Supervisor faced SEC action in '08

According to files, David Blain was involved in improper accounting practices while working at a division of the BISYS Group between 2000 and 2003.

Thursday, July 16, 2009

BY DANIEL VICTOR dvictor@patriot-news.com

A Lower Paxton Twp. supervisor and certified public accountant helped to falsely inflate the reported earnings of the private firm he formerly worked with, according to files from the Securities and Exchange Commission.

In November 2008, the SEC barred David Blain from working directly with the commission for a year because of the actions it said he took between 2000 and 2003.

"What happened was far in the past," Blain said Wednesday. "The penalty I received was very, very minimal; I was not fined or anything of that nature.

"It has no impact on my role as a township supervisor."

The SEC action relates to Blain's role as one of three directors of finance in the insurance services division of the BISYS Group Inc., which was later bought by Citigroup.

At the time, the insurance services division was the most successful part of the company, reporting steady revenue that helped the company meet earnings targets and Wall Street expectations.

According to the SEC, that success was illusory. Several employees, including Blain, were involved in inflating the company's earnings, according to the SEC.

Blain, who now works for Camp Hill-based McKonly & Asbury certified public accountants in family business valuation and succession planning, declined to comment directly on the specifics of the SEC action.

As a township supervisor, Blain is the head of the township's audit committee, but "I'm not booking journal entries or anything," he said.

According to the SEC, much of Blain's improper accounting was done at the behest of his supervisor. After the company's controller raised questions relating to one improper maneuver, Blain said in an e-mail to his supervisor that the controller "was wise to what we were trying to do," according to the SEC.

The supervisor asked if Blain could backdate, to which Blain responded: "I can do whatever you need me to do," according to the SEC.

The supervisor was not named in the report.

Blain participated in the following actions, according to the SEC: -- Unsupportable acquisition accounting; recording as revenue to BISYS bonus commission income that had already been earned but not recorded by an acquired company. -- Creating inflated and unsupportable receivables for commissions on the sale of an insurance product. -- Creating phony revenue entries that were promptly reversed after the company reported its quarterly results.

In 2007, BISYS paid a $25 million settlement after the SEC uncovered several alleged accounting violations; the main focus was on the insurance services division, but the investigation also turned up alleged wrongdoing in other areas.

Blain was not the only employee who faced action from the SEC, but a list of employees was not available Wednesday.

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