Santa Monica-based CPA Marlin R. Brinsky has agreed to pay a $20,000 civil penalty to settle SEC charges involving accounting fraud at a publicly traded adult Web site.

The SEC’s civil injunctive action was originally filed on April 25, 2005, against Exotics.com Inc., a Nevada corporation based in Vancouver, B.C., and 12 additional principal defendants and one relief defendant. The SEC’s complaint alleged that, between at least 1999 and 2002, Exotics.com, which was then an Over-the-Counter Bulletin Board company in the business of operating adult Web sites, was the subject of a stock manipulation and accounting fraud (see CPAs Disciplined for Porn Site Accounting Fraud).

The complaint alleged, among other things, that Brinsky and others engaged in conduct that resulted in the company filing materially false and misleading financial statements in its SEC filings. The complaint further alleged that the staff of Exotics.com’s outside auditor, of which Brinsky was a member, committed acts and/or omissions that caused them to become non-independent during audits of Exotics.com and that their firm thereafter issued audit reports falsely representing that the audits had been conducted by an independent accountant. Brinsky worked for the now defunct New York-based accounting firm Merdinger, Fruchter, Rosen & Corso.

The final judgment against Brinsky, entered on Wednesday, permanently enjoins him from violating the provisions of the federal securities laws governing accountant’s reports and orders him to pay a $20,000 civil penalty. Separately, Brinsky also consented to an administrative order suspending him from appearing or practicing before the SEC as an accountant, with a right to apply for reinstatement after two years. Without admitting or denying the allegations in the complaint, Brinsky consented to the entry of a final judgment against him.

The SEC previously obtained judgments by default against two defendants and judgments by consent against six additional defendants. The action remains pending against the remaining four defendants and a relief defendant.

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