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Metropolitan Mortgage's former controller receives five-year suspension from SEC
By Caroline Salls
Pittsburgh, Feb. 28 - Metropolitan Mortgage & Securities Co. former controller Robert A. Ness Jr. was suspended from appearing or practicing as an accountant for five years under a Securities and Exchange Commission ruling, according to an SEC news release.
According to the release, the SEC filed a complaint against Ness in September 2005, alleging that he, at the direction of Metropolitan's former president and chief executive officer, approved the use of an accounting treatment that did not comply with Generally Accepted Accounting Principles (GAAP).
The SEC alleged that the inappropriate accounting treatment recognized the full gain on several real estate sales immediately, when one or more GAAP criteria had not been met.
To facilitate the real estate sales, the release said Metropolitan had financed all or nearly all of the sales prices to the buyers, and, under GAAP, recognition of the full gain on these real estate sales was not permitted until various criteria were met, including that the buyers make their own substantial initial down payments demonstrating their commitments to pay for the properties.
Despite this, the SEC said Ness approved the immediate recognition of the full gain for the transactions even though he knew, or was reckless in not knowing, that the accounting treatment was a departure from GAAP and contrary to advice the company has received from its auditor.
The release said the fraudulently recorded income allowed Metropolitan to report a net profit for the third quarter of 2002 and the 2002 fiscal year instead of a net loss.
After his five year suspension period, Ness can submit an application to the SEC for reinstatement.
Spokane, Wash.-based Metropolitan Mortgage filed for bankruptcy on Feb. 4, 2004. Its Chapter 11 case number is 04-00757.
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