Disciplinary Action AC-2017-04 - California Board of … and carryolJ.t"-thedi.sciplinarydr

BEFORE THE

CALIFORNIA BOARD OF ACCOUNTANCY

DEPARTMENT OF CONSUMER AFFAIRS

STATE OF CALIFORNIA

In the Matter of the Accusation Against: Case No. AC-2017-4

GARY WILLARD COX 61115th Street Huntington Beach, CA 92648

OAH No. 2017020678

Certified Public Accountant Certificate No. 28322

Respondent.

DECISION AND ORDER

The attached Stipulated Settlement and Disciplinary Order is hereby adopted by the

California Board of Accountancy, Department of Consumer Affairs, as its Decision in this

matter.

This Decision shall become effective on Y\1\tuJ -\ c 76 l'"l il

It is so ORDERED \J\f\o.,YLAt\.. '60 1 2.0\:).

FO~ ACCOUNTANCY DEPARTMENT OF CONSUMER AFFAIRS

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XAVIER BECERRA Attorney General ofCl:llifornUt JAMES M. LBDAKIS Supervising Deputy Attorney General CARL W, SONNE . Deputy Attorney General State Bar No. 116253

600 West Broadway, Suite 1800 San Diego~ CA 9210t P.O. Box 85266 San Diego~ CA 9.2186~5266 Telephone: (619) 738.-9423 Facsimile: (619) 6452061

Attorneysfor Complainant

BEFORE THE


I)Ji:PARTMENT OF CONSUMERAFF AIRS

STATE OF CALIFORNIA

In the Matter of the Accusation Against: Case No. AC2017~4

GARY WILLARD COX OAHNo. 2017020678 611 15th Street Huntington Beach, CA 92648 STIPULATED SETTLEMENT AND

Certified Public Accountant DlSCIPLINAI~Y ORDER Certificate No. 2~32)

Respondent.

IT IS HEREBY STIPULATED AND AGREED by and between the parties to the above..

entitled proceedings thatthe following matters are true:

PARTIES

1. Patti Bowers (Complainant) is the Executive Officer of the California Board of

Accountancy (CBA). She brought this action so !ely in her official capacity and is represented in

this matter by Xavier Becerra, Attorney General of the State of California, by Carl W. Sonne,

Deputy Attorney GeneraL

2. Respondent Gary Willard Cox (Respondent) is .represented in this proceeding by

attorney NicoleT. Irmer~ Esq., whose address is: 2550 Fifth Avenue, Suite 1060, San Diego, CA

92103,

STIP!JLATED SE1TLEMENT (AC~2017-4)

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3. On or about September 28, 1979, the CBA issued Certified Public Accountant

Certificate No. 28322 to Gary Willard Cox (Respondent). The Certified Public Accountant

Certificate was in full force and effect at all times relevant to the charges brought in Accusation

No. AC~2017-4, and will expire on February 28r 2018,unlcss renewed.

JURISDICTION

4. Accusation No. AC-20174 was fifed before the CBA, and is currently pending

against Respondent. The Accusation and all other statutorily reqtdred documents were properly

served on Respondent on December 141 2016, Respondent timely filed his Notice of Defense

contesti;ng the Accusation.

5. A copy of Accusation No. AC~2017~4 is attached as Exhibit A and incorpqrated

herein by reference.

ADVISEMENT AN'D WA1VERS

6. Respondent has carefully read, fully discussed with counsel, and understands the

charges and allegations in Accusation No. AC~2017~4. Respondent has also carefully read, fully

discussed with coun,sel, and understands the effects ofthis Stipulated Settlement and Disciplinary

Order;

7. Respondent is fully awar.e ofhis legal rights in this matter, including the right to a

hearing on the charges and atlegations in the Accusation; the rightto confront and cross-examine

the witnesses against him; the right to present evidence and to testifY on his own behalf; the right

to the issuance ofsubp0enasto compel the attendance ofwitnesses and the production of

documents; the right to reconsideration and coutt review ofan advetse decision; and all other

rights accorded by the Califotnia Administrative Procedure Act and other applicable laws.

8. Respondent voluntarily, knowingly" and intelligently waives and gives up each and

every right &et forth above,

CULPA}llLITY

9, Respondent admits the truth of each and every charge and allegation in Accusation

No. AC~2017-4.

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STIPULATED SETTLEMENT (AC-20174)

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l0. Respondent agrees that his Certified Public Accountant Certificate is subject to

discipline and he agrecsto be bound by the CBA's probationary terms as set forth in the

Disciplinary Order below.

CIRCUMSTANCES IN MITIGATION

11. Respondent helped create a situation where a prime contractor falsely stated to the

government that it was exceeding its small business subcontracting goals by virtue ofthe .first tier

sub~contracting participation of a business that failed the "affiliation'' test for a small business in

vio.lation of 18 U .S.C sections 2 and lOO1. In view ofthe totality ofthe mitigating

circumstances, the federal judge in the underlying criminal prosecution substantially departed

from the federal sentencing guidelines, which had .a 60 months maximum sentence, to a sentence

of six ti1onths, ofwhich Respondent was only required to serve tour. Those mitigating

c-ircumstances included (i) Respondent's early assumption off\.iH aceountabHity for his

misconduct, (H) his honesty admitting his analytic errors regarding the application ofthe

affiliatio11" tests for government conttacts to the government investigators a,lld cooperating with them,(iii) the lack ofha.rmtothe government or otherstherebyrequiting no restitution, (iv).the

lack ofpersonalfirnmcial benefit from the. misconduct, ~nd (v)Respondent's remarkable personal ..

and professional history of nearly 40 years, Based on these circumstances, the sentencing judge

concluded that Respondent did not pose ariskto the public. The federal court sentenced

Respondentto two y(:ars ofsupervised release following his incarceration~ which the court

thereafter terminated one year early due to Respondent's compliance with all sentencing terms.

12. After Respondent disclosed his convictiorttothe IRS, the IRS requested additional

information, which Respondent provided) and the lRS thereafter renewed Respondent's PTIN

without issue,

RESERVATION

13. The admissions made by Respondent herein are.only for the purposes ofthis

proceeding, or any other proceedings in which the CBA or other professional Heensing agency is

involved, and shall not be admissible in any other criminal or civil proceeding.

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STlPULATED SETTLEMENT (AC-2017-4)

CONTINGENCY

14. This stipulation shall be subJect to approvalby the CBA. Respondent understands

and agrees that counsel for Complainant and the staffofthe CBA may communicate d.irectly with

the CBA regarding this stipulation and settlement, without notice to or participation hy

Respbndent or his counseL By signingthe :;.tipulation, Respondent understands and agrees that he

may not withdraw his agreement or seek to rescind the stipulation ptiorto the time the GBA

l;ionsldefs and acts upon it. lf the CBAfails to adopt this stipulation .as its Decision and Order) thq Stipulated Settlement and Disciplinary Order shali be ofM for.ce or effect, .except for this

paragraph, it shall be inadmissible in any legal action between the parties; and the GBA shaH not

be disqualified from further action by having cot1sidered this matter.

15. The parties understand and agree that Portable Doct!ment Format{PDf) and facsimile

copies ofthis Stipulated Settlement and Disciplinary Order, including PDF and facsimile

signatures theteto, shall have the same force and. effect as the originals.

16. This Stipulated Settlement and Disciplinary Order I$ intendedbythe parties to be an

integratedwriting.representing the c.omplett\ final~ and exclusive embodh11ent oftheir agteetl1ent.

- It supersedes any and all priqr or contemporanequs agl"eements, understandings~ discussions.

negotiations., and commitments (written or oral). ThisStipulated Settlementand Disciplinary

Order may not be altered~ amended, modified, supplemented, or otherwise chan.ged except by a

writing executed by an authorized repr.esentative ofeach of the parties.

17. Inconsideration ofth.eforegoing admissions and stipulations, the parties agree that

the CUA may. without fu.rther notice or fbrrnal proceeding1 issue and enter the fo Bowing

Disciplinary Order:

DISCIPLINARY ORDER

IT IS HEREBY ORDERED that Certified Public Accountant Certificate No. 28322 issued

to Respondent Gary Willard Cox is revoked. However, the revocation is stayed and Respondent

is placed on probation for three (3) years on the following terms and conditions.

l, Suspension

Certified Public Accountant Certificate No. 28322 issued to respondent Gary Willard Cox

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STIPULATED SETILErytENT (AC-20 174)

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is suspended for 120 days commencing on the effective date ofthe CBA's Order. During the

period of suspension the Respondent shaH engage in no activities for Which certification as a

Certified Public Accountant or Public Accountant is required as described in Business and

Professions Code, Division 31 Chapter 1, Section 5051.

2. Obey AU Laws

Respondent shall obey all federal, California, other states' and local laws, including those

rules reluting to the practice ofpublic accountancy in Calitbrnia.

3. Cost Reimbursement

Respondent shallreimburse the CBA $2,840.75 for its investigation and prosecution costs.

The payment shall be made in quarterly payments (due with quarterly written reports), the final

payment being due one year before probation is scheduled to terminate.

4. Submit Written Reports

Respondent shall submit, within 10 days of comp1etion ofthe quarter, \Vritten reports to the

CBA on a form obtained'&om. the CBA. The Respondent shall submit, under penalty of perjury,

such other written reports; declarations, and verification of actions as are required. These

declarations shall contain statements relative to Respondent's compliance with all the terms and

conditions .ofprobation. Respondent .shaH immediate!y execute an release .of information forms as may be required by the CBA or its representatives;

$. Personal Appearances

Respondent shall, during the period of probation, appear in person at interviews/meetings as

directed by the CBA or its designated representatives, ptovided such notification is accomplished

in a timely manner.

6. Comply With Probation

Respondent shall fully comply with the terms and conditions ofthe probatlon imposed by

the CBA and shall cooperate fully with tepresentatives of the C:8A in its monitoring and

investigation of the Respondent1s compliance with probation terms and conditions.

7. Practice Investigation

Respondent shall be subject to, and shall permit, a practice investigation of the

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STIPULATED SE1TLEMENT (AC-2017-4)

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Respondent's professional practice, Such a practice investigation shall be conducted by

representatives of the CBA, provided notifica.ti.on ofstich review is accomplished in a timely

manner,

8, Comply With Citations

Respondent shall comply with an final orders resulting fi:om citations issued bytheCBA. 9. Tolling ofProbado11 for Out~of$State R

13. Ethics Continning Education

Prior to reswnption ofpractice, Responde11t shaH complete four hours ofcontinuing

education .in course subject matter pertait1ing to the 11) Howing: a review of nationally recognized

codes ofconduct emphasizirtg how the codes relate to professional responsibilities; case~based

instruction focusing on real-life situational learning; ethical dilemmas facing the accounting

profession; or business ethics, ethical sensitivity, and consumet' expectations. Courses must be a

minimum ofone hour as described inCalifornia Code ofRegulattons Section 88.2. This shall be

in addition to continuing education requirements for reiicensure.

IfRespondent fails to complete said courses within the time period provided, R~spondent

shaH so notify the CBA and shaH cease practice until Respondent completes said courses, has

submitted proof of same to the CBA, attd has .been notified by the CBA that he or she may

resume practice. Failure to complete the required courses within the time provided. shaH constitute

a violation of probation.

14. RegulatoryReview Course

Prior to the resumpti0n 0fpractice, Respondent shaH co1)1plete a CBA~approved course on

the provisions ofthe California Acc.ountancy. Act and .the CBA Regulations specific to the

practice ofpublic account;mcy in California emphasizing the provisions applicable to current

practice. The course also will include an overview of histotic and recent disciplinary actions

taken by the CBA, hi~hlightingthe misconduct which led to licensees being disciplined; This

shaH be in addition to continuing education requirements for relicensure.

IfRespondent fails to complete said courses within the time period provided} respondent

shall sb notify the CBA and shall ce

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. effectiv~$ the Heense must be r~newed within 30 day~ oftheeffective date ofthe decision.

II IS li~BEBYFURJ:HEB JRQERED that:.

I6, RESTRICTED PRACTICE ORDER.. After the completion ofprobation)

Respondent shallbe permanently prohibited from enga~lng irt and performing any audits,

reviews. cotnpilations., or other attestation sei'Vices. This 'Condition shall cntintie until such 'iime1.

ifever, Re!!'J)ondettt successfuJly petitions the. CBA for the reinstatement ofthe ability to perlbrm

audits~ reviews~ compilations} or other attestation s:e:rvices. Respondent understands and agrees,

that the CBA is under no fibligatio'l!l to reinstate eitherofResponnfs ability ~operform au4its.~

review$~ compilations, or other attestation services~ that the CUAhas made no representations

cohcerninl whether any such reinstatement might occur~ and th1$t the d~.cisiotito reil:l$ta;te i~,

withihthe sole discmionl}fthe CBA.

17. Full Compliant.e. Respondent understands and agrees that this ;Btipijlated 'Sett~rn~.nt

and.Dt$ciplmary Order as a.-resolution to the charges in Accusation attached hereto as }Exhibit A

. and is: based upon, inrer alia;Rcspo:n4ent~s fuU CQmpJianee witb the Restricted P!Mtic,~ Or9er s~

'forth ~oove. IfRespondent'filils ixl satisfy th.e ~~~t~d Pr~tic,e:Ofd~, Re$1>(i:nd~nt agrees that

-the: CB.t'\ can file an accusatklJ1:agfinst himforl)npr1Jfessio~lconduct blised onthe failure-to - -

comply with the Restricted Pra~iceJ>r4er as; an ind:epende.ntbui~ for disclplitli:try, action,

pursuant to Business and Profess!~ns Cod,e &c1ion $100. In addition. Respdndentoortsentstlutt

the CBA may enforc,e the J~e.stri~.ted Practice Order in any court ofcotnJ)etcntjurisdictlon

(including;. an administrative-courtlto't\1()1n.hittt. temporarily and/or permanently, from violatitt~

the Re.$!r(cted Praetice Order, and may ~~k in such proceeding all ~ther remedies as allowed by

law.

,1\.qCEPTANCE ,

I have carefullyread the above Stipulated Settlement and Disciplln.ary Order and have fi,dly

di$cyssed it with my attorney, NicoleT, lnner, I und:erstand the stipulation and the effect it will

have on my Certified Public Accountant Certificate. I enter into this Stipulated Settlement and

Ill

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STIPULA'l"gD. SETILEMENT (AC~20l'7-4)

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http:Sett~rn~.nt

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Dis:eipHnm, Order vohmtarity1 koowingly, al:ld inteUi$eutly, arulag:r to be~ 'bytht

OooisiQn aridOrder ofthe CBA.

DATED:

I have read.MdfuU:rdiseussed with R~potldent Ouxy Willard .eo~ tho ~ .. ~.M ooMi~~ru~

aoo other matt~ts contaiMd ln th~ lllro.Ve Stipu!At~d Settl~ment md D~soiJI.~Otder. h~~

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its form a.ttd cc:mtent,

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Sup~msmJ~t1Atto.,.YO.Mtl

CATU.W. SQNNBDeputy AttorooyOell

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Exhibit A

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l KAMALA D. HARRIS Attorney General of California JAMES M. LEDAKIS Supervising Deputy Attorney General CARL W. SONNE Deputy Attorney General State Bar No. 116253

600 West Broadway, Suite 1800

San Diego, CA 92101

P.O. Box 85266

San Diego, CA 92186-5266

Telephone: (619) 738-9423

Facsimile: (619) 645-2061

Attorneys for Complainant

BEFORE THE


DEPARTMENT OF CONSUMER AFFAIRS

STATE OF CALIFORNIA

In the Matter of the Accusation Against: Case No. AC-2017-4

GARY WILLARD COX ACCUSATION 611 15th Street Huntington Beach, CA 92648

Certified Public Accountant Certificate-No. 28322

Respondent.

Complainant alleges:

PARTIES

1. Patti Bowers (Complainant) brings this Accusation solely in her official capacity as the

Executive Officer of the California Board of Accountancy (CBA), Department of Consumer

Affairs.

2. On or about September 28, 1979, the CBA issued Certified Public Accountant

Certificate Number 28322 to Gary Willard Cox (Respondent). The Certified Public Accountant

Certificate was in full force and effect at all times relevant to the charges brought herein and will

expire on February 28, 2018, unless renewed.

Ill

Ill

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(GARY WILLARD COX) ACCUSATION

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JURISDICTIONAL & STATUTORY PROVISIONS )

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3. This Accusation is brought before the CBA under the authority of the following laws.

All section references are to the Business and Professions Code (Code) unless otherwise indicated.

4. Section 5109 ofthe Code states:

The expiration, cancellation, forfeiture, or suspension of a license, practice privilege, or other authority to practice public accountancy by operation of law or by order or decision of the board or a court oflaw, the placement of a license on a retired status, or the voluntary surrender of a license by a licensee shall not deprive the board of jurisdiction to commence or proceed with any investigation of or action or disciplinary proceeding against the licensee, or to render a decision suspending or revoking the license.

5. Section 5100 states:

After notice and hearing the board may revoke, suspend, or refuse to renew any permit or certificate granted under Article 4 ( c01mnencing with Section 5070) and Article 5 ( cmmnencing with Section 5080), or may censure the holder ofthat pennit or certificate for unprofessional conduct that includes, but is not limited to, one or any combination of the following causes:

(a) Conviction ofany crime substantially related to the qualifications, functions and duties of a certified public accountant or a public accountant;

(j) Knowing preparation, publication, or dissemination of false, fraudulent, ormateriallymisleading financial statements, reports, or information....

6. Section 5100.5(a) ofthe Code states:

After notice and hearing the board may, for unprofessional conduct, permanently restrict or limit the practice of a licensee or impose a probationary term or condition on a license, which prohibits the licensee from perfonning or engaging in any ofthe acts or services described in Section 5051.


A plea or verdict of guilty or a conviction following a plea of nolo contendere is deemed to be a conviction within the meaning ofthis article. The record ofthe conviction shall be conclusive evidence thereof. The board may order the certificate or pennit suspended or revoked, or may decline to issue a certificate or permit, when the time for appeal has elapsed, or the judgment ofconviction has been affirmed on appeal or when an order granting probation is made, suspending the imposition ofsentence, irrespective ofa subsequent order under the provisions ofSection1203 .4 ofthe Penal Code allowing such person to withdraw his plea of guilty and to enter a plea ofnot guilty, or setting aside the verdict of guilty or dismissing the accusation, information or indictment.

Ill

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Each board under the provisions of this code shall develop criteria to evaluate the rehabilitation of a person when:

(a) Considering the denial of a license by the board under Section 480; or

(b) Considering suspension or revocation of a license under Section 490:

Each board shall take into account all competent evidence ofrehabilitation furnished by the applicant or licensee.

9. Section 490 of the Code provides, in pertinent part, that a board may suspend or

revoke a license on the ground that the licensee has been convicted of a crime substantially related

to the qualifications, functions, or duties of the business or profession for which the license was

issued.


Notwithstanding any other provision oflaw, in a proceeding conducted by a board within the department pursuant to law to deny an application for a license or to suspend or revoke a license or otherwise take disciplinary action against a person who holds a license, upon the ground that the applicant or the licensee has been convicted of a crime substantially related to the qualifications, functions, and duties ofthe licensee in question, the record of conviction of the crime shall be conclusive evidence of the fact that the conviction occurred, but only of that fact, and the board may inquire into the circumstances surrounding the commission of the crime in order to fix the degree of discipline or to determine if the conviction is substantially related to the qualifications, functions, and duties of the licensee in question.

As used in this section, "license" includes "certificate," "permit," "authority," and "registration."

REGULATORY PROVISIONS

11. California Code ofRegulations, Title 16, section 99 states:

For the purposes of denial, suspension, or revocation of a certificate or permit pursuant to Division 1.5 (commencing with Section 475) ofthe Business and Professions Code, a crime or act shall be considered to be substantially related to the qualifications, functions or duties ofa certified public accountant or public accountant ifto a substantial degree it evidences present or potential unfitness ofa certified public accountant or public accountant to perform the functions authorized by his or her certificate or permit in a manner consistent with the public health, safety, or welfare. Such crimes or acts shall include but not be limited to those involving the following:

(a) Dishonesty, fraud, or breach of fiduciary responsibility of any kind;

(b) Fraud or deceit in obtaining a certified public accountant's certificate or a public accountant's permit under Chapter 1, Division III of the Business and Professions Code;

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(c) Gross negligence in the practice ofpublic accountancy or in the performance of the bookkeeping operations described in Section 5052 ofthe code;

(d) Violation ofany ofthe provisions ofChapter 1, Division III ofthe Business and Professions Code or willful violation of anyrule or regulation of the board.

12. California Code ofRegulations, Title 16, section 99.1 states:

When considering the denial of a certificate or permit under Section 480 of the Business and Professions Code, the suspension or revocation ofa certificate or permit or restoration of a revoked certificate under Section 11522 of the Government Code, the board, in evaluating the rehabilitation of the applicant and his present eligibility for a certificate or permit, will consider the following criteria:

(1) Nature and severity of the act(s) or offense(s).

(2) Criminal record and evidence ofany act(s) committed subsequent to the act( s) or offense(s) under consideration which also could be considered as grounds for denial, suspension or revocation.

(3) The time that has elapsed since commission of the act(s) or offense(s) referred. to in subdivision (1) or (2).

(4) The extent to which the applicant or licensee has complied with any terms of parole, probation, restitution, or any other sanctions lawfully imposed against the applicant or licensee.

(5) Ifapplicable, evidence ofexpungement proceedings pursuant to Section 1203.4 of the Penal Code.

(6) Evidence, ifany, of rehabilitation submitted by the applicant or licensee.

COSTS & ADMINISTRATIVE PENALTIES

13. Section 5107, subdivision (a) of the Code states:

The executive officer ofthe board may request the administrative law judge, as part ofthe proposed decision in a disciplinary proceeding, to direct any holder ofa permit or certificate found to have committed a violation or violations ofthis chapter to pay to the board all reasonable costs ofinvestigation and prosecution ofthe case, including, but not limited to, attorneys' fees. The board shall not recover costs incurred at the administrative hearing.

14. Section 5116 of the Code provides, in pertinent part, that the CBA may order any

licensee or applicant for licensure or examination to pay an administrative penalty as part of any

disciplinary proceeding. Administrative penalties shall be in addition to any other penalties or

sanctions imposed on the licensee or other person, including, but not limited to, license revocation,

license suspension, denial of the application for licensure, denial of the petition for reinstatement,

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or denial ofadmission to the licensing examination. Payment ofthese administrative penalties may

be included as a condition ofprobation when probation is ordered..

FmST CAUSE FOR DISCIPLINE

(May 28, 2014 Criminal Conviction for False Statements to the Federal Government)

15. Respondent has subjected his license to disciplinary action under sections.490 and

5100, subdivision (a) of the Code in that he was convicted of a crime that is substantially related to

the qualifications, functions, andduties of a ~ertified Public Accountant. The circumstances are as

follows:

a, On or about May 28, 2014, in a criminal proceeding entitled United States of

America v. Gary Willard Cox, in United States District Court, Eastern District ofNorth Carolina,

case number 7:13-CR-77, judgment was entered convicting Respondent ofviolating Title 18,

United States Code section 1001, False Statements to the Federal Government and Aiding and

Abetting, a felony.

b. As a result of the conviction, Respondent was sentenced to a term of six months

inthe Federal Bureau ofPrisons. Following release, Respondent was pl~ced on supervised - --------------- -----------~--------------- -----------------

probation for two years on standard terms and conditions, and special conditions that he not incur

new credit charges or open additional lines of credit without the approval of the probation office,

and consent to a warrantless search at the request oflaw enforcement. Respondent was ordered to

pay a $50,000.00 and a $100.00 assessment.

c. The facts that led to the conviction are that Respondent became the accountant

for Frazier Masonry Corporation (FMC) in 2008. Harper Construction Company, Inc. (Harper), a

large general contractor, won the general contracting bid for the Courthouse Bay project, a U.S.

Navy project at USMC Camp Lejeune inNorth Carolina on or about August 11, 2011, in the

amount of$67,681,224.

d. In or around April2012, FMC submitted a $9.4 million bid for the sub

contracted masonry work on the Courthouse Bay project. The Courthouse Bay project manager

told FMC's president (Frazier) that in order for FMC to get the masonry subcontract, FMC would

need to use a minority-owned company. FMC elected to use FY, Inc. ("FYI"), his disabled

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veteran~owned small business company. FMC is a large masonry company co~owned by two

people. FMC had approximate revenues of$58 million for 2009, $55 million for 2010, and $40

million for 2011. FYI is owned by Frazier's son~in~law. FYI was incorporated on or about July

20, 2011 and submitted an application to the Department ofVeteran Affairs to be considered for

Service Disabled Veteran Owned Small Business (SDVOSB) status on or about September 7,

2011. Frazier's son~in~law was a project manager at FMC before FYI was formed. After FYI was

formed, he continued to l?erform the exact same work he had been performing for FMC. FMC

employees, including the Chief Financial Officer and Respondent, calculated exactly what Frazier's '

son~in~law was earning at FMC and contracted with him to pay him the same amount at FYI.

Frazier's son~in~law was also subject to the same consideration for bonuses with FMC that he had

been previously even though he was officially no longer a FMC employee and even though there

was no written contract. Respondent prepared tax returns for FYI. He alsoprepared, reviewed,

and corrected financial reports for FYI. He hap.dled bonding issues relating to FYI. He handled

these matters even though he was an officer ofFMC and had no position with FYI.

e. One of the primary purposes of forming FYI was so that FYI could bid for work

as a SDVOSB, work that Frazier would actuallyper(orm. Respondent arid Frazier were aware of

FYI's affiliation with FMC. Respondent and Frazier were aware that if FYI was affiliated with

FMC, it could not qualifY as a SDVOSB or a small business. In 2011, Respondent prepared an

executive summary noting that the SDVOSB must have revenues averaging less than $14 million

for the past three years and made it clear that FYI was an affiliate of FMC and therefore could not

be SDVOSB or small business of any kind under the SBA rules and regulations. Despite this,

FMC used FYI for the Courthouse Bay project.

f. General Contractor Harper was required by its contract to submit twice annually

an updated subcontract report to the Department of the Navy. Harper made a submission to the

Navy on or about October 25, 2012, falsely stating that it exceeded the small business

subcontracting goal of 75% and the SDVOSB subcontracting goal of 4%. In particular, it stated

that its percentage of total subcontract awards to small business concerns was 79.2% and awards

to SDVOSB concerns were 18.2%. These statements were false because they were based upon

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the participation ofFYI. Neither the SDVOSB category nor the overall small business category

would have met the percentile goals without the involvement ofFYI. Frazier and Respondent

knew that the whole point ofusing FYI in Courthouse Bay was so that Harper could meet the

small business goals and requirements for the Courthouse Bay contract. Frazier and Respondent

knew that falsifying FYI's status as a small business would cause Harper to make false statements

to the Government about its small business representation and SDVOSB representation.

SECOND CAUSE FOR DISCIPLINE

(Knowingly Preparing, Publishing or Disseminating False, Fraudulent or Materially

Misleading Financial Statements, Reports or Information)

16. Respondent has subjected his license to disciplinary action under section 5100,

subdivision G) of the Code in that his conduct, as described above, involved false, fraudulent or

materially misleading financial statements about the affiliation between FMC and FYI, whi9h

caused Harper to make false statements to the government about its small business representation

and SDVOSB representation.

PRAYER

WHEREFORE, Complainant requests that a hearing be held on the matters herein alleged,

and that following the hearing, the California Board ofAccountancy issue a decision:

1. Revoking or suspending, restricting, limiting or otherwise imposing discipline upon

Certified Public Accountant Certificate Number 28322, issued to Gary Willard Cox;

2. Ordering Gary Willard Cox to pay the California Board ofAccountancy the reasonable

costs of the investigation and enforcement of this case, pursuant to Business and Professions Code

section 5107;

3. Ordering Gary Willard Cox to pay the California Board of Accountancy an .

administrative penalty pursuant to Business and Professions Code section 5116; and,

Ill

Ill

Ill

Ill

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4. Taking such other and further action as deemed necessary and proper.

DATED: -+\d=--J---;1~~~j---=---:70~tk~ Executive Officer California Board ofAccountancy Department of Consumer Affairs State of California Complainant

,SD2016701933 81436452.doc

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Disciplinary Action AC-2017-04 - California Board of Accountancy

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