[Photo: Metal Gear Wiki]

PKF O’Connor Davies, a New York-based audit firm, and a senior partner Domenick Consolo agreed to settle SEC charges that they issued fraudulent audit reports pertaining to municipal bond offerings by the town of Ramapo, NY, and its local development corporation.

SEC investigators say the defendants allowed Ramapo to record a $3 million receivable in its general fund for a property sale that Consolo knew had not occurred.  Consolo also ignored red flags and relied upon what turned out to be false representations by Ramapo officials about certain other receivables, interfund transfers, and liabilities.  PKF O’Connor Davies failed to take appropriate action even after senior management became aware that Ramapo’s financial statements were the subject of multiple law enforcement investigations and Consolo received complaints about possible fraud.

Ramapo, its local development corporation, and 4 town officials were charged with fraud earlier this year and accused of hiding a deteriorating financial situation from municipal bond investors.

PKF O’Connor Davies will pay nearly $500,000 in audit fees, penalties and interest, and must engage an independent consultant.  Consolo will pay a $75,000 penalty and was suspended from practicing public company accounting;  he also is prohibited from acting as an engagement partner on any municipal audit for 5 years.

The SEC investigation continues.