News Column

SEC Issues Administrative Ruling on Edward L. Cummings, CPA

July 30, 2014



WASHINGTON, July 30 -- The Securities & Exchange Commission issued the following administrative proceeding:

In the Matter of EDWARD L. CUMMINGS, CPA, Respondent

ORDER INSTITUTING PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTIONS 4C AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 102(e) OF THE COMMISSION'S RULES OF PRACTICE, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER

I. The Securities and Exchange Commission ("Commission") deems it appropriate that public administrative and cease-and-desist proceedings be, and hereby are, instituted against Edward L. Cummings, CPA ("Respondent" or " Cummings") pursuant to Sections 4C1 and 21C of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 102(e)(1)(iii) of the Commission's Rules of Practice. 2

II. In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except a s to the Commission's jurisdiction over him and the subject matter of these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order ("Order"), as set forth below.

III. On the basis of this Order and Respondent's Offer, the Commission finds 3 that:

A. SUMMARY

During the 2008 and first quarter 2009 reporting periods (the "relevant period"), QSGI Inc. ("QSGI" or the "Company") was a reseller of and maintenance services provider in relation to used computer equipment. Cummings, who served as QSGI's Chief Financial Officer prior to becoming its Vice President of Finance and Controller in 2009, was aware during the relevant period of deficiencies in and the circumvention of internal controls relating to inventory and the resulting falsification of the Company's books and records. He also participated in the decision, on occasion during the relevant period, to improperly accelerate by up to a week recognition on QSGI's books and records of accounts receivable and receipt of inventory in order to increase the borrowing base available under a revolving credit facility with the Company's chief creditor. Cummings withheld this information from the Company's extern al auditors in connection with their audit of the financial statements for the fiscal year ended December 31, 2008 and review of the financial statements for the quarter ended March 31, 2009, and made affirmative misrepresentations and statements that were misleading as a result of his omission of information, including in management representation letters, about the design, maintenance, and operation of internal controls. Further, Cummings signed a Form 10-K for the 2008 fiscal year containing management's report on internal control over financial reporting ("ICFR"), as required by Section 404 of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act") and Exchange Act Rule 13a-15(c), which falsely represented that the Company's Chief Executive Officer had participated in assessing the effectiveness of the Company's ICFR. Cummings also signed certifications required under Section 302 of the Sarbanes-Oxley Act and Rule 13a- 14 of the Exchange Act falsely representing that the other certifying officer, the CEO, and Cummings h ad evaluated ICFR and, based on their evaluation, disclosed all significant deficiencies to the auditors. Cummings signed the Forms 10-K and 10-Q filed with the Commission to which the certifications were attached.

B. RESPONDENT

Cummings co-founded QSGI Inc. in 2001. He thereafter served as Chief Financial Officer and Treasurer until May 2009, when he became Vice President of Finance and Controller. Cummings also served as a Director from February 2004 until October 2008. He was terminated in September 2009 following the Company's filing for Chapter 11 bankruptcy in July 2009, but continued until June 2011 to work as a financial consultant to the Company while it reorganized. Cummings was licensed as a certified public accountant in the State of Pennsylvania in 1977; his license has been inactive since 1979.

C. FACTS

1. Cummings' Awareness of Deficiencies In and Circumvention of Inventory Controls

a. QSGI is a Delaware corporation headquartered during the relevant period in West Palm Beach, Florida. Its common stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act and is quoted on the OTC Link (formerly "Pink Sheets") operated by OTC Markets Group.

b. From May 2004 through the time QSGI filed for bankruptcy in July 2009, QSGI maintained inventory principally at facilities in New Jersey and Minnesota. The New Jersey inventory, which comprised 50% of the Company's reported gross inventory and 55% of its reported net inventory, after reduction for reserves, as of the close of its fiscal year ended December 31, 2008, was comprised of laptops, monitors, and other consumer electronics and components. The Minnesota inventory, which comprised 40% of QSGI's reported gross inventory and 35% of its reported net inventory, after reduction for reserves, as of the close of QSGI's 2008 fiscal year, was comprised chiefly of servers, mainframes, and component parts.

See rest of the document: http://www.sec.gov/litigation/admin/2014/34-72722.pdf

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