Release: 5000-04
For Release: September 30, 2004

CFTC FILES ACTION AGAINST G. VICTOR JOHNSON AND THE ACCOUNTING FIRM OF ALTSCHULER, MELVOIN & GLASSER LLP FOR ALLEGED AUDITING FAILURES

WASHINGTON, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing of a two-count administrative complaint against G. Victor Johnson (Johnson), a certified public accountant (CPA) licensed in Illinois, and the accounting firm of Altschuler, Melvoin & Glasser LLP (AMG), an Illinois limited liability partnership located in Chicago, Illinois, in connection with financial audits AMG performed of a commodity pool. The CFTC alleges that Johnson and AMG failed to detect a fraud perpetrated upon customers.

The CFTC’s complaint alleges that Johnson performed annual audits of a commodity futures pool operated by Melrose Asset Management (Melrose), a registered commodity pool operator, for the years ending December�31, 2000 and December�31, 2001. Specifically, the CFTC alleges that the audits were not conducted in accordance with generally accepted auditing standards (GAAS), and that Johnson failed to exercise due professional care in conducting the audits. The complaint further alleges that AMG is liable for Johnson’s violations.

This action related to a previously filed federal anti-fraud action brought by the CFTC against Melrose and its chief executive officer, John Martin Lofgren (Lofgren), formerly of Kenilworth, Illinois, which alleged that Lofgren had misappropriated at least $1.4�million in customer funds and had issued false statements to customers. CFTC v. Lofgren and Melrose Asset Management, No. 02-C-6222 (N.D.Ill.) (see CFTC News Release 4695-02, September�4, 2002). On August�30, 2004, Judge William J. Hibbler of the U.S. District Court for the Northern District of Illinois entered a consent order of permanent injunction against Lofgren and Melrose ordering payment of over $6.7 million (see CFTC News Release 4999-04, September 30, 2004).

According to the CFTC’s action today, Johnson performed the audits of Melrose while Lofgren’s violations were taking place and AMG issued unqualified auditor’s reports representing that the pool’s financial statements were free from material misstatement, when such was not the case. The CFTC’s complaint alleges that Johnson and AMG’s audit team reviewed and tested certain financial transactions concerning secret misappropriations by Lofgren but failed to obtain sufficient competent evidence of the transactions.

“Accounting standards are designed to discipline the accounting profession to flag irregularities of the kind found in our prosecution of Melrose Asset Management. However, as alleged, Mr. Johnson and his accounting firm dropped the ball; and in some ways, the fumble paved the way for Lofgren and his company to camouflage their deceitful behavior,” said Gregory Mocek, the Commission’s Director of Enforcement.

The following Division of Enforcement staff are responsible for this action: David A. Terrell, Elizabeth M. Streit, Hugh J. Rooney, Scott R. Williamson, and Rosemary Hollinger.

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Media Contacts
Alan Sobba
(202) 418-5080
Dennis Holden
(202) 418-5088
Office of External Affair

Staff Contacts
Rosemary Hollinger
Regional Counsel and Associate Director
CFTC Division of Enforcement
(312) 596-0520

Joan M. Manley
Deputy Director
CFTC Division of Enforcement
(202) 418-5356

Related Document
AMG – Johnson CFTC Complaint (#04-29)