Court Issues Final Judgment Against Auditor Timothy Quintanilla

Securities Fraud
The United States Securities and Exchange Commission (SEC) announced that, on December 4, 2015, the Court for the Southern District of New York issued a final judgment, on consent of defendant Timothy Quintanilla, which permanently enjoined him from violating the antifraud provisions of the federal securities laws and ordered him to pay a $100,000 civil penalty. Quintanilla was the former outside auditor of Electronic Game Card Inc. (EGMI). This final judgment fully resolves the enforcement action before Judge Sullivan, in which final judgments were previously entered against three other defendants, former CEO Kevin Donovan, Lee Cole (Donovan’s predecessor as CEO), and Linden Boyne (EGMI’s former CFO), who the SEC charged with violations of the securities laws’ antifraud provisions and other violations.

The Complaint, filed in November 2012, alleged that Quintanilla, as the engagement partner for EGMI, violated the securities laws by authorizing the issuance of unqualified opinions for the years 2006 through 2008 by the accounting firm Mendoza Berger & Co. LLP (“Mendoza Berger”). The Complaint alleged that in Mendoza Berger’s audit reports, Quintanilla knowingly misrepresented that it had conducted audits of EGMI’s financial statements “in accordance with the standards of the Public Company Accounting Oversight Board (United States)” (“PCAOB”) and that those statements “present[ed] fairly, in all material respects, the financial position” of EGMI. In the course of its audit work, Quintanilla and the audit team he supervised failed to properly investigate a series of red flags, any number of which, if appropriately pursued, would have quickly uncovered large-scale fraud in EGMI’s financial statements. Other evidence indicated that Mendoza Berger simply failed to audit significant portions of EGMI’s balance sheet. To conceal those failures, Mendoza Berger employees, under Quintanilla’s supervision, created and backdated documents for the EGMI audit file shortly before an inspection by the PCAOB in September and October 2009.

Without admitting or denying the allegations of the Complaint, Quintanilla consented to the final judgment which: (a) permanently enjoins him from violating Section 17(a) of the Securities Act of 1933, Sections 10(b), 10A(a)(1), and 10A(b)(1) of the Securities and Exchange Act of 1934, and Rule 10b-5 thereunder; and (b) orders him to pay a $100,000 civil penalty.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com.   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
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Boca Raton, Florida 33432
Telephone: (561) 416-8956
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