# Initial Decision Release No. 1407

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Asec%3Afd1061c21e3b25f6

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

Initial Decision Release No. 1407
Administrative Proceeding
File No. 3-18292
UNITED STATES OF AME RICA
Before the
SECURITIES AND EXCH A NGE COMMISSION
Washington, D.C. 20549

In the Matter of
Anton & Chia, LLP,
Gregory A. Wahl, CPA,
Michael Deutchman, CPA,
Georgia Chung, CPA, and
Tommy Shek, CPA

Appearances:

Initial Decision
as to Gregory A. Wahl, CPA,
Michael Deutchman, CPA,
and Georgia Chung, CPA
February 8, 2021

Alyssa A. Qualls, Daniel J. Hayes, Ariella O. Guardi, John
E. Birkenheier, Donald Searles, Jennifer Calabrese, Leslie
Kazon, and David Van Havermaat for the Division of
Enforcement, Securities and Exchange Commission
Lahdan Rahmati, in a limited capacity, for Respondents
Gregory Wahl and Georgia Chung 1
Gregory Wahl and Georgia Chung, pro se
John R. Armstrong and Vanoli V. Chander, Horwitz &
Armstrong, APC, for Respondent Michael Deutchman

Before:

Jason S. Patil, Administrative Law Judge

Rahmati appeared for Respondents Wahl and Chung in the limited
capacity of conducting their direct examinations at the hearing. Respondents
otherwise represented themselves at the hearing and in the post -hearing
phase. Additional attorneys appeared for Respondents in prior phases of the
proceeding.
1

Introduction
This case involves multiple violations of the federal securities laws and
improper professional conduct by accountants associated with Anton & Chia,
LLP, an audit firm registered with the Public Company Accounting Oversight
Board (PCAOB). The misconduct relates to audit or interim review
engagements for three companies: Accelera Innovations, Inc., Premier Holding
Corporation, and CannaVEST Corp.
Respondent Gregory A. Wahl, CPA, was majority owner and managing
partner of Anton & Chia, and served as the engagement partner for Accelera’s
2013 and 2014 year-end audits and five interim reviews from the first quarter
of 2014 through the third quarter of 2015 (with the exception of the third
quarter 2014 review, in which he was not involved), Premier’s 2013 year-end
audit, and CannaVEST’s 2013 interim reviews. Respondent Michael
Deutchman, CPA, was an audit partner at Anton & Chia and served as the
engagement partner during the interim review of Accelera for the third quarter
of 2014 and engagement quality reviewer for Accelera’s 2014 year-end audit
and the interim reviews for 2015.2 Respondent Georgia Chung, CPA, co-owned
Anton & Chia with Wahl and served as the engagement quality reviewer for
CannaVEST’s first quarter of 2013 interim review.
Accelera vastly inflated its financial position and results by treating
another company’s revenues, assets, and liabilities as its own. Premier inflated
and provided an unsupported valuation of an otherwise worthless promissory
note and further improperly allocated the entire purported value of an acquired
company to goodwill. CannaVEST greatly overstated its assets due to its
improper valuation of an acquired company. In performing the audits or
interim reviews of these companies, Respondents egregiously deviated from
multiple PCAOB standards 3 and ignored numerous red flags indicating the
My findings regarding the timeframe of Wahl and Deutchman’s
involvement in the Accelera interim reviews and their respective position titles
differ somewhat from the allegations in the order instituting proceedings
(OIP). See OIP at 5, 16. The discrepancy has no bearing on their degree of
culpability or the sanctions imposed.
2

In this initial decision, in line with Securities and Exchange Commission
interpretive guidance, I use the term “PCAOB standards,” not the older term
“GAAS” (generally accepted auditing standards), to mean the auditing
standards required by the Commission’s rules when dealing with public
company financial statements. Commission Guidance Regarding the Public
Company Accounting Oversight Board’s Auditing and Related Professional
Practice Standard No. 1, 69 Fed. Reg. 29,064, 29,065 (May 20, 2004)
3

2

companies’ financial statements and public filings contained material
misstatements. Moreover, Wahl and Deutchman were reckless in not knowing
that the statements in Anton & Chia’s reports for Accelera and Premier were
false and misleading. In its audit reports, the firm egregiously misrepresented
that it had conducted its work in accordance with PCAOB standards and that
the companies’ financial statements fairly presented their financial positions
according to generally accepted accounting principles (GAAP).
In connection with work related to Accelera, Deutchman aided and
abetted Anton & Chia’s violation of Section 10(b) of the Securities Exchange
Act of 1934 and Rule 10b-5(b)’s antifraud provisions; Wahl and Deutchman
aided and abetted and were a cause of Accelera’s violation of Exchange Act
Section 13(a) and Rules 13a-1 and 13a-13’s requirement that an issuer file
accurate reports; Wahl and Deutchman aided and abetted and were a cause of
Anton & Chia’s violation of Rule 2-02(b) of Regulation S-X due to the
misrepresentations in the firm’s reports; and Wahl and Deutchman willfully
violated or willfully aided and abetted violations of the federal securities laws
or rules within the meaning of Exchange Act Section 4C(a)(3) and Rule
102(e)(1)(iii) of the Commission’s Rules of Practice, and engaged in improper
professional conduct within the meaning of Section 4C(a)(2) and Rule
102(e)(1)(ii).
In connection with his work related to Premier, Wahl violated Exchange
Act Section 10(b) and Rule 10b-5(b), aided and abetted Anton & Chia’s
violations of Section 10(b) and Rule 10b-5(b), aided and abetted and was a
cause of Premier’s violation of Exchange Act Section 13(a) and Rule 13a-1,
aided and abetted and was a cause of Anton & Chia’s violation of Rule 2-02(b)
of Regulation S-X, willfully violated or willfully aided and abetted violations of
the federal securities laws or rules within the meaning of Section 4C(a)(3) and
Rule 102(e)(1)(iii), and engaged in improper professional conduct within the
meaning of Section 4C(a)(2) and Rule 102(e)(1)(ii).
In connection with their work related to CannaVEST, Wahl and Chung
engaged in improper professional conduct within the meaning of Section
4C(a)(2) and Rule 102(e)(1)(ii).
The following sanctions are warranted in the public interest: cease -anddesist orders against Wahl and Deutchman; $160,000 in civil penalties against
Wahl and $40,000 against Deutchman; Wahl and Deutchman are permanently
(“[R]eferences in Commission rules and staff guidance and in the federal
securities laws to GAAS or to specific standards under GAAS, as they relate to
issuers, should be understood to mean the standards of the PCAOB pl us any
applicable rules of the Commission.”).

3

denied the privilege of appearing or practicing before the Commission as
accountants, and Chung is denied the privilege of appearing or practi cing
before the Commission as an accountant with the right to reapply after one
year.
Procedural History
On December 4, 2017, the Commission issued an OIP against Wahl,
Deutchman, and Chung under Exchange Act Sections 4C and 21C and Rule of
Practice 102(e).4 The Commission also instituted proceedings against Anton &
Chia and Tommy Shek, CPA, but later settled as to those parties. 5 Anton &
Chia, LLP, Exchange Act Release No. 87033, 2019 WL 4572716 (Sept. 20,
2019) (Anton & Chia); Anton & Chia, Exchange Act Release No. 83622, 2018
WL 3388553 (July 12, 2018) (Shek).
On January 5, 2018, Respondents answered by generally denying the
allegations and asserting affirmative defenses. See Wahl Answer; Deutchman
Answer.6 The affirmative defenses contain assertions against the elements of
The proceeding was instituted under Section 21C as to Wahl and
Deutchman, but not Chung.
4

Allegations in the OIP about the failure to maintain an adequate system
of quality controls pertained only to Anton & Chia, and thus I do not address
them in this decision. For the same reason, I do not address the 2015 year -end
audit of Accelera.
5

Citations to the answer filed by Anton & Chia, Wahl, and Chung are noted
as “Wahl Answer at __”; citations to Wahl and Chung’s post-hearing brief,
proposed findings of fact and conclusions of law, and response to the Division
of Enforcement’s proposed findings of fact, are noted as “Wahl Post-hr’g Br. at
__,” “Wahl PFOF at __,” and “Wahl Resp. to Div. PFOF at __,” respectively.
When referring to arguments made in Wahl and Chung’s post-hearing briefing,
I state “Wahl and Chung argue” only when the argument is relevant to both of
them; otherwise I merely state “Wahl argues.” Citations to Respondent
Deutchman’s answer and his proposed findings of fact and conclusions of law
are noted as “Deutchman Answer at __” and “Deutchman Post-hr’g Br. at __,”
respectively. Citations to the Division’s post-hearing brief, proposed findings
of fact, response to Wahl’s PFOF, response to Deutchman’s PFOF, and posthearing reply brief, are noted as “Div. Post-hr’g Br. at __,” “Div. PFOF at __,”
“Div. Resp. to Wahl PFOF at __,” “Div. Resp. to Deutchman PFOF at __,” and
“Div. Post-hr’g Reply Br. at __,” respectively. Citations to the hearing
transcript are noted as “Tr. __.” When exhibits lack both consistent internal
pagination and Bates style numbering, I cite to the page of the PDF and follow
the PDF page number with “(PDF).”
6

4

the allegations and also raise constitutional issues, reliance on professionals,
and various other defenses that were not supported by further briefing, such
as the doctrines of laches and estoppel. See Wahl Answer at 27–30; Deutchman
Answer at 22–24. All three Respondents were initially represented by counsel,
but Wahl and Chung’s attorneys withdrew; Wahl and Chung now defend
themselves.
This proceeding was initially assigned to another administrative law
judge, but after the Supreme Court’s decision in Lucia v. SEC, 138 S. Ct. 2044
(2018), it was reassigned to a different judge, and then was reassigned to me
prior to the hearing. See Pending Admin. Proc., Admin Proc. Rulings Release
No. 5955, 2018 SEC LEXIS 2264, at *1–3 (ALJ Sept. 12, 2018) (reassignment
post-Lucia); Anton & Chia, Admin Proc. Rulings Release No. 6690, 2019 SEC
LEXIS 3410, at *1 (ALJ Sept. 27, 2019) (assigning proceedings to me).
The evidentiary portion of the hearing took place in Los Angeles,
California, over the course of 25 days: October 15–18, November 4–8 and 18–
22, and December 2–6 and 16–18, 2019, and January 6–8, 2020. Closing
arguments were conducted through videoconference on January 15, 2020.
After the hearing, I admitted multiple exhibits into evidence and
rescinded the inclusion of one exhibit. See Anton & Chia, Admin Proc. Rulings
Release No. 6726, 2020 SEC LEXIS 2622, at *1 (ALJ Jan. 28, 2020) (admitting
Ex. 772); Anton & Chia, Admin Proc. Rulings Release No. 6727, 2020 SEC
LEXIS 3143, at *1 (ALJ Jan. 29, 2020) (admitting Exs. 432 and 1119); Anton
& Chia, Admin Proc. Rulings Release No. 6741, 2020 SEC LEXIS 658, at *1
(ALJ Mar. 9, 2020) (admitting Ex. 839.8); Anton & Chia, Admin Proc. Rulings
Release No. 6766, 2020 SEC LEXIS 3435, at *2–3 (ALJ June 10, 2020)
(admitting Exs. 13, 14, 15, 1203, 1281, 1283, and 1284; rescinding admission
of Ex. 44.1); Anton & Chia, Admin Proc. Rulings Release No. 6801, 2020 SEC
LEXIS 5066 (ALJ Dec. 3, 2020) (admitting Ex. 1285). Post-hearing briefing
closed on August 10, 2020, and the matter is now ripe for decision. All
arguments inconsistent with this decision have been considered and rejected.
Preliminary Issues
Before my findings of fact and legal conclusions on the merits, I address
two preliminary issues: Respondents’ constitutional arguments, and the
weight that I give to expert evidence, which includes the resolution of pending
motions in limine.
1. Respondents’ constitutional arguments are moot or unsuccessful.
Wahl, Chung, and Deutchman raise several constitutional arguments:
(1) the proceeding violates the Appointments Clause, Wahl Answer at 28;
5

Deutchman Answer at 22–23; (2) disgorgement is unlawful on unspecified
constitutional grounds, Wahl Answer at 30; Deutchman Answer at 24; Wahl
Post-hr’g Br. at 75; see Wahl PFOF at 768–69 (PDF); (3) having an
administrative law judge preside over this proceeding violates Respondents’
right to due process, Wahl Answer at 28; Deutchman Answer at 22–23; and
(4) the proceeding violates Respondents’ right to jury trial, Wahl Answer at 30;
Deutchman Answer at 24; see Wahl PFOF at 184 (PDF).
Further, Wahl and Chung assert that (5) the issuance of a press release
regarding the OIP and the filing of proof of claim in Wahl’s bankruptcy
proceeding deprived them of due process of law, Wahl Post-hr’g Br. at 76; Wahl
PFOF at 54–58, 631–33, 639–41, 643–45, 673–75, 680–85, 705, 749 (PDF); and
(6) the press release and claim constituted an unconstitutional taking of their
property, Wahl Post-hr’g Br. at 76–77; Wahl PFOF at 680–88, 765, 797, 805
(PDF). Finally, although not a constitutional claim, Wahl and Chung assert
that this proceeding is time-barred. Wahl Post-hr’g. Br. at 71–72.
The first argument is mooted by the reassignment of this proceeding to a
different, properly appointed administrative law judge for a new hearing
following the Supreme Court’s decision in Lucia. Pending Admin. Proc.,
Exchange Act Release No. 83907, 2018 WL 4003609, at *1 (Aug. 22, 2018);
Anton & Chia, 2019 SEC LEXIS 3410; Pending Admin. Proc., 2018 SEC LEXIS
2264, at *2–3; see Pending Admin. Proc., Exchange Act Release No. 82178,
2017 WL 5969234, at *1 (Nov. 30, 2017) (ratifying the appointment). The
second is mooted by the Division’s decision to abandon its request for
disgorgement. Div. Post-hr’g Reply Br. at 1. The remaining constitutional
arguments are unsuccessful for the reasons discussed below.
1.1. A proceeding before an administrative law judge does not deprive
Wahl, Chung, and Deutchman of due process.
Wahl, Chung, and Deutchman argue, without elaboration, that having a
Commission administrative law judge adjudicate this proceeding violates the
Due Process Clause. Wahl Answer at 28; Deutchman Answer at 22–23.
However, courts have long rejected the argument that adjudication before an
agency deprives a respondent of due process. See Blinder, Robinson & Co. v.
SEC, 837 F.2d 1099, 1104–08 (D.C. Cir. 1988). The Commission has the
authority to preside over administrative proceedings involving alleged
securities law violations and may delegate that authority to an administrative
law judge as it has done here. 15 U.S.C. § 78d-1(a); 17 C.F.R. § 201.110; see
OIP at 42. Respondents have been given the opportunity to be heard, put on
evidence, and make arguments. See Matthews v. Eldridge, 424 U.S. 319, 333
(1976). They have been provided the required process.

6

1.2. Wahl, Chung, and Deutchman are not entitled to a jury trial in this
administrative proceeding.
Wahl, Chung, and Deutchman assert as affirmative defenses that
“[d]etermination of this proceeding by an ALJ violates [their] right to a jury
trial pursuant to the Seventh Amendment.” Wahl Answer at 30; Deutchman
Answer at 24. But it is well established that “the Seventh Amendment is not
applicable to administrative proceedings.” Tull v. United States, 481 U.S. 412,
418 n.4 (1987); see John Thomas Capital Mgmt. Grp., Securities Act Release
No. 10834, 2020 WL 5291417, at *27 (Sept. 4, 2020) (“[The Commission] ha[s]
repeatedly rejected claims that [its] administrative proceedings violate the
Seventh Amendment.”). Respondents in administrative proceedings are not
entitled to a jury trial. See Atlas Roofing Co. v. Occupational Safety & Health
Review Comm’n, 430 U.S. 442, 450, 460–61 (1977); Kabani & Co., Exchange
Act Release No. 80201, 2017 WL 947229, at *20 (Mar. 10, 2017), pet. denied,
733 F. App’x 918 (9th Cir. 2018).
1.3. The press release and bankruptcy claim did not deny Wahl and Chung
due process.
Wahl and Chung argue that they were denied due process by a press
release announcing the issuance of the OIP against them and by the
Commission’s filing of a proof of claim in Wahl’s personal bankruptcy
proceeding. Wahl Post-hr’g Br. at 76. They imply that this proceeding must be
dismissed because these two statements defamed them “without ANY actual
evidence,” resulting in their “financial ruin” by “steal[ing] away their
livelihoods,” and inflicted emotional distress. Id.; Wahl PFOF at 680–85 (PDF).
But both actions were lawful. Neither deprived them of due process in this
proceeding; rather, this proceeding provided them the process to which they
were entitled. See Jonathan Feins, Exchange Act Release No. 41943, 1999 WL
770236, at *7 (Sept. 29, 1999) (“Administrative due process is satisfied where
the party against whom the proceeding is brought understands the issues and
is afforded a full opportunity to meet the charges during the course of the
proceeding.”).
The press release issued by the Commission on December 4, 2017, states
that the OIP was filed, summarizes its allegations, and quotes statements of
opinion by the two co-directors of the Division. Ex. 1285. The Exchange Act
authorizes the Commission to make this type of release, “in its discretion, to
publish information concerning any … violations” of the securities laws. 15
U.S.C. § 78u(a)(1); see SEC v. Rivlin, No. 99-1455, 1999 WL 1455758, at *3
(D.D.C. Dec. 20, 1999). Moreover, Commission proceedings—like the majority
of government adjudications in the United States—are presumptively public,
so even without a press release some reputational harm may be unavoidable.
7

17 C.F.R. §§ 201.301, .322(b); cf. Disciplinary Proceedings Involving
Professionals Appearing or Practicing Before the Commission, 53 Fed. Reg.
26,427, 26,429 (July 13, 1988) (“recogniz[ing] that any public proceeding may
involve reputational damage to the respondent,” but concluding that
proceedings under the predecessor to 17 C.F.R. § 201.102(e) should be public
like other administrative proceedings). A press release that does little more
than repeat the allegations in an already public OIP is well within the
discretion granted by the Exchange Act to publish information about securities
law violations.
Similarly, the proof of the Commission’s contingent, unliquidated claim
that was filed in Wahl’s bankruptcy proceeding on December 20, 2018, stated
only that this proceeding had been brought and that it might result in a
judgment payable to the Commission in an unspecified amount. Proof of Claim,
In re Gregory Anton Wahl, No. 8:18-bk-12449 (Bankr. C.D. Cal. Dec. 20, 2018),
Claim 16-1. The amended proof of claim filed on May 20, 2019, merely valued
the claim at $456,000 based on the Division’s claims for disgorgement (which
the Division was then seeking), civil penalties, and prejudgment interest.
Ex. 1283 at 2. The proofs of claim did not decide the issues in this proceeding
or imply that they had already been decided. Rather, both the claim and
amended claim fall within the bankruptcy code’s broad definition of “claim,”
which includes “unliquidated” and “contingent” rights to payment. 11 U.S.C.
§ 101(5)(a); accord In re Castellino Villas, A.K.F. LLC, 836 F.3d 1028, 1033–34
(9th Cir. 2016) (observing that a claim—such as one for attorneys’ fees not yet
earned—can arise when it can fairly or reasonably be contemplated even if the
cause of action had not accrued under nonbankruptcy law). The Commission
was not just entitled, but was required to file a proof of claim for potential
recovery in pending pre-bankruptcy-petition litigation if it wished to preserve
its right to recovery. Bendall v. Lancer Mgmt. Grp., 523 F. App’x 554, 558 (11th
Cir. 2013); see Fed. R. Bankr. P. 3003(c)(2) (requiring any creditor “whose claim
or interest is not scheduled or scheduled as disputed, contingent, or
unliquidated” to file a proof of claim). Moreover, like the press release, the
proofs of claim did not make this already public proceeding any more public
than it already was.
Thus, neither of these routine actions by the Commission deprived Wahl
and Chung of due process of law in this proceeding. And although the release
and the proof of claim may have caused them “reputational and professional
harm,” their arguments “do not give rise to due process relief unless they
prejudiced the hearing process,” which they did not do. Kevin Hall, CPA,
Exchange Act Release No. 61162, 2009 WL 4809215, at *23 (Dec. 14, 2009);
accord United States v. Black, 733 F.3d 294, 302 (9th Cir. 2013) (holding that
to completely invalidate a criminal prosecution based on investigative conduct,

8

the government’s actions must have “‘violate[d] fundamental fairness’ and
[been] ‘so grossly shocking and so outrageous as to violate the universal sense
of justice’” (quoting United States v. Stinson, 647 F.3d 1196, 1209 (9th Cir.
2011))); United States v. Smith, No. CR-13-14, 2014 WL 1744253, at *2–3 (E.D.
Wash. Apr. 30, 2014) (rejecting defense based on allegedly defamatory press
release calling defendants “snake oil salesmen”). This is because “[t]he
fundamental requirement of due process is the opportunity to be heard ‘at a
meaningful time and in a meaningful manner.’” Matthews, 424 U.S. at 333
(quoting Armstrong v. Manzo, 380 U.S. 545, 552 (1965)); cf. Bd. of Regents of
State Colleges v. Roth, 408 U.S. 564, 573 (1972) (holding that the remedy for
unconstitutional defamation is “an opportunity to refute the charge”). The OIP
in this proceeding began the process before a neutral adjudicator. See Rivlin,
1999 WL 1455758, at *3; see also Concrete Pipe & Prod. of Cal., Inc. v. Constr.
Laborers Pension Tr. for S. Cal., 508 U.S. 602, 618 (1993); cf. Hall, 2009 WL
4809215, at *23 & n.111 (citing Hannah v. Larche, 363 U.S. 420, 443 (1960)).
I have served as that neutral adjudicator in this proceeding, and whatever
reputational harm may have been caused by the press release and proof of
claim does not undermine my neutrality. See FTC v. Cinderella Career &
Finishing Schs., Inc., 404 F.2d 1308, 1312–15 (D.C. Cir. 1968); Bowman v. U.S.
Dep’t of Agric., 363 F.2d 81, 86 (5th Cir. 1966).
Finally, insofar as Wahl and Chung are attempting to assert an
affirmative claim for damages based on unconstitutional defamation or some
other theory, I must deny this claim. The Rules of Practice do not permit
respondents to assert counterclaims for damages against the Commission. See
17 C.F.R. § 201.220(c) (detailing the permitted contents of an answer to the
OIP).
1.4. The press release and bankruptcy claim did not take Wahl and Chung’s
property without compensation.
Along with their due process arguments, Wahl and Chung contend that
the Commission “unconstitutionally took Respondents property without
compensation” by issuing the OIP and accompanying press release and filing
the proof of claim. Wahl Post-hr’g Br. at 76; see Wahl PFOF at 683 (PDF).
Under the theory that Respondents’ professional licenses were rendered
“worthless”—as opposed to being actually revoked or taken by the
Commission—they characterize the press release and proof of claim as a
“regulatory taking of property.” Tr. 6190; Wahl PFOF at 684 (PDF). But
“diminution of property values caused by government action is not a regulatory
taking.” Eagletech Commc’ns, Inc., Exchange Act Release No. 54095, 2006 WL
1835958, at *3 & n.12 (July 5, 2006); see Penn Cent. Transp. Co. v. City of New
York, 438 U.S. 104, 131 (1978). And, as noted above, insofar as Wahl and
Chung seek money from the Commission in this proceeding, the Rules of
9

Practice do not permit respondents to assert counterclaims for damages. See
17 C.F.R. § 201.220(c); Wahl Post-hr’g Br. at 76–77.
1.5. The proceeding is not time-barred.
Wahl and Chung assert that the statute of limitations on the charges
against them has expired because, under 28 U.S.C. § 1658(b)(1), the proceeding
cannot be brought more than “2 years after the discovery of the facts
constituting the violation.” Wahl Post-hr’g Br. at 71–72. But this is incorrect.
Section 1658 applies to “a private right of action,” 28 U.S.C. § 1658(b), not a
Commission proceeding, which under Section 2462 has a five year statute of
limitations. 28 U.S.C. § 2462; see Gabelli v. SEC, 568 U.S. 442, 444–45 (2013)
(holding that Section 2462 applies to Commission proceedings seeking civil
penalties). The proceeding commenced in December 2017, less than five years
after the audit engagements at issue.
2. Weight given to expert testimony
Two experts testified at the hearing: Harris Devor for the Division and
John M. Misuraca for Wahl and Chung. William W. Holder prepared an expert
report for Wahl and Chung during the Commission’s investigation but he was
not engaged and did not prepare a report or testify in this proceeding.
2.1. The Division’s accounting and auditing expert Harris Devor
The Division offered Harris Devor as an expert in accounting and
auditing. Tr. 1120. Respondents conducted a voir dire of Devor regarding his
qualifications, especially as it concerned audits of public companies and
microcap public companies. Based on Devor’s education, experience, and
credentials, I found him qualified to opine about those topics in this proceeding.
Tr. 1140–41. As I explained at the hearing, I would consider arguments from
Respondents in determining what weight to give Devor’s opinions. Wahl and
Chung have argued that I should generally not give weight to Devor’s opinions
because (1) there is no legal standard for expert testimony in Commission
administrative proceedings, (2) Devor lacks the experience and credentials to
opine about public company audits or PCAOB standards, (3) Devor is biased in
favor of the Commission, and (4) his expert testimony has been excluded four
times in federal court.
2.1.1. Standard for expert testimony in Commission proceedings
Wahl and Chung assert that “there is no legal standard for an expert” in
Commission administrative proceedings, which allows supposed experts to act
in a “lawless and reckless” manner. Wahl Post-hr’g Br. at 43. This is untrue.
Although the standard for admitting expert testimony in Commission
10

administrative proceedings differs from the standard in federal court, like all
other admissible evidence in Commission proceedings, an expert’s testimony
must be relevant and cannot be immaterial, unduly repetitious, or unreliable.
17 C.F.R. § 201.320(a). In addition, an expert witness must prepare a written
report and submit a statement of qualifications and other initial disclosures.
17 C.F.R. § 201.222(b).
Expert testimony in federal court is subject to the Daubert standard,
codified in Federal Rule of Evidence 702, under which the district court
performs a “gatekeeping” role to ensure that only reliable expert evidence
reaches the jury. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999); see
Fed. R. Evid. 702; Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 597
(1993). The Daubert standard does not apply in administrative proceedings,
however. Ralph Calabro, Securities Act Release No. 9798, 2015 WL 3439152,
at *11 (May 29, 2015). This is because the “gatekeeping” role is unnecessary in
a nonjury proceeding such as this one. See City of Anaheim, Exchange Act
Release No. 42140, 1999 WL 1034489, at *2 (Nov. 16, 1999) (“Administrative
agencies such as the Commission are more expert fact-finders, less prone to
undue prejudice, and better able to weigh complex and potentially misleading
evidence than are juries.”). The Commission has thus seen “no reason why a
law judge, if he deems it appropriate, cannot hear expert testimony (and crossexamination) and then determine what weight to give that testimony.”
Calabro, 2015 WL 3439152, at *11 n.66.
This is why I allowed Devor, as well as Wahl and Chung’s expert
Misuraca, to testify at the hearing while reserving ruling on the weight to give
their testimony. In weighing this expert testimony, I will consider the “spirit
of Daubert.” Niam v. Ashcroft, 354 F.3d 652, 660 (7th Cir. 2004) (“‘Junk science’
has no more place in administrative proceedings than in judicial ones.”);
Calabro, 2015 WL 3439152, at *11 n.67 (citing Niam). I will not give any
weight to unreliable or misleading expert testimony, just as I will give no
weight to unreliable or misleading factual testimony. Wahl and Chung’s
argument that there is no standard for expert testimony is incorrect, and I do
not give diminished weight to any expert on that basis.
2.1.2. Experience and credentials
Wahl and Chung argue that Devor lacks the expertise to opine about
public company accounting and PCAOB auditing standards. Wahl Post-hr’g
Br. at 42–45. Wahl and Chung point out, and Devor candidly acknowledges,
that he has not personally audited a public company since 1990, has not
conducted an audit subject to PCAOB standards, and has no experience
auditing microcap companies or companies in the cannabis industry. Wahl
PFOF at 102, 126–27 (PDF).

11

Performing public company audits is one way to gain auditing expertise,
but it is not the only method. Cf. Fed. R. Evid. 702 (expert may be qualified
based on “knowledge, skill, experience, training, or education”); United States
v. Frazier, 387 F.3d 1244, 1260 (11th Cir. 2004) (“[E]xperts may be qualified in
various ways.”). Since he stopped auditing public companies, Devor has
maintained his knowledge of public company auditing issues and has testified
extensively as an expert witness about public company accounting. Tr. 1112,
1114–17. He has testified as an expert in high-profile accounting cases such as
the WorldCom securities litigation, litigation related to the collapse of Lehman
Brothers, and the Petrobras securities litigation. Tr. 1116, 1118. Devor’s
testimony on both direct and cross-examination showed his competence and
understanding of the subject matter.
Devor’s body of training and experience is also sufficient for him to qualify
as an expert in accounting and auditing. Devor is a certified public accountant
and has forty-six years of experience in administering and supervising audits.
Ex. 88, Resume at 1. Although his recent experience is with private companies,
to the degree there are differences in accounting issues and standards between
private and public companies, no pertinent differences were identified that
would disqualify Devor testifying. Tr. 1112–13, 1118–20; see Crowdfunding, 80
Fed. Reg. 71,388, 71,414 (Nov. 16, 2015) (“As the standards for non-public
business entities are new, there are currently very few distinctions between
U.S. GAAP for public and non-public business entities.”).
2.1.3. Bias
Wahl and Chung argue that because the Commission is Devor’s largest
client for his services as an expert witness, Devor is biased. Wahl PFOF at
121–22 (PDF). This argument is unpersuasive. The potential for bias exists for
any expert retained and compensated by a party. The remedy is for the expert’s
opinions to be tested by cross-examination and weighed by the trier of fact.
Calabro, 2015 WL 3439152, at *38 & n.179. I did not see any evidence of
improper bias during Devor’s testimony. Devor has testified as an expert on
behalf of many clients, including for defendants against the Commission. See,
e.g., SEC v. Guenthner, 395 F. Supp. 2d 835, 843–44 (D. Neb. 2005). His expert
services are only one aspect of his business. See Tr. 1114 (“I can go years
without testifying.”). Even if the Commission is his largest client with respect
to expert engagements, it does not appear to be such a large portion of his work
as to presume bias that would require discounting his testimony in this
proceeding.

12

2.1.4. Exclusion of Devor’s testimony in other proceedings
Wahl and Chung point to several instances in which Devor’s testimony
was allegedly excluded in federal district court. Although it is permissible to
impeach an expert based on the exclusion of testimony in other proceedings,
the cases cited by Wahl and Chung are not persuasive. Wahl and Chung assert
that “Devor’s testimony was dismissed four times in Federal Court.” Wahl
Post-hr’g Br. at 42. They do not list these four cases. Of the cases that they cite
in their filings, I have identified five in which Devor served as an expert
witness. See id. at 42–43, 45; Wahl PFOF at 734–47 (PDF). None of these five
cases support their contention.
In citing Lawrence E. Jaffe Pension Plan v. Household International, Inc.,
No. 02-cv-5893 (N.D. Ill.), for example, Wahl and Chung quote a party’s brief—
not the court—criticizing Devor. See Wahl Post-hr’g Br. at 42 (quoting Defs.’
Reply Daubert Mot. at 5, Jaffe Pension Plan (Feb. 13, 2009), ECF No. 1456,
2009 WL 464036). The court in that case limited Devor’s testimony in one area
but otherwise found his opinions to be “permissible expert testimony.” Minute
Order at 2, Jaffe Pension Plan (Mar. 23, 2009), ECF No. 1528.
The district court in Acceptance Insurance Cos., Inc. Securities Litigation,
352 F. Supp. 2d 940, 948 (D. Neb. 2004), excluded an affidavit by Devor from
the summary judgment record, finding that it failed to “describe the analytical
processes he went through to reach his opinions.” The court noted, however,
that it resolved the summary judgment motions before the close of expert
discovery and disclosure, which may have provided additional foundation for
expert opinions. Id. at 947–48. And unlike the affidavit in Acceptance
Insurance, I find Devor’s lengthy expert report to be supported satisfactorily in
this case.
Devor’s proposed testimony was also excluded in L&M Beverage Co. v.
Guinness Import Co., No. 94-cv-4492, 1996 WL 368327 (E.D. Pa. June 24,
1996). In that case, Devor offered an opinion about the plaintiff ’s lost profits,
but the district court determined that the proper measure of damages was the
diminution in value of distribution rights, not lost profits. Devor’s lost profits
opinion was excluded as not relevant. Id. at *3–4. Here, Devor’s opinions are
relevant to the allegations.
The fourth case in which Wahl and Chung allege Devor’s testimony was
excluded from is SEC v. Cole, No. 12-cv-8167 (S.D.N.Y.). Wahl and Chung
assert that Deutchman, who was an expert for defendant Timothy Quintanilla,
“beat” Devor in that case and that the district judge “saw through” Devor’s
testimony. Wahl Post-hr’g Br. at 43. But the court did not exclude Devor.
Quintanilla objected to Devor’s expert report as hearsay, irrelevant, improper

13

opinion testimony, and lacking foundation. Def.’s Objections to Decl. Supp’g
Summ. J. at 22, Cole (June 5, 2014), ECF No. 130. The court rejected
Quintanilla’s objections to Devor’s report and other evidence as “unsupported
boilerplate assertions presented in a clumsy attempt to strike the entirety of
the SEC’s evidence.” Cole, 2015 WL 5737275, at *4 (Sept. 19, 2015). In denying
the parties’ cross motions for summary judgment, the court did not reference
Devor’s opinions positively or negatively. See generally id. at *4–10. The case
was ultimately resolved by a settlement.
Finally, Devor served as a defense expert witness in SEC v. Guenthner.
Devor’s testimony was not excluded by the court. Instead, the court heard the
testimony of Devor during a bench trial and included Devor’s expert opinions
in its findings of facts. 395 F. Supp. 2d at 837, 843–44. Although the court
granted the defendants’ motion for judgment as a matter of law on other
grounds, it noted that, in the alternative, “it would find in favor of defendants
based on all the evidence adduced in this case,” including Devor’s testimony.
Id. at 848 & n.8.
The cases cited by Wahl and Chung about Devor’s work in other
proceedings do not convince me to give diminished weight to Devor’s testimony
here.
2.1.5. Devor’s opinions are generally helpful but those about specific
violations will not be considered.
Devor’s testimony helped provide a general understanding of some of the
accounting and auditing issues in this case. His testimony also provided a
vehicle for many of the relevant documents the Division introduced in its casein-chief. I have considered his opinions for this general background
information.
I have not relied, however, on Devor’s opinions about specific violations of
GAAP or PCAOB standards. Whether a specific accounting or auditing
standard is violated is often a mixed question of fact and law. See Russell
Ponce, Exchange Act Release No. 43235, 2000 WL 1232986, at *8 n.33 (noting
that whether an activity is manufacturing or research and development under
GAAP “is a mixed question of law and fact”), pet. denied, 345 F.3d 722 (9th Cir.
2003); cf. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1421 (3d Cir.
1997) (“[I]t is a factual question whether BCF’s accounting practices were
consistent with GAAP.”); SEC v. Caserta, 75 F. Supp. 2d 79, 91 (E.D.N.Y. 1999)
(“Whether GAAP has been violated is a fact-specific issue.”). Although it may
be appropriate to rely on expert testimony for thorny fact-bound issues related
to GAAP or PCAOB standards, I have not done so here. Instead, I have
considered the documentary evidence and testimony of percipient witnesses.

14

And I have not relied on Devor’s testimony to resolve legal questions. See
optionsXpress, Inc., Securities Act Release No. 10125, 2016 WL 4413227, at
*27 (Aug. 18, 2016) (“[W]e do not defer to expert testimony about the meaning
of the law.”); Robert D. Potts, CPA, Exchange Act Release No. 39126, 1997 WL
690519, at *10 n.56 (Sept. 24, 1997) (“The testimony of expert witnesses on
questions of law may be precluded, because adjudicators—courts and
administrative law judges—are themselves qualified to determine and
interpret the law.”), pet. denied, 151 F.3d 810 (8th Cir. 1998).7
2.2. Wahl and Chung’s valuation expert John M. Misuraca
John M. Misuraca is a certified public accountant who specializes in
forensic accounting and business valuation. Ex. 1036 at 2; Tr. 3391–92.
Misuraca prepared two expert reports. One dealt with CannaVEST’s purchase
of PhytoSphere Systems, LLC, and the valuation and subsequent impairment
of goodwill from that purchase. Ex. 1036. The second report discussed the
valuation of a promissory note held by Premier. Ex. 1122. At the hearing, I
admitted the Premier report, and noted that the CannaVEST report would
come into the record in some fashion, but I deferred ruling on its admissibility.
Tr. 3398–99, 3437–38, 3631–32. I turn to that question now, and I also consider
the evidentiary weight to give to either report.
2.2.1. CannaVEST report
This report relied on information Misuraca received from Wahl that
purported to be financial projections prepared for CannaVEST management,
but Wahl misled Misuraca about the origins of those projections. For this
reason, although I admit the report (Exhibit 1036) as an exhibit, its admission
is to provide context only, and I give Misuraca’s opinions in it no weight. In
addition, and more troubling, Wahl submitted a perjurious declaration in
support of his opposition to the Division’s motion to exclude Misuraca’s
testimony and lied about the projections under oath at the hearing.
Misuraca advanced three opinions in the CannaVEST expert report: (1)
the internal rate of return for CannaVEST at the time of the purchase was
20.48%, (2) this rate of return was reasonable, and (3) there was no impairment
of goodwill as of the purchase date of Phytosphere. Ex. 1036 at 6. These
opinions were based on “the forecast provided by Greg Wahl from an email he
sent to Tommy Shek and Richard Koch on November 8, 2013.” Id. at 5; see
Wahl and Chung also raise various arguments about the reliability of
Devor’s opinions regarding specific violations. Because I have not relied on
Devor’s opinions about specific violations, I do not address those arguments
here.
7

15

Tr. 3476–77. Misuraca accepted this forecast as true and did not independently
verify or test the figures. Ex. 1036 at 6.
Unbeknownst to Misuraca, his reliance on these figures was misplaced.
Wahl altered the email he provided Misuraca—it was not the original email he
sent to Shek and Koch. The actual CannaVEST financial projections were
attached to the original email. Wahl did not forward the attachment to
Misuraca; instead, he typed different figures into the email he forwarded to
Misuraca. The numbers Wahl typed in looked like they were part of the original
email, and Misuraca accepted them as genuine. Compare Ex. 824 (original
email), with Ex. 823 (email forwarded to Misuraca adds, “Below is what we had
for original projections, etc.” and Wahl’s typed projections).
Wahl provided shifting and incredible explanations for his alteration of
the email. When the Division moved to exclude Misuraca’s testimony and
pointed out the discrepancies, Wahl’s opposition called the Division’s allegation
“a preposterous theory” that is “half baked and factually erroneous.” Opp’n to
Mot. to Exclude Misuraca at 3 (Oct. 1, 2019). Wahl declared, in support of the
opposition and under penalty of perjury, that he had simply “pasted” into the
body of the email the actual projections that were attached to the original
email. Id. at 7. Those projections, he claimed, were from page 36 of projections
prepared by a valuation firm, Vantage Point Advisors, Inc., and were what he
had considered during the CannaVEST review engagement. Id.
Wahl’s declaration is untrue. The Vantage Point projections attached to
the original email differ from the figures Wahl sent to Misuraca. Compare
Ex. 824, ASC 718 IRC 409A Report at 36, with Ex. 823, and Ex. 1036 at 11.8
The figures for the five categories Wahl provided Misuraca—revenue, cost of
goods sold, gross profit, operating expenses, and pre-tax net profit—are
significantly different from the numbers in the Vantage Point report. For four
of the five years of figures that Wahl provided, he reduced total revenue
between 55% and 33% and decreased gross revenue between 48% and 13%.
Compare Ex. 824, ASC 718 IRC 409A Report at 36, with Ex. 823. He increased
operating expenses for three of the five years of data and decreased it in the
other two years. Compare Ex. 824, ASC 718 IRC 409A Report at 36, with
Ex. 823. Wahl even sent Misuraca quarterly data for 2013 that was not
included at all in the Vantage Point report. See Tr. 5503–05. Compare Ex. 824,
ASC 718 IRC 409A Report at 36, with Ex. 823. Thus, in addition to altering
actual data by wide margins, Wahl also fabricated data for periods for which
no data was ever reported previously.
A chart comparing the projections in the original attachment to the figures
Wahl emailed Misuraca is in the appendix to this initial decision.
8

16

When the Division questioned Wahl about the email at the hearing, Wahl
at first maintained his story that he had “copied and pasted” the valuation
report into the email. Tr. 5498. He claimed he meant to paste the financial
projections at the top of the email and that it was a mistake that they ended
up at the bottom, where they looked like part of the original email. Tr. 5501–
02. When the Division informed Wahl that the revenue figure for the second
quarter of 2013 he sent Misuraca did not match actual revenue, Wahl testified
that he “could have done a typo.” Tr. 5505. When the Division pressed him on
why other numbers did not match, Wahl said he was in a hurry and
“ballparked” the numbers. Tr. 5506. Wahl then contradicted his sworn
declaration and his testimony from just minutes earlier and denied that he had
copied and pasted the numbers—he now testified that he had to type the
numbers in because the original was a PDF. Tr. 5507. When asked whether
the figures in the Vantage Point report were the same as what he typed, Wahl
first said, “I believe it’s pretty close to what I typed in.” Tr. 5507. Then he
almost immediately backtracked and said the figures he provided Misuraca
were lower than those in the Vantage Point report. Tr. 5507. Not slightly lower
but lower by half, he claimed. Tr. 5508–09. Wahl did this, he averred, because
he wanted Misuraca’s analysis to be “conservative” and not overstate the value
of CannaVEST’s goodwill. Tr. 5508–09. He testified that he did not lie but had
forgotten that he had reduced the figures. Tr. 5515. In his post-hearing filings,
Wahl claimed that he did not intentionally “doctor” the email he sent to
Misuraca but “made a harmless error in copying and pasting the numbers from
the valuation and reduced them by approximately 50% which would reduce the
discount rate by 50%.” Wahl Resp. to Div. PFOF at 239–40 (PDF).
Wahl’s conduct and testimony was neither harmless nor merely an error.
As Wahl’s explanations disintegrated under cross-examination, he changed his
story again and again, often in contradictory ways. First he said that he copied
and pasted the numbers, then that he made a typo, then that he was in a hurry
and only estimated the numbers, then that he intentionally reduced the
numbers by about half to be conservative. His claim that he had simply
forgotten that he altered the projections is not credible. The only reas onable
conclusion from his dissembling testimony is that Wahl intentionally misled
Misuraca and repeatedly lied about it under oath.
As a result, I cannot give Misuraca’s CannaVEST opinions any weight.
Misuraca was under the false impression that he was re viewing financial
projections prepared for CannaVEST management. Ex. 1036 at 5. Wahl never
told him that he reduced those figures by half. Tr. 5511 (“I could have trued it
up with him, but I didn’t have time.”), 5512 (“I should have sent the Excel
spreadsheet to him and had a discussion with him, but I didn’t have time.”).
Wahl claimed that he was not misleading Misuraca because if he wanted to

17

mislead Misuraca, he would have increased the projections to make
CannaVEST’s goodwill look stronger rather than reduce the projections to be
conservative. Tr. 5512, 5516. While decreasing the projections could make
CannaVEST’s goodwill appear smaller, evaluating CannaVEST’s goodwill was
not the only topic Misuraca addressed. He also calculated CannaVEST’s
internal rate of return and opined on its reasonableness. Ex. 1036 at 4, 6. Wahl
himself testified that he believed CannaVEST’s projections were “a little
overstated.” Tr. 5510. Moreover, Wahl altered the figures he provided
Misuraca by varying amounts, not by a simple division in half. Misuraca thus
analyzed figures that had no relationship to CannaVEST management’s
projections. Misuraca’s resulting opinions are not tied to the facts and are
entitled to no evidentiary weight. See Ira Weiss, Securities Act Release
No. 8641, 2005 WL 3273381, at *6 n.21 (Dec. 2, 2005) (giving “such weight to
the expert testimony as [the Commission] consider[s] is indicated by the
relevant facts in the record”), pet. denied, 468 F.3d 849 (D.C. Cir. 2006).
That leaves Wahl’s false statements under oath. Perjury is troubling in
any context, and giving false testimony in Commission proceedings can in itself
constitute improper professional conduct. Exchange Act Section 4C and Rule
of Practice 102(e) allow the Commission to bar from practicing before it those
who are “lacking in character or integrity.” 15 U.S.C. § 78d–3(a)(2); 17 C.F.R.
§ 201.102(e)(1)(ii); see William A. Dougherty, Public Utility Holding Company
Act of 1935 Release No. 13567, 1957 WL 52386, at *3 (Oct. 18, 1957) (finding
that an attorney’s false testimony in a Commission investigation was improper
professional conduct and barring the attorney from practicing before the
Commission).9 But the OIP in this case did not reference the “character or
integrity” part of Section 4C or Rule 102(e) as a basis for this proceeding. OIP
at 1 nn.1–2; id. at 3–4, 20–21, 31, 40–42. Because Wahl’s false testimony does
not come within the scope of the OIP, I do not rely on it to find any violations.10
See OIP at 40–42 (charging violations based on “the conduct described” in the
OIP, and directing for a determination as to whether the “allegations set forth
In Dougherty, the Commission considered whether the attorney
committed improper professional conduct under former Rule 2(e) of the Rules
of Practice. Rule 102(e) is the successor to Rule 2(e), and the text of Rule 2(e)(2)
is identical to Rule 102(e)(1)(ii). See Steven C. Wolfe, Sr., CPA, Exchange Act
Release No. 39589, 1998 WL 28039, at *1 n.1 (Jan. 28, 1998) (“While we revised
comprehensively our Rules of Practice in 1995, we made no substantive
changes to Rule 2(e), other than to renumber it as Rule 102(e).”). Compare 17
C.F.R. § 201.2(e)(2) (1949), with 17 C.F.R. § 201.102(e)(1)(ii).
9

This decision has no bearing on whether the Commission or another
authority takes subsequent action based on Wahl’s perjury.
10

18

in Section II [of the OIP] are true” and whether sanctions should be imposed);
see also Russell W. Stein, Exchange Act Release No. 47504, 2003 WL 1125746,
at *8 n.34 (Mar. 14, 2003), recons. granted on other grounds, Exchange Act
Release No. 50168, 2004 WL 1778889 (Aug. 9, 2004). Nevertheless, I consider
Wahl’s misconduct in the context of whether a sanction is in the public interest.
See infra Sanctions §§ 2, 2.11.
2.2.2. Premier report
Misuraca opined in his Premier report that the valuation of an unsecured
promissory note that Premier received was reasonable and “in conformity with
GAAP” and that Wahl’s work as engagement partner on Anton & Chia’s audit
of Premier for 2013 materially complied with GAAS and GAAP. Ex. 1122 at 6.
The Division argues that these opinions should not be given any weight
because Misuraca has never worked as an auditor or audited a public company
and is not an expert in GAAS or GAAP. Div. Mot. to Exclude Misuraca at 11–
12 (Sept. 16, 2019); see Tr. 3392, 3466–67.
The scope of Misuraca’s review of the Premier audit and his opinions is
limited. He focused on valuation issues and the method of valuing the note.
Tr. 3469–70. He has the requisite expertise to opine on valuation issues, and I
will consider his opinion on the issue of the valuation of the promissory note.
Misuraca stated in his report that, “[b]ased on [his] review of Greg Wahl’s work
in this action,” it was his opinion that Wahl’s work materially complied with
GAAP and GAAS. Ex. 1122 at 6. In his hearing testimony, however, Misuraca
clarified that his review of Wahl’s work was limited. Tr. 3446–47 (testifying
that he looked at various Anton & Chia workpapers but did not read them line
by line). He testified that he was not offering an opinion about whether Premier
complied with GAAP or Anton & Chia’s audit complied with GAAS. Tr. 3467.
As with Devor’s testimony, I do not rely on Misuraca’s testimony to decide
whether specific conduct complied with the PCAOB standards or GAAP. See
optionsXpress, 2016 WL 4413227, at *27; Potts, 1997 WL 690519, at *10 n.56.
2.3. Wahl’s valuation expert William W. Holder
Wahl engaged William W. Holder as an expert during the Commission’s
investigation before this proceeding began, and Holder prepared an expert
report. Holder was not retained as an expert for the proceeding, and I
provisionally granted the Division’s motion to exclude him from testifying as
an expert witness at the hearing. Anton & Chia, Admin. Proc. Rulings Release
No. 6694, 2019 SEC LEXIS 3758, at *3 (ALJ Oct. 7, 2019). I reserved ruling on
the admissibility of Holder’s report because Misuraca may have relied on it in
forming the opinions in his Premier report. Id. at *4. At the hearing, however,

19

Misuraca testified that he did not rely on Holder’s report. Tr. 3594, 3627. For
this reason, Holder’s report, Exhibit 1113, is not admitted.
Findings of Fact and Violations of Accounting Standards
1. Legal standard for factual findings
I base the findings of fact herein on the entire record; the parties’
stipulations, see 17 C.F.R. § 201.324; and on facts officially noticed from
publicly available court filings, see id. § 201.323; Global Network Commc’ns
Inc. v. City of New York, 458 F.3d 150, 157 (2d. Cir. 2006). I apply
preponderance of the evidence as the standard of proof. See Rita J. McConville,
Exchange Act Release No. 51950, 2005 WL 1560276, at *14 (June 30, 2005),
pet. denied, 465 F.3d 780 (7th Cir. 2006).
2. Respondents
Anton & Chia, LLP, was a PCAOB-registered audit firm with three offices
in California that was founded in 2009. Ex. 840 ¶ 21 (stipulations). The firm
filed for bankruptcy in July 2018, and the case was converted to Chapter 7
liquidation in August 2018. Tr. 4912. Anton & Chia’s audits and interim
reviews of Accelera Innovations, Inc., Premier Holding Corporation, and
CannaVEST Corp. are the subject of this proceeding. See id.; OIP at 8–40.
Gregory Wahl is a certified public accountant who was the managing
partner of Anton & Chia during the relevant period and also owned 90% of the
firm. Ex. 839.6 at 156 (PDF) (designated portions of Wahl’s deposition). Wahl
was the engagement partner for Accelera’s 2013 and 2014 year-end audits and
five 2014 and 2015 interim reviews, Premier’s 2013 year-end audit, and
CannaVEST’s 2013 interim reviews. Wahl Answer at 5.
Michael Deutchman was a non-equity partner at Anton & Chia and was
either the engagement partner or engagement quality review partner on
multiple reviews of Accelera’s financial statements in 2014 and 2015 and the
2014 audit. Tr. 638–39.
Georgia Chung is a certified public accountant who helped set up Anton &
Chia in 2009 and served as the engagement quality reviewer for CannaVEST’s
2013 first quarter interim review. Ex. 840 ¶ 23; Tr. 5143, 5153. She is married
to Wahl. Tr. 4926.

20

3. Accelera facts and accounting violations
3.1. Introduction and summary
Accelera Innovations, Inc., a Delaware corporation doing business in
Frankfort, Illinois, was incorporated in April 2008 as a shell company in the
business of acquiring and managing other companies, primarily in the
healthcare and information technology service industries. Ex. 840 ¶¶ 24, 35;
Tr. 54.
On November 11, 2013, Accelera signed a stock purchase agreement with
Behavioral Health Care Associates, Ltd., a health care provider in
Schaumberg, Illinois, specializing in psychiatry and substance abuse
treatment. Tr. 193–94; Ex. 184; Ex. 840 ¶ 25. The agreement provided for
Accelera to acquire Behavioral’s stock once it paid $1 million as consideration
90 days after closing, with the rest of the $4.55 million purchase price to be
paid in installments over time. Ex. 184 §§ 1.1, 1.1.1, 1.1.1.1.
Despite never making any of the payments due under the agreement,
Accelera consolidated Behavioral’s revenues, assets, and liabilities with those
of its own in its Commission filings from 2013 through 2015. Consolidation did
not comply with GAAP, which requires the acquirer to have obtained control
of the acquired company and for consideration to change hands. By
consolidating Behavioral’s finances with its own, Accelera’s revenues were
overstated by 90% in 2013 and 2014.
Relevant here are the six interim reviews and two year -end audits for
Accelera from year-end 2013 through the third quarter of 2015 that Anton &
Chia performed. See Ex. 840 ¶ 18. In 2013 and 2014, Anton & Chia issued an
unqualified audit opinion for Accelera’s financial statements. Wahl was the
engagement partner on both year-end audits and all but one of the other
engagements. Ex. 1.1 at 3; Ex. 1.4 at 3; Ex. 1.6 at 3; Ex. 136 at 5; Ex. 152 at 3;
Ex. 166 at 3; Ex. 171 at 5; Ex. 178 at 3. Deutchman was the engagement
quality reviewer (EQR) for the 2014 audit and the three quarterly reviews in
2015, and was engagement partner for the third quarter interim review in
2014. Ex. 1.4 at 3; Ex. 1.6 at 3; Ex. 152 at 3; Ex. 171 at 5; Ex. 178 at 3.
Wahl and Deutchman did not comply with the PCAOB’s auditing
standards in their respective roles during the audits and quarterly reviews of
Accelera. As detailed below, both failed to note several red flags indicating that
consolidation was inappropriate. Both failed to exercise due professional care
and professional skepticism, failed to gather appropriate audit evidence, and
did not adequately question the representations of Accelera’s management in
the year-end audits and the interim reviews. Both insufficiently documented
issues concerning the Behavioral acquisition. Wahl failed to properly supervise
21

one of the staff accountants during the 2013 audit, and Deutchman failed to
act appropriately in carrying out the engagement quality review during the
2014 audit.
3.2. Accelera’s consolidation of Behavioral
3.2.1. Accelera signed agreements to acquire Behavioral upon initial
payment of $1 million.
Accelera’s common stock was quoted on OTC Link operated by OTC
Markets Group, Inc., under the ticker symbol ACNV, starting in January 2014.
Ex. 840 ¶ 24. John Wallin was the company’s CEO, and Cynthia Boerum was
its chief strategic officer. Tr. 55, 378. From September 2014 through March
2015, Daniel Freeman was Accelera’s CFO. Tr. 54–55. Dr. Blaise Wolfrum was
the president and CEO of Behavioral. Tr. 194.
The stock purchase agreement signed November 11, 2013, provided that
Behavioral will “become a wholly owned subsidiary of [Accelera] upon receipt
of [the] purchase price set forth in Section 1.1.1.1” of the agreement. Ex. 184
at 1 (recitals). Section 1.1.1.1 in turn states that ninety days after closing
(which, as defined in Section 2.1, was the date the agreement was signed),
Accelera was to pay Wolfrum $1 million, and would pay the full purchase price
of $4.55 million over time. Id. § 1.1.1.1; see also id. §§ 1.1.1.2–.3, 2.1. The
operative paragraphs of the agreement reiterated the language from the
recitals that Behavioral’s stock would transfer only upon its receipt of the
initial $1 million payment. Id. § 1.1. Both Wolfrum and Boerum understood
these clauses to indicate that Behavioral would not be owned by Accelera until
the $1 million payment was made. Tr. 199, 382. Accelera never made any
payments to Wolfrum under the agreement, and thus never acquired its stock.
Tr. 62–63, 202–03, 212, 382–83.
Sections 2.2, 2.3, and 2.4 of the agreement required deliveries of certain
documents by Accelera, Wolfrum, and Behavioral at closing. These documents’
terms are consistent with the stock purchase agreement in that they indicate
that Behavioral’s stock would not transfer until payment of $1 million 90 days
later. The bill of sale stated that Wolfrum will convey Behavioral’s stock to
Accelera once the $1 million payment is paid. Ex. 194. A stock powers
certificate said the same. Ex. 189. Accelera signed a promissory note for $3.55
million, effective once the $1 million was paid, to cover the rest of the $4.55
million purchase price the parties had agreed upon. Ex. 186 at 1. According to
a stock pledge and escrow agreement (also effective upon payment of the $1
million), Behavioral’s shares would be placed in escrow and held as security
until the entire purchase price was paid. Ex. 188 at 142959–60. A security
agreement added that Wolfrum would retain a security interest in Behavioral’s

22

assets until Accelera paid Wolfrum the full purchase price. Ex. 1207 §§ 1, 2,
7(d), Ex. A. An operating agreement provided for the creation of an entity
called Accelera Healthcare Management Service Organization LLC, and a
shareholder action agreement said that Wolfrum would become the manager
of the new management service organization and the president of Behavioral,
which was to become a wholly owned subsidiary of Accelera. Ex. 185; Ex. 191
at 143275. But the shareholder agreement stated that Wolfrum would remain
CEO of Behavioral until Accelera made the $1 million payment. Ex. 191 at
143275. And no assets were ever moved to the management service
organization. Tr. 70–71, 214–16. Finally, the parties signed an employment
agreement providing that Wolfrum would become president of Acceler a’s
Behavioral unit, would report to Wallin, and would receive $300,000 in annual
salary. Ex. 190 at 1. Although the employment agreement said nothing about
when it would become effective, Wolfrum understood that like the other
agreements, its effectiveness was dependent on Accelera’s payment of the
initial $1 million. Tr. 218. Further, it was a “condition of employment” that
Wolfrum sign a confidentiality agreement, and that agreement was only
effective upon the payment of the initial $1 million. Ex. 190 at 2, 18. In any
event, Wolfrum never reported to Wallin or collected a salary from Accelera.
Tr. 216–17, 388.
In addition to all these agreements which never took effect, Accelera never
made any management decisions for Behavioral or entered into contracts on
its behalf; never paid its expenses or controlled its bank accounts; never
supervised Wolfrum or decided his salary; never directed or made employment
decisions about Behavioral’s employees; never directed Behavioral’s day-to-day
operations; and never received any of Behavioral’s revenues. Tr. 73–74, 77–78,
245–46, 387.
Recognizing that Accelera had not made its initial $1 million payment,
Wolfrum and Accelera entered into four amendments to the stock purchase
agreement between February 2014 and May 2015. Exs. 197, 201, 205, 257.
Each amendment substituted a new Section 1.1.1.1 of the stock purchase
agreement for the old one. The new Section 1.1.1.1’s provided more time for
Accelera to pay the $1 million. Ex. 197 at 1; Ex. 201 at 1; Ex. 205 at 2; Ex. 257
at 2. Each amendment also provided Wolfrum with shares of Accelera as
consideration for the extension of time. Ex. 197 at 1–2; Ex. 201 at 2; Ex. 205 at
2–3; Ex. 257 at 2–3. But none of the amendments altered the fundamental
nature of the transaction, namely, that Behavioral’s stock would only transfer
to Accelera upon Accelera’s payment of the initial $1 million.

23

3.2.2. Accelera consolidated Behavioral’s financials with its own
despite never making the initial $1 million payment to acquire
Behavioral.
Despite never making the initial $1 million payment to acquire
Behavioral, Accelera consolidated Behavioral’s revenues, assets, and liabilities
with those of its own in its publicly filed financial statements from its 2013 10K through its 2015 10-K. E.g., Ex. 105 at F-3–4 (Accelera 2013 Form 10-K);
Ex. 114 at F-3–4 (Accelera 2014 Form 10-K) (consolidating Behavioral but
writing off the goodwill); Ex. 132 at F-21 (Accelera 2015 Form 10-K)
(consolidating Behavioral but counting it as a discontinued operation from
January 1, 2016, and onward because of the termination of the stock purchase
agreement); Ex. 135 at 7 (Accelera 2016 Form 10-K) (explaining that “[t]he
2015 financial statements included elsewhere in this Form 10-K have been
restated to remove [Behavioral] from our consolidated financial statements”).
Freeman testified that Accelera decided to consolidate Behavioral’s
financials with its own because it had no other operations and would otherwise
have been considered a shell company. Tr. 81. Indeed, in its Form 10-Q directly
preceding the stock purchase agreement with Behavioral, Accelera reported no
revenues and only $50 of assets. Ex. 840 ¶ 35. Once Accelera consolidated
Behavioral, Behavioral comprised 90% of its revenue in 2013 and 2014. Ex. 105
at F-4; Ex. 175 (2014 consolidated trial balance worksheet); Tr. 2321–23 (Shek
explaining how the trial balance supports his earlier statement that 90% of
Accelera’s 2014 revenue came from Behavioral).
3.2.3. Accelera’s agreement to purchase Behavioral was terminated,
and a new auditor restated Accelera’s 2015 Form 10-K.
In mid-October 2015, Wolfrum emailed Accelera, reiterating his belief that
Accelera did not own Behavioral until he was paid for the shares. Ex. 307 at
1340–41. On March 31, 2016, Wolfrum and Accelera terminated the stock
purchase agreement, effective as of January 1, 2016. Ex. 133, Ex. 10.1 at 1, 6
(termination agreement); Ex. 840 ¶ 37. An earlier draft of the termination
agreement included a paragraph that would have required Accelera to file a
Form 8-K disclosing that it “should not have recognized on its books and
records the revenue and expenses of” Behavioral. Ex. 264 § 4. But Accelera did
not agree to put that paragraph in the final version of the termination
agreement. Tr. 288–89.
In November 2016, Accelera terminated its relationship with Anton &
Chia and engaged AJ Robbins CPA, LLC, as its auditor instead. Ex. 134 at 2.
Accelera specifically wanted an auditor who would restate the reports where
Behavioral had been consolidated. Tr. 409–10. Robbins told Boerum that

24

Accelera should not have been recognizing revenue based on the stock
purchase agreement. Tr. 409–10. In its 2016 Form 10-K, Accelera restated its
2015 financial statements because it “determined that the financial statements
of [Behavioral] should have never been consolidated with those of the Company
since the Company was never able to take control of [Behavioral] due to nonpayment of the purchase price.” Ex. 135 at F-19.
3.3. Accelera’s consolidation of Behavioral’s financials with its own did not
comply with GAAP.
Accelera’s consolidation of Behavioral did not comply with GAAP. The
Financial Accounting Standards Board (FASB) establishes the financial
accounting and reporting standards for public and private companies that
follow GAAP. FASB Accounting Standards Codification (ASC) 805 covers
business combinations, or, in other words, a “transaction or other event in
which an acquirer obtains control” of a business. ASC 805-10-20. Control is the
“direct or indirect ability to determine the direction of management and
policies through ownership, contract, or otherwise.” Id. A business combination
must be accounted for using the acquisition method, which requires, as its
second step, “[d]etermining the acquisition date.” ASC 805-10-05-4. The
acquisition date is “the date on which [the acquirer] obtains control of the
acquiree” and “generally is the date on which the acquirer legally transfers the
consideration, acquires the assets, and assumes the liabilities of the acquiree—
the closing date. However, the acquirer might obtain control on a date that is
either earlier or later than the closing date.” ASC 805-10-25-6–7. Further, ASC
810 discusses when financial statements should be consolidated. See ASC 81010-05. It provides that “[f]or legal entities other than limited partnerships,
consolidation is appropriate if a reporting entity has a controlling financial
interest in another entity” and that “[t]he usual condition for a controlling
financial interest is ownership of a majority voting interest.” ASC 810-10-251; see ASC 805-10-20 (defining “control” as having the same meaning as
“controlling financial interest” in ASC 810). 11

ASC 810 also discusses the variable interest entity (VIE) model for
consolidation, according to which “a controlling financial interest may be
achieved other than by ownership of shares or voting interests” when the
acquiring company has both the “power to direct the activities that most
significantly impact the VIE’s economic performance” and “[t]he obligation to
absorb losses of the VIE that could potentially be significant to the VIE or the
right to receive benefits from the VIE that could po tentially be significant to
the VIE.” ASC 810-10-05 (General Note on Consolidation). But there is no
indication that VIE accounting would have been appropriate here. The
11

25

Accelera entered into an agreement to purchase Behavioral’s shares. But
because it never paid for the shares, it never obtained them. Ex. 184 §§ 1.1,
1.1.1.1. Accelera thus did not have a “controlling financial interest” in
Behavioral that would make consolidation appropriate under ASC 810-10-251. Further, the acquisition date as defined in ASC 805-10-05-4 never came to
pass. Although the closing date of the stock purchase agreement was the day
it was signed on November 11, 2013, consideration—which was the initial $1
million payment—never transferred. As ASC 805 recognizes, sometimes
control passes only after the closing date. ASC 805-10-25-7. Finally, Accelera
never controlled Behavioral by other means either. As Boerum, Freeman, and
Wolfrum testified, Accelera had no ability to “determine the direction” of
Behavioral’s “management and policies.” ASC 805-10-20. Accelera was not
following GAAP when it consolidated Behavioral’s financial statements with
its own.
3.4. Wahl and Deutchman’s arguments that consolidation was appropriate
are unpersuasive.
Wahl argues that consolidation was appropriate because the stock
purchase agreement defined the date it was signed as the “closing” date and
said it was “effective” as of the closing. Wahl Post-hr’g Br. at 62. Yet as
explained above, the fact that the closing date of the transaction was the date
it was signed does not mean control transferred on that date. See ASC 805-1025-7. To the contrary, the agreement made it clear that Behavioral’s stock
would not transfer until $1 million was paid, and that even then, it would be
held in escrow until the rest of the purchase price was paid. Ex. 184 §§ 1.1,
1.1.1.1; Ex. 188 at 142959–60. The same is true regarding other documents
such as the promissory note documenting Accelera’s liability and the
shareholder action agreement; the note became effective only once the $1
million was paid, and the shareholder agreement stated that Wolfrum would
remain Behavioral’s CEO until the $1 million was paid. Ex. 186 at 1; Ex. 191
at 143275; see Wahl Post-hr’g Br. at 62, 68.
Wahl further argues that Accelera had control because the operating
agreement, which was effective as of November 2013, called for the creation of
transaction was a straightforward stock purchase in which controlling
financial interest would be achieved once Accelera paid for Behavioral’s stock.
Further, as noted, Accelera had no power to direct Behavioral’s activities,
which would be required for consolidation under the VIE model. To the extent
that Wahl attempts to claim in his proposed findings that VIE accounting is
applicable, see Wahl PFOF at 534–38 (PDF), his arguments are unclear.
Moreover, I will not consider arguments made only in a party’s proposed
findings of fact.

26

a management service organization with Wolfrum at its head, and the security
agreement spoke of the purchase of Behavioral’s stock in the past tense, as if
it had already occurred. Wahl Post-hr’g Br. at 63; see Ex. 1207 § 2; Ex. 185 at
1; Tr. 4658–59 (Wahl, speaking about the operating agreement’s creation of the
new organization, wondered, “if the business intent isn’t to close a transaction,
why go through all this trouble and why have this clause in the agreement?”).
But these agreements did not provide Accelera with control of Behavioral. They
were ancillary documents; neither consummated the stock purchase. No assets
were ever moved to the management service organization created by the
operating agreement. Tr. 70–71, 214–15. And the security agreement was
relevant only once Accelera had paid Wolfrum the initial $1 million; it gave
him a continued security interest in Behavioral’s assets until he was paid in
full by Accelera. See Ex. 1207 §§ 1, 2, 7(d), Ex. A.
Similarly, although Wahl argues that the employment agreement between
Accelera and Wolfrum was effective as of November 2013, Wahl Post-hr’g Br.
at 63–64, the agreement alone provides no basis for control. Wolfrum was
never actually employed by Accelera in any meaningful way. Tr. 216–17, 388
(Wolfrum never reported to Wallin or collected a salary from Accelera). 12
Pointing to both the language of the employment agreement and an April 2016
document from Accelera’s board of directors following the termination
agreement, Wahl maintains that Wolfrum must have been an employee
because he received 600,000 shares of Accelera as compensation pursuant to
the employment agreement. Wahl Post-hr’g Br. at 63–65, 68; Ex. 190 at 1–2;
Ex. 1259 at 2 (PDF) (Accelera’s board in 2016 “confirms that the 600,000
shares were earned as compensation under the November 20, 2013
Employment Agreement in increments of 200,000”). However, the Division
disputes that Accelera granted Wolfrum the shares under the te rms of the
employment agreement, noting that Wahl’s assertion is belied by the
termination agreement itself and that Wolfrum and Boerum testified to a
different reason for his receipt of the shares. Div. Resp. to Wahl PFOF at 563–
64, 570 (PDF); Ex. 133, Ex. 10.1 at 2 (“The Parties agree that the transfer of
Shares from the Purchaser to Seller shall not be deemed to be consideration
The fact that several of Accelera’s 10-Ks call Wolfrum an “executive
officer” of Accelera also does not demonstrate that Accelera had control of
Behavioral. See Wahl Post-hr’g Br. at 63, 65; Ex. 105 at 49–50; Ex. 114 at 26–
27; Ex. 132 at 29–30. The 10-Ks stating that Wolfrum was actually employed
by Accelera were as mistaken as they were in other respects; indeed, the 2014
10-K is equally mistaken when it refers to Behavioral as a 100% owned
subsidiary of Accelera, and its statements alone cannot be used to support
consolidation. Ex. 114 at F-7; see Wahl Post-hr’g Br. at 65.
12

27

under or pursuant to any of the Stock Sale Agreements.”); Tr. 285, 404–05
(Wolfrum and Boerum testified the shares were compensation for the hassle of
allowing Behavioral to be audited in early 2016 for the 2015 audit while the
termination agreement was already being negotiated). Regardless of whether
the shares granted were compensation contemplated by the original
agreement, the fact remains that Wolfrum never worked for Accelera in any
way that could support Accelera’s control of Behavioral for accounting
purposes.13
Wahl appears to assert that the amendments to the stock purchase
agreement somehow created a new means of transferring control of Behavioral
to Accelera. He notes that each amendment deleted the outdated Section
1.1.1.1 of the agreement—the provision requiring Accelera to pay Wolfrum $1
million 90 days after closing to obtain Behavioral’s stock. Wahl Post-hr’g Br.
at 65–67. Wahl argues the amendments instead provided for a different type
of consideration: “an obligation to pay Wolfrum $4.5MM and … compensat[e]
him with shares at each event of default.” Id. at 66 n.75 (emphasis omitted);
see also Wahl PFOF at 520 (PDF). He explains that since the first two
amendments became effective in February and March 2014, respectively,
during the 2013 audit, the amendments overrode the original stock purchase
agreement for that period. Wahl Post-hrg Br. at 65–67. But the amendments
merely substituted a different Section 1.1.1.1 with new payment deadlines in
place of the old one. Ex. 197 at 1; Ex. 201 at 1. The terms of the agreement
never changed in principle; Accelera would control Behavioral only after it paid
for its stock. Moreover, the 2013 audit was about Accelera’s 2013 finances; the
2014 amendments were not retroactive and could not have changed the
Insofar as Accelera’s 2016 board resolution purports that the transfer of
shares was compensation under the employment agreement, that resolution
cannot alter the terms of the termination agreement, which made clear that:
the transfer of shares was not consideration under prior agreements including
the original stock purchase agreement, employment agreement, or any
subsequent amendments (collectively referred to as the stock sale agreements
in the termination agreement); Accelera did not make payments required by
the stock sale agreements; and the termination agreement constituted the
entire agreement among the parties and superseded any prior understandings,
agreements, or representations. See Farmers Auto. Ins. Ass’n v. Wroblewski,
887 N.E.2d 916, 923 (Ill. App. Ct. 2008) (indicating that under Illinois law,
contracts are interpreted by first considering the contractual language and
that extrinsic evidence cannot modify unambiguous terms in a written
contract); Ex. 133, Ex. 10.1 at 1, 2, 5. Thus, the transfer of shares did not fulfill
the purchase price requirement and do not show that Accelera employed
Wolfrum in any meaningful way that established control over Behavioral.
13

28

accounting for 2013. No better is Wahl’s argument that consolidation was
appropriate because the first amendment removed the provision allowing
either party to terminate the agreement before the payment of the purchase
price, and the second amendment restricted Accelera’s ability to cancel. Wahl
Post-hr’g Br. at 65, 67; Ex. 197 at 1; Ex. 201 at 2. The lack of an ability to
terminate does not mean that the agreement was actually consummated.
Wahl asserts that Wolfrum never said that the transaction had not closed,
and to the contrary, he confirmed the debt Accelera owed him each year upon
Anton & Chia’s request and he cooperated with the audits. Wahl Post-hr’g Br.
at 68–69. But these points have little to do with who actually controlled
Behavioral. That Wolfrum cooperated with the audit does not mean Accelera
actually controlled his company or even that he believed it did. And the fact
that Wolfrum confirmed that the full $4.55 million was still owed to him
indicates that control never passed to Accelera.
Deutchman, for his part, points out that ASC 805 provides many ways of
obtaining control, even “without transferring consideration,” including “by
contract alone.” ASC 805-10-25-11; see Deutchman Post-hr’g Br. at 18. He
asserts that there was “common control” between Behavioral and Accelera
because the agreements had been signed, Wolfrum was a contractual employee
of Accelera, he was paid Accelera shares, and the parties wanted to merge.
Deutchman Post-hr’g Br. at 19. In such a situation, according to Deutchman,
consolidation was appropriate even though no consideration transferred as
long as the Accelera’s debt to Behavioral was booked on its balance sheet and
Accelera did not recognize any goodwill from the transaction. Id. But
Deutchman’s theory has no basis. The transaction between Accelera and
Behavioral was a stock purchase agreement, and the agreement was quite
clear that Behavioral’s shares would not transfer until the stock was paid for.
This was not a situation where the contract provided for control without
payment of consideration.
Next, Deutchman argues that consolidation was permitted by Commission
regulations. Rule 3-05 of Regulation S-X concerns “[f]inancial statements of
businesses acquired or to be acquired,” and states that “[f]inancial statements
prepared and audited in accordance with this regulation should be furnished”
if a “business combination has occurred or is probable,” or “[c]onsummation of
a combination between entities under common control is probable.” 17 C.F.R.
§ 210.3-05(a)(1)(i)–(ii) (emphasis added). Further, Rule 3-05 provides:
“Acquisitions of a group of related businesses that are probable or that have
occurred subsequent to the latest fiscal year-end for which audited financial
statements of the registrant have been filed shall be treated under this section
as if they are a single business combination.” 17 C.F.R. § 210.3-05(a)(3)
(emphasis added). Deutchman asserts that these regulations demonstrate that
29

consolidation of two companies’ financial statements is permissible even before
the combination has occurred, as long as it is probable that it will occur.
Deutchman Post-hr’g Br. at 15–17. Nothing, however, shows that the auditors,
when reviewing Accelera’s financial statements, considered this supposed
rationale or the degree of probability in which Accelera’s transaction with
Behavioral would be consummated. The information available to the auditors
should have raised serious concerns undercutting that probability.
Moreover, Rule 3-05 merely requires the financial statements of a soonto-be subsidiary to be “furnished” to investors. See 17 C.F.R. § 210.3-05(a)(1).
It does not support the notion that the financials of two entities should be
consolidated in the situation presented by this case. See Instructions for the
Presentation and Preparation of Pro Forma Financial Information and
Requirements for Financial Statements of Businesses Acquired or To Be
Acquired, 47 Fed. Reg. 29,832, 29,834–35 (July 9, 1982) (recognizing, in the
adopting release, the distinction between furnishing an acquired or to-beacquired business’s financial statements and consolidating those financials
with the acquiree after the acquisition). Indeed, Commission rules found
elsewhere provide guidance on when consolidation is appropriate. See 17
C.F.R. § 210.3A-02(a) (stating, with exceptions, “[g]enerally, registrants shall
consolidate entities that are majority owned and shall not consolidate entities
that are not majority owned”).
Deutchman also points to Rule 4-08 of Regulation S-X, which provides that
“[a]mounts of related party transactions should be stated on the face of the
balance sheet” and that when separate financial statements are presented for
the entity or its subsidiaries, “intercompany profits or losses resulting from
transactions with related parties and the effects thereof shall be disclosed.” 17
C.F.R. § 210.4-08(k). He therefore argues that he was required to disclose
Accelera’s contractual relationship with Behavioral, and that his failure to do
so could also have been the basis for fraud charges. Deutchman Post-hr’g Br.
at 19–20. But again, Rule 4-08 is talking about disclosure, not consolidation.
Accelera could have drafted financial statements disclosing the relationship
between Accelera and Behavioral without consolidating the entities.
Finally, Anton & Chia’s audit file never referenced any of the preceding
Regulation S-X rules as a basis for consolidation, and Deutchman never
mentioned any of them in his testimony as something he considered at the
time. See Gregory M. Dearlove, CPA, Exchange Act Release No. 57244, 2008
WL 281105, at *10 n.39 (Jan. 31, 2008) (“We consider the absence of work
papers to be evidence that the audit team did not devote substantial, if any,
effort to review the areas in question.”), pet. denied, 573 F.3d 801 (D.C. Cir.
2009).

30

3.5. Anton & Chia’s audits and interim reviews of Accelera
3.5.1. 2013 audit
For the 2013 year-end audit, Wahl served as the engagement partner, and
Yu-Ta Chen was one of two staff accountants. Ex. 136 at 5. In its planning
memorandum, the firm stated that it would examine the agreements
surrounding Accelera’s purchase of Behavioral and would request a purchase
price allocation. Id. at 3.
The team was aware that their main correspondent at the company,
Timothy Neher—who was the founder of Accelera and was doing the
accounting at the time—had poor financial and accounting abilities. Tr. 56–57,
474, 559–60. Anton & Chia documented that it would not rely on Accelera’s
internal controls because it had no significant operations and a small board of
directors. Ex. 1, 2013 Audit Annual, WP 1105 at 2. Neher did not provide
Anton & Chia with a draft Form 10-K or draft financials until March 24, 2014,
just six days before the filing deadline. Ex. 202 at 22969.
Anton & Chia, including Wahl, received all of the agreements concerning
Accelera’s purchase of Behavioral. Exs. 302–04; Tr. 499–504. Wahl signed off
as having reviewed several of them (including the stock purchase agreement).
Ex. 138 at 1–2, 4. Accelera’s Form 10-K also noted that pursuant to the stock
purchase agreement, Accelera was required to pay $1 million 90 days from the
date of closing. Ex. 105 at F-7. Thus, it would have been obvious to the auditors,
either from the Form 10-K itself, or certainly through review of the
agreements, that payment was required to consummate the acquisition. At the
hearing, Wahl admitted that Accelera had never paid Wolfrum the initial $1
million. See Tr. 5216.
Chen prepared a memo to document the Behavioral acquisition, which
Wahl signed off on as having reviewed. Ex. 142; Ex. 138 at 4 (sign off for WP
2503); Tr. 508. Chen did not have any auditing experience at the time and had
just been hired earlier that month. Tr. 468, 471; see Ex. 280 (Chen’s resume).
He had never worked on business combinations before and had never drafted
anything like the acquisition memo previously. Tr. 514–15. He based the memo
largely on a template. Tr. 510, 513.
The memo identified ASC 805 as the relevant GAAP standard. Ex. 142 at
2–3. It also acknowledged that it is key to determine if, in the transaction,
“someone gain[ed] control.” Id. at 2. And it noted that “the usual condition for
controlling interest is the ownership of the majority voting interest in the
entity.” Id. at 4. After setting forth the basics of control, the memo then
explained that one must identify the acquisition date, which is “not necessarily
the date of an agreement or reaching binding terms.” Id. Yet curiously, the
31

memo did not attempt to determine the acquisition date, and turned instead
to other topics. It is not entirely clear whether Chen believed that the
acquisition had even gone through yet. The memo noted, for example, that
Accelera will pay Behavioral $4.55 million, and that “[a]s a result, [Behavioral]
would become a wholly owned subsidiary of the Issuer.” Id. at 1–2. And it
further stated that per the agreement, Accelera “will obtained [sic] 100% of the
ownership” of Behavioral. Id. at 2 (emphasis added). The memo concluded with
another ambiguous remark, that “[r]evenue will begin to accrue to the Issuer
from Target operations prospectively from the date the Issuer obtains control.”
Id. at 9. In sum, the memo failed to explain if and when Accelera obtained
control of Behavioral.
Anton & Chia performed no fieldwork for the 2013 audit. Tr. 497–98.
There is no evidence in the workpapers that the team questioned Wolfrum
about whether Accelera controlled Behavioral. Chen did not recall having any
such conversations with Wolfrum. Tr. 536–37.
Accelera’s 2013 Form 10-K had an unqualified audit opinion from Anton
& Chia. The firm opined that Accelera’s financial statements, “present fairly,
in all material respects, the consolidated financial position of Accelera
Innovations, Inc. as of December 31, 2013 and 2012, and the consolidated
results of their operations and their cash flows for each of the years then ended,
in conformity with accounting principles generally accepted in the United
States of America.” Ex. 105 at F-2. Anton & Chia further represented that it
had “conducted [its] audits in accordance with the standards of the Public
Company Accounting Oversight Board.” Id. The report included a going
concern disclosure, noting “substantial doubt about [Accelera’s] ability to
continue as a going concern” because of, among other things, the company’s
“recurring operating losses and negative cash flow.” Id.
In its report to Accelera’s board of directors related to its 2013 audit, Anton
& Chia “identified a lack of sufficient personnel” for accounting and financial
reporting “with appropriate skills, training, and experience” to ensure
compliance with GAAP. Ex. 143 at 927. The firm recommended Accelera “hire
a full time CFO with relevant experience.” Id.
3.5.2. 2014 interim reviews and year-end audit
Anton & Chia continued to audit Accelera in 2014, and Wahl remained the
engagement partner on all engagements (including year-end) except for the
third quarter review, in which he was not involved. Ex. 1.1 at 3; Ex. 1.4 at 3;
Ex. 166 at 3; Ex. 171 at 5. Tommy Shek was the audit manager for the yearend audit. Ex. 171 at 5.

32

No additional analysis of Behavioral’s consolidation was undertaken in
2014. See Tr. 548 (Chen testified that the issue did not come up again in the
reviews he worked on). No additional workpapers analyzed the issue. See
Tr. 1162 (confirmed by Devor’s review). Chen and others, however, wondered
on a couple of occasions whether Accelera had ever paid off its debt to
Behavioral. Ex. 206 at 27229 (August 2014 email from Chen to Neher asking
whether “the Company paid off [Behavioral]”); Ex. 207 at 27237 (draft Q2 10Q with Richard Koch’s handwritten notes asking whether the purchase price
installments had even been paid); Tr. 560–63.
Anton & Chia auditors visited Behavioral to perform fieldwork three
times. Tr. 248. In mid-April 2014, Wolfrum instructed Anton & Chia staff by
email to remain confidential and keep a low profile during the audit, and not
to mention anything about the sale to Accelera to anyone but himself. Ex. 204
at 15069. At the hearing, Wolfrum claimed he sent this email because he
“didn’t want people in the office to think that we had sold the business, because
we hadn’t.” Tr. 253. Wolfrum then told the staff who came for fieldwork that
he still “owned Behavioral, and that no one’s made any payments yet, …
although I was hoping they would soon.” Tr. 255. He further told the auditors
that he paid the taxes, wrote the checks, and managed the bank accounts,
because “it’s totally separate from Accelera. They haven’t purchased us yet.”
Tr. 256. Similarly, during field work at Behavioral in 2015, Wolfrum told the
auditors that “Accelera hasn’t paid yet, and I still own a hundred percent of
the company.” Tr. 258–59, 264. Indeed, during both audits, the auditors had
access on site to Behavioral’s bank records, which, had the auditors looked at
them, would have showed that Behavioral had not paid any of its revenues to
Accelera. Tr. 258, 266.
Anton & Chia was hired to complete an acquisition audit for Behavioral.
Ex. 839.6 at 110 (PDF). But, as of September 2014, Accelera had not completed
the required filings on its end. Id. at 494 (PDF); Tr. 2345. Anton & Chia never
completed the acquisition audit. Tr. 538–39.
Deutchman was staffed as the engagement partner on Accelera in the
third quarter of 2014. Ex. 1.4 at 3; Tr. 729. For the year-end audit, on the other
hand, he was listed as the EQR in the planning memo. Ex. 171 at 5. But while
Deutchman maintained that he was indeed EQR, Tr. 769–70, a draft of the
planning memo for the year-end audit and the engagement summary memo
instead listed Deutchman as the engagement partner and Wahl as the EQR.
Ex. 176 at 48171; Ex. 237 at 13485; Tr. 768–70. Moreover, in several emails
from the time of the year-end audit, Deutchman was referred to as the “EP,”
the “partner in charge,” or by other terms indicating he was engagement
partner. Ex. 228 at 24839; Ex. 229 at 1475; Ex. 233 at 25660. Deutchman also
took on roles that were more appropriate for an engagement partner: he
33

communicated directly with Accelera, proposed calls, organized field work, and
was involved in the audit planning meeting as well as other decisions at an
early stage. Ex. 229 at 1475; Ex. 231 at 93380; Ex. 234 at 25680; Ex. 235 at
25729; Ex. 237 at 1 (PDF); Ex. 311; see Ex. 88.1 at 65 (Devor opined in his
report that communicating with the company to be audited is a duty “typically
performed by the Engagement Partner”). Wahl was not even copied on some of
these emails. See Ex. 231 at 93380; Ex. 235 at 25729. Freeman testified that
he thought Deutchman was the engagement partner because Deutchman was
working with him to get ready for the audit. Tr. 132–33.
Once Freeman became the CFO of Accelera in September 2014, he was
concerned that Behavioral was inappropriately consolidated. Tr. 54, 79–80.
Freeman raised his concerns to Deutchman on a number of occasions. On a
phone call in October 2014, Freeman opined that consolidation was
inappropriate. See Ex. 214 at 492. Freeman followed up by email in December,
and asked Deutchman to forward Anton & Chia’s basis for consolidation,
including any research and analysis the firm had done supporting
consolidation. Id. Not receiving any response, Freeman pressed Deutchman
again for a copy of the research in early January 2015. Tr. 102–03; Ex. 217 at
22132–33. Deutchman, however, again did not provide any research. Tr. 103.
On February 2, 2015, Freeman sent a draft agenda for a call to Deutchman
and others, one discussion point being whether Behavioral should be
consolidated for the 2014 audit. Ex. 223 at 1283. Freeman also emailed
Deutchman directly, telling him that the issue of Behavioral’s consolidation
would come up on the conference call, and that he did not agree with Neher’s
rationale for consolidation, because Accelera’s “subsidiary never controlled”
Behavioral. Ex. 222 at 1. At some point, Freeman also told Deutchman that he
had called the hotline for the American Institute of Certified Public
Accountants (AICPA), and that they had told him that Behavioral had been
inappropriately consolidated. Tr. 111, 119–21.
During the conference call on February 9, Freeman again explained his
problems with consolidation. Tr. 121–23; see Ex. 225. Accelera’s attorneys,
although on the call, expressed no opinion on the matter, as they felt it was an
accounting matter, not a legal one. Tr. 122. According to Freeman, Deutchman
opined that the previous financial statements were fine and did not need
restatement, but did not offer any reason for his opinion. Tr. 123; but see
Tr. 712 (Deutchman could not recall much about the call). Also according to
Freeman, the parties on the call agreed to have Accelera’s attorney Bob Acri
meet with Wolfrum and enter into a supplemental agreement that would say
that Behavioral “would be under the control of Accelera to get around the issue
of consolidation.” Tr. 123. No such agreement, however, was ever entered into.
Tr. 123–24. Freeman resigned from Accelera on March 20, 2015, in part

34

because of “the inappropriate consolidation of Behavioral with Accelera.”
Tr. 125–26; see Ex. 124; Ex. 227 at 1.
Deutchman never acted on any of Freeman’s concerns. See Tr. 707–08,
711, 941. There is no evidence in the workpapers that Deutchman documented
Freeman’s questions or told the other members of the engagement team about
them. See Tr. 698–700, 2336 (Shek, the audit manager for 2014, testified that
he would have liked to have known), 2346 (Shek testified there were no
discussions about Accelera’s control of Behavioral during the 2014 audit).
Moreover, it seems likely that Deutchman did not go back and review Chen’s
consolidation memo. Tr. 1050–54.
Deutchman testified that he did not take Freeman’s concerns seriously for
several reasons. For one, he and Wahl had a low opinion of Freeman’s work;
the firm needed to make many audit adjustments to the financial statements
Freeman prepared. Tr. 702–03, 917, 4620, 5292. Second, he thought that if
Freeman had real concerns about consolidation, it was his job to prepare a
proper memo documenting them. Tr. 707–08, 719, 892. Third, he felt that
providing Freeman with Chen’s consolidation memo was inappropriate and
would compromise his independence as an auditor. Tr. 938–39. Fourth,
Deutchman believed that if Freeman had wanted an opinion on the legality of
consolidation, it should have come from the Commission or another accounting
firm that audited public companies, not the AICPA, which only worked with
private companies. Tr. 870, 902. Finally, to a certain extent, he did not consider
it to be his place to challenge his own firm’s prior determination. Tr. 762, 1060–
61; Ex. 839.6 at 480, 491 (PDF) (Deutchman’s 2018 and 2019 deposition
testimony in the Commission’s district court case against Accelera). Anton &
Chia had signed off on Accelera’s financial statements back in 2013, and
Deutchman was not “reordering the work or replanning the work”; he instead
assumed that consolidation had been “done correctly.” Tr. 762, 1061 (“I
deferred to the firm’s opinion and I still do.”).
Despite the fact that Deutchman deferred to Anton & Chia on
consolidation and did not formulate his own opinion, he testified (at the
hearing at least) that he accepted the firm’s position because he had seen the
stock purchase agreement, Wolfrum’s employment agreement, the promissory
note, and the operating agreement—documents which convinced him that the
firm’s position was at least reasonable. Tr. 1097–98; but see Tr. 1062
(Deutchman impeached with 2016 investigative testimony where he said he
could not recall whether he read any of the agreements). Deutchman was
aware, however, that none of the purchase price for Behavioral had been paid.
Among the workpapers for the 2014 audit on which Deutchman signed off was
a confirmation signed by Wolfrum that Accelera had not paid him any of the
$4.55 million purchase price for the company. See Ex. 239 at 1–2; Ex. 1, 2014
35

Audit Annual, WP 5303; Ex. 147 at line 453; see also Ex. 247; Ex. 840 ¶ 36
(Deutchman reviewed and signed off on the amendments to the stock purchase
agreement extending the payment deadline). Further, Deutchman never asked
Wolfrum about the status of the stock purchase agreement or whether Accelera
had actually acquired Behavioral. Tr. 1066.
On March 31, 2015, Brian Rusywick, the chief operating officer of Anton
& Chia, asked Deutchman to speak to an Accelera attorney and confirm which
entities should be audited in 2014. Tr. 475; Ex. 240 at 1287. Deutchman did
not think this was a legal question, however, and it appears he did not follow
up with an attorney. See Tr. 796–99. On April 6, 2015, in an email titled “Legal
- Accelera,” Shek asked Deutchman “to call the attorney and obtain written
representation for the entity to be consolidated in 2014.” Ex. 241 at 1290.
Deutchman did not follow up on this request either. Tr. 2333. The Division
suggests that these incidents are further evidence Deutchman was put on
notice that Behavioral’s consolidation may have been inappropriate and was
in fact told to obtain a legal opinion on the matter. See Div. Post-hr’g Br. at 8–
10, 34; see also Div. PFOF at 88–89; Tr. 800–01, 2330.
But this is a stretch. The emails do not ask Deutchman to obtain a legal
opinion about Behavioral’s consolidation. Rusywick told him to ask Accelera’s
attorneys “what entities need to be audited,” but there is no indication that his
query was related to the appropriateness of Behavioral’s consolidation.
Similarly, there is no indication in Shek’s request that Deutchman obtain an
attorney’s “written representation for the entity to be consolidated in 2014” is
a representation about the appropriateness of Behavioral’s consolidation with
Accelera. Shek’s subsequent email listing audit matters still outstanding,
which asks for “[l]egal representation for business [Accelera] acquired in 2013
and 2014,” is not questioning Behavioral’s consolidation; in a routine manner,
the email also asks for other information from Behavioral such as revenue
testing and confirmation about the $4.55 million not yet paid. Ex. 249 at
30160–61. This suggests that the issue of consolidation was not the target of
Shek’s emails. In any event, if Deutchman had asked Accelera’s attorneys
about consolidation, it is not clear it would have been particularly illuminating.
On the February 2015 call with Accelera—just a couple months before the
emails from Rusywick and Shek—Accelera’s attorneys saw the matter as an
accounting question and not a legal one. See Tr. 122.
Earlier, on November 25, 2014, Accelera entered into a stock purchase
agreement with Grace Home Health Care, Inc. See Ex. 113. The same day,
Accelera entered into an asset purchase agreement with Watson Health Care,
Inc., and Affordable Nursing, Inc. Id. On January 5, 2015, Accelera entered
into a stock purchase agreement with Traditions Home Care, Inc. See Ex. 116.
Accelera never made any payments toward completing these acquisitions.
36

Tr. 415. Unlike with Behavioral, however, Accelera did not consolidate these
companies’ financials with its own. Tr. 416. Wahl and Deutchman signed off as
having reviewed the purchase agreements for Grace, Watson, and Traditions.
Ex. 1, 2014 Audit Annual, WP 0418.01 (Grace and Watson 8-K) and WP
0419.01 (Traditions 8-K); Ex. 147 at lines 62, 66, 76, and 80 (Wahl and
Deutchman’s sign offs on 0418.01 and 0419.01). But the fact that these
companies were not consolidated did not cause the team to rethink whether
Behavioral’s consolidation was appropriate. Shek testified that he reviewed
the agreements and decided Accelera “didn’t have control.” Tr. 2340. He did
not reevaluate the Behavioral transaction because he expected that the 2013
audit team had looked into it. See Tr. 2340–41.
Although Accelera was required to prepare a goodwill impairment
analysis and purchase price allocation for Behavioral within one year of the
acquisition, it had not done so by the time of the 2014 audit. Tr. 2342–43. Shek
therefore drafted a goodwill impairment analysis, which was reviewed by both
Wahl and Deutchman. Ex. 146; Ex. 147 at lines 409 and 412; Tr. 898–99. Shek
and Deutchman decided to impair the entire amount of goodwill, over $4
million, because of Accelera’s losses and because it did “not have sufficient
support to validate the goodwill for [Behavioral].” Ex. 146 at 1487–88.
In addition to writing down all of the goodwill from the Behavioral
acquisition, Anton & Chia proposed a number of other adjustments to
Accelera’s financials for the 2014 audit. Ex. 1204 at 5; Tr. 4612–17. In total,
the firm made eight adjustments, which increased Accelera’s losses by over $18
million and just about doubled the company’s reported losses for the year.
Tr. 4612, 4616–17. Wahl testified that this showed that Accelera’s
management was “not taking their job seriously,” and that conversely, Anton
& Chia was taking its job seriously. Tr. 4614. Deutchman testified that by
making Accelera’s losses worse, and especially by impairing all of the goodwill
for Behavioral, Anton & Chia presented Accelera’s financials to investors in
the most conservative way. Tr. 703–04, 911.
Anton & Chia’s unqualified audit report for 2014, like its 2013 report,
stated that Accelera’s financials had been presented in accordance with GAAP
and that Anton & Chia’s audit had complied with PCAOB standards. Ex. 114
at F-2. It also contained a going concern disclosure. Id.
3.5.3. 2015 interim reviews
Not much changed during Anton & Chia’s quarterly reviews in 2015. The
engagement team was similar; Wahl was the engagement partner and

37

Deutchman was the EQR. Ex. 1.6 at 3; Ex. 152 at 3; Ex. 178 at 3.14 Although
the firm noted in the second quarter of 2015 that Accelera still had not made
any payments to Behavioral, no reassessment of the transaction was
conducted. Tr. 582–84; Ex. 1.7. No one asked whether Accelera really
controlled Behavioral. Tr. 2354–55. During the course of the 2015 reviews,
Wahl continued to note that Accelera’s internal controls were very poor.
Ex. 258 at 2214; Ex. 261 at 115024. By July 2015, Anton & Chia was aware
that Accelera was being investigated by the Commission for its financial
reporting related to the Behavioral consolidation. Ex. 840 ¶ 40.
3.6. Wahl and Deutchman failed to follow PCAOB standards.
In their respective roles in the Accelera engagement, Wahl and
Deutchman did not adhere to several PCAOB standards in effect at the time.15
3.6.1. Inadequate audit evidence, insufficient professional skepticism,
and improper acceptance of management representations
“The auditor must plan and perform audit procedures to obtain sufficient
appropriate audit evidence to provide a reasonable basis for his or her opinion,”
and appropriateness is measured by “relevance and reliability.” PCAOB
Auditing Standard (AS) No. 15.4, .6. But in 2013, the team did not perform
field work at Behavioral or ask Wolfrum any questions to determine whether
Deutchman’s testimony that he did not believe he was involved in the 2015
third quarter review is contradicted by the planning memo for that quarter.
Compare Tr. 639, with Ex. 178 at 3.
14

Wahl and Chung make a global argument pertaining to all three
engagements, suggesting that many of the professional standards the Division
claims they violated are not obligatory, as the standards use words like “shall”
and “should” instead of “must.” See Wahl Response to Div. PFOF at 2–3, 823
(PDF). But the PCAOB considers “shall” to denote an “unconditional
responsibility” and “should” a “presumptively mandatory” responsibility
“unless the auditor demonstrates that alternative actions he or she followed in
the circumstances were sufficient to achieve the objectives of the standard .”
PCAOB Rule 3101(a)(1)–(2), https://pcaobus.org/Rules/Pages/Rule_3101.aspx.
Similarly, FASB considers the words “shall” and “should” to be comparable,
and notes that both represent “the requirement to apply a standard.” FASB
Accounting Standards Codification, About the Codification (v 4.10), at 23 (Dec.
2014), https://asc.fasb.org/imageRoot/71/58741171.pdf. The fact that neither
Wahl or Chung understood the meaning of “shall” or “should” in the
professional standards that were obliged to follow—either then or now—lends
further credence to the proposition that they engaged in improper professional
conduct.
15

38

Accelera was actually controlling Behavioral. The memo prepared by Chen and
reviewed by Wahl failed to properly interpret the stock purchase agreement,
and did not even opine on whether the acquisition had actually taken place.
Wahl thus also failed to “consider the competency and sufficiency of the
evidence.” PCAOB AU § 230.08.
Further, “[i]f a representation made by management is contradicted by
other audit evidence, the auditor should investigate the circumstances and
consider the reliability of the representation made.” AU § 333.04. However, the
engagement team improperly accepted management’s representation in its
financial statements that Behavioral should be consolidated without properly
evaluating the obviously contrary evidence in the legal agreements. All these
failures contradict “an attitude that includes a questioning mind and a critical
assessment of audit evidence” and demonstrate that they did not exercise due
professional care and professional skepticism. AU §§ 230.01, 230.07.
In 2014, these failures were compounded. The engagement team stuck to
their earlier position despite numerous red flags and additional evidence that
consolidation was improper. Deutchman, as EQR, also failed to address several
red flags of which he was aware. (1) On more than one occasion during
fieldwork at Behavioral, Wolfrum told the team that he had never sold his
company and that he did not work for Accelera. (2) Both Wahl and Deutchman
knew that Accelera did not consolidate Grace, Watson, and Traditions because
Accelera had never paid for those companies, but they did not reevaluate
Behavioral’s consolidation even though they knew Accelera had not paid for it
either. (3) Accelera failed to complete its paperwork to support Anton & Chia’s
acquisition audit of Behavioral, but this did not cause the team to wonder
whether Accelera had actually acquired the company. (4) Deutchman ignored
Freeman’s repeated concerns that Behavioral was inappropriately
consolidated, and did not question former management representations in
light of the arguments Freeman made. (5) Deutchman impaired all of the
goodwill from Accelera’s purchase of Behavioral, but then failed to take a closer
look at the transaction itself and whether control had been obtained and
consolidation was appropriate. All of these matters demonstrate a failure to
obtain appropriate audit evidence, a failure to exercise due professional care
and skepticism, and unreasonable acceptance of management representations
in light of conflicting evidence. Accelera’s transaction with Behavioral, which
accounted for 90% of Accelera’s revenues in 2013 and 2014, demanded much
more scrutiny than it received.
The Division further alleges based primarily on AU § 230’s requirement
to exercise due professional care and professional skepticism that Anton &
Chia and Wahl also failed to properly plan the 2013 and 2014 audits. See Div.
Post-hr’g Br. at 8–10; see also Div. PFOF at 56–57, 60–61, 81–82. For example,
39

the team noted at the outset of the 2013 audit that they could not rely on
Accelera’s internal controls, which means that they should have exercised
heightened skepticism. But whether one characterizes the problems as being
in the planning or in the execution, it is unquestionable that Wahl and
Deutchman failed to exercise due professional care in conducting the audits.
3.6.2. Failure to document significant issues and findings
In 2013, Wahl failed to prepare audit documentation “in sufficient detail
to provide a clear understanding of its purpose, source, and the conclusions
reached” with appropriate organization “to provide a clear link to the
significant findings or issues.” AS No. 3.4. Chen’s memo exploring Accelera’s
stock deal with Behavioral, which Wahl reviewed, did not sufficiently support
the conclusion that Accelera had acquired Behavioral. To the contrary, it was
vague on essential points such as when the acquisition date was and whether
Accelera actually exercised control over Behavioral. The engagement team
prepared no other documentation concerning the purported acquisition. AS
No. 3.6 requires audit documentation to “contain sufficient information to
enable an experienced auditor, having no previous connection with the
engagement: [t]o understand the nature, timing, extent, and results of the
procedures performed, evidence obtained, and conclusions reached.” But from
the memo alone, an auditor unconnected to the engagement would not have
been able to determine Accelera’s basis for consolidation.
Deutchman failed to document the concerns raised by Freeman about
improper consolidation. Instead, he did nothing. His approach was inconsistent
with AS No. 3 because the auditor must retain “records documenting
consultations on, or resolutions of, differences in professional judgment …
between the engagement team and others consulted,” and “audit
documentation must include information the auditor has identified relating to
significant findings or issues that is inconsistent with or contradicts the
auditor’s final conclusions.” AS No. 3.8. Further, if correct, Freeman’s concerns
indicated that Accelera’s financial statements were misstated, and the auditor
must document the actions taken to address significant findings, which include
“the existence of material misstatements.” AS No. 3.12(b). But this was not
done.
3.6.3. Insufficient experience and supervision
“The audit is to be performed by a person or persons having adequate
technical training and proficiency as an auditor,” and “[t]he junior assistant,
just entering upon an auditing career, must obtain his professional expe rience
with the proper supervision and review of his work by a more experienced
superior.” AU §§ 210.01, .03. Likewise, “[a]n auditor should possess ‘the degree

40

of skill commonly possessed’ by other auditors’” and “should be assigned to
tasks and supervised commensurate with their level of knowledge, skill, and
ability so that they can evaluate the audit evidence they are examining.” AU
§§ 230.05, .06. The Division maintains that Wahl should not have assigned
Chen, who had no auditing experience, to the Accelera audit, or, at the very
least, should not have tasked him with drafting the acquisition memo for
Behavioral.
Given that Chen had no experience in business combinations and the
Behavioral acquisition was a significant part of the audit, it is indeed
questionable whether Wahl should have assigned him to draft the memo. Yet
regardless, Wahl failed to adequately supervise Chen. “[T]he engagement
partner is responsible for proper supervision of the work of engagement team
members” and must “[r]eview the work of engagement team” taking into
account “[t]he knowledge, skill, and ability of each engagement team member.”
AS No. 10.3, .5(c), .6(d); see AU § 230.06. Wahl reviewed the memo, but did not
catch its glaring errors, including the fact that it failed to determine when
Accelera had actually acquired Behavioral. If anything, Wahl had a heightened
requirement to carefully supervise Chen given his lack of experience.
In light of Deutchman’s disciplinary history and performance issues at
Anton & Chia, the Division argues that Wahl should not have assigned him to
be the EQR for the 2014 Accelera audit. See Div. Post-hr’g Br. at 9–10; see also
Div. PFOF at 79–80. In 2008, Deutchman was censured by the Commission for
auditing a public company without being registered with the PCAOB. Tr. 643;
Michael Deutchman, Exchange Act Release No. 58240, 2008 WL 2902011, at
*1–2 (July 29, 2008). In 2015, the PCAOB found he participated in an effort to
alter audit files in an attempt to deceive PCAOB inspectors in 2008. Tr. 647;
Kabani & Co., PCAOB File No. 105-2012-002, at 4–6, 18–19 (PCAOB Jan. 22,
2015), https://pcaobus.org/Enforcement/Adjudicated/Documents/105-2012-002Kabani.pdf. And while at Anton & Chia, in February 2015, Deutchman was
written up for “[s]ubstandard job performance.” Ex. 226 at 51112. The warning
was never signed or made effective, however, and Deutchman testified he was
never presented with it. Tr. 659–61, 876; see Tr. 5593 (Wahl testified that he
had wanted the document destroyed but that it was put in Deutchman’s file
against his wishes). At one point in March or April of 2015, Wahl told
Deutchman that he was too old to be an engagement partner. Tr. 661–62, 664.
But Deutchman “didn’t take it personally,” and moved to San Diego to do
marketing work for the firm instead. Tr. 662–63. After learning of
Deutchman’s resignation in August 2016, Wahl wrote in an email that there
were a “number of issues with Mike” and that he had hoped to “properly retire
him in October,” but did not specify what the issues were. Ex. 271 at 50868;
Tr. 5130.

41

Yet, despite these issues, Deutchman was an experienced auditor who had
once worked for the Commission, Tr. 662, and there is no evidence that he was
incapable of being an EQR or that he was inadequately supervised. His censure
by the PCAOB was years prior, and the PCAOB’s decision about his second
offense—the allegation that he altered documents—came out in the middle of
the 2015 audit, and was promptly appealed. Kabani, 2017 WL 947229
(Commission decision on appeal released in March 2017). It is not clear that
Wahl should have been required to remove Deutchman from the audit at that
time. In terms of his performance at Anton & Chia, the warning drafted was
never placed in his record, and Wahl’s comments about Deutchman’s age or
other issues were vague. These matters are insufficient to show that Wahl
violated PCAOB standards by having Deutchman work on the Accelera audit.
3.6.4. Lack of independent and appropriate engagement quality
review in 2014
“To maintain objectivity, the engagement quality reviewer and others who
assist the reviewer should not make decisions on behalf of the engagement
team or assume any of the responsibilities of the engagement team.” AS
No. 7.7. But Deutchman, as the EQR for the 2014 audit, assumed several
engagement team responsibilities, such as communicating with Accelera. In
fact, due to Deutchman’s extensive involvement in communicating about and
planning the audit, Freeman thought Deutchman was the engagement partner
and not the EQR.
Further, “the engagement quality reviewer should evaluate the significant
judgments made by the engagement team and the related conclusions reached
in forming the overall conclusion on the engagement and in preparing the
engagement report.” AS No. 7.9. But Deutchman did not properly do so. As
discussed above, he failed to acknowledge several red flags about Behavioral’s
consolidation, including: (1) the fact that the agreements themselves indicated
consolidation was inappropriate until the initial $1 million payment was made;
(2) Accelera’s disparate treatment of Behavioral and Grace, Watson, and
Traditions; (3) Freeman’s repeated warnings that consolidation was
inappropriate; and (4) that the lack of support for goodwill from the Behavioral
transaction might indicate the acquisition did not really take place. While it is
true that Anton & Chia approved Accelera’s decision to consolidate Behavioral
in 2013 before Deutchman got involved, he became aware of sufficient red flags
as EQR in 2014 and should have reconsidered the firm’s earlier decision.

42

3.6.5. Failure to identify non-conformance with GAAP during interim
reviews
“The objective of a review of interim financial information” under AU
§ 722 “is to provide the accountant with a basis for communicating whe ther he
or she is aware of any material modifications that should be made to the
interim financial information for it to conform with generally accepted
accounting principles.” AU § 722.07. If, during this review, the accountant
becomes aware of possible non-conformance with GAAP, “the accountant
should make additional inquiries or perform other procedures that the
accountant considers appropriate to provide a basis for communicating
whether he or she is aware of any material modifications that should be made
to the interim financial information.” AU § 722.22.
Wahl was involved in all but one of Anton & Chia’s reviews of Accelera’s
finances for its quarterly reports in 2014 and 2015. During those reviews,
various red flags should have caused Wahl and the engagement team to
reconsider whether Behavioral’s consolidation complied with GAAP. For
example, in late April or early May 2014, Wolfrum told the members of the
engagement team who did fieldwork at Behavioral that he still owned the
company and Accelera’s purchase had not been completed. In August 2014,
Chen wondered whether Behavioral had ever been paid for its stock, and
Koch’s handwritten notes on the Q2 10-Q similarly asked whether the
purchase price installments had even been paid. During the second quarter of
2015, Anton & Chia noted that Accelera still had not made any payments to
Behavioral. Yet in none of these instances did the engagement team examine
the original sale documents or reassess whether the transaction was
consummated and whether consolidation was appropriate. Nor, for example,
did the team make further inquiries of Accelera management to determine
what should be done. Finally, in no instance did the engagement team mark
the Behavioral transaction as having continuing significance on forms and
checklists prepared during its interim reviews. See Div. Post-hr’g Br. at 9; see
also Div. PFOF at 69–70, 76–77, 97–98, 101–02; AU § 722.11 (procedures for
interim reviews should include reading prior audit documentation to
determine whether there are “significant financial accounting and reporting
matters that may be of continuing significance, such as weaknesses in internal
control”); see, e.g., Ex. 164 ¶ 4(a)(iv); Ex. 1.2 ¶ 4(a)(iv); Ex. 1.3 ¶ 4(a)(iv); Ex. 1.8
at 1; Ex. 1, 2015 Q1, WP 3001 at 1; Ex. 1, 2015 Q2, WP 3001 at 1; Ex. 1, 2015
Q3, WP 3001 at 1. Although the firm believed that Behavioral had been
appropriately consolidated, and thus would have had no reason to flag the
transaction as having continued significance, the failure to do so nonetheless
demonstrates that Wahl and his the team neglected to notice red flags
indicating that consolidation was inappropriate.

43

4. Premier facts and accounting violations
4.1. Introduction and summary
An audit team from Anton & Chia led by Wahl audited the 2013 year-end
financial statements of Premier Holding Corporation. In those financial
statements, in violation of GAAP standards, Premier recorded the value of an
unsecured promissory note (the Note) it had received from a related party as
$869,000 even though the note was worthless. In further contravention of
GAAP, Premier recorded the entirety of its $4.5 million acquisition of The
Power Company (TPC) as goodwill even though the transaction included
identifiable assets that should have been recorded differently. Anton & Chia’s
engagement team did not adequately review these problematic transactions
according to PCAOB standards. Rather, in his work on and review of the audit,
Wahl failed to: (1) exercise due professional care and skepticism; (2) prepare
appropriate audit documentation and obtain sufficient audit evidence; (3)
properly use the work of a valuation specialist; (4) consider the possibility of
fraud in Premier’s financial statements; or (5) perform alternative
confirmation procedures.
4.2. Premier’s initial accounting for the Note
4.2.1. Premier entered into several transactions with related parties
that eventually led to the issuance of the Note.
Premier is a Nevada corporation with its principal place of business in
Tustin, California. Ex. 840 ¶ 26. Premier’s common stock is and was

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3Afd1061c21e3b25f6. Public record. Not legal advice.