The Securities and Exchange Commission (SEC) has settled a civil injunctive action against medical transcription company MedQuist, which was charged with securities fraud and other violations of the federal securities laws.
The SEC complaint alleged that MedQuist claimed that the company's strong financial performance from 1999 to 2004 was due to "its disciplined and conservative business practices, while at the same time it was systematically and secretly inflating customer bills to increase revenues and profit margins."
Without admitting or denying the allegations, the Mount Laurel, N.J.-based MedQuist agreed to be permanently enjoined from violating the antifraud, reporting, books and records, and internal controls provisions of the federal securities laws.
The SEC also filed a settled civil action against former MedQuist Director, President and Chief Operating Officer John A. Donohoe. Without admitting or denying the commission's allegations, Donohoe agreed to a permanent injunction, a $75,000 civil penalty and a five-year officer and director bar. In its complaint, the SEC alleged that Donohoe knew that MedQuist was increasing its bills to meet revenue and margin targets. The complaint further alleged that Donohoe and others at MedQuist told shareholders and other public investors that the company's financial performance was due to disciplined and conservative business practices, while at the same time it was engaged in overbilling customers.
The commission said its settlements with Donohoe and MedQuist are subject to the approval of the U.S. District Court for the Southern District of New York.