SEC Action to Bar 2 Auditors Is Overturned

A U.S. appeals court ruled Friday that the Securities and Exchange Commission improperly barred two former Coopers & Lybrand accountants from public audits.

The SEC last year barred Michael J. Marrie and Brian Berry from the industry, saying they failed to investigate discrepancies in California Micro Devices Corp.’s accounts in 1994 and helped it hide $4 million in losses. The Milpitas, Calif., company, which makes components used in MP3 players, restated 1994 earnings after finding that sales had been inflated by bogus transactions.

The federal appeals court in Washington voted 3 to 0 to overturn the SEC ruling. The SEC clarified its standard for determining professional recklessness in 1998 and retroactively applied it to the 1994 case, the court said.

“At the time of the 1994 audit, Marrie and Berry did not have fair notice that they could be sanctioned for improper professional conduct even if they had been acting in good faith,” the ruling said.

An SEC administrative law judge had dismissed the case in 2001, saying the auditors hadn’t conspired to aid the fraud. The SEC commissioners overturned that decision in July 2003.

Michael Perlis, an attorney who represented Marrie and Berry, said his clients had been working in Arizona since leaving Coopers & Lybrand, which is now part of PricewaterhouseCoopers. Marrie is working at a law firm and Berry is a corporate consultant, he said.