996, just days before SII filed its third quarter Form 10-Q, SII's accounting staff provided Swisher with preliminary financial statements that showed a significant loss for the quarter. Thereafter, Swisher directed the accounting staff to recognize SII's sale of the Houston franchise to Lone Star Hygiene, LLC (Lone Star) in the third quarter, even though the transaction had not been completed. Further, the complaint alleges that SII improperly described two-thirds of the revenue as "other income" instead of revenue from a nonrecurring item. This enabled SII to report quarterly net income of $163,886 instead of a loss of $120,131.

According to the complaint, Patrick Swisher, who owned 51% of Lone Star, had directed SII's sales department to omit his name from the sale documents, and failed to disclose his interest in Lone Star to the company's auditors during the company's 1996 audit.

The complaint also alleges that, on October 3,1996, Swisher transferred 480,000 shares of his personal restricted stock, then approximately one-fourth of the company's outstanding shares, to a Bahamian Corporation for which Swisher was the sole director. According to the complaint, SII and Swisher failed to disclose in an October 30, 1996 registration statement registering those shares that Swisher beneficially owned Armand. On December 2, 1996, Armand sold 200,000 shares at $5.475 per share resulting in $1,095,000 in proceeds.

According to the Complaint, SII also failed to disclose the related party nature of the Houston franchise sale and another material transaction, and failed to discount notes receivable to reflect interest-free periods as required by generally accepted accounting principles.

Without admitting or denying the allegations in the complaint, Swisher consented to the entry of a Final Judgment permanently enjoining him from future violations of Sections 17(a)(2) and (3) of the Securities Act, and Sections 10(b)(5), 13(b)(5) and 16(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1, 13b2-2, 16a-2 and 16a-3; ordering him to pay $162,000 in disgorgement, prejudgment interest of $67,627, a $162,000 civil penalty, and imposing a five year officer and director bar. Without admitting or denying the allegations in the complaint, SII consented to the entry of a Final Judgment permanently enjoining it from future violations of Securities Act Sections 17(a)(2) and (3) and Exchange Act Sections 10(b),13(a), 13(b)(2)(A), and 13(b)(2)(B), and Rules 10b-5, 12b-20, 13a-1, and 13a-13.

In settled administrative proceedings also instituted today, without admitting or denying the Commission's findings, Reeder consented to the entry of an order that he cease and desist from committing or causing any future violations of Section 17(a)(2) and (3) of the Securities Act, and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2. Also, without admitting or denying the Commission's findings, Moore consented to the entry of an order that he cease and desist from committing or causing any future violation of Section 17(a)(2) and (3) of the Securities Act, and Rule 13b2-1 of the Exchange Act, and from causing violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13. Moore also consented to an order under Rule 102(e) of the Commission's Rules of Practice denying him the privilege of appearing or practicing before the Commission as an accountant with a right to apply for reinstatement after two years.

A third settled Commission administrative order found that Reames, then a registered representative at the now-defunct Argent Securities, approved and authorized the issuance of two research reports on Swisher International without disclosing that SII paid Argent for the reports. Without admitting or denying those findings, Reames has agreed to cease and desist from committing or causing any future violations of Section 17(b) of the Securities Act. Based on his sworn statement of financial condition, the Commission did not impose a penalty on Reames.